State-controlled GAIL (India) Ltd, through its American subsidiary GAIL Global (USA) LNG LLC, has signed a terminal service agreement with US-based Dominion to book a 2.3 mmtpa liquefaction capacity in the Cove Point LNG liquefaction terminal project at Lusby, Maryland.
Under this agreement, GAIL will procure its own natural gas and deliver it to the Cove Point pipeline for liquefaction at the terminal and loading into ships brought to the facility on the Chesapeake Bay.
Dominion will be setting up the liquefaction facilities in the premises of its existing 11.7 mmtpa regasification terminal. Construction work is expected to start in 2014, so as to put the liquefaction facilities into service in 2017. Dominion is marketing 4.6 mmtpa and GAIL has booked half of this capacity for 20 years. An unnamed Japanese buyer holds the balance capacity in the terminal.
Cove Point will be a premier facility in terms of direct access to the Marcellus and Utica shale plays, two of the most prolific shale gas basins in North America.
In 2011, GAIL signed a similar deal with Cheniere and coupled with the latest contract, GAIL becomes one of the largest Henry Hub LNG portfolio holders with an opportunity to market about 6 mmtpa of LNG from the US.
“This will enhance GAIL’s scale of operations in the US where we already have a presence through our participation in a shale gas asset in the Eagle Ford basin. This deal will also provide GAIL with an opportunity to trade part of the volume in the international market apart from organising the ships required to transport the rest of the volume to India,” said BC Tripathi, chairman and MD of GAIL.
For this deal, Akin Gump Strauss Hauer & Feld assisted GAIL on legal matters; Ernst & Young was involved with financial and tax matters while Poten & Partners was the commercial consultant.
Dominion is one of the largest producers and transporter of energy in the US with a portfolio of approximately 27,500 MW of generation, 11,000 miles of natural gas transmission, gathering and storage pipeline, and 6,300 miles of electric transmission lines. The firm serves retail energy customers, spread across 15 states in the US.
GAIL provides liquefied petroleum gas, liquid hydrocarbons and petrochemicals, and has extensive infrastructure in the mid-stream and downstream gas value chain in India.
In February this year, the firm signed an MoU with EDF Trading to jointly acquire and develop upstream oil and gas assets in North America and to partner in the trading of US gas and LNG.
(Edited by Sanghamitra Mandal)