Officials privy to board deliberations said the issue was discussed at the company's board meeting in April/May and members felt that the company should not go ahead with the deal due to changing global gas market dynamics, where the fuel is available in abundance at rock bottom prices.
Locking imports for 40 years together with an equity investment in the LNG terminal was not favoured, they said, adding Petronet's promoters, including state-owned gas utility GAIL India Ltd, refiner Indian Oil Corp (IOC) and Oil and Natural Gas Corp (ONGC), were all against the deal.
Company managing director and CEO Prabhat Singh neither answered calls and nor replied to text messages sent for comments.
Petronet is a firm promoted by GAIL, IOC, ONGC and Bharat Petroleum Corp Ltd (BPCL), and Secretary to Ministry of Petroleum and Natural Gas, Government of India, is its chairman.
The officials said the deal with Tellurian is far from closed and will require negotiations.
The deal will go through if the government was to push for it, they added.
If concluded, this would be the first long-term LNG import contract signed since the Narendra Modi government came to power in 2014. All the previous deals - 7.5 million tonnes with Qatar, 1.44 million tonnes with Australia, 2.5 million with Russia and 5.8 million tonnes with the US - were all signed during the Congress-led UPA regime.
Petronet had first signed a broader agreement in February.
The sources said India is looking at reopening pricing of previously entered LNG import deals with the US and Petronet board was of the majority view that locking in quantities and price for 40 years was not a good option at this point of time.
Petronet signed the MoU on sidelines of Prime Minister Narendra Modi's visit to Houston.
GAIL had in 2011 signed a 20-year deal to buy 5.8 million tonnes per year of US LNG, split between Dominion Energy Inc's Cove Point plant and Cheniere Energy Inc's Sabine Pass facility in Louisiana.
That deal prices of LNG were at 115 per cent of prevailing Henry Hub price of gas plus $5.05 per million British thermal unit. The landed price in India comes to $9-10 per mmBtu against LNG being available in the spot or current market for USD 5-6.
GAIL wants to renegotiate the 2011 sales and purchase agreement (SPA) with Cheniere Energy for import of 3.5 million tonnes of LNG annually, with yearly fixed fees of $548 million and a term of 20 years.
Besides the 3.5 million tonnes per annum of LNG from Houston-based Cheniere, GAIL has booked 2.3 million tonnes a year capacity at Dominion's Cove Point liquefaction facility.
In the statement, Tellurian and Petronet had stated that they will endeavour to finalise the transaction agreements by March 31, 2020. Petronet's regulatory filing, however, did not mention of this deadline.
Tellurian is investing $28 billion in setting up a 27.6 mtpa liquefaction export facility near Lake Charles, Louisiana on the US Gulf Coast.
In April, the US Federal Energy Regulatory Commission (FERC) issued the order granting authorisation for Driftwood LNG and the 96-mile Driftwood Pipeline, which will inter-connect the LNG terminal to the US natural gas market.