GAIL likely to buy 26% stake in U.S. LNG project

New Delhi: GAIL, is looking to purchase up to 26% of a US LNG project in an effort to secure supplies in response to escalating demand, business paper reported.

Last year, due to Western sanctions on Moscow for its invasion of Ukraine, Russia's Gazprom Marketing and Trade (GMTS), which is owned by GAIL (India) Ltd., experienced supply problems.

The firm has released a tender in which it is looking for expressions of interest (EoI) from the operators of liquefied natural gas (LNG) liquefaction facilities that are now in operation or who have projects in the works that will be operational by 2027 in the United States.

According to the bidding document, the company also intends to purchase 1 million tonnes of LNG annually from the plant for 15 years beginning in the final quarter of 2026.

GAIL is willing to prolong the supply agreement for an additional 5 to 10 years.
The EoI submission date is March 10.

In order to make up for the Russian shortage as well as increased demand from an expanding economy, GAIL is seeking for additional supplies. GAIL currently has commitments to purchase 5.8 million tonnes of LNG annually from the United States.

Prior to this, in September 2019, Petronet LNG Ltd., a company in which GAIL is one of the promoters and holds a 12.5% share, inked a non-binding agreement to invest $2.5 billion in the Louisiana LNG project of U.S. energy startup Tellurian in exchange for 40 years of gas deliveries.

Without a binding agreement being made, that accord expired at the end of 2020.

The tender document said that "GAIL, directly or via any of its affiliates, is investigating the option to purchase up to 26% equity at par from existing LNG liquefaction plant/project in the USA" or ones that will be operational by the end of the calendar year 2026/27.

Moreover, it stated that GAIL "is willing to source 1 million tonnes per annum LNG on FOB basis from the LNG liquefaction facility / project for a period of 15 years on mutually acceptable terms and circumstances."

Additionally, according to chairman Sandeep Kumar Gupta at a conference last week, GAIL is in talks for long-term LNG arrangements with Abu Dhabi National Oil Co. and Russia's Novatek PJSC.

There is no equity involved in its existing 5.8 million tonnes of LNG import agreements from U.S. projects.
In 2012, GAIL and GMTS agreed to a 20-year contract for the purchase of 2.5 million tonnes of LNG annually. With the western sanctions, the parent company, now known as Sefe, abandoned GMTS, a division of Gazprom Germania.

ALSO READ: Digboi Refinery to be expanded at Rs 740 cr