Ahead of Prime Minister Narendra Modi’s meeting with President Barack Obama, the US has approved construction of a liquefied natural gas project that will ship the fuel to India.

US regulators gave the final approval yesterday for Dominion Resources to build the east coast’s first natural gas liquefaction plant at its Cove Point site on the Chesapeake Bay.

State-owned gas utility GAIL India Ltd has taken 40 per cent of the project’s capacity to liquefy 5.75 million tons a year of natural gas for export in ships. The $ 3.8 billion project is likely to be completed in June 2017.

The US Federal Energy Regulatory Commission (FERC) issued the permit for the Cove Point terminal in Maryland, Dominion Resources said in a statement.

“We are pleased to receive this final approval that allows us to start constructing this important project that offers significant economic, environmental and geopolitical benefits,” said Diane Leopold, president of Dominion Energy.

Modi on the last leg of five-day US visit will meet Obama here to reinvigorate an economic relationship between the two nations.

The US Energy Department has approved Cove Point’s exports to both free-trade and non-free trade agreement countries, according to FERC’s statement.

India does not have a free-trade deal with the US. LNG exports from US is allowed only to countries with which Washington has a free-trade agreement. Some terminals like Cove Point have however been exempted from this condition.

GAIL in April last year signed an agreement with Dominion for booking 2.3 million tons per annum liquefaction capacity in the Cove Point LNG liquefaction terminal project located at Lusby in the state of Maryland.

Cove Point would be the nearest export terminal to the Marcellus Shale, the most productive US natural gas deposit.

Under the agreement with Dominion, 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.

GAIL already holds a 20 per cent stake in Carrizo’s Eagle Ford Shale acreage. It also has a deal with Cheniere Energy Partners to buy 3.5 million tonnes per annum of LNG from Sabine Pass Liquefaction, a subsidiary of Cheniere, from 2017-18.

Dominion’s waterfront site, about 96-km, southeast of Washington, has already imported liquefied natural gas and requires minimal construction for beginning exports, Dominion said in the statement.

Source: Financial Chronicle