Cheniere Energy Partners LP's Sabine Pass Liquefaction LLC and Gail (India) Ltd. have struck a liquefied natural gas (LNG) sale and purchase agreement (SPA). Gail has agreed to buy 3.5 million metric tons per year from train four of the Sabine Liquefaction project in Cameron Parish, LA.
Before the fourth train comes online, Gail is to buy bridge volumes of about 0.2 million metric tons per year once the second train of the project is completed. Sabine Liquefaction recently said it had reached its targeted annual contract quantity of 7 million metric tons per year for the first phase of the project and is advancing toward a final investment decision for the development and construction of two liquefaction trains (see Daily GPI, Nov. 22).
"Gail will join BG [Group] and Gas Natural Fenosa as the next foundation customer for our Sabine Pass liquefaction project," said Cheniere CEO Charif Souki. "Gail is India's leading natural gas company and its largest shareholder is the government of India. We are building a strong portfolio of customers, consisting of energy companies engaged in the natural gas, LNG and power markets with operations spanning the globe.
"We continue to hold advanced discussions with additional global LNG buyers and expect to complete commercial discussions for the remaining capacity of the second phase of the project, train three, in the coming weeks."
The Gulf Coast liquefaction project is seen as an outlet for growing supplies of U.S. natural gas that are coming from shale plays around the country, including in Texas and Louisiana. Another division of Gail has its foot in the U.S. shale patch.
In September Gail acquired its first shale gas assets in the United States through its wholly owned Gail Global (USA) Inc. The unit, which has an office in Houston, struck agreements with Houston-based Carrizo Oil & Gas Inc. for a joint venture (JV), acquiring a 20% interest in Carrizo's Eagle Ford Shale acreage. The JV has 20,200 gross acres, out of which Gail would have 4,040 net acres spread over four counties in Texas.
The SPA with Gail represents the first contract for the second phase of the project, which would also include two liquefaction trains with combined production capacity of 9 million metric tons per year. The project at the Sabine Pass LNG terminal would include up to four trains capable of producing up to 18 million metric tons per year. Sabine Liquefaction is targeting selling approximately 14 million metric tons per year of the capacity under long-term SPAs.
Under the SPA, Gail is to buy LNG on a free on board (FOB) basis for a price indexed to the monthly Henry Hub price plus a fixed component. LNG would be loaded onto Gail's vessels. The SPA has a term of 20 years starting on the date of first commercial delivery, and an extension option of up to 10 years.
Delivery of the bridge volumes is to occur with the commencement of operations of train two of the liquefaction project, which is expected in 2016. Deliveries from train four are to occur upon commencement of its operations, which is expected as early as 2017.
"The SPA with Cheniere will help Gail to ensure long-term gas supply for the growing demand in the Indian market," said Gail (India) Chairman B.C. Tripathi. "This will be in addition to other initiatives being undertaken by Gail, which includes building captive LNG facilities in India and augmenting its transmission capacity from 175 MMcf/d to over 300 MMcf/d over the next two years. With an office established in Houston, Gail has acquired shale gas assets in Carrizo's Eagle Ford Shale acreage and is further looking for shale gas assets in the U.S."
The Indian company's Gail Global (Singapore) Pte. Ltd. unit has operations in Singapore for sourcing LNG, trading LNG and petrochemicals and managing overseas investments.
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