U.S. shale gas sails to India as Gail buys LNG from Cheniere

LNG tanker
Source: DollarPhotoClub

Last Friday saw the beginning of U.S. LNG exports to Asia with a state-owned Gail India purchasing a load of LNG from Cheniere Energy’s Sabine Pass in Louisiana. The cargo, heading for the Dabhol LNG import terminal in Maharashtra, was bought on spot basis. This is the second batch of LNG sailing from the newly-opened terminal after a load was shipped to Brazil in February, and one of eight cargoes that Cheniere plans to ship from Sabine Pass by May 2016.

An unnamed Gail official told Press Trust of India that the delivered price of the American shale gas cargo is about $5 per million British thermal units (Btu). This is lower than earlier estimates. Back in January, a local newspaper reported that thanks to the currently low natural gas prices in the U.S. India’s landed cost of the fuel, despite freight and re-gasification costs, would not exceed $6 per million metric British thermal units.

The Indian energy company has signed a 20-year sales and purchase agreement with Cheniere’s Sabine Pass Liquefaction LLC for the supply of 3.5 million tons per year of LNG. The company also signed a terminal service agreement for 2.3 million tons per year of LNG liquefaction capacity with Dominion Cove Point LNG. The shipments are expected to start in 2017 or 2018.

“This is the first and definitely will not be the last shipment to go to India from the U.S. Gulf Coast,” Chris Rumley, a senior LNG and natural gas consultant at Poten & Partners, told Bloomberg. “There is terminal capacity in India and if the price is competitive against alternative fuels, then there’s a market there for it.”

India at present imports 76 percent of its crude oil requirements and almost 36 percent of its gas requirements. 7.6 percent of these numbers, according to Indian government figures, come from Africa and the country is looking at broadening that cooperation, seeking deals with countries such as Mozambique – according to the quoted source.

Upon lifting the sanctions imposed in 2006, Iran is also a potential source of imports – of crude in particular – but before that happens, India will have to pay off the $6.5-$7 billion in dues that the country owes Iran.

Last year, India overtook South Korea as the world’s second biggest importer of the fuel on a spot and short-term basis.

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