Analysts expect south Asia to become one of the world’s fastest-growing LNG-import markets. Tapping that demand isn’t easy – but the potential is immense. Karen Thomas reports
The Indian subcontinent is on course to become one of the world’s fastest-growing markets for receiving LNG cargoes. Last year, India and Pakistan posted the world’s third and fourth largest annual increases in LNG imports, lagging behind only Egypt and China.
In 2016, India imported nearly 20 million tonnes (mt) of LNG, increasing its intake by a whopping 39 per cent. But regional demand is about to soar, as India and Pakistan invest in new import and distribution infrastructure – and as Bangladesh and Sri Lanka race to join them.
Analysts tip India as one of the world’s most exciting LNG-import prospects. The country’s four LNG-import terminals, which all lie on the west coast, can receive 30mt of LNG a year (mta). But new projects are shifting the focus east, and opening a more flexible approach to imports.
In April, Mumbai-based H-Energy announced that it has chartered a floating storage and regasification unit (FSRU), becoming India’s first floating import terminal.
H-Energy has chartered GDF Suez Cape Ann from next summer, to be moored off India’s west coast at Jaigarh. This is just the first of two FSRUs that the Indian conglomerate plans to charter, see interview with H-Energy chief executive Darshan Hiranandani on page21.
Several FSRU-based projects have been proposed in India, but progress has been slow. Industry sources blame uncertainty over demand, high project costs and red tape as obstacles to new ventures.
In the meantime, India is also expanding or adding shore-based regasification capacity. At least two new projects are planned.
GSPC LNG is building a terminal at Mundra in northeast Gujarat to handle the largest Q-max LNG carriers. The terminal, which features two 160,000m³ storage tanks, will handle an initial 5 mta – although this could double if demand requires it.
Indian Oil is planning a 5 mta land-based regasification terminal at Ennore, north of Chennai. This has a tentative 2019 start date. This, like several other new projects, has turned east.
H-Energy wants to base its second FSRU at Digha in West Bengal from 2021. This FSRU could also deliver LNG to neighbouring Bangladesh.
Two import terminals are planned at Kakinada in Andhra Pradesh. But at least one is now in question. In May, Engie and Shell pulled out of a GAIL-backed project, which proposed to import LNG via FSRU. Indian sources say the two multinationals demanded a guaranteed minimum volume to reach a final investment decision.
This summer GAIL was negotiating with the state government, seeking to salvage the scheme.
That leaves the VGS-backed Krishna Godavari LNG terminal. It aims to import up to 3.6 mta through the east coast port, using a floating storage unit (FSU) and a floating regasification unit (FRU).
Petronet, India’s largest importer of gas, is driving regional infrastructure investment. The company has pledged to increase its LNG-import and regasification capacity to 30 mta by the end of the decade.
Petronet plans to supplement its terminals at Dahej in Gujarat and at Kochi in Kerala with new ventures at home and in neighbouring countries. It has expanded capacity at Dahej from 10 mta to 15 mta. A third development phase will increase this figure to 17.5 mta.
Petronet also plans to invest in new capacity in Mauritius, Bangladesh and Sri Lanka, see below.
New importer Pakistan is on course to open its second FSRU-based import terminal at Port Qasim and has chartered a third FSRU. Now, it plans a fourth FSRU at the port to create the country’s first private LNG-import terminal.
Engro-backed Elengy Terminal Pakistan introduced the country to the LNG-importers club. In its first year, it received 1 mta using the 150,900m³ FSRU Exquisite, chartered from Excelerate to import up to 5.2 mta to 2030.
In February, Excelerate signed a fast-track deal with Engro and its consortium partners Shell and Fatima to supply a second FSRU next year.
Excelerate has not said which FSRU it will deploy – or whether the vessel will come from its existing fleet. The shipowner has unfixed tonnage but is also trying to raise funds to expand its fleet.
Pakistan’s second FSRU will be the BW LNG-owned, 2017-built, 170,000m³ BW Integrity. The vessel is chartered to Pakistan Gas Port (PGPL) to import an initial 5 mta and was due to be delivered in June to Port Qasim.
BW Integrity left the shipyard in January and completed its sea trials in March. It laid anchor off Singapore on May Day and was not yet under way to Pakistan at the time of going to press, in mid-June.
Höegh LNG will supply Pakistan’s fourth FSRU, having agreed a 20-year charter deal with Global Energy Infrastructure (GEIL). Höegh will deliver Hyundai Heavy Industries (HHI)-built Hull 2909 to Port Qasim next spring. The 170,000m³ vessel will deliver up to 4.3 mta.
Sri Lanka may soon join the LNG-importers club, too. It plans to take in LNG via Kerawalapitiya on the west coast, between Colombo and Negombo. The 2 mta project is valued at US$250 million.
A 300MW oil-burning power plant will switch to gas and a pipeline will encourage other industries to follow suit. Some reports suggest that Sri Lanka sees an FSRU as the best solution.
A 50/50 Indian-Japanese partnership will build the infrastructure. Sri Lanka sources have named Petronet the Indian partner. Plans for the joint venture were due to be finalised this summer.
Japanese companies have carried out LNG feasibility studies for the Ceylon Electricity Board. India’s prime minister Narendra Modi signed an MoU to develop the LNG project when he visited Colombo in May.
Bangladesh’s LNG-import plans are advancing even faster. Moheshkhali floating LNG terminal was due to complete financing this year. Petrobangla has signed terminal use and implementation agreements with Excelerate. The US-headquartered shipowner will supply a 138,000m³ FSRU to the project, to start early next year, importing up to 3.5 mta.
The project is billed as the world’s first fully integrated floating LNG terminal. Excelerate will provide all the services under a single deal. It has fixed the vessel, which it has yet to name, for a 15-year contract.
Bangladesh plans several additional import projects.
Also on Moheshkhali, Power Cell has invited bids for a 3.5 mta, land-based project. Power Cell wants an international partner to take up to 60 per cent of the project, awarded as an EPC venture. Petronet is shortlisted for the scheme, alongside Shell, Mitsui & Co and Chinese players.
However, Petronet has also signed an MoU to build a 7.5 mta import terminal on Kutubdia Island. The US$950 million project includes small-scale proposals to deliver LNG by barge and truck to off-grid customers around Bangladesh.
The race to deliver multiple projects across the Indian subcontinent highlights the region’s thirst for gas. Pinning down the demand and recouping investment is tricky. But there is no questioning south Asia’s appetite for chilled gas, to combat shortages and to meet growing power demand.
Indian subcontinent, LNG imports 2015-2030
Country 2015 imports (mta) forecast 2030 imports (mta, range)
India 14.4 47.8-57.4
Pakistan 1.01 10.1-18.8
Bangladesh 0 13.0-18.8
Source: OIES, 2016