Petronet signs 20-year deal with United LNG to import US gas

India's state-run gas importer Petronet LNG said today it has signed a preliminary agreement with United LNG LP to purchase around 4 million metric tons a year of liquefied natural gas for 20 years, beginning 2018.

"We have signed a preliminary agreement to import LNG from US," Petronet director finance R K Garg said in a statement from Mumbai.

Petronet will sign the final agreement - called the gas sale and purchase agreement (GSPA) - after Houston-based United LNG obtains approval of the US Department of Energy to export gas to India, with which Washington does not have a free-trade agreement (FTA).

The deal will mark India's first purchase of gas from the US. The gas will come from United LNG's Main Pass Energy Hub in the Gulf of Mexico.

"Detailed terms and conditions including price will be finalised later," Garg said. He added that the price will be linked to benchmark Henry Hub rates.

United LNG is developing the Main Pass export terminal with a capacity of 24 million tonnes per annum, in association with Freeport McMoRan Energy LLC.

"They said the project will be ready by 2017-18 and we expect to begin imports sometime in 2018," Garg said.

GAIL has also booked capacity to export another 2.3 million tonnes at US-based Dominion Energy's Cove Point liquefaction plant from 2017, Garg said.

Gas exports by the US to India would have many positive effects on both economies, Nirupama Rao, India's ambassador to the US, wrote in The Wall Street Journal earlier this month.

"For the US it would help create thousands of jobs and an expanded revenue stream for the federal government. For India, it would provide a steady, reliable supply of clean energy that will help reduce our crude oil imports from the Middle East and provide reliable energy to a greater share of our population," she said.