2 LNG projects augur well for Kakinada deep-water port

R. S. Sarma Visakhapatnam | Updated on July 15, 2013

The Kakinada deepwater port, built by the Andhra Pradesh government and being managed by the private consortium, the Kakinada Seaports Private Limited, for the past 13 years or so, has only made slow progress over the years in increasing and diversifying its cargo, as many of the projects based on the port have not come up in the hinterland due to various reasons.

But of late, there has been some momentum, as two major LNG terminals – one to be set up by a consortium of Shell, Reliance and the KSPL and the other by AP Gas Distribution Corporation Limited (a joint venture of Gail Gas and AP Gas Infrastructure Corporation) and KSPL– are being set up here.

The acute power crisis in the State and the fall in production levels of natural gas in the D-6 field of Reliance (Mukesh Ambani group) in the Krishna-Godavari basin have prompted the State Government to expedite the projects at Kakinada.

Shell, Reliance Power (Anil Ambani group) and KSPL are setting up a five-million-tonne a year (mtpa) LNG terminal here, later to be expanded to 10 mtpa.

The draft environment assessment impact report has been prepared for the Rs 7,000-crore project and submitted to the Andhra Pradesh Pollution Control Board. The State Government is also keen on expediting the other LNG terminal – a floating one with a capacity of 3.5 mtpa, which is to be upgraded to five mtpa.

The project cost is estimated at Rs 5,000 crores. The first phase of the project is expected to be ready by 2014, facilitating LNG import.

KSPL has a stake in both the projects, though it is not known how much. The early completion of the two terminals will provide energy to the gas-starved power plants in the Krishna-Godavari basin. It is expected that two terminals will trigger economic growth in the hinterland.

KSPL is also investing in deepening the approach channel from a draft of 14-16 m and dredging is being taken up for the purpose. The consortium is investing Rs 600-650 crore on dredging and related projects and by 2015 the port may be in a position to handle the bigger vessels, of 1,50,000 dwt, against 70,000-dwt vessels now. It will reduce the freight cost.

During 2012-13, the deep water port handled 12.4 million tonnes against 9.7 mt the previous year. During the first quarter of the current financial year, the port handled more than three mt and it is set to improve its performance this year substantially during the current fiscal, according to sources.

However, not much headway has been made in the implementation of the other major project – the Kakinada Special Economic Zone in which a major oil refinery is proposed to be set up by the GMR group.

Originally, it was proposed to be set up by ONGC, and a MoU was signed with the Andhra Pradesh Government, but ONGC backtracked expressing doubts over the economic feasibility of the project.

Subsequently, the AP Government signed a memorandum of understanding with the GMR group for setting up the 15-mtpa refinery and petrochemical complex.


Published on July 15, 2013

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