Please comment on the importance of FSRU LNG Terminal for India?
FSRU is a faster and low-cost solution for LNG importation for India's future growth aspirations under The Prime Minister His Excellency Shri Narendra Damodar Das Modi, and is impossible without the proper energy supply, it is clear that access to abundant and economically viable energy will be critical to sustaining the momentum of this growth. India has few indigenous energy resources apart from coal and will necessarily have to diversify its fuel mix and look to global energy markets for its energy needs.
Liquefied Natural Gas (LNG) can be a long term solution to India's needs given that it is a proven and commercially viable energy source. LNG is going to play one of the major role in making success of "Make in India" movement.
Whereas the LNG industry is nearly half a century old, and India is a beginner to the party since it missed the first round of LNG trade growth. While LNG usage has risen dramatically in the country, it has done so in an unplanned manner that it has hit the power sector badly; The root cause of failure is not the the Government, Indian companies have, by and large, not taken advantage of the flexibility afforded by evolving mechanisms in LNG contracting, shipping and infrastructure to finalise favourable terms of trade.
In the Indian context, LNG is associated with spot cargoes and carries connotations of ad-hoc supplies at very expensive rates, which impacts in loss of power production rates. This is regrettable because other nations, in particular the Asian JKT (Japan, Korea, and Taiwan) trio, have shown that a country can have a viable development model driven by LNG, as long as there is sufficient foresight and planning.
The structural deficiencies of India's domestic energy sources make it clear that India will need to rely on steady LNG imports, causing Indian firms to look aggressively for LNG capacities in existing, expanding and upcoming LNG projects. Pricing mechanisms and contracting structures too are evolving to accommodate new price discovery models and more equitable distribution of risks.
Whereas at present, India is the world's fourth largest consumer of energy, consuming ~660.00 MTOE per year, driven primarily by an increase in energy consumption in tandem with the rapid economic growth of the last few decades. On a per capita basis however, India's average consumption is 0.80 MTOE, substantially lower than the global average of 1.90 and far below the consumption norms in developed economies. In the economic development lifecycle, India is currently at the 'take off' stage and will need to sustain rapid rates of growth for the coming few decades to improve the living standards of its citizens. Thus, there is substantial room for further growth in energy consumption. India's energy demand is expected to increase to 1,120.00 MTOE by 2025-30.
What is the current status of the proposal made to the Karnataka Govt. in terms of development?
HENCE TO BE A PARTNER IN NATIONAL ENERGY DEVELOPMENT, we have proposed the Government of Karnataka, India to allow us to set up - Floating Storage Regasification Offshore to process 1 billion cubic feet (bcf) of gas per day and a storage capacity of 330,000 m3 of LNG Onshore and same capacity Offshore to cater the Energy Need of the State of the Karnataka and Southern part of India. This terminal will help in the delivery of LNG to onshore locations via an infrastructure of sub-sea pipelines. Six members of Fox Consultancy Services -Engineers of senior class were tasked to provide a front-end engineering analysis for a Floating Storage and Regasification Unit (FSRU) which is proposed to be located in the Indian Coastal region off the coast of Arabian Sea in Karawar District.
The terminal is required to satisfy regulations as set forth by the Government of The Karnataka & Government of India, and other statutory and regulatory body of Government of India, as well as design constraints imposed by concerning operational expectations. Such constraints consisted of the following:- Will be permanently moored in 40 m of water, Must be able to process 1 billion cubic feet (bcf) of gas, Must have a storage capacity of 330,000 m3 of LNG, Must maintain a constant draft condition while loading or offloading, Must sustain offloading operations in a 1-year storm event, Must sustain shoreline delivery of LNG in a 10-year storm event, Must survive a 100-year storm event - With these parameters defined, the team began its analysis and has produced the report to Company and it is submitted to the Honorable Chief Minister of Karnataka; Current status as I have been informed the proposal has been forwarded to high powered committee to asses and approve; This is the first of its kind in India.
Any proposed location for the LNG Terminal?
We have chosen after survey- Karwar, The Uttara Kannada. The Uttara Kannada is one of the biggest districts of Karnataka state. District Head Quarters is Karwar, which is know as Kashmir of Karnataka. Karwar is blessed with a wide variety of flora and fauna. Karwar is well connected to prominent cities in India including Mumbai, Delhi and Mangalore through the Konkan Railway. The district is blessed with Pristine beaches & beautiful Western Ghats. The Terminal will be feeding gas to - Kochi -Manglore-Bangalore - Pipeline and Dabhol -Bangalore -Pipeline;
Kindly focus on the opportunity and challenges of setting up FSRU LNG Terminal ?
An operational definition is a result of the process of operationalization and is used to define something in terms of a process (or set of validation tests) needed to determine its existence, duration, and quantity output.
Same is in case of FSRU (Floating Storage and Regasification Unit) Terminal. But the pioneers developed and constructed the first LNG supply chains and subsequent generations built on these foundation stones with larger and more sophisticated liquefaction plants, regasification terminals and LNG carriers. We also need to acknowledge the entrepreneurial and innovative spirit of the current players who are helping to extend the LNG supply chain into new realms, namely offshore and small-scale LNG, and to develop new MARKET opportunities, not least the use of LNG as marine fuel. The industry can be justifiably proud of the exemplary safety record that has been built up over its first half century.
So far some 77,000 + LNG cargoes have been discharged without any major accident attributable to the cargo.
First Challenge is to convince yourself about the "NOC - No Objection Certificate". First NOC you need from the Company and its Board of Directors. Survey and identification of location for FSRU (Floating Storage and Regasification Unit) Terminal and filling application before authority with fear of failure and anxiety, that it will get Government NOC or not; It is the First stage and fifty percent of the project die at this level; And it is due to the one word - " NOC").
