GAIL (India) will be the first Indian company to import shale gas after receiving a waiver from the US department of energy (DoE), whose permission is needed for oil and gas exports to countries that don’t have a free trade pact with the United States.

The first-ever authorisation to export LNG to non-FTA countries at a rate of up to 2.2 bcf/d was granted to Sabine Pass LNG Terminal in Cameron Parish, Louisiana, in May 2011. GAIL has executed an LNG off-take agreement with Sabine Pass Liquefaction for the import of 3.5 million metric tonnes per annum (mmtpa) from the US on a freight-on-board (FoB) basis. The supplies are expected to start from 2017-18.

In a May 2013 decision, which has major implications for India, the DoE announced that it had conditionally authorised Freeport LNG Expansion and FLNG Liquefaction (Freeport) to export liquefied natural gas (LNG) to non-FTA countries from the Freeport Terminal on Quintana Island in Texas. It can export at a rate of up to 1.4 billion cubic feet of natural gas a day (bcf/d) for 20 years.

The DoE is now processing other applications on the issue and New Delhi is pressing for more such waivers to other Indian companies.

GAIL has around $1 billion to spend on shale assets in North America, which will act as a hedge against the planned imports of US LNG. ?We need gas, so equity gas is also required,? GAIL director (marketing) Prabhat Singh told FE.

?GAIL has signed a terminal-service agreement with Dominion through GAIL Global (USA) LNG for 2.3 mmtpa liquefaction capacity in the Cove Point LNG liquefaction terminal project located at Lusby in the state of Maryland. The contracts signed with Cheniere and Dominion make GAIL one of the largest Henry Hub LNG portfolio holders and provide us an opportunity to market about 6.0 mmtpa of LNG from the US,? Singh added.

Under this agreement, GAIL will procure its own natural gas and deliver it to the Cove Point pipeline for liquefaction at the terminal and loading into ships brought to the facility on the Chesapeake Bay.

Pushing for US export of shale gas, Indian ambassador to US Nirupama Rao in a recent talk at the American Enterprise Institute (AEI) had said the demand-supply gap of natural gas in India, estimated at around 2.2 trillion cubic feet (tcf) per annum, was likely to go up to nearly 4 tcf per annum by 2016-17. The demand of natural gas is expected to be about 8 tcf per annum by 2030.

Indian companies have already made large investments in the US on this front and have put money in liquefaction terminals that are likely to come up.

India?s Petronet LNG and United LNG have entered into a conditional agreement to supply LNG from the Main Pass Energy Hub LNG project in the Gulf of Mexico, with the final agreement expected to be concluded by the end of this year.

According to a ministry of external affairs (MEA) official, ?By late 2017, on the assumption of DoE approvals, we are already looking at a scenario of 0.5 tcf per annum of LNG exports from the US to India, which is nearly 75 % of our current yearly imports of natural gas from all sources.?

Indian companies are scouting for more tie-ups and stakes in the 19-odd terminals, which have applied for export of natural gas to non-FTA countries. OIL and Indian Oil Corporation in October last year jointly acquired 30% stake in Carrizo Oil and Gas Inc’s Colorado shale gas assets for $82 million. GAIL bought 20% of Carrizo’s Eagle Ford acreage for over $63 million. Reliance has spent about $5 billion in buying various shale gas assets. Said, NK Bharali, director Human Resources and Business Development, OIL, ?There is a lot of potential for shale gas. Its a demand and supply situation.?

?Export permission to other projects would depend on the outcome of a contentious debate raging in the US Congress on whether exporting gas might hurt consumers by pushing up prices at home. Once they decide that it’s viable economically to export, then the discussion about rates will take places between the companies,? says Petronet, India, director (finance) RK Garg .

Although the release of a comprehensive national shale oil and gas policy has been postponed, in 2010 the government signed an MoU with the US in order to cooperate in developing Indian shale gas resources. Exploration and assessment of the potential of shale gas were part of the objectives of the MoU, and under the agreement, in 2012 the US Geological Survey assessed the resources in a number of basins like the Cambay, Cauvery, and Krishna-Godavari basins, estimating the total recoverable resources at 6.1 tcf. Incidentally, this MoU was expected to be renewed during the just-concluded visit of the US secretary of state John Kerry, but, according to sources, the Indian side had some issue with the text.

Now, the extension of this MoU will come up during the visit of the US vice-president, said a source.