Reliance Power, Shell to Set up LNG Terminal in Andhra

Facility to import 5 MT of LNG a year, to help serve plants that were expecting gas from RIL’s D6 block

A consortium of Anil Ambani-controlled Reliance Power and energy major Shell will build a terminal to import 5 million tonnes a year of liquefied natural gas (LNG) on the Andhra Pradesh coast from 2014.

The consortium will build a floating terminal, which can be set up quickly. It will be located near RIL’s D6 block, where output has fallen sharply hitting several power plants in the region. It will help supply gas to customers on the East Coast who built plants in anticipation of supply from Reliance Industries’ D6 block.

Several power projects in the region, with a combined capacity of 8,000 MW, urgently need natural gas. These include Reliance Power’s 2,400-MW Samalkot unit, and others which are being built by GMR Energy, GVK Power and Lanco Infratech. “We are pleased to have reached an agreement with Reliance and Kakinada Sea Ports to implement the LNG terminal in AP,” Royal Dutch Shell global head of LNG, De la Rey Venter, said in a statement. The oil ministry estimated India’s gas demand to soar to over 356 million standard cubic meters per day by (mmscmd) 2014-15 while domestic output would almost remain static at about 113 mmscmd. Most of the demand shortfall would be met through imported liquefied natural gas (LNG).

Kakinada Sea Ports, which operates the Kakinada deepwater port in Andhra Pradesh, will be a minority partner in the project that industry officials say would require an investment of $1 billion (. 56,000 crore). ET had reported this first on January 3. According to industry sources, Shell and Reliance Power would hold 40% equity stake each, while Kakinada Port would hold the balance. Companies did not disclose their equity holdings in the consortium. The partners had agreed to set up the venture in December 2011.

Rey Venter said, “India is an important market for LNG and the states of Gujarat and Andhra Pradesh 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.” Shell operates the Hazira LNG terminal in Gujarat and plans to construct a similar floating LNG terminal in Dubai.

The consortium is setting up a floating storage and regasification terminal that would be located adjacent to the existing island breakwater, the companies said in their statements. “The floating unit would not require land. Besides, such terminals are faster in commissioning,” Reliance power CEO JP Chalasani said. The capacity of a floating terminal can be increased to 10 million tonnes as natural gas demand in the region is expected to grow significantly, he said. Reliance Power, which is setting up a 2,400 MW gas-based power plant in Andhra Pradesh, is one of the largest consumers of natural gas in the region. “Kakinada, with its proximity to our Samalkot power plant and several other gas consumers, is a natural choice for setting up an LNG terminal,” Chalasani said.

Several companies, including Petronet LNG, India’s biggest gas importer, are considering setting up a terminal on the East Coast.

Souce: ET