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India Set to See its First FSRU Installed

Correction: H-Energy’s Kolkata FSRU project in West Bengal will be in partnership with Japanese shipping firm “K” Line, who will also supply the vessel, and not Excelerate as the article originally stated.

India’s H-Energy, a unit of real estate conglomerate Hiranandani Group, is set to start commercial operations at its FSRU-based LNG terminal at Jaigarh Port in the Ratnagiri district of Maharashtra State by Q2 this year. Our LNG Market Tracker has traced the movements of H-Energy-chartered FSRU GDF Suez Cape Ann off the Maharashtrian coast since 26 February. The vessel is ready to approach the Maharashtrian port of Jaigad, where H-Energy completed a FSRU jetty in May 2018. All that is missing is the FSRU.

India has seen robust LNG demand over the past year, with low spot prices in the Pacific spurring further buying activity. Brent’s rapid decline since mid February will also affect long-term contracts.

Engie to supply FSRU GDF Suez Cape Ann on 5-year initial charter

In June 2017, H-Energy signed an agreement with French energy firm Engie for chartering the GDF Suez Cape Ann for a period of five years starting in 2018. The companies have an option to extend the charter beyond the initial term on mutual agreement.

FSRU to kick-start gas supply into regional market

The GDF Suez Cape Ann has LNG storage capacity of 145,000m3 and is capable of reloading LNG onto other vessels, which would allow H-Energy to provide storage, regasification, reloading, fuel bunkering and truck loading services to regional Indian industry that is showing increasing gas demand to generate electricity, as transportation fuel or as feedstock. Moreover, scarce regional gas supply resulted in a lack of local gas infrastructure to deliver to individual consumers, a potential market H-Energy hopes to make inroads with the new FSRU.

Project was plagued by delays

The FSRU was originally scheduled to arrive at the LNG jetty at Jaigarh port by Q3 2018 with commercial operations to begin in Q4 2018. However, the terminal’s commercial start of operations has been plagued by several delays since the completion of its associated infrastructure – from the original start date to Q1 2019, then to Q4 2019 and now to Q2 2020. Monsoon rains and the Indian elections have delayed the start-up of the terminal. Overall, the project has been in development since 2015.

Two-phase project with potential of at least 8mtpa

The Jaigarh FSRU project is to be implemented in two phases. Phase I will rely on the GDF Suez Cape Ann’s FSRU capabilities alongside some land-based infrastructure to provide nominal LNG capacity 4 million tonnes per annum (mtpa). For Phase II a conventional land-based LNG terminal with nominal capacity of 8 mtpa has been proposed. Assuming Phase II will retain the capability to host an FSRU through the pre-existing jetty, overall capacity could be boosted to 12 mtpa. Phase II will advance to the investment decision stage following the successful completion and stabilisation of Phase I.

LNG supply via Malaysia to reach heart of India’s ‘Silicon Valley’

H-Energy through its subsidiary H-Energy Gas Marketing will be sourcing LNG from Malaysia to supply regasified methane to downstream customers directly via a 60km pipeline connector to the national gas grid at Dabhol, namely the Dabhol-Bangalore and the Dahej-Uran-Panvel-Dabhol pipelines. Dabhol is already site to Maharashtra’s first conventional LNG terminal, operated by GAIL. H-Energy’s trading office in Dubai signed a sale and purchase agreement with Malaysia’s Petronas for LNG supply to the Jaigarh terminal in 2018.

The developer is also building a 635km pipeline connecting Jaigarh to energy-hungry Mangalore – dubbed India’s ‘Silicon Valley’ – which is envisioned to be ready by 2023. However, work on that pipeline has also been delayed due to unrelated highway works in the region. With the Mangalore pipeline, gas supplied via Jaigarh will also be able to flow to the demand centres of Ratnagiri, Sindhudurg, Goa, Karwar and Udupi.

Oversupplied LNG market will welcome additional Indian demand

The global LNG market has been oversupplied in the past year, with current spot prices still at record lows. The low prices have enticed Indian buyers to procure cheap LNG. Accordingly, whilst we expect robust Indian demand to continue provided remain relatively low, sustained demand growth is contingent on projects such as the Jaigarh FSRU.

Further FSRU projects in the works

The company also has plans to station a second FSRU south of Kolkata in the Bay of Bengal, scheduled for December 2020. This FSRU will be located 115km into the sea within the Kolkata Port Trust boundary limits and will be connected to onshore receiving facilities at Contai through a subsea pipeline. The 3mtpa FSRU is to be supplied by Japanese shipping firm “K” Line, following a similar two-phase blueprint to the Jaigarh project. Phase I entails an initial city gate station to supply Kolkata directly whilst Phase II will see extensive pipeline works to supply gas further afield and across the border into Bangladesh. H-Energy plans to export up to 2mtpa to Bangladesh under a 20-year contract involving a tolling element to provide optional regasification capacity by 2022.

H-Energy also plans to install a third FSRU in Andhra Pradesh alongside an onshore vaporiser with 3mtpa to expand its supply network on India’s eastern shore. The project is scheduled to be commissioned in Q3 2022.