Opening up the prospects of export of shale gas to energy starved India,the US granted conditional authorization to export domestically produced liquefied natural gas (LNG) to nations that do not have Free Trade Agreement (FTA) with it.
In a decision,which has major implications for India,the Department of Energy announced that that it has conditionally authorized Freeport LNG Expansion,LP and FLNG Liquefaction,LLC (Freeport) to export domestically produced LNG to non-FTA countries from Freeport Terminal on Quintana Island in Texas.
Given that the companies from countries like China,Japan and Britain have already have an overwhelming stake in this Texas company,India is unlikely to benefit immediately from this grant of license.
But the decision paves the way for India,which does not has a FTA with the US,to get its companies seek similar licenses for import of much needed gas from the United States 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 United States.
For countries that do not have an FTA with the United States,the Natural Gas Act directs the Department of Energy to grant export authorizations unless the Department finds that the proposed exports “will not be consistent with the public interest.”
In its 132 page order,the Department of Energy said that the proposed exports are likely to yield net economic benefits to the United States.
“We further find that granting the requested authorization 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.
Freeport facility in Texas,the Department of Energy said,is conditionally authorized to export at a rate of up to 1.4 billion cubic feet of natural gas a day (Bcf/d) for a period of 20 years. The Department granted the first authorization to export LNG to non-FTA countries in May 2011 for the Sabine Pass LNG Terminal in Cameron Parish,Louisiana at a rate of up to 2.2 Bcf/d.
The Gas Authority of India Limited (GAIL) 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 USA on FoB basis.
The commencement of supply is expected to start from 2017-18.
The Department is currently processing several other applications in this regard.
Pushing for US 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 demand supply gap of natural gas in India,which is estimated at around 2.2 trillion cubic feet (TCF) per annum presently,is likely to go up to nearly 4 TCF/annum by 2016-17.
The demand of natural gas is expected to be about 8 TCF/annum by the year 2030.
“We estimate that these savings would be in the range of USD 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 has said Indian companies have already made some large investment in the US 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 Ltd 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/annum of LNG exports from US to India,which is nearly 75 percent of our current yearly imports of natural gas from all sources,” Rao said,adding that Indian companies are scouting for more tie-ups and ownership stakes in the 19 odd terminals which have applied for export of natural gas to non- FTA countries.
Besides,other Indian companies,including Reliance Industries Limited in the private sector,have bought stakes in oil and gas exploration and production companies,a trend which will receive a huge boost if export of natural gas is permitted to India,she argued.
According to another study,roughly 20 percent of the USD 133.7 billion invested in US tight oil and shale gas from 2008 to 2012 has come from abroad,with Indian companies accounting for a total investment of nearly USD 4 billion so far.