(EnergyAsia, April 26 2013, Friday) — India’s main gas importer Petronet LNG has signed an initial 20-year agreement with Houston, US-based United LNG to purchase four million tonnes of liquefied natural gas (LNG), the two companies have announced.
They are now discussing commercial terms including prices linked to Louisiana state’s Henry Hub that are expected to lead to a definitive sales and purchase agreement by end-2013. The deal will strengthen India’s position in on-going talks with Qatar, Australia and other LNG suppliers for prices to be linked to the cheaper Henry Hub index as opposed to oil.
State-owned Petronet, which already owns an LNG import terminal in India and expects to start up a second one in the third quarter, said it is interested to acquire a stake in the proposed Gulf of Mexico terminal that will export the fuel from 2018.
United LNG will source the gas and convert it into LNG from the proposed Main Pass Energy Hub project owned by Freeport-McMoRan Energy, LLC (FME), a jointly owned subsidiary of McMoRan Exploration Co and United LNG.
FME is helping to develop Main Pass Energy Hub into a facility to receive, store and condition natural gas for off loading to liquefaction storage and offloading vessels for export. FME said Main Pass has received a free trade agreement (FTA) licence from the US Department of Energy to export the maximum permitted volume of 24 million tonnes of LNG per year.
The company has also applied to the DOE for a licence to export LNG to a country like India that does not have an FTA deal with the US.
Petronet’s managing director and CEO, A.K. Balyan, said:
“Petronet LNG is delighted to have executed our first US-based LNG supply off take agreement and looks forward to moving ahead with United LNG and their JV partner Freeport-McMoRan Energy. As both a reliable and low cost LNG supplier, the USA is now the world’s prime target to secure LNG, and this agreement with United is another big step forward to meeting India’s growing demand for clean energy.”
Stephen Payne, chairman and general partner of Houston, Texas-based United LNG, LP said:
“Petronet is our largest single LNG buyer and our second customer on the Indian sub-continent. United LNG now has supply agreements totalling 12 million tonnes/year, which represent half of our total off-take capacity.”
In India, Petronet owns and operates a 10-million-tonne terminal at Dahej in Gujarat state and is completing the construction of a five-million-tonne terminal in Kochi in Kerala state. Shell holds a 74% stake in the 3.6-million-tonne Hazira LNG terminal in Gujarat state with Total the remaining 26%, while state-owned GAIL started up the country’s third import terminal at Dahbol in Maharashtra state in January with a five-million-tonne capacity.
As its demand for clean fuel rises, India expects to nearly triple its current 18.6-million-tonne LNG import capacity to 45 million tonnes by 2018.
In a recent op-ed article in the Wall Street Journal, the Indian ambassador to the US, Nirupama Rao, urged the US to approve LNG exports to her country as the deals would strengthen bilateral ties as well as bring economic benefits to both sides.