Royal Dutch Shell, Reliance Power and Kakinada Seaports have reached an agreement to construct an LNG terminal on India’s eastern sea coast, targeting the energy-hungry local market.
Shell and Reliance Power will hold the majority of the equity in the terminal company and the venture would represent a significant Foreign Direct Investment in the country and Andhra Pradesh, the companies said.
The Kakinada project is expected to start with a capacity up to 5 million tons per annum (mtpa) and is designed for easy expandability to 10+ mtpa to meet the surging demand for gas in the region.
Shell majority owns and operates one of India’s two operating LNG import terminals, the Hazira terminal in Gujarat, and have recently supported the development of a similar FSRU based terminal in Dubai.
The project is progressing as per plan for completion in 2014 and statutory clearances are being progressed accordingly, Reliance Power said.
The LNG import and regasification terminal at the Kakinada Deepwater port in Andhra Pradesh (India) is moving to its next phase in implementation, the Reliance Power said in a statement
“Royal Dutch Shell, Reliance Power and Kakinada Seaports have made steady progress towards implementing the project following intense developmental activities since early 2011,” a statement said.
“India is an important market for LNG and the states of Gujarat and Andhra Pradesh (AP) have the highest demand for gas in India. After the success of Shell’s Hazira terminal in Gujarat, Shell is keen to set up an LNG receiving terminal in AP,” said De la Rey Venter, Global Head of LNG, Royal Dutch Shell.
An agreement was signed in December 2011 to undertake a number of joint technical studies and commercial agreements, the statement said.
With the completion of such studies and agreements, the consortium has finalized the specific location of a Floating Storage and Regasification Unit (“FSRU”) based receiving-terminal adjacent to the existing island breakwater thus minimizing terrestrial impact as little or no onshore facilities will be required, it said.
Besides the location, the orientation and specifications of the FSRU have also been agreed. The consortium is currently engaged with FSRU suppliers for selection of a preferred provider.
Kakinada Seaports operates the Kakinada Deepwater Port which has very suitable marine conditions for the project. Shell holds the largest equity share of LNG capacity among International Oil Companies. In 2011, joint ventures in which Shell has an interest supplied more than 30% of global LNG volumes.
The project will be designed to the highest international standards associated with the LNG industry. FSRUs, in addition to enabling faster start up, are also lower in cost than onshore terminals and allow for modular expansion.
Mr. J P Chalasani, CEO, Reliance Power Limited, said “The LNG receiving terminal in AP is of strategic importance to Andhra Pradesh and India. Kakinada, with its proximity to our Samalkot power plant and several other gas consumers, is a natural choice for setting up an LNG terminal.”
Reliance Power Limited, a part of Reliance Group, is India’s leading private sector power generation company. The company has the largest portfolio of power projects in the private sector based on coal, gas, hydro and renewable energy, with an operating portfolio of 1,240 MW.
The company also has the largest captive coal reserves in the private sector, estimated at more than two billion tonnes. Besides, the company has purchased three coal mines in Indonesia and also has plans to develop coal bed methane based generation capacity.
Shell is a global leader in LNG and helped pioneer the liquefied natural gas (LNG) sector, providing the technology for the world’s first commercial liquefaction plant in 1964.
Shell is a participant in eight operating LNG projects in operation with some 21 million tonnes per annum (mtpa) operational LNG capacity, in seven countries, with another ready for start up and three new projects under construction and 15 mtpa of LNG options.
Kakinada Sea Ports Limited (KSPL) operates the Kakinada Deep Water Port in Andhra Pradesh East Coast India. It was the first operational privatized port on the East Coast.