GAIL India in talks to buy US gas from Freeport LNG plant

GAIL India Ltd, the nation’s biggest natural gas distributor, is in talks to buy the fuel from Freeport LNG Development LP’s proposed plant in the US, a person with direct knowledge of the matter said.

The state-run company has held talks with Macquarie Group Ltd, Freeport LNG’s partner in the plant, and may buy the gas at prices linked to Henry Hub, a US benchmark, the person said on condition of anonymity.

B C Tripathi, chairman of GAIL, didn’t answer two calls to his mobile phone seeking comment. Navleen Prasad, a spokeswoman for Sydney-based Macquarie, declined to comment.

GAIL is negotiating its second LNG supply contract from the US, where a surge in shale gas output has led to increased availability of the fuel for export. The New Delhi-based company reached an agreement with Cheniere Energy Partners LP in December and is seeking supplies from the 13.2 million metric tonne a year of the fuel that Freeport LNG plans to export from a plant due to start in 2016.

The gas distributor declined 0.5 per cent to Rs 371.50 at 1.43 pm in Mumbai trading. The stock fell 25 per cent last year. The Sensex was little changed on Monday.

GAIL expects to sign a deal with Macquarie within a month to buy two million tonne of the fuel annually for 20 years, the Wall Street Journal reported on Monday.

GAIL agreed last month to buy 3.5 million tonne of LNG a year for two decades from Houston-based Cheniere’s Sabine Pass LNG terminal in western Cameron Parish, Louisiana.

The company has signed an initial agreement to set up an LNG import terminal of as much as five million tonne on the east coast in India’s Andhra Pradesh state, GAIL said on January 13.

Gas extracted from shale rock has made the US the world’s largest producer of the fuel and caused prices to collapse 75 per cent from highs in 2008, opening prospects for exports by ship.