GAIL trades Gulf Coast LNG cargoes

India’s largest state-owned gas company, Gas Authority of India Limited (GAIL), has reached a deal with Swiss energy trading firm Gunvor to swap American LNG cargoes for shipments from other sources. Under the deal, GAIL will sell Gunvor 0.6 million tons of next year's LNG cargoes Free On Board (FOB) from Cheniere Energy Partners’ liquefaction facility at Sabine Pass, La., at a premium to GAIL's contracted price. [FOB is an international commercial law term specifying at what point respective obligations, costs, and risks involved in the delivery of goods shift from the seller to the buyer.] GAIL has signed a 20-year purchase agreement for 3.5 million tons per annum LNG from Cheniere's export facilities, plus another 2.3 mtpa from Dominion Energy's Cove Point plant in Maryland. In return, Gunvor will sell GAIL 0.8 million tons of LNG in 2017 at 12 percent of the Brent crude price with delivery included. It will save GAIL shipping costs of Cheniere on the Gulf of Mexico to the Indian Ocean. Economic Times estimates the total price differential could be as large as $2 per mmbtu (one thousand thousand British Thermal Units) or about 25 percent of delivered costs. GAIL had initially intended to contract for up to 11 new vessels to transport American LNG to India. However, a "Make in India" provision requiring one in three to be built in India was likely a deal-breaker. After pushing back the bidding deadline, GAIL decided to cancel the deal and charter ships on the open market. GAIL has a wholly-owned subsidiary, GAIL Global (USA) Inc., located in Houston. (Source: Maritime Executive 03/03/17)