"Maximum trouble comes when Government Agencies wanted to do it, but they don't have clear cut policy to clear the project as per their rule book".
It happens when the Countries are not developed, can be understood but at the same time not developed there black and white papers to engage INVESTMENT in their Country is direct deficiency in policy infrastructure. Policy infrastructure is the back bone to lay stone for real infrastructure.
The most difficult is the environmental clearances i.e. NOC from Government Environment Ministry; In that case no one should get LNG FSRU PROJECT Clearances, as per my knowledge - 200000 MT of LNG = 100 Hiroshima Nagasaki Bomb; I think, for FSRU LNG Terminal - Fire Safety Clearances should be prime.
If all things goes well the term comes - Large funding requirements; The FSRU LNG Terminal now often have larger capital budgets, hence they have to seek the finances from IPO or Private Equity or Further Issues; These all sources of finances again needs - Stock Exchange Clearances to raise fund.
But some other sources of financing available are - Reserves based lending, Public bonds, Retail bonds, Project FINANCE, Private placement, Multilateral development banks, Mezzanine finance; But they also needs NOC;
Now if, all NOC = Yes; You are ready to start the project, where by the grace of innovation and availability of First Class Experts, you will face no difficulty in setting up FSRU LNG TERMINAL. Now the real challenge i.e. Operational Challenge will come to the Company;
The Opportunities are huge; First once again, I am reminding you - FSRU Terminal. What you call in general- FSRU HOTSPOT - are becoming the terminal of choice in the 2-4 MtPA. (million tons per annum) lng import range, making them a cost effective choice.
FSRU import terminal - are at less than half the cost of an onshore facility and moreover can be commissioned in 2-3 years against land based terminal of 5-7 years and with three times cost; And, if I am not wrong in my calculation after three years with advanced technology which is yet in process to come in the MARKET - a SMALL FSRU HOTSPOT can be commissioned in 12-14 months and within a cost range of 100 Million to 120 Million USD.
LNG is the right choice for INVESTMENT for a period of next 15 years without a down or red mark in exchange market. I am sure and I am right to make the statement that LNG is one of the only bull markets right now in energy sector. The FSRU market is at the leading edge of this.
They are new and exciting, and the growth rate right now is huge-likely 100% in the next two years. And the profits are rolling in fast for one of the leading companies in the space. This company has already built and sold 4 of them. The thing to keep in mind here - FSRUs are different than LNG carriers in that they are much longer contracts (10- to 20-year contracts), with great long-term cash flow-exactly the thing you can plan a dividend around. And that's what this company has done - having increased its dividend in each of the last four quarters. The total dividend increase during this time is 30-40%. How many companies are doing that in this market? Analysts are calling for quarterly EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) to DOUBLE in the next quarter-a 100% increase in just one quarter. Its utilization is 100%, and operating profit margins are an eye-popping 80%. That's why they are one of the most profitable companies in the worldwide energy sector.
It is to know that FSRU is a demand not a Choice and vice versa; Due to several benefits, it is only the need based choice, because, FSRU HOTSPOT is at the best as it has "Lower port management & maintenance cost" and replacement for LNG Terminal is cost effective; at the outset environmentally friendly and the best is easier to get approval from local authorities i. e. Government Clearances, Replacing existing "high" emission solutions and mo re economic than on-shore solution as discussed above. Shorter start-up & construction time that is almost very less time than any type of Port. Particular for conversion solutions, Bridging solution for smaller volumes and Flexible, can be relocated, can TRADE as a vessel too, Can be SRV (shuttle), stationary, moored offshore or dockside . Hence FSRU HOTSPOT is leading LNG market into new sky but limited higher forecast of its growth for next 15 years.
What are the possible effects of the project on the Port Industry and future of the country as a whole?
Without any dought, It is going to impact on the socio-economic, development of the region and the nation; Natural gas is the economy's great white hope. As a fuel, gas is underrepresented in India's energy mix, accounting for a mere ~12 percent of primary energy consumption, well below the world average of 23 percent. The Planning Commission has an ambitious target of increasing the share of natural gas to 20 percent from the current levels by 2025. We will share the burden;
The bulk of this shift towards a gas economy will come from four consuming sectors: power, fertilizers, industrial (petrochemicals, refining, steel etc) and City Gas Distribution (CGD). It is estimated that by 2029-30, these four sectors will account for 746 MMSCMD of gas demand. The capacity of domestic gas production to serve this demand is limited and there is substantial uncertainty around trans- national pipelines. By implication, LNG will play a critical part in establishing the foundation of India's aspirational gas economy, and by extension, its energy security endeavour.
Anything important you would like to mention in this context?
Yes, For me as an Individual Country First, REST is RIP i.e. Return in Peace; We are trying to setup "Need of the nation project" not the Choice of the nation project". It is going to be better than creating a Taj Mahal; Fox Consultancy Services Team provided with the unit cost of each terminal component for three shipyards in Korea, Japan, and Spain respectively. At current market prices, Spain is the least-expensive location. The total cost for constructing the FSRU in Spain, including construction, transportation, and contingency, is US $563 million only offshore and onshore US $495 Million and hence we are following the same value of amount to invest; By the grace of Almighty God, we have sufficient funds to flow into the project to follow the contours and gradients of our vision duly assisted by some of the best talents drawn from respective Industry. We are open to any suggestions that will serve the business model and mutual interests and look forwards to harness the best technology and make our project a further harbinger of International repute and be partner in socio economic development of The Karnataka, India; And, as general citizen of India, I promise- If all things goes well, and when the project will start making profit - I at my personal capacity, will dedicate my entire share of profit of the project to Charity to Government of Karnataka, to use the dividend in public works for Children's and Establish Peace, Practicing Peace.
