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GAIL books 50% capacity in US LNG plant to convert shale gas

GAIL has signed a terminal service agreement with Fortune 500 company Dominion through GAIL Global (USA) LNG LLC for booking 2.3 mmtpa liquefaction capacity in the Cove Point LNG liquefaction terminal project located at Lusby, Maryland. Dominion would be setting up the liquefaction facilities in the premises of its existing 11.7 mmtpa regasification terminal.

Construction work is expected to start in 2014 so as to put the liquefaction facilities into service in 2017. Dominion is marketing 4.6 mmtpa and GAIL has booked 50 per cent of such capacity for 20 years.

Japanese company Sumitomo holds the balance capacity in the terminal. Cove Point will be a premier facility in terms of direct access to the Marcellus and Utica shale plays, two of the most prolific shale gas basins in North America.

Following the signing of the document, GAIL CMD B C Tripathi said on an interactive video session, 'This is an important occasion for GAIL and we are delighted to have executed this agreement. GAIL has a positive outlook on Henry Hub indexed LNG exports from the US and that has prompted us to sign this terminal service agreement which follows our deal with Cheniere signed in 2011.'

'The contracts signed with Cheniere and Dominion make GAIL one of the largest Henry Hub LNG portfolio holders and provide us an opportunity to market about 6.0 mmtpa of LNG from the US,' he added. Under the pact, GAIL will procure its own natural gas and deliver it to the Cove Point pipeline for liquefaction at the terminal and loading into ships brought to the facility on Chesapeake Bay.

'This will enhance GAIL’s scale of operations in the US, where we already have a presence through our participation in a shale gas asset in the Eagle Ford basin. Our upstream acquisition efforts for gas sourcing and hedging would now intensify in US,' explained Tripathi.

'The deal would also provide GAIL an opportunity to trade part of the volume in the international market apart from organising the ships required to transport rest of the volume to India,' he noted.

Tripathi added that with its extensive pan-India infrastructure in the midstream and downstream segments, GAIL is well positioned to market and distribute this gas to meet the growing domestic demand in India.

Dominion is one of the largest producers and transporter of energy in the US with a portfolio of approximately 27,500 megawatts of generation, 11,000 miles of natural gas transmission, gathering and storage pipeline and 6,300 miles of electric transmission lines. It serves retail energy customers spread across 15 states in the US.
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