India has sought an exception from the US to the rule which bans shale gas exports to those countries with which it does not enjoy free-trade agreements.
If the US agrees to this demand, Indian companies like Reliance Industries and GAIL can source the hydrocarbon at cheaper costs.
Reliance Industries has invested $3.8 billion in US shale assets and is exploring opportunities to buy stakes in LNG terminals to ship the gas to India. GAIL India last year bought a 20% stake in a US shale asset for $300 million and is planning to buy a stake in an LNG export terminal, too. While India, in past few weeks, has sped-up reforms, it now wants developed nations like the US to reciprocate by relaxing trade rule and investment flows.
A recent visit of an Indian business delegation to the US deliberated on a wide-ranging issues and shale gas was one of the agenda item, Ficci president RV Kanoria told FE in an interview. ?India is participating in shale gas exploration but the US restricts export of the gas on ground that India is not party to the free trade agreement,? he said.
?We have sought an exemption for Indian companies from a clause (under Section 3 of the Natural Gas Act of US) that bars export of shale gas to countries which do not have a FTA with the US,? he said.
At present, the US department of energy evaluates applications to import and export natural gas and liquefied natural gas (LNG) to and from the country and grants a permit unless it finds such action is not consistent with the public interest. As a practical matter, the need for DOE to make a public interest judgement applies only to trade involving countries that have not entered into a free trade agreement (FTA) with US.
The US allows only Cheniere Energy to export liquefied natural gas (LNG) from Sabine Pass LNG terminal to those countries that have not signed FTAs with the US such as India. US fears large scale export of shale gas, especially to energy-scarce Asian nations, would prompt companies to align domestic prices with global rates and result in higher expenditure for the US consumers and industry.
Indian companies like GAIL has asked the ministry of external affairs to push its case with the US as it would be many times cheaper to get liquefied shale gas from the US than to buy LNG from countries like Qatar. Shale gas can be shipped at less than $10 per million British thermal units in 2011, while LNG imports cost from countries like Qatar costs as much as $15-17 per mmBtu.
Apart from shale gas, Kanoria said India has also discussed issues pertaining to nuclear and renewable energy with the US officials. Welcoming recent reform measures announced by the government like FDI in multi-brand retail, the US-based companies have evinced interest in cold chains, logistics and food preservative.
?My view is that the announcements on reforms have been taken positively and generated lot of enthusiasm and brought back confidence. While sentiment remains buoyant, investors want the measures to be implemented,? he said referring to investor interest in FDI in insurance and pension.
