January 16, 2012 / 2:38 PM / 8 years ago

GAIL in talks to buy LNG from Macquarie's US plant

* Chairman says talks with Macquarie at nascent stage

* Industry source says 20 yr deal for 2 mln T/yr will be soon signed

* Source says prices linked to Henry Hub

NEW DELHI, Jan 16 (Reuters) - State-run GAIL (India) Ltd is in talks to buy liquefied natural gas (LNG) from suppliers, including Macquarie Energy, which has a share in the U.S.-based Freeport LNG project, GAIL chairman B. C. Tripathi said on Monday.

“We are in talks with several suppliers including Macquarie Energy from its Freeport plant. The talks with Macquarie are at a very nascent stage,” Tripathi told Reuters.

Freeport LNG and Macquarie Energy, the North American energy marketing and trading arm of Macquarie Group, are developing an export plant in Texas costing about $2 billion. The plant would be able to export 1.4 billion cubic feet per day of gas by 2015.

GAIL has not yet decided on the volumes to be purchased from Macquarie, Tripathi said. “We have a 3.5 million tonnes deal with Cheniere Energy. There are so many things like price and how much do we need to buy.”

Buying gas from the United States is about $2 per million British thermal units cheaper than that from India’s other long term LNG purchase contracts, he said without elaborating.

However, an industry sources with the knowledge of the talks said GAIL would soon sign a deal with Macquarie to annually buy 2 million tonnes of LNG for 20 years.

He said the delivered price of an mBtu of gas would be 1.17 times Henry Hub prices plus a constant of $5.80-$6.

GAIL, which is primarily a gas transmission firm, is gradually stepping up its gas portfolio to emerge as a major player in the local market, where output lags demand.

LNG accounts for a tiny amount of India’s energy needs and the country currently has capacity to import just 13.5 million tonnes per year.

Most of its energy requirements are met by coal with oil covering about a quarter of the demand — making the country Asia’s third-largest oil importer.

In September, GAIL agreed to buy a 20 percent stake in one of Carrizo Oil & Gas Inc’s shale gas assets in the United States and will invest a total of $300 million over the next five years.

In December it signed a deal to annually buy 3.5 million tonnes of LNG from Cheniere Energy under a 20 year deal commencing from 2017.

A boom in unconventional gas production, including shale gas, is sweeping the U.S. natural gas market, but demand has flagged pushing gas prices way below global levels.

Once expected to be a major importer, the United States now has up to a century’s worth of supply, prompting plans to ship the cheap fuel to thirsty markets in Europe and Asia where prices are up to five times higher.

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