U.S. clears shale gas export to India

The Excelsior arrives at the Freeport LNG terminal in Houston.  

Opening up the prospects of export of shale gas to energy-starved India, the U.S. has granted conditional authorisation to export domestically-produced liquefied natural gas (LNG) to countries that do not have a free trade agreement (FTA) with it.

In a decision, which has major implications for India, the Department of Energy, on Friday, announced that it had conditionally authorised Freeport LNG Expansion, LP and FLNG Liquefaction, LLC (Freeport) to export domestically-produced LNG to non-FTA countries from the Freeport Terminal on Quintana Island in Texas.

Given that the companies from countries such as China, Japan and Britain have already an overwhelming stake in this Texas company, India is unlikely to benefit immediately from this grant of licence.

But the decision paves the way for India, which does not have a free trade agreement with the U.S., to get its companies seek similar licences for import of the much-needed gas from the U.S. in large quantities from other terminals.

The existing federal law generally requires approval of natural gas exports to countries that have an FTA with the U.S.

For countries that do not have an FTA with the U.S., the Natural Gas Act directs the Department of Energy to grant export authorisations unless the Department finds that the proposed exports “will not be consistent with the public interest.”

The DoE order

In its 132-page order, the Department of Energy said the proposed exports are likely to yield net economic benefits to the U.S.

“We further find that granting the requested authorisation is unlikely to affect adversely the availability of natural gas supplies to domestic consumers or result in natural gas price increases or increased price volatility such as would negate the net economic benefits to the United States,” it said.

The Freeport facility in Texas, the Department of Energy said, is conditionally authorised to export at a rate of up to 1.4 billion cubic feet of natural gas a day (Bcf/d) for 20 years.

The Department granted the first authorisation for the Sabine Pass LNG Terminal in Cameron Parish, Louisiana, to export LNG to non-FTA countries in May, 2011 at a rate of up to 2.2 Bcf/d.

GAIL (India) has executed an LNG off-take agreement with Sabine Pass Liquefaction LLC, for import of 3.5 million metric tonnes (mmtpa) per annum LNG from the U.S.A on FoB basis.

Supply to start from 2017-18

The commencement of supply is expected to start from 2017-18.

The Department is now processing several other applications in this regard.

Pushing for U.S. export of shale gas to India, the Indian Ambassador to India, Nirupama Rao, in a recent talk at the American Enterprise Institute (AEI), had said that the demand-supply gap of natural gas in India, estimated at around 2.2 trillion cubic feet (tcf) per annum at present, was likely to go up to nearly 4 tcf per annum by 2016-17.

The demand of natural gas is expected to be about 8 tcf per annum by the year 2030.

“We estimate that these savings would be in the range of $4-5 per million metric British Thermal Units (mmbtu).

“This would result in cheaper electricity, lower subsidies on urea and other nitrogenous fertilizers, and a more economical fuel for a variety of industrial and consumptive gas usages,” she argued.

She had said Indian companies had already made some large investment in the U.S. in this regard.

“Already, we have invested significantly in the liquefaction terminals that are likely to come up in this country. Recently, GAIL booked 2. 3 mmtpa capacity in the Cove Point LNG Terminal proposed to be commissioned by Dominion Cove Point LNG LP in 2017.

“During the recently-concluded LNG 17 Conference at Houston, India’s Petronet LNG and United LNG, LP, have entered into a conditional agreement to supply LNG from the Main Pass Energy Hub LNG project in the Gulf of Mexico, with the final agreement expected to be concluded by year-end.

“Thus, by late 2017, on the assumption of DoE approvals, we are already looking at a scenario of 0.5 tcf per annum of LNG exports from the U.S. to India, which is nearly 75 per cent of our current yearly imports of natural gas from all sources,” Ms. Rao said, adding that Indian companies were scouting for more tie-ups and ownership stakes in the 19-odd terminals which had applied for export of natural gas to non-FTA countries.

Besides, other Indian companies, including Reliance Industries in the private sector, had bought stakes in oil and gas exploration and production companies, a trend which would receive a huge boost if export of natural gas was permitted to India, she argued. According to another study, roughly 20 per cent of the $133.7 billion invested in U.S. tight oil and shale gas from 2008 to 2012 has come from abroad, with Indian companies accounting for a total investment of nearly $4 billion so far.

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Printable version | Jun 19, 2021 1:12:13 PM |

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