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Mr. Darshan Hiranandani, MD & CEO, H-Energy Private Limited, H-Energy Private Limited

03 Jan 2017

Attractiveness for LNG spot contracts has increased Darshan Hiranandani, MD & CEO, H-Energy Private Limited, talks to InfralinePlus about the LNG scenario in India, company’s growth plans and challenges in the natural gas industry.

In an attempt to keep Infraline Energys’ readers abreast with the key issues and challenges engulfing the sector, Infraline Energy tries to bring forth the opinion of key personnel whose decisions and opinion play a vital role in shaping the sector. Please find below excerpts from the interview that Infraline Energy conducted :

Please share your outlook on the LNG industry in India.

India is one of the largest importers of natural gas after Japan, Korea and China. The increasing requirement of natural gas for new power generation projects, fertilizer plants and other industrial users has resulted into rapid growth in LNG demand over last few years. Currently, India has four LNG re-gasification terminals with a total capacity of appox. 30 MMTPA and proposed projects are likely to augment this capacity to approx. 50-60 MMTPA. Regasified LNG (RLNG) contributes to 45% (around 55 MMSCMD) of the total natural gas consumption in India which is 140-145 MMSCMD.Considering that the rising energy needs,steady decline of indigenous productionand discovery of domestic fields not keeping pace with the rate of decline of existing fields, the contribution of RLNG is expected to soar further. Today there are 250 million households in India. Only about 3.3 million are connected to gas which is barely 1.5%. This figure is expected to grow and become much stronger leading to more demand for natural gas consumption.

What is the progress on the LNG project being executed by H-Energy on the west coast?

We are setting up a LNG receiving facilityat Jaigarh Port in Ratnagiri district of Maharashtra.The project will be implemented in 2 phases. Phase–1 will consist of a jetty based FSRU [Floating Storage Regasification Unit] of approx. 4 MMTPA capacity and will be hooked up through a 60 km tie-in pipeline from Jaigarh to Dabhol. The project is strategically located at Jaigarh near Dabhol where two major trunk natural gas pipelines viz. Dahej-Uran-Dabhol-Panvel (DUDPL) and Dabhol-Bangalore (DBPL) are inter-connected. With this existing pipeline infrastructure, RLNG from Jaigarh LNG Terminal can be supplied to western, northern and southern markets giving the terminal access to existing gas markets. The first phase of the project is expected to be operational by Q2/2018. Phase-II will consist of construction of land based LNG regasification terminal with a capacity of 8 MMTPA.The sub-concession agreement and port services agreement have been signed with JSW Jaigarh Port Limited. Jaigarh Port is an operating all-weather and deep-water port with night navigation facilities. The port has an existing breakwater and sufficient draft which provides adequate tranquil conditions for berthing LNG carriers. The LNG terminal project has also received all major clearances, including approval from Maharashtra Maritime Board (MMB). Presently the company is in the process of finalizing the charter party contract for the FSRU and will initiate jetty construction work shortly to ensure timely completion of the project. The detailed route survey and regulatory permissions for the 60km tie-in line are in place and the laying of the pipeline will begin shortly.

What is the update on the Jaigarh-Mangalore Natural Gas Pipeline?

We have received authorization from Petroleum and Natural Gas Regulatory Board (PNGRB) to lay, build, operate or expand 637 km natural gas pipeline from Jaigarh to Mangalore. The pipeline will connect to the demand centers in the coastal towns and cities of Ratnagiri, Sindhudurg, Goa, Karwar, Udupi and Mangalore. It is expected that regasified LNG flowing through this pipeline will act as a key source of clean energy for industries, homes and vehicles in these coastal towns and cities which have been deprived of natural gas infrastructure so far. After receiving the authorization for this pipeline in June 2016, we have started detailed route survey work and are in the process of obtaining regulatory clearance required for the laying the pipeline.

The company also has plans to execute an FSRU on the East Coast. Please elaborate.

We have plans to set up a Floating Storage and Regasification Unit (FSRU) at offshore Digha region, West Bengal. The FSRU will have regasification capacity of 3-4 MMTPA and is expected to be commissioned by Q4-2019. The offshore FSRU will deliver regasified LNG to onshore receiving facility (ORF) at Contai in West Bengal through a 115 km subsea pipeline.From the ORF the regasified LNG will be supplied to the customers through the 715 km Contai-Dattapulia-Jajpur-Dhamra pipeline.The pipeline on its northern leg will serve regions of Haldiaand Kolkata in West Bengal and will also supply gas to customers in Western Bangladesh.On its southern leg, the pipeline will connect Dhamra, Pradeep and Bhubaneshwar in Odisha. H-Energy consortium was awarded this project through a tender by Kolkata Port Trust (KoPT) in August 2015 and will be the first offshore FSRU project in India. The project will enable customers in Eastern India to have access to regasified natural gas allowing them the opportunity to switch over from existing liquid fuels towards a cleaner fuel option.

Please share your current investments and future plans.

H-Energy is currently developing LNG re-gasification terminals and cross-country pipelines on the east and west coast of India. This infrastructure project entails investment up to USD 2.0 billion. Being involved in sourcing of LNG and marketing of RLNG, H-Energy will pioneer a regime of contractual offers to customers that will strike a balance between commercial viability and flexible provisions for both buyer and seller which is still an alien concept to the existing industry. We also plan to enter into city gas distribution business for development of local gas pipeline network ensuring its presence in the midstream and downstream industries.

What are the challenges in the Indian gas market today?

Price volatility in the recent past has made customers sceptical towards long term contracts.Gas pricing issues remain a concern. The uncertainty in price is one of the major challenges in seeking long term contracts from customers. The attractiveness for spot-contracts has increased. When short-term contracts predominate, it deters investment flows to infrastructure projects. That is what we are experiencing currently in the Indian market. Offtake planning for short term contracts is easier as demand in the near future can be more accurately forecasted than for a period of ten to fifteen years. The next three to five years are going to be quite crucial in determining how the markets are going to behave during the next decade. Demand from city gas is expected to grow faster as compared to industrial segment.Going ahead, operating on a demand pull rather than inventory push will help industry to grow. Customers will enjoy the freedom to opt for contractual arrangements that suits their requirement rather than being compelled to accept the terms of the seller. Industry will eventually make progress if business entities will collaborate rather than compete. Going ahead shared synergy is likely to be the norm of this industry.

Infraline Energy would like to thank the contributor for his/her valuable time and opinion shared on the topic.