GAIL to buy 3.5 million tonnes of LNG from U.S. firm

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by Sujay Mehdudia

“It will ensure long-term gas supply to meet demand in India

In a major step aimed at meeting India’s energy security requirements, state-run Gas Authority of India Limited (GAIL) on Sunday announced that it signed an agreement to buy 3.5 million tonnes a year of liquefied natural gas (LNG) for 20 years from a U.S. firm.

“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, the United States, for supply of 3.5 million tonnes per annum of LNG,” the company announced it in a statement here. The supplies may start as early as 2016.

“Under the SPA, GAIL will pay Sabine Liquefaction as per contractual provisions on a Henry Hub (U.S. gas benchmark) basis after transfer of custody on FOB. LNG will be loaded onto GAIL’s vessels,” the statement said.

The 20-year term would commence upon the date of first commercial delivery, and there was 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 a day to over 300 msmcd over the next two years.”

“Charif Souki, chairman and CEO, said GAIL would join BG and Gas Natural Fenosa as the next foundation customer for our Sabine Pass liquefaction project,” he said.

GAIL is India’s leading natural gas company and its largest shareholder is the government of India.

“We are building a strong portfolio of customers, consisting of energy companies engaged in 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 added.

The LNG would be supplied from 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. Sabine Liquefaction recently announced that it had reached its targeted annual contract quantity of 7 mtpa for the first phase and was advancing towards making a final investment decision for the development and construction of the first two liquefaction trains.

“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.

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Posted on December 11, 2011, in Cameron (P), LNG, Parish - LA and tagged , , , , , , , . Bookmark the permalink. 3 Comments.

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