GAIL looks to buy 26% stake in US LNG project

New Delhi: State-owned GAIL is looking to buy up to 26 percent stake in a LNG project in the United States in an attempt to shore up supply sources to meet rising demand. GAIL (India) Ltd, had run into supply disruptions last year after Russia-owned Gazprom Marketing and Trading (GMTS) failed to deliver contracted LNG due to western sanctions on Moscow over its invasion of Ukraine.

GAIL has issued a tender seeking EoI from operators of existing LNG

The company has issued a tender seeking expression of interest (EoI) from operators of existing liquefied natural gas (LNG) liquefaction plants or proposed projects in the US that will be commissioned by 2027. Liquefaction plants convert natural gas into the liquid form, enabling its seaborne transportation.

The company is also looking to buy one million tonne of LNG per year from the facility for 15 years, starting the last quarter of calendar year 2026, according to the tender document. GAIL is open to extending the supply contract by another 5 to 10 years. The deadline to submit EoI is March 10.

GAIL already has contracts to buy 5.8 million tonnes of LNG from US

GAIL already has contracts to buy 5.8 million tonnes of LNG per year from the US and is looking for more supplies to make up for the Russian shortfall as well as rising demand of a growing economy.

Prior to this, Petronet LNG Ltd, a firm in which GAIL is one of the promoters with 12.5 percent stake, had in September 2019 signed a non-binding agreement to invest USD 2.5 billion in the US energy upstart Tellurian's LNG project in Louisiana in return for gas supplies for 40 years.
That pact lapsed at the end 2020 without a firm deal being signed.

Petronet was to buy up to five million tonnes per annum of LNG from Tellurian Inc's proposed Driftwood LNG terminal for 40 years. The deal was concurrent with Petronet making an equity investment of USD 2.5 billion for an 18 percent stake in Driftwood. At that time, Petronet's promoters questioned the rationale of making an equity investment and locking in such large volumes from one supplier for a 40-year period.

To satisfy promoters as well as test if LNG from Tellurian would be competitive, Petronet invited bids to buy one million tonne per annum of LNG for 10 years. Tellurian was among the 13 suppliers that quoted in the tender but did not meet price expectations.

GAIL interested to source 1 MTPA LNG on FOB basis

"GAIL, directly or through any of its affiliates, is exploring the opportunity to acquire upto 26 percent equity at par from existing LNG liquefaction plant/project in USA or ones that will be commissioned latest by calendar year 2026-27," the tender document said.

In addition, "GAIL is interested to source one million tonne per annum LNG from the LNG liquefaction plant / project on FOB basis for a period of 15 years on mutually acceptable terms and conditions," it said.

Separately, GAIL is in discussions with Abu Dhabi National Oil Co and Russia's Novatek PJSC for long-term LNG deals, chairman Sandeep Kumar Gupta said at a conference last week. Its current 5.8 million tonnes LNG import deals from US projects do not involve any equity holding.

GAIL had signed a 20-year deal with GMTS in 2012 to buy 2.5 million tonnes of LNG annually. GMTS was a unit of Gazprom Germania, now called Sefe, but the parent abandoned the business last April after the western sanctions.

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