AP Maritime Board to issue comfort letter to H-Energy for Kakinada LNG terminal

The Andhra Pradesh government has granted permission to the State’s maritime board to issue a comfort letter to East Coast Concessions Pvt Ltd promoted by H-Energy for building a ₹1,600 crore LNG receiving and re-gasification terminal at Kakinada Deep Water Port.

The AP government issued an order in this regard on July 8, according to R Karikal Valaven, special chief secretary, AP government.

The East Coast Concessions will spend another ₹200 crore for setting up L-CNG stations in the first phase and ₹3,600 crore in the second phase of the project.

The comfort letter was sought by H-Energy to help its subsidiary East Coast Concessions to continue with the LNG project directly with the AP Maritime Board or with the new port operator of Kakinada Deep Water Port in case of cessation of the concession period or termination of the concession agreement signed between the state government and Kakinada Seaports Limited (KSPL) for an initial period of 30 years with two extensions of ten years each which ends in 2049.

H-Energy, the energy unit of Mumbai-based real estate firm Hiranandani Group, has signed a term sheet with Kakinada Seaports Limited - the operator of Kakinada Deep Water Port - to sub lease about 100 acres of land to help build the infrastructure for loading LNG and other regasification activities.

H-Energy told the A P Maritime Board that the lenders were “insisting on a comfort letter from the A P government because the project is heavily capital intensive and is unlikely to be commercially viable if the project comes to conclusion upon cessation of the concession period or termination of the concession agreement between Government of A P and KSPL for whatsoever reasons, ECPL should have continuity of operations and to run the terminal without any hindrance”.

The A P Maritime Board told the government that the request of the Company as insisted by their bankers is “genuine” as the left-over period of the concession agreement for Kakinada Deep Water Port is “short” while the setting up of LNG terminal and its operations are long-term business.

“Therefore, it is necessary to extend all assistance as may be required in order to facilitate ECPL to continue with the project directly with A P Maritime Board or with the new port operator in case of cessation of the concession period or termination of the concession agreement with KSPL,” the A P Maritime Board said.

In May this year, H-Energy started operations at India’s first LNG Floating Storage and Regasification Unit (FSRU) in Jaigarh port, located in Maharashtra.

H-Energy is also building an LNG re-gasification terminal at Kukrahati in West Bengal on India’s East coast.

The LNG re-gasification terminal at Kakinada will have LNG re-loading and break-bulk facilities; small LNG carriers will supply LNG from Kakinada to the LNG re-gasification terminal at Kukrahati.

H-Energy is also building a 635 km natural gas pipeline from Jaigarh to Mangalore which will connect gas customers in Maharashtra and Karnataka and a 242 km natural gas pipeline from Kanai Chhata to Shrirampur (at India-Bangladesh border) which will supply re-gasified LNG to customers in West Bengal and Bangladesh. H-Energy has approval from the Petroleum and Natural Gas Regulatory Board of India to develop the India – Bangladesh natural gas pipeline.

In June, H-Energy said it has signed a Memorandum of Understanding (MoU) with Petrobangla to supply re-gasified liquefied natural gas (R-LNG) from India to Bangladesh.

H-Energy’s wholly owned subsidiary HE Marketing Private Ltd will be responsible for sourcing LNG and for supplying R-LNG to Petrobangla.

H-Energy has earlier signed a MoU with Russian gas producer Novatek to collaborate on long-term LNG supplies to India, joint investment in the three LNG terminals being built by the Indian company and form a joint venture to market Novatek’s LNG in India, Bangladesh and other markets.

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