GAIL wants US to relax norms for more LNG imports.

NEW DELHI: Close on the heels of sewing nation's first gas import deal from the US, state-owned GAIL India wants Washington to relax rules so that it can buy more liquid gas (LNG) to meet growing energy needs of the country.

Gas-surplus US at present allows exports of small amounts of natural gas. It has so far allowed only Cheniere Energy to export liquefied natural gas (LNG) from Sabine Pass LNG terminal to countries that have not signed free-trade agreements with the US such as India.

GAIL recently signed an agreement to import 3.5 million tons of LNG from Sabine Pass, a subsidiary of Cheniere Energy.

But given the growing gap between demand and supply, GAIL Chairman B C Tripathi wants to tap all of the seven LNG export terminals planned in the US and has written to Oil Ministry and Ministry of External Affairs seeking diplomatic intervention to push Washington to allow other terminals to sell gas to India.

The seven planned LNG terminals only to nations that have signed free-trade agreements (FTAs) with the US.

"This implies that GAIL as a representative company of India, cannot conclude any contractual arrangement with these seven LNG export terminal companies till the time non-FTA approval is given to them," he wrote. "This is coming in way of GAIL's efforts to finalise liquid shale gas export from the US to India whereas time is very ripe now to strike LNG deals at competitive prices".

Tripathi said GAIL's September 2011 acquisition of 20 per cent stake in Eagle Shale Assets in Texas of Carrizo Oil and Gas, has "provided it with an opportunity to understand the North American gas market".

This led to GAIL sewing up the LNG supply deal with Sbaine Pass at a price linked to US Henry Hub gas price as against the practice of tying it up with oil.

He said LNG imports from the US was largely dependent on approvals from the Department of Energy, Federal Energy Regulation Commission and clearances from various departments of the US pertaining to land, water, air etc.

While FERC's approval was related to construction and conformance to the regulations, approval of DOE pertains to export of LNG to countries which signed FTA with US and/or nations which have not signed FTA with the US but are not covered under any sanctions for trade relations.

As on date, only Sabine Pass has received approval for export to both FTA/non-FTA countries whereas seven export terminals have received only FTA approvals.

"We are given to understand that approval from DOE of the US is largely a policy decision with active involvement of the US government. It is, therefore, essential that Government of India immediately takes up with the counterparts in the US and impresses upon them for treating India as a special nation by keeping us outside the purview of FTA/non-FTA framework," he wrote.

Development of shale gas -- natural gas formed from being trapped within shale formations -- in the US has turned the as market there from shortage to glut.

The US Energy Information Administration estimates that China holds the world's largest shale gas reserves, with 1,275 trillion cubic feet, followed by the United States at 862 trillion cubic feet.

Tripathi said the relaxation would allow India and in particular GAIL to approach all the LNG exporting companies in US to bring large volume of liquid shale gas to India.

With supply outstripping demand for gas in US, chances are quite high to conclude LNG deals at competitive price, he said. "It is, therefore, in the larger interest of India's energy security that this matter is taken up urgently... so that US government extends special status to India for import of liquid shale gas to India."

Under a deal Cheniere Energy signed last year, GAIL will import 3.5 million tonnes of liquid gas per year starting in 2017.

Other US players, including the San Diego-based utility Sempra Energy and Dominion Resources Inc, are also pressing for permits to ship gas across the Pacific.

India's current demand of 254.2 million standard cubic meters per day (mmscmd) of natural gas far overshoots supply of 166 mmscmd.

The demand-supply gap is likely to widen further, potentially hurting output at power, petrochemical plants and refineries.

The government estimates show the nation's gas demand is set to rise 40 per cent by March 2015 to 356.16 mmscmd.

A price linked to Henry Hub, a key benchmark location for pricing throughout the US, is likely to be cheaper than oil-index rates that LNG exporters like Qatar charge from India.

Prices at Henry Hub fell 9 per cent to about $ 4 per million British thermal units in 2011, the second-lowest annual average price since 2002.

LNG imports into India are priced as much as $ 15-17 per mmBtu.

Source : economictimes.indiatimes.com