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India's GAIL to hold off renegotiating US LNG contracts

An official with GAIL (India) Ltd. said the company will hold off its efforts to renegotiate LNG contracts with Cheniere Energy Inc. and Dominion Energy Inc. affiliates for up to two years before trying again to reopen the long-term agreements in the hopes of a better deal.

A.K. Tiwari, executive director of GAIL's finance and accounts group, said the state-run company wants to first evaluate how the terms of the agreements stand up in the changing global market. "Let us see for a few years — one to two years and then we will see whether the demand comes up," Tiwari said on the sidelines of CERAWeek by IHS Markit. "If the price stabilizes, then we are OK. There is no problem."

India has been outspoken about seeking to renegotiate contracts for U.S. LNG. The country's oil minister in December 2017 told lawmakers in India that GAIL was in talks with Cheniere and Dominion Energy Cove Point LNG LP to renegotiate the terms of existing agreements. Another Indian company and LNG buyer, Petronet LNG Ltd., has twice altered the terms of its deals, once for fuel from Qatar and another time for supplies from Qatar. Such contracts often serve as vouchers for the viability of proposed LNG projects when developers go to banks for financing.

Cheniere and Cove Point declined to comment on GAIL's plans to renegotiate its contracts for U.S. LNG. Both have said in the past that they expect their customers to uphold their end of the deal when it comes to the 20-year contracts that back their companies' multibillion-dollar export terminals.

The first LNG cargo under Cheniere's contract with GAIL left the Sabine Pass liquefaction and export terminal in Louisiana on March 5. Under the agreement, signed in December 2011, GAIL will buy about 3.5 million tonnes per annum from the fourth train at the terminal.

A contract between Cove Point and GAIL will take effect when the Maryland facility, which just shipped its first cargo, enters commercial service. The developer received approval from federal regulators March 5 to officially come online.