India Inc India Inc: Friday, 01 June 2012 11:08

Reliance Power, Shell strike JV for India terminal

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ReliancePowereditedAnil Ambani led Reliance Power and Royal Dutch Shell have together to set up a consortium to build a liquefied natural gas (LNG) terminal in India.

The consortium, which also includes Kakinada Sea Ports, will build a floating terminal off the coast of Andhra Pradesh in South India to import 5 million tonnes a year of LNG from 2014.

Reliance Power, which is setting up a 2,400 MW gas-based power plant in the region, is one of the largest consumers of natural gas in the area.

Shell and Reliance Power will together hold a majority stake in the new consortium.

Many local and overseas companies are planning to set up or expand LNG terminal capacity in India as domestic gas supply struggles to keep pace with a growing demand from industries such as power, refineries and petrochemicals.

India has an LNG import capacity of about 13.5 million tonnes, which is estimated to hit 50 million tonnes by 2017.

The Indian government had recently done away with import duty on natural gas/LNG for power generation to meet this increase in demand.

About 9 per cent of India's 201 gigawatt electricity generation capacity is gas-dependent, and many new and existing power projects are in urgent need of natural gas.

Shell currently operates a 3.6 million tonne terminal on India's west coast, at Hazira, in a joint venture with France's Total SA and is expanding its capacity to 5.0 million tonnes.

The latest agreement will boost Reliance Power's business as it has planned several coal-fired plants.

In a statement issued this week, the joint venture players said an agreement to undertake joint technical studies and commercial agreements was signed last December.

With the completion of the study, the consortium has finalised the specific location of a Floating Storage and Re-gasification Unit (FSRU) based receiving terminal adjacent to the existing island breakwater, thus minimising terrestrial impact as little or no onshore facilities will be required.

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