Ambitious Shell LNG project hits a brick wall

Vol 19, PW 1 (10 Sep 15) Midstream & Downstream

Unless progress is announced soon, Shell’s ambitious FSRU project offshore Kakinada with partners GdFSuez and GAIL’s joint venture with the Andhra Pradesh government risks joining several fictional LNG projects dotted along India’s coast.

Enthusiastic claims by hungry contractors of an imminent tender “before the end of this year” for a Project Management Consultant (PMC) to oversee EPC contracts for the onland installation and reception of piped R-LNG facilities at Kakinada port are dismissed by project sources as wildly optimistic. “Important agreements need to be signed before any EPC construction can begin,” we hear.

“This isn’t just a technical question, it’s a commercial one. As long as there’s no money on the table there won’t be any construction.

Only Indian PSUs (Read: GAIL) tell you a decision is made before there’s money on the table, you need money for all this.” Financial closure, or lack of it, isn’t the only hurdle holding up consortium plans to hire a 3.5m t/y ‘base-load’ FSRU expandable to 5m t/y and later 10m t/y.

After months of talks the lack of a formal Shareholder Agreement remains as elusive as ever. “When you have three big companies like Shell, GdF and GAIL around a table it’s not surprising there’s delay,” adds a source.

“Each partner has a different view, there’s lots of negotiation.”