India has rejected the price that Qatar is seeking for supplying additional 5 million tons a year of liquefied natural gas, saying that domestic consumers cannot afford the rate the world's largest LNG exporter is asking for.

Qatar wants at least 14.5 per cent of the prevailing Brent crude oil price for supply of 5 million tons of LNG but New Delhi has rejected the offer, said sources with knowledge of talks with a high-level Qatari delegation, led by Minister for Industry and Energy Mohammed Bin Saleh Al Sada.

At Brent crude oil price of USD 110 per barrel, gas in its liquid form (LNG) will cost USD 15.96 per million British thermal unit at the time of loading in ships at Qatar ports.

After adding shipping cost, import duty of 5 per cent, cost of regasifying the fuel, pipeline tariff and local levies, the gas would cost a consumer about USD 20 per mmBtu, three times the price of domestic gas.

Sources said New Delhi politely told the visiting Qatari delegation, which included the head of Ras Laffan Liquefied Natural Gas Co -- a venture between Exxon Mobil Corp and the Qatari state that currently supplies 7.5 million tons a year of LNG on a long-term contract.

India's concerns on pricing reflected in Oil Minister S Jaipal Reddy's speech at function where the visiting Qatari minister was also present.

"On the pricing front, a major challenge is that for end consumers in India, gas has to compete with relatively cheaper fuels such as coal, especially in the power sector," he said at the foundation day celebration of Petronet LNG Ltd.

"Therefore, price fixation of gas, whether LNG from abroad of gas through trans-national pipelines, will have to be mindful of this reality," he said hoping the negotiations between RasGas and Petronet will 'soon reach fruition, to the satisfaction of both sides'.

Qatar, world's largest LNG producer, is seeking larger and longer export deals amid a surge in global supplies that is encouraging buyers to call for an end to costing the fuel based on oil prices.

GAIL India, which is a promoter firm of Petronet, recently signed a deal to source LNG produced from shale gas in US at a price linked to Henry Hub, which is the benchmark for gas traded in US.

US gas traded at the lowest level in 10 years of less than USD 3 per mmBtu while Brent crude has jumped to a three and a half year high of USD 125 per barrel.

Al-Sada urged India to commit expeditiously saying "a wait and see attitude in some markets who are deferring decision will in turn delay investment decision (in LNG producers). As history has shown as, it will lead to potential market instability and demand-supply imbalance."

Sources said the price sought by Qatar is the same that India has committed to pay to Exxon Mobil Corp for buying 1.5 million tons a year of LNG under long-term contract from Australia's Gorgon project.

RasGas of Qatar now supplies 7.5 million tons a year of LNG under long-term contract at a price indexed at 12.67 per cent of JCC.

LNG is natural gas chilled to a liquid so that it can be transported in cryogenic ships.

Sources said Petronet wants 2-3 million tons additional LNG from 2013 at its Dahej terminal in Gujarat whose capacity is being expanded to 15 million tons a year from current 10 million tons, as well as at the under-construction five million tons a year terminal at Kochi in Kerala.

GAIL wants 1-2 million tons LNG at its almost ready import facility adjacent to the Dabhol power plant in Maharashtra.

Qatar, which raised annual LNG capacity to 77 million tons last year with the start of its 14th liquefication plant, typically signs agreements at prices tied to crude on an energy-equivalent basis.

US may overtake Qatar as the world's top LNg producer if planned projects are built.

GAIL in December signed contracts to import 3.5 million tons from Cheniere Energy Partners LP in Louisiana.