GAIL signs agreement to buy LNG from US firm

State-owned gas utility GAIL India today said it has signed an agreement to buy 3.5 million tonnes a year of LNG 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 LNG 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. LNG 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 LNG from Sabine Pass shall form a part of the basket for feeding LNG to Dabhol terminal in Maharashtra and Kochi in Kerala.

GAIL Chairman and Managing Director B C Tripathi 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 LNG 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 companies engaged in the natural gas, LNG and power markets with operations spanning the globe.

"We continue to hold advanced discussions with additional global LNG 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 LNG would be supplied from train four of the Sabine Pass LNG receiving terminal located on the Sabine Pass Channel in western Cameron Parish, Louisiana. The Sabine Pass LNG terminal project is being developed by Sabine Liquefaction and would include up to four liquefaction trains capable of producing up to 18 mtpa of LNG.

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