GAIL in time-swap deal for US LNG
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New Delhi: State-owned gas utility GAIL (India) Ltd on Monday said it has signed a first-ever time-swap deal to sell some of its US liquefied natural gas (LNG) as it rejigs the supply portfolio in line with domestic demand.
GAIL chairman and managing director B.C. Tripathi said the company is to receive LNG from its shale gas project in US from March next year. It has, however, time-swapped some of the supplies. Under the agreement, it will get 15 cargoes or about 0.8 million tonnes of LNG from an unnamed trader this year. In return, GAIL will sell 10 cargoes or about 0.6 million tonnes next year from Sabine Pass on the US Gulf coast. “We imported 55 cargoes of LNG on short or medium-term contracts in 2016-17. This equals to under 4 million tonnes of LNG in a year. This volume we expect to replace from our US portfolio,” he said.
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GAIL has a deal to buy 3.5 million tonnes of LNG a year for 20 years from Cheniere Energy and has also booked capacity for another 2.3 million tonnes at Dominion Energy’s Cove Point liquefaction plant. Against a supply of 5.8 million tonnes of LNG from US, GAIL has been able to create a market for just under 4 million tonnes in India and so it wants to sell off the remaining overseas. Tripati said GAIL had separately signed a deal with Royal Dutch Shell to sell about 0.5 million tonnes of its US LNG. So from a potential supply of 5.3 million tonnes (after the Shell deal), GAIL feels Indian market can absorb only 4 million tonnes or so. “We hope to replace the short and medium-term contracted volumes with US LNG,” Tripathi said, adding that the company has floated a tender to time-charter four LNG ships to ferry the gas in its liquid form from US coast to Dahej in Gujarat.
The LNG that GAIL will receive this year between April and December under the time-swap deal will be at oil-linked prices. The sale of US gas next year will be at a premium to its pricing formula on a free-on-board (FOB) basis. Tripathi said there are not many new takers for imported LNG, particularly in the power sector which is price sensitive, thereby forcing the rejig of supply portfolio. The company is also renegotiating the price and time of the supply of 2.5 million tons per annum of LNG by Russia’s Gazprom. GAIL is saddled with long-term deals for US and Russian gas after it went on a contracting spree between 2011 and 2013, when the fuel was scarce and prices kept rising.