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GAIL signs deal to source 3.5 mt of LNG annually from Cheniere arm

GAIL (India) Limited has contracted for a supply of 3.5 million tonnes a year liquefied natural gas with Sabine Pass Liquefaction, LLC, a subsidiary of Cheniere Energy Partners, LP, of the US.

The company has signed a sales and purchase agreement for supply of LNG (liquefied natural gas) over 20 years beginning 2017. Under the agreement, GAIL will pay for gas on a Henry Hub (which decides futures gas price at the New York Mercantile Exchange) basis. The current Henry Hub price is $3.5/mBtu. The landed price in India will be higher.

According to GAIL, the agreement has an extension option of up to ten years for supplies. The bridging supplies of LNG will start from 2016.

In a statement issued here on Sunday, GAIL said, “The LNG would be supplied from the Sabine Pass LNG receiving terminal located on the Sabine Pass Channel in western Cameron Parish, Louisiana.”

Mr B. C. Tripathi, Chairman & Managing Director, GAIL (India) said, “The sales and purchase agreement with Cheniere will help GAIL to ensure long-term gas supply for the growing demand in the Indian market. This will be in addition to other initiatives being undertaken by GAIL, which includes building captive LNG facilities in India and augmenting its transmission capacity from 175 mmscmd to over 300 mmscmd over the next two years.”

“GAIL has already established an office in Houston and acquired shale gas assets in Carrizo's Eagle Ford Shale acreage and is further looking for shale gas assets in the US,” Mr Tripathi added.

The Sabine Pass LNG terminal project is being developed by Sabine Liquefaction and would include up to four liquefaction trains capable of producing up to 18 million tonnes per annum of LNG.

The project is being developed in phases. The sale and purchase agreement with GAIL represents the first contract for the second phase of the project, which will also include two liquefaction trains with combined production capacity of 9 million tonnes a year .

The liquefied natural gas will be loaded onto GAIL's vessels. The sales and purchase agreement is subject to certain conditions precedent, including but not limited to Sabine Liquefaction receiving regulatory approvals, securing necessary financing arrangements and making a final investment decision to construct the second phase of the liquefaction project, GAIL said.

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