India's Gail CEO calls for more flexibility in U.S. LNG contracts

  • Mar 14, 2019
  • Economic Times

Gail India called on U.S. liquefied natural gas (LNG) producers to offer more flexibility contract terms as the state-owned gas distribution gas company hunts for supplies from the middle of the next decade.

India last year was the fifth largest importer of U.S. LNG and natural gas is projected to double its share of the nation's energy mix by 2030 as oil-fired power plants convert.

Shri B.C. Tripathi, chairman and managing director of Gail India, said on Wednesday at the CERAWeek energy conference his company is in discussions with U.S. gas exporters to acquire new LNG supplies from 2024-2025.

"Traditional suppliers like Qatar or Russia have shown a lot of flexibility in recent past where they have modified their contracts, re-negotiated their contracts, aligned them to the market," Tripathi said in a brief interview.

"However, the U.S. contracts are purely a tolling model. Their tolling fee is fixed," he said, adding that U.S. LNG becomes less competitive against traditional supplies when oil prices drop.

The company has 20-year LNG contracts to buy 5.8 million tonnes per year of U.S. LNG, split between Dominion Energy Inc's Cove Point plant and Cheniere Energy Inc's Sabine Pass facility in Louisiana.

Gail currently sends up to 75 percent of its U.S. LNG supplies back to India, Tripathi said, and sells the rest into the spot market. All the LNG will eventually be shipped to India when more gas pipelines and regasification terminals are completed, he said.

Natural gas is expected to account for 15 percent of India's energy mix by 2030, up from the current 6.2 percent, MM Kutty, secretary of India's Ministry of Petroleum and Natural Gas, said earlier in the week.

Half of that demand will be met by LNG imports, he said.

The world's fourth largest energy consumer is replacing oil-fired power plants with gas and is building pipelines so that piped gas can reach 70 percent of its population.

India also aims to expand the number of compressed natural gas (CNG) refuelling stations by 10-fold to 10,000.