Petronet LNG Ltd has signed a multi-billion dollar agreement secure LNG for its Kochi terminal with two Australian subsidiaries of oil giant ExxonMobil from the proposed Gorgon LNG project in Australia.

India's largest liquefied natural gas importer, formalised a May 2009 agreement with ExxonMobil (See: Exxon Mobil, Petronet reach LNG supply deal) to purchase 1.5 million tons of LNG annually, with supplies expected to start from 2014. 

The two companies have not revealed the value of the deal but ExxonMobil said that it has the potential to supply an additional 1.3 MT of LNG if Petronet is able to commit additional volumes.

The gas will be delivered to Petronet's new LNG terminal under construction at Kochi in Kerala. The Kochi terminal will have a capacity to import 2.5 million tons of LNG a year and is expected to start operations in 2011.

Luke Musgrave vice president, LNG Australia, Exxon Mobil, said, ''We are pleased to move forward with Petronet LNG on securing LNG sales from the Gorgon Project. This historic agreement is the first long-term sale of LNG from Australia to India."

The US major's Australian subsidiary has a 25-per cent stake in the $ $32 billion Chevron-led Gorgon LNG project on Barrow Island in Western Australia, where Chevron holds 50 per cent and Royal Dutch Shell 25 per cent.

The Gorgon gas fields was first discovered in 1981 and is reported to have gas reserves of over 40-trillion cubic feet with a development life of around 60 years. Another oil major, Chevron, had expanded the size of the Gorgon LNG processing plant last year to 15 million tonnes per annum (mtpa) from the earlier planned capacity of 10 mtpa.

Chevron recently won conditional approval from an Australian regulator for the expanded Gorgon project and expects to hike its investment from $9.2 billion to $32 billion.

"I am very pleased to finalise this long-term agreement for the provision of LNG to our new terminal in Kochi, supporting more than $2 billion of related energy infrastructure investment in India," Petronet managing director Prosad Dasgupta said.

''Energy consumers in Kerala will now have access to a clean-burning base load fuel, which will enhance the economic development of the region and maintain the pristine ecology of Kerala,'' he added.

India is emerging as a key LNG market in Asia along with China at a time when traditional buyers like Japan are reducing purchases. Both India and China want to raise imports of cleaner-burning gas to cut their reliance on burning coal and foreign oil.

PetroChina's chairman Jiang Jiemin in March said the company is likely to sign an LNG import deal with Exxon in the first half of this year.

This deal with Petronet would be Exxon Mobil's first Asian customer.