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After slow start, US LNG exports to India expected to grow within limits

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After slow start, US LNG exports to India expected to grow within limits

After accounting for just a sliver of Indian LNG imports, American natural gas should become a bigger part of the mix with the start of two long-term contracts for supply from Cheniere Energy Inc.'s Sabine Pass and Dominion Energy Inc.'s Cove Point LNG export terminals. But industry watchers cautioned that volumes might not be as high as expected when the deals were signed.

Since Sabine Pass began exporting in February 2016 through November 2017, India received just 4.3% of U.S. LNG production, or about 34.4 Bcf worth of gas out of the total of 807.9 Bcf, according to data from the U.S. Department of Energy. Despite the slow start in India, the U.S. should grow in its role as a supplier to the country, said Jane Nakano, senior fellow with the energy and national security program at the Center for Strategic and International Studies.

The state-run GAIL (India) Ltd. has a 20-year contract to obtain LNG from a fourth liquefaction train at the Sabine Pass terminal in Louisiana. While train 4 is already operational, the contract does not officially begin until March. GAIL also has a deal to receive LNG from the Cove Point facility set to enter service in March.

But signs surrounding India's future with U.S. LNG reveal some tension, said Susan Sakmar, a visiting professor at the University of Houston Law Center and author of Energy for the 21st Century: Opportunities and Challenges for Liquefied Natural Gas.

"Going forward, I'm not sure how much U.S. LNG will flow to India, and it is not likely to be as much as originally thought when GAIL signed its off-take agreements with Cheniere and Cove Point," Sakmar said. "I'm holding my breath to see if GAIL actually takes its cargoes from [the U.S.]."

Indian oil and gas minister Dharmendra Pradhan has said GAIL is in talks with Cove Point and Cheniere to redo the terms of the existing agreements, according to a Reuters story from New Delhi. Both Dominion and Cheniere have said they intend to stand by the original deals.

GAIL is also looking to sell two dozen Cove Point cargoes between 2019 and 2020, S&P Global Platts reported in late January.

"I think we can safely say that a number of Indian companies over-contracted cargoes of LNG and have been attempting, and encouraged at the ministerial level in India, to renegotiate," said Tim Boersma, a senior research scholar at Columbia University's Center on Global Energy Policy. He said he sees cargo swaps as a product of price-sensitive Indian demand and infrastructural bottlenecks that complicate companies' efforts to bring gas to market.

"A significant number of U.S. cargoes now have a new owner," Boersma said. "They might still end up in India, of course, though chances have probably not increased."

Still, India will remain an important market for LNG from around the globe. The country is planning to more than triple its imports to more than 70 million tonnes per annum over the next seven years, Reuters reported Feb. 7. Reuters cited Narendra Taneja, a spokesman for the ruling Bharatiya Janata Party, who spoke at an industry conference in Bali, Indonesia. To do that, India will need to build 11 more import terminals in addition to the four already operating, Taneja said.

S&P Global Platts and S&P Global Market Intelligence are both owned by S&P Global Inc.