New Delhi: GAIL India Ltd Monday said it has booked capacity at a proposed LNG production plant in at Lusby in Maryland, US that the state-owned gas utility plans to use to convert shale gas it will produce in US into liquid (LNG) for shipping to India.
GAIL Global (USA) LNG LLC, a US affiliate of GAIL, signed a 20-year terminal service agreement with Dominion Resources Inc to book 2.3 million tonnes per annum liquefaction capacity in the Cove Point LNG project, the two companies announced today.
Dominion plans to start construction on the 5.25 million tons per annum facility in 2014 and put the liquefaction facilities in service in 2017.
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.
Dominion would be setting up the liquefaction facilities in the premises of its existing 11.7 million tonnes per annum LNG receipt and regasification terminal.
The US firm is marketing 4.6 million tonnes of the proposed capacity to turn gas into liquid, called liquefaction, and GAIL has booked 50 percent of such capacity for 20 years. Pacific Summit Energy, a US affiliate of Japanese trading firm Sumitomo Corporation, has booked the remaining capacity.
GAIL Chairman and Managing Director B C Tripathi said the company, besides taking equity stake in shale gas project, has also signed deal to buy LNG from US at Henry Hub index price.
"Under this agreement, GAIL will procure its own natural gas and deliver it to the Cove Point pipeline for liquefaction at the terminal and loading into ships brought to the facility on the Chesapeake Bay," GAIL said in the statement.
"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 rest of the volume to India," Tripathi said.
On the occasion, Thomas F Farrell II, Chairman, President and CEO of Dominion said "Japan and India are important allies and trading partners of the United States that are in need of secure sources of natural gas, and Sumitomo and GAIL are high-quality companies working to meet those needs. We believe the agreements we have signed serve very important economic goals for all three nations."
In concluding this transaction, GAIL was assisted by Akin Gump Strauss Hauer & Feld on legal matters and by Ernst & Young on financial and tax matters while Poten & Partners was the commercial consultant engaged by GAIL.