Shell and Reliance Power quietly abandon FSRU plan

Vol 16, PW 6 (04 Oct 12) Midstream & Downstream

Expensive as it might be, any hope Anil Ambani might have had of using R-LNG from Shell to fire the expansion of his 220-MW power station at Samalkot appears to be going nowhere.

Four months after Reliance Power signed a MoU with Shell and Kakinada Sea Ports to deploy a FSRU on the Andhra Pradesh coast, work has ground to a halt. “Since the announcement there’s been hardly any progress,” says a source.

“No one is talking about it any longer.” One reason might be a change of heart at Reliance over the project’s viability, and crucially, cost.

“Reliance was supposed to take a 20% stake in the FSRU,” adds a source, “with Shell holding 80%.” More, Reliance seems not to be honouring cash calls to pay its share of the estimated $180m cost of the onshore facilities to handle LNG discharged to land from the FSRU.

“There would also be a recurring cost of up to $50m/annum to maintain the onshore facilities and the FSRU,” adds our source. “These costs are over and above the cost of a LNG cargo which could be anything from $250m.

” With the Shell-promoted FSRU plan in limbo, there seems little likelihood Reliance Power will expand its 220-MW power station to 2400-MW anytime soon. “First we wanted to add 2400-MW capacity by December 2012,” Reliance tells us.

“Now it will happen only by March 2013.” In February, Reliance installed new GE-made turbines, today lying idle because it can’t source the 3.2m cm/d needed to generate 1400-MW.

By next March, Reliance will add more turbines to generate a further 1000-MW - but can it source the gas Probably not.