Cheniere finalizes export pact with GAIL India for Sabine Pass LNG

Cheniere subsidiary Sabine Pass Liquefaction entered into a liquefied natural gas (LNG) sale and purchase agreement with GAIL India under which GAIL will buy 3.5 million tpy of LNG from train four.

Prior to the commencement of train four operations, GAIL will purchase bridge volumes of approximately 200,000 tpy upon the commencement of operations of train two, the companies said.

Sabine Liquefaction is developing a liquefaction project at the Sabine Pass LNG terminal that would include up to four liquefaction trains capable of producing up to 18 million tpy of LNG.

Sabine Liquefaction is targeting selling approximately 14 million tpy of the capacity under long-term sales agreements.

© Bechtel CorporationThe project is being developed in phases, the company said. Sabine Liquefaction recently announced that it has reached its targeted annual contract quantity of 7 million tpy for the first phase and is advancing towards making a final investment decision for the development and construction of two liquefaction trains.

The deal with GAIL represents the first contract for the second phase of the project, which will also include two liquefaction trains with combined production capacity of 9 million tpy.

Under the agreement, GAIL will purchase LNG on an FOB basis for a purchase price indexed to the monthly Henry Hub price plus a fixed component. LNG will be loaded onto GAIL's vessels.

The deal has a term of twenty years commencing upon the date of first commercial delivery, and an extension option of up to ten years. Delivery of the bridge volumes are to occur with the commencement of operations of train two, which is expected in 2016 and deliveries from train four are to occur upon commencement of its operations, which is expected as early as 2017.

The agreement is subject to certain conditions precedent, including but not limited to Sabine Liquefaction receiving regulatory approvals, securing necessary financing arrangements and making a final investment decision to construct the second phase of the liquefaction project.

"GAIL will join BG and Gas Natural Fenosa as the next foundation customer for our Sabine Pass liquefaction project,” said Charif Souki, CEO. “GAIL is India 's leading natural gas company and its largest shareholder is the Government of India.

“We are building a strong portfolio of customers, consisting of energy companies engaged in the natural gas, LNG and power markets with operations spanning the globe. We continue to hold advanced discussions with additional global LNG buyers and expect to complete commercial discussions for the remaining capacity of the second phase of the project, train three, in the coming weeks.

B. C. Tripathi, managing director of GAIL (India ) Ltd., said: "The [agreement] with Cheniere will help GAIL to ensure long term gas supply for the growing demand in the Indian market.

“This will be in addition to other initiatives being undertaken by GAIL which includes building captive LNG facilities in India and augmenting its transmission capacity from 175 MMSCMD to over 300 MMSCMD over the next two years. With an office established in Houston, GAIL has acquired shale gas assets in Carrizo's Eagle Ford Shale acreage and is further looking for shale gas assets in the US."

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