New Delhi, Sept. 10 (PTI): India has renegotiated the pricing of liquefied natural gas (LNG) imported from Australia's Gorgon project to save more than Rs 10,000 crore over the term of the contract.
Exxon Mobil Corp has agreed to charge 13.9 per cent of the prevailing Brent oil price at the port of delivery rather than the previously decided 14.5 per cent of the oil rate at the port of loading, a source privy to the development said.
"Besides changing the indexation, LNG pricing will be on DES basis rather than FOB previously decided," he added.
Delivered ex-ship (DES) is a trade term requiring the seller to deliver goods to a buyer at an agreed port of arrival. Under FOB, the buyer has to make the shipping arrangement.
At $50 per barrel oil price, Gorgon LNG, whose supplies started in January this year, would have cost $7.25 per million British thermal unit (mBtu) at the port of loading. Adding another $1 for transportation would have increased the delivered price to $8.25.
In the new formula, Gorgon LNG delivered at Indian port will cost $6.95 per mBtu.
"Happy to share the good news that India has, yet again, been able to address the long-term price issue of LNG from Gorgon to suit the Indian market," oil minister Dharmendra Pradhan said in a tweet.
India had used its status of Asia's third-largest LNG buyer to renegotiate in 2015 the LNG pricing formula with Qatar's Rasgas to buy the gas at half the original price.
"Indian customers will receive (Gorgon) LNG volumes at an amicable price soon. This is done in a similar way to what we did with LNG from Qatar," Pradhan said in another tweet.
Petronet LNG Ltd, India's largest liquefied natural gas importer, had last year formally sought at least a 10 per cent cut in the price of LNG from Australia's Gorgon project.
Petronet LNG, a private firm whose chairman is the oil secretary, had in August 2009 signed a 20-year deal to buy 1.44 million tonnes per annum of LNG at a price equivalent to 14.5 per cent of the prevailing oil rates.
The indexation agreed was one of the highest in the world.
In late 2015, Petronet had renegotiated the price of the long-term deal to import 7.5 million tonnes per year of LNG from Qatar, helping save Rs 8,000 crore.