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GAIL signs pact to buy 3.5 mt per year LNG from US

Press Trust Of India  |  New Delhi 

State-owned gas utility on Sunday said it has signed an agreement to buy 3.5 million tonnes a year of Liquefied Natural Gas for 20 years from a US firm to meet India's growing energy needs.

“GAIL has signed a Sales and Purchase Agreement (SPA) for supply of over 20 years with Sabine Pass Liquefaction, LLC, a subsidiary of Cheniere Energy Partners, LP, USA for supply of 3.5 million tonnes per annum of LNG,” the company said in a press statement here.

Supplies may start as early as 2016. “Under the SPA, GAIL will pay Sabine Liquefaction as per contractual provisions on a Henry Hub (US gas benchmark) basis after transfer of custody on FOB. will be loaded onto GAIL’s vessels,” it said. The SPA has a term of 20 years commencing upon the date of first commercial delivery, and an extension option of up to 10 years.

The from Sabine Pass shall form a part of the basket for feeding to Dabhol terminal in Maharashtra and Kochi in Kerala. GAIL Chairman and Managing Director said: “The SPA with Cheniere will help GAIL to ensure long term gas supply for the growing demand in the Indian market."

This will be in addition to other initiatives being undertaken by GAIL which includes building captive facilities in India and augmenting its transmission capacity from 175 million standard cubic metres per day to over 300 mmsmcd over the next two years.

“GAIL will join BG and Gas Natural Fenosa as the next foundation customer for our Sabine Pass liquefaction project. GAIL is India's leading natural gas company and its largest shareholder is the Government of India,” said Charif Souki, Chairman and CEO. "We are building a strong portfolio of customers, consisting of energy engaged in the natural gas, and power markets with operations spanning the globe.

“We continue to hold advanced discussions with additional global buyers and expect to complete commercial discussions for the remaining capacity of the second phase of the project in the coming weeks," he said.

The would be supplied from train four of the Sabine Pass receiving terminal located on the Sabine Pass Channel in western Cameron Parish, Louisiana.

The Sabine Pass terminal project is being developed by Sabine Liquefaction and would include up to four liquefaction trains capable of producing up to 18 mtpa of

The project is being developed in phases with each train commencing operations approximately six to nine months after the previous train.

Sabine Liquefaction has recently announced that it has reached its targeted annual contract quantity of seven mtpa for the first phase and is advancing towards making a final investment decision for the development and construction of the first two liquefaction trains.

The SPA with GAIL represents the first contract for the second phase of the project, which will also include two liquefaction trains with combined production capacity of 9 mtpa. “The SPA is subject to certain conditions precedent, including but not limited to Sabine Liquefaction receiving regulatory approvals, securing necessary financing arrangements and making a final investment decision to construct the second phase of the liquefaction project,” the statement said. GAIL has already established an office in Houston and acquired shale gas assets in Carrizo's Eagle Ford Shale acreage and is further looking for shale gas assets in the US, Tripathi said.

The firm has acquired its first shale gas assets in the US when its wholly owned US subsidiary GAIL Global (USA) Inc bought 20 per cent interest in Carrizo's Eagle Ford Shale acreage. Cheniere Partners owns 100 per cent of the Sabine Pass receiving terminal located on the Sabine Pass Channel in western Cameron Parish, Louisiana.

The Sabine Pass terminal has regasification and send-out capacity of 4.0 billion cubic feet per day (Bcf/d) and storage capacity of 16.9 billion cubic feet equivalent (Bcfe). Cheniere Partners is developing a project to add liquefaction and export capabilities to the existing infrastructure at the Sabine Pass terminal.

First Published: Mon, December 12 2011. 00:19 IST