American gas exports to India will be competitive

The US India Political Action Committee (USINPAC) is a bipartisan organisation working through economic diplomacy to impact policies concerning the Indian-American community in the US. Robinder Sachdev, Director of India Affairs, USIPNAC, speaks to Devarajan Mahadevan on the latest issues that the entity is trying to resolve between the two countries.

What are the chances that the Domestic Prosperity and Global Freedom Act, which promises to free up US LNG exports, will see the light of day? Does this legislation have bipartisan support? Will this speed up the approval process of this Act?
The Domestic Property and Global Freedom Act has a reasonably high chance of getting passed. However, as the saying goes “what goes into the Congress may be an apple, but what comes out could be an orange!” in the same way, a bill that goes into the House of Representatives and then to the Senate is likely to have amendments and deletions by the time the bill is passed.

Yes, this legislation has full bipartisan support and the bailing out of Ukraine has been one factor which is helping to bring urgency to this legislation. Japan is also facing its own demands and situations with respect to energy and US is ready to help them. Another side-effect of the Ukraine situation is that Russia, which is a competitor in the global gas markets, can make offers to India that are differently attractive or strategic.

Thus it is important that the Act be passed at the earliest so that India can consider whether it wants to buy US gas or not.

There was a hearing on US LNG exports to India organised by Congressman Ted Poe, what was the outcome from this deliberation?
The congressional hearing on the US LNG exports was held on April 25, 2013 in Washington DC. Congressman Ted Poe set the agenda by acknowledging the significant potential for US LNG exports and laid specific emphasis on exports to India, a key strategic ally. He referred to Nirupama Rao's (Indian ambassador to US) statement in the Wall Street Journal regarding India's keenness to import LNG from the US and thus reduce its crude oil imports and also said that whenever he visited India, he is asked about US LNG exports.

Congressman Poe questioned “Why we are not exporting LNG to India”, as US LNG exports to India and other allies would create US jobs, stimulate the economy, forge strong ties with India and preclude India's dependence on the Iran gas pipeline project.

He urged the DOE to approve licenses of companies who want to export LNG to non-FTA countries including India and his views were endorsed by all the speakers who favorably testified about the viability of US LNG exports to allies such as India, stating that more the LNG exports greater would be the economic benefits to the US. The other key participants at the hearing included Congressmen Brad Sherman, Alan Lowenthal, Randy Weber, and Joe Wilson and speakers Rob Bryngelson, David Montgomery, Michael Levi, and David Mallino and Michael Ratner.

Compared to the current cost that India pays for its gas imports, how competitive will be American gas imports? Are there any definite numbers that you can share with us?
American gas exports to India will be competitive (compared) to other sources from where India is buying currently. According to the estimates of USINPAC, the landed price of US gas in India will range between $10-12 per mmBTU. Thus, it is most likely that US gas can be lower in cost than other competitors.

Apart from gas supply, is there any scope for India and the US to explore joint options for gas recoveries?
Yes, there is a certainly a chance for India and US to explore joint options for gas recoveries. India and the US can together make a good combination in countries like Vietnam and Myanmar.

Does USIPNAC feel that India and the US can enter into technology transfer agreements and infrastructure development contracts for oil & gas production in the years to come?
The technology transfer agreements and infra¡structure development contracts for oil & gas production are areas that will need to be handled with care. However, USINPAC feels that India and US can enter into these areas of developments.

What can be done to revive the moribund Indo-US Nuclear Deal?
The US industry has to look at an important thing immediately, i.e., American suppliers must run a full-scenario business model with maximum indigenisation/local content to lower the costs and also meet the stipulations that India is recommending which will help them to work out their costs and the lowering of cost structures. They should also compare the cost savings, with the increased insurance premium to which they will be exposed. Once the issues highlighted below are complete, which will take about a year, the US suppliers will decide on a go, no-go decision:

• First, the issue of the Areva project how the issue of liability is contracted in its contract with NPCIL which will help to give them indicators on how the liability clause is being factored into the contract.
• Second, to see when the India-Japan nuclear deal happens- U.S. suppliers may run into problems unless there is a Japan-India deal, reason being Westinghouse is owned by Toshiba; and GE's nuclear business worldwide is through a JV with Hitachi (GE-Hitachi). So an India-Japan deal is a must before US can supply to India.

These issues have a viable role as this is where the US suppliers homework on computing costs with domestic components in consideration will help them to do accurate costing, and assimilate the cost of insurance premium into the project. They key is that the US industry must prepare itself for decision making about one year down the line and now is the best time to do it.

An alliance called the 'Alliance for Free Trade with India' has been lobbying to declare India a “Priority Foreign Country' due to the ongoing trade disputes. You have personally condemned this decision to blacklist India. What are the latest developments on this front? USINPAC has been arranging and participating in discussions, on ways to improve economic diplomacy between the US and India to counter this negative sentiment.

USINPAC is also meeting up with some Congressmen and legislative staffers in Capitol Hill to discuss the negative impact of any such move by the US administration.With the resignation of the US Ambassador Nancy Powell last week, USINPAC expects the new Ambassador to bring some new perspectives and energy into this process.

Also, since it is election time in India, the US administration also realises that it cannot engage the Indian government too much at this point of time. Thus several of the matters are also in limbo right now.

Is your alliance also looking into the row between India and the US over the domestic content stipulation for Indian solar power plants?
Yes, USINPAC is looking over the domestic content stipulation for Indian solar power plants between India and US and is also closely watching the conflict of interest between the Indian project owners and the domestic producers. To a large extent USINPAC agrees to the special dispensation that should be accorded to JNNURM projects as these could fall into social objectives, wherein the public interest holds primacy. However this matter could be headed to the WTO.