GAIL to source gas from US firm for its Maryland LNG terminal

GAIL Global USA LNG Llc, a unit of state-run gas utility GAIL (India), has agreed to source natural gas from WGL Midstream for producing about 2.5 million tonnes (mt) of LNG at its Cove Point Terminal in Maryland, US.

WGL Midstream is a subsidiary of WGL Holdings Inc, a major natural gas company in the US.

GAIL did not disclose the price at which it is sourcing the gas. The prevailing gas price in the US is in the range of $4-4.5 per million British thermal units.

The definitive gas sale and purchase agreement has been signed for 20 years and supplies are expected to commence from 2017-end when the LNG terminal becomes operational.

While the plan is to get this gas to India, the modalities are yet to be worked out, an official said. “We are now in the process of chartering LNG ships, thereby entrenching our presence across the complete LNG supply chain and bringing more value to Indian customers,” said BC Tripathi, Chairman and Managing Director of GAIL.

In a statement issued by GAIL, Terry D McCallister, Chairman and Chief Executive of WGL Holdings, said: “WGL Midstream’s long-term relationship with GAIL capitalises on the growing supply of abundant natural gas from the Marcellus Shale production region. This growing supply source has been providing clean burning natural gas to the Northeast and Mid-Atlantic regions of the US and now will supply India as well.”

Pace Global (a Siemens business), Thompson & Knight, and Amarchand Mangaldas assisted GAIL on the commercial and legal aspects of the transaction. WGL Midstream engaged Vega Energy Partners Ltd for the execution of these transactions. Vega will also play a role in the implementation of these contracts.

GAIL has already signed a 20-year sales and purchase agreement with Sabine Pass Liquefaction Llc, a unit of US-based Cheniere Energy Partners, for supply of 3.5 mt a year of LNG. It also has a terminal service agreement with Dominion Cove Point LNG for 2.3 mt a year of LNG liquefaction capacity.

While India’s demand for gas is 230 million standard cubic metre a day (mscmd), the availability is 130 mscmd.

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