Adnan Faruqi
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After US$ 20 billion deal India to sign US$ 12 billion gas deal with USA
NEW DELHI: State-run gas utility GAIL is in the final stages of signing a 20-year deal for shipping two million tonnes of gas a year from a facility for exporting shale gas in liquid form that is coming up in the US east coast, sources close to the development said.
The east coast deal could be worth an aggregate $12 billion or more, going by the value of a pact GAIL had signed in December 2011 with Sabine Pass Liquefaction for 3.5 million tonnes of liquid gas a year. That deal was valued at some $20 billion.
Sources said a team of senior GAIL executives and oil ministry officials were in the US last week for giving final touches to the east coast deal, requesting anonymity for the US firm's name to avoid breaching strict confidentiality clauses.
According to sources, the SPA (sale-purchase agreement) for the deal is being vetted by Clifford Chance, a global legal advisor. Ernst & Young, the advisor, is conducting financial and taxation due diligence.
Shipping Corporation of India (SCI)has also been roped in to help reduce shipping costs. SCI is to find the cheapest carrier for charter by taking quotes from shipping companies around the world. The reduced cost of shipping liquid gas, which has gone up in recent times, would be passed on to GAIL by way of a proportionate reduction in the gas price.
According to sources, GAIL had initiated talks with three other US shale gas companies that plan to put up or have liquid gas exporting facilities on the east coast. But the talks faltered on their price offer. The company in the final lap of the negotiations revised its price for SPA but it was still lower than the offers from the other companies.
Increasing demand in the face of falling domestic supplies have pushed up India's liquid gas imports to 40% of consumption. GAIL aims at exploiting the situation to expand its home market by tapping into new and diversified gas sources such as the export terminals on the US east coast that are riding on the recent shale gas boom there.
But GAIL's latest deal could face hurdles by way of US laws that bar energy exports to countries that are not its preferred trade partners. India does not have an FTA (free trade agreement) with the US and is seeking a special waiver on gas exports from Washington. Sabine Pass is the only shale gas liquefaction project that has a clear permission for exporting liquid gas.
GAIL nears $12bn US gas deal - The Times of India
