New Delhi, Sep 10 (PTI) India has renegotiated the pricing of liquefied natural gas (LNG) imported from Australias Gorgon project to save more than Rs 10,000 crore over the life 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 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 shipping arrangement.

At USD 50 per barrel oil price, Gorgon LNG, whose supplies started in January this year, would have cost USD 7.25 per million British thermal unit at the port of loading. Adding another USD 1 for transportation would have led to delivered price of USD 8.25 in the old contract.

In the new formula, Gorgon LNG delivered at Indian port will cost USD 6.95 per mmBtu.

"Happy to share good news that India has, yet again, been able to address the long-term price issue of LNG from Gorgon to suit Indian market," Oil Dharmendra Pradhan said in a tweet.

India had used its status of Asias third largest LNG buyer to renegotiate in 2015 the LNG pricing formula with Qatars 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, Indias largest liquefied natural gas importer, had last year formally sought at least 10 per cent cut in price of LNG it plans to buy from Australias 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.

Petronet had in late 2015 renegotiated price of the long-term deal to import 7.5 million tonnes per year of LNG from Qatar, helping save Rs 8,000 crore. At that time, it had also signed a contract to buy an additional 1 million tonne per annum till 2028.

"That deal for an additional 1 million tonne was at 13.05 per cent of the ruling Brent price. So naturally, the expectation is that the Gorgon should lower the indexation to a minimum 13 per cent," the source said.

LNG in spot or current market is available at USD 5-6 per million British thermal unit where as Gorgon LNG at current formula will cost USD 7.25 per mmBtu at an oil price of USD 50 per barrel.

State-owned gas utility GAIL India, one of the four PSU promoters of Petronet, had way back in 2013 sought review of the Gorgon LNG price formula.

Its then Director (marketing) Prabhat Singh, who now is the Managing Director and CEO of Petronet LNG, had in June 2013 written a letter seeking reduction in price of Gorgon LNG.

Sources said the case of renegotiating the Gorgon deal had strengthened after Petronet last year got RasGas of Qatar to lower the rate for 7.5 million tons per annum LNG it supplies under a 25-year long term contract since 2004.

The price of imported LNG under this agreement had been linked to crude oil (Japanese Customs Cleared Crude or JCC) and had a concept of floor and ceiling indexed to last 5-year average. The rate thus arrived was higher than spot LNG.

Petronet sought renegotiation of the deal and RasGas agreed to modify the pricing formula to link it with last 3- month average rate of Brent crude oil, they said.

GAIL, Indian Oil, Bharat Petroleum and Oil and Natural Gas Corp (ONGC) hold 12.5 per cent each in Petronet. Petronet was to get Gorgon LNG by the end of 2015, but supplies have been deferred to 2017. PTI ANZ ABM