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India plans new floating LNG import terminal on east coast by 2022

New Delhi — India plans to build a new floating LNG import terminal with a 1.0 million mt/year capacity on its eastern coast, at the port city of Krishnapatnam in Andhra Pradesh state, by 2022, oil ministry officials said Tuesday.

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The FLNG terminal will be India's sixth LNG import facility to-date and is in line with expectations of high gas demand in the eastern region of the South Asian country in coming years, on the back of increasing urbanization and industrialization.

The officials said the FLNG terminal will be built by Bharat Gas Resources Ltd, or BGRL, a subsidiary of state-owned fuel retailer Bharat Petroleum Corp Ltd or BPCL, at an estimated cost of $208 million-$238 million.

"We have plans to scale up the initial capacity to 3 million mt or 5 million mt later on," BPCL chairman D Rajkumar said on the sidelines of an industry event Monday.

BPCL will hold a 74% share in BGRL, while the remaining 26% will be held by Petronet LNG -- India's state-run LNG company.

India has been promoting the use of natural gas, which is a cleaner burning fuel than coal or oil. It aims to increase the share of natural gas in its overall energy basket to 15% by 2030, from the current 6.2%.

At the core of this strategy lies a gas-based economy in the eastern region that has seen multiple announcements to build new LNG import terminals in recent years. The Indian government has also been working to build a national gas grid and construct 14,000 km of additional gas pipeline network, mainly in the east.

A floating terminal is faster and cheaper to build as it does not involve the complex issues related to land acquisition. It is also typically used as a stop-gap solution until a full-fledged LNG supply system can be built, and has been instrumental in meeting energy supply in neighboring Pakistan and Bangladesh.

However, the success rate of commissioning LNG terminal projects on the east coast has been poorer than the west coast, where much of India's economic activity has been concentrated.

The proposed FLNG terminal at Krishnapatnam is likely to receive LNG supply from Mozambique as BGRL has a 1.0 million mt/year supply agreement with Mozambique LNG1 Co Pvt Ltd for 15 years.

(Corrects estimated project cost in third paragraph)

-- Ratnajyoti Dutta,

-- Edited by Norazlina Jumaat,