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Indian GAIL in 3 time-swap deal for US LNG

GAIL signed 3 time-swap deals to sell some of its US LNG as it rejigs the supply portfolio in line with domestic demand.

Indian GAIL in 3 time-swap deal for US LNG

State-owned utility GAIL India reported on August 22, 2017, that the company signed 3 time-swap deals to sell some of its US LNG as it rejigs the supply portfolio in line with domestic demand.

Under the deals, GAIL will buy LNG from international companies this year and sell equivalent amount of Henry Hub-indexed volumes during 2018-19.

It is also seeking destination swaps to cut shipping costs of US LNG.

GAIL has a deal to buy 3.5 million tonnes a year of LNG for 20 years from Cheniere Energy of US and has also booked capacity for another 2.3 million tonnes at Dominion Energy's Cove Point liquefaction plant.

The company said it had contracted LNG from US to meet the demand of growing Indian economy with power sector being considered as a major buyer.

But electricity produced using imported LNG is not finding buyers due to cheaper alternatives including renewables, leading to stranding of significant capacity out of 25,000 MW of installed gas based power plants.

To mitigate the risks, GAIL said it is exploring opportunities to market Henry Hub indexed LNG volumes in the international markets either directly or through Singapore based subsidiary, GGSPL.

GAIL said it «has already concluded 3 time swap deals, where-in LNG volumes are purchased from international parties during financial year 2017-18 with an agreement to sell equivalent volumes of Henry Hub volumes during FY 2018- 19».

It added: «In parallel, your company is also making efforts to optimise Henry Hub LNG through destination swap transactions that could significantly reduce cost of shipping (US) LNG to the Indian ports resulting in improved affordability for the Indian customers.»

GAIL had in May signed a 1st-ever time-swap deal to sell some of its US LNG.

Under the agreement, it will get 15 cargoes or about 0.8 million tonnes of LNG this year.

In return, GAIL will sell 10 cargoes or about 0.6 million tonnes next year from Sabine Pass on the US Gulf coast.

GAIL had separately signed a deal with Shell to sell about 0.5 million tonnes of its US LNG.

The LNG that GAIL will receive this year between April and December under the time-swap deal will be at oil-linked prices.

The sale of US gas next year will be at a premium to its pricing formula on a free-on-board (FOB) basis.

GAIL said it is trying to market LNG to anchor customers such as refineries, steel plans along planned and existing pipelines.

It is also in talks to supply LNG to new fertiliser plans and expect firm agreements in 2017.

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