India’s GAIL sets 18 September deadline for US FOB LNG interest

Indian state-owned gas network operator GAIL has set a deadline of 18 September for expressions of interest for 1mtpa of its US Sabine Pass LNG that is available for a five-year period.

The volume is available on a free on board (FOB) basis, according to a document published on GAIL’s website on 4 September.

GAIL’s 3.5mtpa volumes were secured through a 20-year long-term contract from US-based Cheniere’s plant in Louisiana.

“Present estimates indicate first commercial delivery in the first quarter of 2018,” according to the GAIL document.

GAIL agreed a purchase price of 115% of the US Henry Hub natural gas futures price plus a $3.00/MMBtu liquefaction fee on an FOB basis.

Cheniere has estimated that trains 3 and 4, which are contracted to South Korea’s KOGAS and GAIL, respectively, are expected to come online sometime between 2016 and 2017. Trains 1 and 2 are marketed to UK-based BG Group and Spain’s Gas Natural Fenosa.

The potential bid level from market participants for Sabine Pass volumes was previously understood to be around $1.00-1.50/MMBtu above GAIL’s contract price. However, the exact level of the bid prices could not be confirmed by GAIL.

Several market participants, including Switzerland-based trading houses Glencore and Gunvor, and Russia’s Gazprom are understood to be in discussions with GAIL for securing volumes.

“Almost everyone has been in touch with GAIL barring the Indian companies – GSPC and Petronet. The interest in the tender is dependent on the demand from Japan and South Korea,” a market source said.

The sale of the volumes will be handled out of GAIL’s Singapore office. GAIL first announced its intent to market the volumes from Sabine Pass in May.

GAIL’s US long-term volumes include 3.5mtpa in a 20-year contract from Sabine Pass – the only US export project under construction – and 2.3mtpa in another 20-year term contract from Dominion’s Cove Point export project in Maryland.

GAIL also has an option to purchase 200,000 tonnes per annum in bridging volumes from the second Sabine Pass train, estimated to come on line in 2016, before the start-up of Train 4.

GAIL’s volumes through Cove Point are based on an FOB tolling structure of a liquefaction fee heard just below $3.00/MMBtu, where the buyer will have to source its own gas. Taken together, GAIL is already the single-largest buyer of US LNG from the two projects. Ranjana Kaushal