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GAIL wants US to relax norms for more LNG imports

Press Trust Of India / New Delhi 21 Jun 12 | 12:23 AM

On the heels of sewing the nation’s first gas import deal from the US, state-owned GAIL India wants Washington to relax rules so that it can buy more liquefied natural gas (LNG) to meet growing energy needs here.

Gas-surplus US at present allows exports of small amounts of natural gas. It has so far allowed only Cheniere Energy to export LNG from Sabine Pass LNG terminal to countries that have not signed free-trade agreements with the US such as India.

GAIL recently signed an agreement to import 3.5 million tons of LNG from Sabine Pass, a subsidiary of Cheniere Energy.

But given the growing gap between demand and supply, GAIL Chairman B C Tripathi wants to tap all the seven LNG export terminals planned in the US and has written to the petroleum and external affairs ministries for diplomatic intervention to push Washington to allow other terminals to sell gas to India.

The seven planned LNG terminals are only to nations that have signed free-trade agreements (FTAs) with the US.

“This implies that GAIL as a representative company of India, cannot conclude any contractual arrangement with these seven LNG export terminal companies till the time non-FTA approval is given to them," he wrote. “This is coming in the way of GAIL’s efforts to finalise liquid shale gas export from the US to India, whereas the time is ripe now to strike LNG deals at competitive prices".

Tripathi said GAIL’s September 2011 acquisition of the 20 per cent stake in Eagle Shale Assets in Texas of Carrizo Oil and Gas, has “provided it with an opportunity to understand the North American gas market". This led to GAIL sewing up the LNG supply deal with Sabine Pass at a price linked to US Henry Hub gas price, as against the practice of tying it up with oil.

He said LNG imports from the US were largely dependent on approvals from the Department of Energy, Federal Energy Regulation Commission and clearances from various departments of the US pertaining to land, water, air, etc. While FERC’s approval was related to construction and conformance to the regulations, approval of DOE pertains to export of LNG to countries which signed an FTA with the US and/or nations which had not signed FTA with the US but are not covered under any sanctions for trade relations.

As on date, only Sabine Pass has received approval for export to both FTA/non-FTA countries, whereas seven export terminals have received only FTA approvals.

“We are given to understand that approval from DOE of the US is largely a policy decision, with active involvement of the US government. It is, therefore, essential that Government of India immediately takes up with counterparts in the US and impresses upon them for treating India as a special nation by keeping us outside the purview of FTA/non-FTA framework," he wrote.

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