Macquarie Vies To Sell U.S. LNG To India
For all the hubbub over the competitive threat posed by U.S. gas exports to Australia’s rapidly growing liquefied natural gas sector, Macquarie clearly smells an opportunity.
Indian energy company GAIL expects to sign a deal within a month with Macquarie Energy to buy 2 million tons of liquefied natural gas annually for 20 years from the Freeport LNG project in the U.S.
“We are in advanced discussions with Macquarie. I think we will be able to sign the deal in a month’s time,” a senior executive with India’s largest gas distributor told Deal Journal Australia’s colleague Rakesh Sharma in New Delhi.
Macquarie Group’s North American energy marketing and trading arm, Macquarie Energy, and Freeport LNG Expansion LP, are jointly developing and marketing liquefaction capacity at the LNG terminal in Freeport, Texas.
Macquarie’s corporate communications team weren’t immediately available for comment on the talks with GAIL.
The U.S. shale-oil and natural-gas boom has transformed the gas market, made the country a net exporter, depressed gas prices and has prompted several players to set up LNG export operations with an eye on rapidly-expanding Asian markets.
GAIL in December agreed to buy 3.5 million tons per year of LNG for over 20 years from Sabine Pass Liquefaction LLC, a unit of the U.S.-based Cheniere Energy Partners LP, at a free-on-board price indexed to the Henry Hub price, the main international benchmark for natural gas prices in North America.
The executive said the deal with Macquarie will also be linked to Henry Hub, instead of crude-oil prices. This will help GAIL get LNG at competitive rates as its end-customers in India are price sensitive, he added.
GAIL projects its gas import needs to grow seven times to 187 million standard cubic meters a day by 2015 from end-2010. The share of imported gas in its total gas use is set to rise to around 48% from 15% during the same time period, IHS Global Insight said in a note last month.
The gas pipeline utility is pushing hard to line up supplies. In September, it took a 20% stake in Houston-based Carrizo Oil & Gas Inc.’s Eagle Shale Ford acreage and in November set up a unit in Singapore for LNG trading.
“The deal [with Macquarie] is a part of company strategy to assure long-term supplies,” Bhavesh Chauhan, an analyst with Mumbai-based Angel Broking, said.
Another analyst, who didn’t wish to be named, said the deal will be a big positive as a fall in domestic Indian gas production has reduced GAIL’s transmission volumes and its pipeline network is facing low utilization.
Last month, the head of global gas at UK-based energy consultancy Wood Mackenzie said the U.S. could emerge as a major competitor to Australia’s burgeoning gas-export market, challenging the viability or expansion plans of close to a dozen Australian liquefied natural gas projects.
“We’re of the view that North America will have 20 million tons of LNG capacity maybe as early as 2018,” Woodmac’s Noel Tomnay said. “Consequently, that will remove potential market share for Australian LNG projects.”
Investment totaling over A$175 billion has been earmarked for new Australian LNG terminals focused mainly on Asia since 2007, which could catapult Australia ahead of Qatar as the world’s largest LNG exporter within a decade. Friday, Japan’s Inpex and France’s Total formally approved construction of their $34 billion Ichthys gas-export facility in the Northern Territory.
- USA: Seventeen LNG Cargoes Re-Exported in Jan-Nov (mb50.wordpress.com)
- India to focus on cheaper LNG from U.S. (thehindu.com)
- GAIL to buy 3.5 million tonnes of LNG from U.S. firm (mb50.wordpress.com)
- Angola LNG Looks to Sell Liquefied Natural Gas to Non-U.S. Buyers (mb50.wordpress.com)
- Lithuania: Cheniere Eyes LNG Exports by 2015 (mb50.wordpress.com)
- Petronet in Talks to Buy Capacity at US, Australia LNG Terminals (mb50.wordpress.com)
- InterOil Seeks Strategic Partner for Papua New Guinea LNG Project (mb50.wordpress.com)
- USA: Cheniere Plans Corpus Christi LNG Export Terminal (mb50.wordpress.com)
- Chesapeake CEO Opposes US LNG Exports (mb50.wordpress.com)
Posted on January 16, 2012, in Freeport, LNG, Shale Oil and tagged Australia, Freeport LNG project, GAIL, India, Liquefied natural gas, LNG, LNG export, Qatar, Texas, United States. Bookmark the permalink. 4 Comments.