GAIL to swap a 3rd of US LNG, save transport costs
State-owned gas utility GAIL India Ltd will swap one-third of the liquefied natural gas (LNG) it has contracted from the US with a gas seller nearer to the country to save on transportation costs.
GAIL, in two deals, contracted 5.3 million tonnes a year of super-cooled gas (LNG) from the US starting 2018. Of this, it reckons 3-3.5 million tonnes will be shipped to India for consumption by local industries like power and fertiliser plants.
“Transporting LNG in cryogenic ships from the US will not just be time-consuming, but will add a little extra to the cost, wiping away some of the gain accruing from a Henry Hub linked price for gas,” a senior company official said.
To overcome this, GAIL plans to swap 1-2 million tonnes per annum of LNG from the US with a seller in Africa, the Middle East or Asia-Pacific. GAIL has issued a tender seeking expression of interest (EoI) from swapping part of the 3.5 million tonnes per annum of LNG it has contracted from Sabine Pass Liquefaction, LLC, US on FOB basis for 20-year period with supplies expected to commence from Q1, 2018.
“There are suppliers who sell LNG to Europe from the Middle East or East Africa or the Asia Pacific region. GAIL’s US LNG can be supplied to European users and an equivalent volume shipped to India,” the official said. Doing this would help GAIL save on 10-15 days needed for a ship to travel from the US to India and back. For the other seller, the same benefit will accrue, besides saving on the transportation cost.
“We would like the saving the seller makes through the swap to be shared with GAIL. We believe we can save 40-50 cents per million British thermal unit through the swap,” he said. In the tender, GAIL said it wants to swap some of the US LNG volumes from Sabine Pass with firms that have customers in countries in which LNG trade is not prohibited by United States law and sanctions.
In exchange it wants equivalent supplies on a delivered basis at Dahej import terminal in Gujarat and Dabhol facility in Maharashtra.
GAIL sought bids from interest parties by May 5 for a five year swap.
The company has two US deals -- one with Cheniere Energy Partners to buy 3.5 million tonnes a year of LNG from Sabine Pass Liquefaction, a subsidiary of Cheniere, and another a 20-year sales and purchase agreement with Dominion Resources for supply of 2.3 million tonnes per annum.
Supplies from both deals begin in 2018. GAIL also holds a 20 per cent stake in Carrizo’s Eagle Ford Shale acreage in the US. Of the United States volumes, the company has sold 2 million tonnes of LNG to overseas users.