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India CEO Series: Robust demand outlook whets H-Energy's appetite for LNG term deals


Aiming to import LNG under new five-year term contract

Jaigarh terminal to be ready for start-up by Q4 2019

Look to start building West Bengal terminal in Q1 or Q2 2020

New Delhi — India's H-Energy plans to import 2 million mt/year of LNG under new term contracts over a five-year period starting next year as it gets ready to capture a part of the growing gas market in India, its managing director and CEO Darshan Hiranandani told S&P Global Platts in an exclusive interview.

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He said that the company would look at offers from all leading suppliers with the aim to receive the first delivery under those contracts some time in the third quarter or fourth quarter of 2020.

"Our team is working on the tendering process and it is getting ready. It will be for supplies on a five-year basis. We have an ecosystem of suppliers. We will move forward depending on what offers we will get," Hiranandani said.

H-Energy was established in 2009 and is currently developing LNG re-gasification terminals and cross-country pipelines on the west and east coast of India. H-Energy, through its marketing arm, is also offering end-to-end natural gas solutions, including LNG sourcing, re-gasification facilities and downstream deliveries.

Also in the India CEO Series

India's share of gas in its overall energy mix is only 6%, much lower than the global average of more than 20%. New Delhi is stepping up efforts to raise the share of gas to 15% by 2030, but consumption growth faces hurdles because of infrastructural and pricing issues.

"We are hoping that gas will continue to increase its market share slowly but surely because the infrastructure for gas supply is improving across the board -- terminals, transmission pipelines and retail distribution," Hiranandani said. "The government's multi-pronged approach will help to push that growth."

"A lot of people think that a 6% share of gas in the energy mix is too little. I actually feel that with our limited infrastructure, it's actually a lot. I remain optimistic that as infrastructure grows LNG demand will continue to boom. I don't think the target of 15% is too ambitious."

He said that India's LNG demand could witness double-digit growth in some years and relatively lower growth in some years over the next five to 10 years.

"There won't be linear growth. It will depend on projects coming on stream. Some years it could be 5% growth and some years it could be 15%. But on an average we expect growth to be about 10% for the next five years."

According to S&P Global Platts Analytics, India's dependence on LNG imports is set to rise as domestic production is expected to grow at a compound annual growth rate of 8.89% over the next five years, while demand is expected to increase by a compound annual growth rate of 11.07% over the same period.


Commenting on the various projects, Hiranandani said that the Jaigarh terminal, which will have an estimated capacity of 4 million mt/year, would be ready for start-up by Q4 of 2019 instead of Q3, as initially planned, amid heavy monsoon rainfall.

"We have very little left to finish. Because of heavy monsoon rains, we had to let go of 60 days of productive work. We are hopeful that most of the work will be finished by the end of October and then commissioning should start. We expect the first delivery some time before the end of this year," he said.

H-Energy in January 2018 signed an agreement with "K" Line of Japan for the construction of an LNG terminal in West Bengal.

Hiranandani said that H-Energy had already received environmental clearance for the project. "We are hoping to start construction sometime in Q1 or Q2 of 2020 and hope to complete the project by the middle of 2022."

He said that the company was looking to set up breakbulk facilities -- which involves partial unloading of cargoesinto other ships -- at Kakinada in the southern state of Andhra Pradesh.

"Our break bulk facilities will be a game changer as it will give us the ability to re-load in smaller ships and supply to smaller customers directly. We see a lot of that happen in China and northern Europe," Hiranandani said.

Commenting on his vision for the company, Hiranandani said the company would remain focused on projects mainly in India and Bangladesh.

"Once we get Jaigarh fully operationalized and once construction starts in Kakinada and West Bengal, our business development teams can work further in terms of where we focus next -- midstream, downstream, or even possibly participating in the upstream," he said.

Commenting on the current state of the global market, Hiranandani said that market would continue to witness some oversupply as new projects come on stream. The oversupply comes at a time when global trade tensions and currency fluctuations are keeping the market on the edge.

"I think there are too many variables for the market now for people to figure out what's happening. But I feel that the gas market is fairly inelastic for most markets. Europe, Asia and the US will have to go back and start buying for the winter," he added.

-- Sambit Mohanty ,

-- Edited by Kshitiz Goliya,