KOLKATA (miningweekly.com) – Despite Qatar being pushed into diplomatic and economic isolation by its neighbours, India is deepening economic cooperation in liquefied natural gas (LNG) and energy with new proposals and initiatives.

The Indian government has proposed a fresh long-term LNG purchase agreement, while the Qatari government has agreed to open up new trading points now that several of the major ports in the region have been put out of its bounds.

As the third-largest buyer of Qatari gas after Japan and South Korea, India has indicated that it is also willing to offer Qatar investment opportunities to pick up equity in gas-based power plants in India and LNG terminal projects currently under construction in India.

“We have given firm proposals to Qatar on long-term offtake assurances. This includes deals on gas-based power plants. This would enable Qatar to participate in end-to-end solutions in gas businesses,” Minister of Petroleum and Natural Gas Dharmendra Pradhan said in a statement.

Indian officials add that extending energy cooperation with Qatar is a strategic move, considering the glut and soft prices of gas in international markets.

While LNG prices for August delivery have fallen to $5.60 a million metric British thermal unit (mmBtu), some Indian firms are securing spot cargoes at $5.00/mmBtu and India, as the third largest buyer of  Qatari gas, could be looking at assured purchase agreements at even lower prices, officials have said.

Inviting Qatari investments in Indian gas-based power plants would be an additional “sweetener” as it would push India-Qatar beyond “buyer-seller” trade relations, the officials added.

A long-term gas purchase agreement, coupled with Qatar’s investment in India, would also be a bailout for gas-based power plants stranded by a shortage of fuel. According to estimates, 25 000 MW of aggregate gas-based power generation capacity are currently either stranded or operating at extremely low plant load capacity owing to a shortage of natural gas.

India is optimistic about new deals with Qatar, which is actively seeking to eliminate any negative impact on India-Qatar trade following the diplomatic boycott by Saudi Arabia, Bahrain, Egypt and United Arab Emirates.

With major ports, like Jebel Ali in Dubai, out of bounds for Qatari trade traffic, the country has moved to open up alternative routes through ports like Bandar Abas and Chhabahar, in Iran, for trade with India, officials said, adding that India was under no compulsions in taking sides in the diplomatic and trade row between Qatar and its neighbouring countries.

India is also banking on Qatar extending its investment influence beyond the Gulf region and this could trigger much needed investments in India’s gas infrastructure.

By proposing that Qatar extend its gas trading relation with India through investment in gas infrastructure, the Indian government is expecting to plug acutely deficient gas infrastructure even, the officials said.

At present, India has four operational LNG terminals at Dahej, Hazira, Kochi and Dabhol with regasification capacity of 25-million tons a year, but all currently operating below capacity. As per government’s roadmap, India’s natural gas demand would rise to 65-million tons a year, which would include creation of matching storage and regasification capacities.