April 24, 2017 / 2:04 PM / 4 months ago

India's H-Energy leases LNG import terminal, agrees supply

LONDON (Reuters) - Indian gas company H-Energy is to begin importing liquefied natural gas (LNG) from the third quarter of 2018 via a ship-based terminal leased from French group Engie, its chief executive told Reuters on Monday.

India is the world's fourth biggest LNG importer even though gas accounts for just seven percent of its coal-dominated energy mix, but consumption is growing fast in response to cheap LNG prices as new cities and industry get added to the grid.

The government aims to more than double LNG import capacity to 50 million tonnes per year and grow gas's share in the energy mix to 15 percent by late 2020.

Under the deal with Engie, H-Energy will be able to import up to 4 million tonnes a year (mta) of LNG from late next year once the terminal, dubbed GDF Suez Cape Ann, is in place, CEO Darshan Hiranandani said.

The charter term will run for at least five years.

The terminal, known as a Floating Storage and Regasification Unit (FSRU), will be berthed at India's west coast port of Jaigarh, also the starting point for a 635 kilometre coastal pipeline H-Energy is building to open up new gas markets.

The FSRU will convert LNG shipped from multiple suppliers back into gas, before transferring it onshore.

FSRUs are cheaper and quicker to build than land-based LNG receiving terminals, fostering quick take-up among gas-starved countries seeking to ramp up deliveries, including Pakistan and Egypt.

Hiranandani says a second import project on India's east coast is less advanced but the aim is to line up an FSRU within a year, bringing H-Energy's total potential LNG imports to 7 mta.

"The challenge is building the downstream infrastructure (pipelines) to give adequate ability for Indian customers to hook themselves up to the gas network," Hiranandani said.

"India currently has around 16,000 kilometres of gas pipelines and new cities are being added at a good pace but India lacks a spot to short-term market for trading gas which would help to finance some of the mid-stream development," he added.

Engie's terminal has the ability to re-load previously imported cargoes onto new tankers for onward export, giving H-Energy the option of trading out supply as market conditions warrant, Manish Tiwari, the firm's general manager of origination, trading and marketing said.

"We are also currently in discussion with trading companies and portfolio players for them to use the FSRU as an optimisation tool for trading," Tiwari said.

"Some of the supply for the FSRU has already been sourced, some we are still negotiating," he said.

Reporting by Oleg Vukmanovic; Editing by Mark Potter

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