GAIL solution to costly LNG from US

Vol 20, PW 21 (13 Jul 17) News in Brief

GAIL might have hit on a novel solution of finding buyers for its expensive LNG from the US: sell to fertiliser companies.

On June 13 (last month) this report learns GAIL signed a nine-year contract with KK Birla-promoted Chambal Fertilisers and Chemicals to supply 24,955bn BTU/year on a gross calorific value basis or 1.8m cm/d. "The supply is on a firm basis with a strict take or pay clause in place," we hear.

"Now you can expect more fertiliser companies to sign up for US LNG. Fertiliser companies are not bothered about high priced gas.

They get government subsidies." Gas supplies to Chambal's new urea facility at Gadepan in Kota will start on any mutually agreeable date from April 1, 2018 to July 1, 2019 or December 1, 2019 at the latest. GAIL is worried as the 2018 deadline for first deliveries of 3.5m t/y from a 20-year take or pay deal with Cheniere draws near.

This US LNG will be expensive as GAIL will have to pay a $3/mmbtu fixed liquefaction cost plus 115% of the prevailing Henry Hub rate, a fixed premium, and $2 to $2.50/mmbtu shipping.

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