India's Petronet LNG in initial pact to buy US LNG


India's Petronet LNG in initial pact to buy US LNG


MUMBAI -- Petronet LNG said that it has signed a preliminary agreement with United LNG to purchase around 4 MMmt a year of LNG for 20 years.

India's natural gas importers are fast sealing deals to secure supplies as demand far exceeds domestic output. The nation currently produces about three-quarters of its natural gas requirements, but will need to import nearly half of its requirements within a few years due to dwindling production. Several gas fired power plants are already shuttered or operating below capacity due to a shortage of gas.

In a statement, Petronet LNG said it expects to finalize the agreement by the end of this year. The supply of LNG could begin sometime in 2017-18, R.K. Garg, Petronet LNG's Director of finance, told television channel CNBC TV18.

Buyers in Asia are looking to the United States to meet their increasing energy requirements, as the shale revolution has left North America with a huge surplus of gas and prices that are far below those in Asia or Europe. LNG prices in Asia are often several times higher than in the United States because of a regional supply deficit. Japan, the world's biggest importer of LNG, pays about $18 per million British thermal units (BTU), versus $4 in the United States.

While the United States has a surplus of cheap gas now, rising import demand from Asian countries is likely to raise hackles among some United States industry groups and lawmakers who have recently been advocating strict limits on energy exports to Asia citing potential increases in domestic fuel prices.

Petronet LNG said United LNG would supply the super-cooled gas through the Main Pass Energy Hub based off the Louisiana coast in the southern United States.

In 2011, GAIL India signed a contract to buy around 3.5 MMt of LNG annually for 20 years from Cheniere Energy's (LNG) Sabine Pass facility in Louisiana.

A boost in LNG exports would have many positive effects on both the United States and Indian economies, Nirupama Rao, India's ambassador to the United States, wrote in The Wall Street Journal earlier this month. "For the United States it would help create thousands of jobs and an expanded revenue stream for the federal government. For India, it would provide a steady, reliable supply of clean energy that will help reduce our crude oil imports from the Middle East and provide reliable energy to a greater share of our population" she wrote.

Dow Jones Newswires

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