India to discuss LNG imports with US President Barack Obama on his India visit
NEW DELHI: India will strongly raise the issue of LNG imports with President Barack Obama as the country wants liquefied natural gas to be exported only in vessels built in USA, manned by US crew and insured by American companies, official and industry sources said.
Officials also said India wants to make sure that the US government does not take any action against top energy firms Oil and Natural Gas Corp and Indian Oil Corp, which were named by the US government Accountability Office in a list of companies that have done business with Iran.
US sanctions against Iran can create hurdles for such companies. State-run GAIL (India) Ltd has an agreement to ship 5.8 million tonnes a year of LNG from two projects in the United States although it needs the approval of US government to bring gas. It plans to buy gas at Henry Hub prices, a US benchmark, where prices are below $3 a unit, making it the cheapest source of gas.
However, liquefaction and transport charges would raise the price significantly by the time it lands in India. “On top of those costs, if India has to use only US-built and US-flagged vessels and use only American crew, the costs will increase a lot. We will take this up with the US government,” a source familiar with the situation said.
The requirement also upsets the Make in India campaign. The Indian government was keen to make sure that Indian vessels are used for LNG shipments, and was seeking technology for this purpose as the country has emerged as a major LNG importer, particularly after domestic output of natural gas has declined.
GAIL India said last month that it had signed a sourcing agreement between its subsidiary GAIL Global USA LNG LLC (GGULL) and USbased company WGL Midstream Inc. (WGLM) for procurement of natural gas required to produce about 2.5 MTPA of LNG at the Cove Point Terminal located in Maryland, US.
WGLM is a subsidiary of WGL Holdings Inc., a prominent natural gas company of the United States. It said the definitive gas sale and purchase agreement has been signed for a period of 20 years and supplies are expected to commence from late 2017 when the LNG terminal, in which GGULL holds liquefaction capacity, becomes operational.
GAIL has signed a 20 year sales and purchase agreement with Sabine Pass Liquefaction LLC, a unit of Cheniere Energy Partners, USA for supply of 3.5 million tonnes per year of LNG. GAIL also signed a Terminal Service agreement for 2.3 million tonnes per year of LNG liquefaction capacity with Dominion Cove Point LNG LP, USA.