India's Petronet agrees to 20-year deal to buy LNG from US company United


MUMBAI -- India's state-run Petronet LNG said Thursday that it has signed a preliminary agreement with US-based United LNG to purchase around 4 million tpy of liquefied natural gas for 20 years.

India's natural gas importers are fast sealing deals to secure supplies as demand far exceeds domestic output. The nation currently produces about three-quarters of its natural-gas requirements, but will need to import nearly half of its requirements within a few years due to dwindling production.

Several gas-fired power plants are already shuttered or operating below capacity due to a shortage of gas.

In a statement, Petronet LNG said it expects to finalize the agreement by the end of this year. The supply of LNG could begin sometime in 2017-18, R.K. Garg, Petronet LNG's director of finance, told television channel CNBC TV18.

Buyers in Asia are looking to the US to meet their increasing energy requirements, as the shale revolution has left North America with a huge surplus of gas and prices that are far below those in Asia or Europe. LNG prices in Asia are often several times higher than in the US because of a regional supply deficit. Japan, the world's biggest importer of LNG, pays about $18 per million British thermal units, versus $4 in the U.S.

While the US has a surplus of cheap gas now, rising import demand from Asian countries is likely to raise hackles among some US industry groups and lawmakers who have recently been advocating strict limits on energy exports to Asia citing potential increases in domestic fuel prices.

Petronet LNG said United LNG would supply the super-cooled gas through the Main Pass Energy Hub based off the Louisiana coast in the southern US.

In 2011, GAIL (India), a state-run gas processing and distribution company, signed a contract to buy around 3.5 million tpy of LNG for 20 years from Cheniere Energy's Sabine Pass facility in Louisiana.

A boost in LNG exports would have many positive effects on both the US and Indian economies, Nirupama Rao, India's ambassador to the US, wrote in The Wall Street Journal earlier this month.

"For the US, it would help create thousands of jobs and an expanded revenue stream for the federal government. For India, it would provide a steady, reliable supply of clean energy that will help reduce our crude oil imports from the Middle East and provide reliable energy to a greater share of our population," she wrote.

Dow Jones Newswires

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