The shale gas that GAIL will receive from 2017 will not be exclusively for Indian gas-starved industries. The public sector gas distributor is looking to trade a portion of the US shale gas in international markets by wooing suitors as far as Latin America and Japan. Through this effort, the company hopes to rake in better margins than what it can from selling the relatively cheaper fuel domestically.

?Singapore is our trading hub and the team there is now moving out to get a better price. We have apportioned 1 million tonne per annum (mtpa) of the gas it will receive from the US starting 2017,? Prabhat Singh, director (marketing) at GAIL, told FE.

Singh said this is part of a larger effort by the company to sell portions of its long-term liquefied natural gas (LNG) resources in global markets. GAIL has signed several long-term contracts, including those with suppliers from the US, Russia and Qatar.

The first delivery of long-term LNG contracts will arrive from the US in 2017. Up to that point, GAIL will have to depend on spot cargoes to meet LNG requirements.

The trading will be done through GAIL?s subsidiary, GAIL Global (Singapore), which opened a (LNG) trading desk in Singapore in 2011.

GAIL has executed an LNG off-take agreement with Cheniere Energy Partners for importing 3.5 million metric tonne per annum (mmtpa) from the US starting 2017-18. GAIL has also booked a 20-year terminal service agreement with Dominion Resources for supplying 2.3 mmtpa of shale gas from 2017. Apart from this, the company has acquired a 20% interest in Carrizo?s Eagle Ford Shale acreage, which is currently under development.

US shale gas prices are linked to the Henry Hub, which currently rules at around $3.5 mmBtu. At these levels, shale gas will have a landed cost of around $10-11 mmBtu in India. In contrast, the price of imported LNG from other sources ? Qatar, Australia and Russia ? which is linked to crude oil and the Japanese Crude Cocktail (JCC), could be priced higher at $ 14-17/mmBtu.

?If we sell it in India we will not get the margins we want. So we can make some money out of this as this is

the cheapest gas available. We are trying to create that arbitrage for us,? said Singh.

Apart from higher margins, GAIL is also looking to trade in overseas markets to win assured buyers for its long-term LNG contracts. Many of the company?s domestic gas pipelines are working under capacity as several fertiliser and power plants proposed to come adjacent to the pipelines have not come onstream. ?The point is, the US volume will come into India, which we are keeping for fertiliser and power companies. Now, if fertiliser and power plants don?t come up, we need to find alternatives,? said Singh.

GAIL 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 US. Analysts say large Asian gas importers, including India, Japan and South Korea, are aggressively looking to lock in US shale gas contracts owing to the price advantage over the global market.

Analysts say that as part of its increasing global focus, the company is also planning to enter the shipping business. It plans to acquire 6-10 ships by the second quarter of the next financial year. The company is also said to be studying options for entering into swap contracts for gas.

GAIL has so far locked in around 6-7 million tonne per annum (mtpa) of long-term gas contracts that will land in India from 2016-17. This includes deals with Gazprom from Russia and Cheniere Energy Partners from the US. Given the huge demand, GAIL is in talks to lock in a further 5-10 mtpa, including 3 mtpa from Rasgas in Qatar and 1 mtpa from Nigeria. Starting 2018-19, GAIL will also commence a 20-year deal with Russia?s Gazprom to buy 2.5 mtpa LNG. GAIL also has a long-term contract with Qatar to acquire 7.5 mmtpa of gas.