GAIL Signs Pact With Japan's Sumitomo Corporation

New Delhi: State gas utility GAIL India Ltd on Friday said it has signed an agreement with Sumitomo Corp, Japan's third-largest trading house, for cooperation in gas procurement and petrochemicals.

"Under the Memorandum of Understanding (MoU), GAIL and Sumitomo will pursue business opportunities in natural gas and LNG value chain business globally, specifically covering cooperation in petrochemicals, natural gas procurement, pipelines and LNG," the company said in a statement in Delhi.

GAIL and Sumitomo have each booked a capacity of 2.3 million tonnes at Dominion Resources Inc's Cove Point liquefied natural gas (LNG) export terminal at Lusby, Maryland, USA.

The two "have also agreed to coordinate for ensuring smooth operation of the terminal", the statement said, adding that both the firms view US market as a growth area for their line of businesses and would cooperate on businesses ranging from upstream to downstream.

"There are significant opportunities in the North American gas markets and we are pleased to be partnering with Sumitomo in jointly developing this business," GAIL chairman and managing director B C Tripathi said.

GAIL is India's largest gas transmission and marketing firm. In USA, its wholly owned subsidiary, GAIL Global (USA) Inc, has acquired a stake in Eagle Ford shale acreage. It has alsosigned a contract to buy 3.5 million tonnes per annum of LNG from Sabine Pass for 20 years.

Another 2.3 million tonnes has been contracted from Cove Point terminal. Gas from Sumitomo's fields in the northeast of US will be liquefied at the Cove Point terminal for shipping to countries like India and Japan.

Sumitomo was among the first Japanese traders to invest in US shale with the 2009 purchase of a 12.5 per cent stake in the Barnett Shale Gas project in Texas from Carrizo Oil & Gas Inc. Together with its stake in Rex Energy Corp's Marcellus shale area, it has a 140 million cubic feet per day supply of gas.

Its subsidiary Pacific Summit Energy LLC is a significant player in natural gas trading and marketing (physical and financial) in USA. Sumitomo has also invested in shale gas/tight oil assets in USA, the statement added.