US shale gas: GAIL mulls time-swap deal to advance import

Not too many companies have done this globally. We are in talks with many players in the US now regarding this: Prabhat Kumar Singh

State-run GAIL India Ltd plans to strike a “time-swap” deal with US shale gas suppliers so that it can import shale gas by 2015-16, ahead of 2017-18 for which contracts are in place.

Time-swapping deals are a rarity in the global energy market. “Not too many companies have done this globally. We are in talks with many players in the US now regarding this,” said Prabhat Kumar Singh, director (marketing) at GAIL India.

GAIL holds a 20 per cent stake in Carrizo’s Eagle Ford Shale acreage. It has a deal with Cheniere Energy Partners to buy 3.5 million tonnes per annum (mtpa) liquefied natural gas (LNG) from Sabine Pass Liquefaction, a subsidiary of Cheniere, from 2017-18. GAIL also has a 20-year sales and purchase agreement with Dominion Resources for supply of 2.3 mtpa of shale gas starting from 2017-18.

“We have to offer them something which is commercially attractive. In LNG, physical swap of spot cargo happens normally. But time-swapping in global market is one of its kind,” Singh added.

The time-swapping deal would be replaced once its contract period starts or production starts in the US.

GAIL, planning to invest $1 billion on shale gas assets in the US, also has a memorandum of understanding with EDF Trading to jointly acquire and develop upstream oil and gas assets in North America.

To purchase and sell LNG on spot and short-term basis, GAIL had opened its LNG trading desk in Singapore in 2011 through its subsidiary GAIL Global (Singapore). According to estimates, Indian gas demands would touch 473 million standard cubic meters a day (mscmd) by 2016-17. US shale gas price would be cheaper in the Indian market, as it is linked to the Henry Hub, a distribution hub on the natural gas pipeline system in Louisiana, where prices are in the range of $4 a million British thermal units (mBtu).

Once it starts transportation of gas from the US, GAIL may even swap gas with countries in Latin America and Japan, if demand from India is low. The company has already entered into long-term contracts with Russia and Qatar, apart from the US.