Royal Dutch Shell, RPower to set up LNG terminal in AP

New Delhi: Royal Dutch Shell and Reliance Power announced plans to set up a floating liquefied natural gas (LNG) import terminal off the coast of Kakinada in Andhra Pradesh by 2014. The port announced by the two companies in separate but identical press statement is the same as the one for which state-owned gas utility GAIL India had roped in French utility GDF Suez and signed pact with Andhra Pradesh government for a 3.5 million tons floating LNG receipt facility. "After the success of Shell's Hazira terminal in Gujarat, Shell is keen to set up an LNG receiving terminal in Andhra Pradesh," Royal Dutch Shell's Global Head of LNG De la Rey Venter said in the first official announcement of Reliance Power (RPL) and Shell joining hands for the floating terminal. "We are pleased to have reached an agreement with RPL and Kakinada Sea Ports Ltd (KSPL) to implement the LNG terminal in AP and look forward to successfully progressing this project with our partners," he said. While Shell operates a 3.6 million tons a year capacity LNG terminal at Hazira in Gujarat, the project off the Andhra coast "is expected to start with a capacity of up to 5 million tons per annum and is designed for easy expandability to 10 million tons to meet the surging demand for gas in the region." Shell and billionaire Anil Ambani-run RPL will hold the majority of the equity in the terminal company, the statements said but did not give details of the equity structure. Kakinada Seaports operates the Kakinada deepwater port. "This project uniquely benefits from Shell's presence in several existing and planned LNG supply projects around the world which will help ensure diversity and security of supply," it said. Kakinada is also the landfall point of billionaire Mukesh Ambani-led Reliance Industries' flagging KG-D6 gas fields in the Bay of Bengal, and a near 1,400-km line carries the fuel from there carries the fuel to consumption centres in the west. The continuing fall in KG-D6 output has triggered a rush for setting up of LNG import facilities to meet the growing energy demands in the country. While GAIL is doing a detailed feasibility report for the floating import facility, Petronet LNG Ltd - the nation's largest importer of gas in its liquid form (LNG) in ships, too is building a 5 million tons facility at Gangavaram in Andhra Pradesh by 2016. In intervening period to the construction of the Rs 4,000 crore Gangavaram terminal, Petronet plans to hire a floating LNG terminal to begin imports of fuel immediately. State refiner Indian Oil Corp (IOC) too is doing a front-end engineering and design (FEED) study for a terminal at Ennore in Tamil Nad The statements said, "the LNG import and regasification terminal at the Kakinada deepwater port in Andhra Pradesh (India) is moving to its next phase in implementation. "Royal Dutch Shell, Reliance Power and Kakinada Seaports have made steady progress towards implementing the project following intense developmental activities since early 2011. De la Rey Venter, Global Head of LNG, Royal Dutch Shell, said, "India is an important market for LNG and the states of Gujarat and Andhra Pradesh have the highest demand for gas in India." The statements said an agreement was signed in December 2011 to undertake a number of joint technical studies and commercial agreements. "With the completion of such studies and agreements, the consortium has finalised the specific location of a Floating Storage and Regasification Unit (FSRU) based receiving terminal adjacent to the existing island breakwater thus minimising terrestrial impact as little or no onshore facilities will be required," it said. Stating that besides the location, the orientation and specifications of the FSRU have also been agreed, it said the consortium is currently engaged with FSRU suppliers for selection of a preferred provider. "The project is progressing as per plan for completion in 2014 and statutory clearances are being progressed accordingly," it said. FSRUs, in addition to enabling faster start up, are also lower in cost than onshore terminals and allow for modular expansion. J P Chalasani, CEO, RPL said, "Kakinada, with its proximity to our Samalkot power plant and several other gas consumers, is a natural choice for setting up an LNG terminal." "The LNG receiving terminal in AP is of strategic importance to Andhra Pradesh and India. We believe Shell, with its large LNG portfolio and experience in operating LNG terminals will add immense value to the project," he said. An official spokesperson for KSPL, said, "The Kakinada deepwater port is ideally suited for setting up an LNG terminal in the state and has the vision of developing as a world class marine facility.