OREANDA-NEWS. December 12, 2011. In a significant development, state-owned GAIL (India) Ltd announced on Sunday that it has signed a Sales and Purchase Agreement (SPA) to procure liquefied natural gas (LNG) for over 20 years with Sabine Pass Liquefaction, LLC — a subsidiary of Cheniere Energy Partners, LP, USA —for supply of 3.5  million tones per annum (MTPA) of LNG.

“The SPA with Cheniere will help GAIL to ensure long term gas supply for the growing demand in the Indian market,” said B C Tripathi, chairman and managing director, GAIL India, in a statement.

This, he said, will be in addition to other initiatives being undertaken by GAIL, which includes building captive LNG facilities in India and augmenting its transmission capacity from 175 million standard cubic feet per day (MMSCMD) to over 300 MMSCMD over the next two years.

“GAIL will join BG and Gas Natural Fenosa as the next foundation customer for our Sabine Pass liquefaction project,” said Charif Souki, chairman and CEO of Cheniere, USA.

Without mentioning the price details, the statement said that under the SPA, GAIL will pay Sabine Liquefaction as per contractual provisions on a Henry Hub (US gas benchmark) basis. The LNG will be loaded onto GAIL’s vessels and the SPA has a term of 20 years commencing upon the date of first commercial delivery, and an extension option of up to 10 years.

LNG deliveries are expected to occur upon commencement of operations of train four in 2017. GAIL has already established an office in Houston and acquired shale gas assets in Carrizo’s Eagle Ford Shale acreage and is further looking for shale gas assets in the US.

“The LNG would be supplied from train four of the Sabine Pass LNG receiving terminal located on the Sabine Pass Channel in western Cameron Parish, Louisiana,” the company’s statement said.

The Sabine Pass LNG terminal project is being developed by Sabine Liquefaction and would include up to four liquefaction trains capable of producing up to 18 mtpa of LNG. The project is being developed in phases with each LNG train commencing operations approximately six to nine months after the previous train.