Reuters are reporting that GAIL India has signed a time-swap deal with Swiss trader Gunvor to sell some of its US LNG, as the Indian company tries to ease the burden of its costly foreign LNG supplies.
It is the first time-swap agreement by GAIL, which is trying to juggle its LNG portfolio to cut costs for price-sensitive Indian customers after a sharp fall in Asian spot prices made its US gas unattractive.
The deal equates to around 5% of India's 2015/16 LNG imports and will support a government push to promote use of the cleaner fuel.
Under the agreement, Gunvor will supply 15 cargoes or about 0.8 million t of LNG to GAIL on India's west cost between April and December this year in oil-linked prices on a delivered basis in India.
In return GAIL will sell 10 cargoes or about 0.6 million t next year from Sabine Pass on the US Gulf coast in 2018 at a premium to its pricing formula on a free-on-board basis.
The deal means GAIL could get gas from Gunvor at US$6.50 – 7.00 per million British thermal units.
GAIL is saddled with long-term contracts to take expensive US gas after embarking on a buying spree between 2011 and 2013 when the fuel was scarce and prices kept rising.
LNG booked by GAIL under a long-term deal with Cheniere Energy, which owns the Sabine Pass Liquefaction terminal, will cost 115% of Henry Hub prices plus a fixed cost of US$3 per mBtu. At current prices, this equates to a cost of about US$8.50 per mBtu on a delivered basis to India.
The Indian company has a deal to buy 3.5 million tpy of LNG for 20 years from Cheniere Energy and has also booked capacity for another 2.3 million tpy at Dominion Energy's Cove Point liquefaction plant.
It has so far sold about 0.5 million t of its LNG from the US projects to Royal Dutch Shell, but has not been able to attract Indian customers despite repeated attempts.
Read the article online at: https://www.lngindustry.com/liquid-natural-gas/03032017/indias-gail-signs-first-time-swap-deal-for-us-lng/