Gail India books LNG output facility in US for 20 years

New Delhi: Gail India, the country's biggest gas utility, has booked 2.3 million tonnes of liquefied natural gas (LNG) production capacity in the US, from where it hopes to bring the scarce resource to India, company executives said.

It has signed a deal with US energy firm Dominion for using capacity at its Cove Point terminal at Lusby in Maryland. "Dominion is marketing 4.6 million tonnes per annum and Gail has booked 50% of such capacity for 20 years," the company said in a statement. A major Japanese buyer holds the balance capacity in the terminal.

Construction of the terminal is expected to start in 2014 and the liquefaction facilities will be commissioned by 2017, it said.

Cove Point will be a premier facility in terms of direct access to the Marcellus and Utica shale plays, two of the most prolific shale gas basins in North America, Gail said.

Gail plans to import natural gas from America and this project will help it in importing LNG, a company executive said.

"Gail has a positive outlook on Henry Hub-indexed LNG exports from the US and that has prompted us to sign this terminal service agreement, which follows our deal with Cheniere signed in 2011. The contracts signed with Cheniere and Dominion make Gail one of the largest Henry Hub LNG portfolio holders and provide us an opportunity to market about 6 mmtpa of LNG from the US," Gail chairman & managing director BC Tripathi said.This agreement will help Gail to procure its own natural gas and deliver it to the Cove Point pipeline for liquefaction at the terminal. "This would enhance Gail's scale of operations in the US where we already have a presence through our participation in a shale gas asset in the Eagle Ford basin. Our upstream acquisition efforts for gas sourcing and hedging would now intensify in the US," Tripathi said.

"This deal would also provide Gail with an opportunity to trade part of the volume in the international market apart from organising the ships required to transport the rest of the volume to India," he said.