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India: GAIL to Finalize USD 12 Billion Gas Deal

State-run gas company GAIL is just steps away from signing a 20-year contract for shipping two million tonnes of LNG a year from US east coast, The Times of India said, citing sources close to the development.

Value of this contract would be approximately $12 billion.

GAIL executives were in the US last week in order to give final touches to the deal, the newspaper said.

In December 2011, GAIL inked a $20 billion contract with Sabine Pass Liquefaction for 3.5 million tonnes of LNG annually.


USA: Cheniere Urges FERC to Approve Sabine Pass Liquefaction Project


Cheniere Energy of USA has urged Federal Energy Regulatory Commission (FERC) to approve construction of its Sabine Pass liquefaction project by Thursday to prevent any project delays.

In a letter sent to FERC, Cheniere said failure to receive FERC authorization by Thursday could result in delays in construction of the liquefaction project and significant price increases.

Cheniere is developing a project to add liquefaction and export capabilities to the existing infrastructure at the Sabine Pass LNG terminal.

The Liquefaction Project is being designed and permitted for up to four modular LNG trains, each with a nominal capacity of approximately 4.5 mtpa.

In November, Sabine Liquefaction entered into a lump sum turnkey contract for the engineering, procurement and construction of the first two trains of the project with Bechtel Oil, Gas and Chemicals.

Sabine Liquefaction has also entered into four long-term customer sale and purchase agreements for 16.0 mtpa of LNG volumes.

The customers include BG Gulf Coast LNG for 5.5 mtpa, Gas Natural Fenosa for 3.5 mtpa, KOGAS for 3.5 mtpa and GAIL (India) for 3.5 mtpa.


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.


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


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.


GAIL Looking to Buy Stake in Indonesia Offshore Blocks from Chevron


GAIL (India) Ltd is in talks with US energy major Chevron to acquire stakes in its deepwater natural gas blocks in Indonesia.

“Preliminary discussions have been held with the US firm. Chevron officials and Indonesia upstream regulator BPMIGAS will soon be coming to the country to hold further talks,” company sources said.

“The details on the amount of stake are yet to be worked out. The talks are at an early stage.”

Chevron plans to sell its stakes in two deepwater projects — Gendalo-Gehem and Bangka — in Indonesia. It plans to reduce its shares in the blocks this year to 55.1 per cent and 54 per cent, respectively, from 80 per cent, the firm said in its filing with the US Securities and Exchange Commission.

It had reached an agreement with China’s state-owned oil and gas company Sinopec to sell an 18 per cent stake in Gendalo-Gehem for $680 million.

At present, Chevron holds an 80 per cent stake with Italy’s Eni and Indonesia’s Pertamina owning the rest. The Indonesian regulator is yet to approve the sale to Sinopec.

Chevron has also sold some stake in Bangka but not revealed details.

It said, “During 2010, the company reached an agreement to farm out a portion of its working interest in the production sharing contracts of the two projects.”

Sources said GAIL would immensely benefit by acquiring a stake in the project.

The overseas asset acquisition will help it to access LNG for India. The equity participation in such upstream assets will act as a natural hedge to GAIL, which will also get to learn from a global player such as Chevron.

Read more at The Telegraph India

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