GAIL signs 20-year deal to buy LNG from Russia’s Gazprom

State-owned gas utility GAIL India Ltd on Monday said it has signed an agreement with Russia's Gazprom to buy 2.5 million tonnes per annum of gas for 20 years.

Last Updated: Oct 01, 2012, 19:55 PM IST

New Delhi: GAIL India, the nation's biggest natural gas distributor, said on Monday that it has signed a 20- year deal to buy 2.5 million tonnes a year of liquefied natural gas (LNG) from the Singapore unit of Russian gas giant Gazprom OAO.

GAIL, the first Asian company to buy liquefied natural gas from the US, said the supplies will start in 2018-19.

The LNG (natural gas that has been converted to liquid form for ease of transportation) will come from Gazprom's Shtokman production facilities and will be priced with an oil-indexed formula and delivered to Dahej, Dabhol and Kochi terminals, the state-owned firm said in a statement.

In December 2011, GAIL had signed an agreement to buy 3.5 million tonnes of LNG a year for 20 years from Houston-based Cheniere Energy Partners LP's Sabine Pass terminal in western Cameron Parish, Louisiana.

This year in August, it signed an agreement with GDF Suez to buy 12 cargoes of LNG or about 0.8 million tonnes of the fuel from 2013 to 2014.

GAIL "has signed a legally binding 20-year liquefied natural gas (LNG) sales and purchase agreement (SPA) with Gazprom Marketing and Trading Singapore (GM&TS), a 100 percent wholly-owned subsidiary of Gazprom Marketing & Trading," the company said in a press statement Monday.

Under the terms of the agreement, GAIL will receive 2.5 million tonnes of LNG per annum (equivalent to about 130 million British thermal unit or 3.5 billion cubic metres or 122 billion cubic feet per annum) over a period of 20 years beginning 2018-19.

LNG will come from Gazprom's Shtokman production facilities which has 130 trillion cubic feet of inplace reserves. This would be "optimised and supplemented by GM&T's global trading portfolio and capabilities," it said.

Commenting on the development, GAIL Chairman and Managing Director B C Tripathi, "This long-term LNG supply agreement with Gazprom, which holds the world's largest gas reserves, is another milestone in Indian-Russian Energy cooperation."

"The deal with Gazprom reinforces GAIL's commitment to facilitate the development of the Indian market for which USD 6 billion investments are being made by GAIL in creating natural gas infrastructure," he said.

Speaking on the partnership, Gazprom Marketing & Trading CEO Vitaly Vasiliev said, "We are delighted to have signed this agreement with GAIL, during a period of rising demand for LNG in India. We are looking forward to working together with GAIL to help meet India’s expanding gas demand whilst securing a long-term market for Russian gas."