Petronet signs deal with US firm for LNG imports

New Delhi: Petronet LNG has announced an agreement with Houston-based United LNG to import 4 million tonnes of gas a year for 20 years. “If everything goes well, the first cargo should come in 2018,” said R.K. Garg, Director (Finance) of the country’s biggest liquefied natural gas (LNG) importer.

The gas would be imported from Main Pass Energy Hub in the Gulf of Mexico. The $14-billion LNG project is jointly developed by United LNG and Freeport McMoRan Energy, which is yet to be commissioned.

Approvals
One of the conditions associated with the deal is the approval of the US Department of Energy (DoE) to export gas to countries, as the US does not have a free trade agreement (FTA) with India.

“In January, the Main Pass facility received approval from DoE to export gas to nations having an FTA with the US. Approval for sale to non-FTA nations is still pending,” said Deepak Pareek, analyst at Prabhudas Lilladher.

Garg said the project with which Petronet signed the agreement is in queue to seek an approval for exporting to India.

Buying Equity
According to industry watchers, Petronet is also keen to pick up equity stake in United LNG’s liquefaction facilities.

“We keep on discussing such proposals. Nothing has been finalised on this yet,” Garg said.

Main Pass Energy Hub is expected to begin construction of its first vessel this year. First LNG export from the said facility would commence in 2017. The project has taken an approval to export up to 24 million tonnes of gas every year.

Gas Price
Petronet did not comment on the expected gas price to be sourced from the project. Industry watchers are expecting the price to be similar to GAIL’s agreement with Cheniere.

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 landed price in India will be higher.