FSRUs IN

SOUTH ASIA
FAD OR A PRACTICAL
SOLUTION?
This article takes a closer look at why the Indian sub-continent
is currently a favourable destination for LNG imports and also
examines where FSRUs fit in the entire LNG value-chain in
India, Bangladesh and Pakistan

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W
ith more than 1.7 billion people, the Indian sub-continent is a one of the most densely populated regions
on Earth, and consists of countries with varying levels of economic success, infrastructure development,
geopolitical stability and energy demand.
However, one common challenge that these countries face is massive power deficits, caused by several factors including
a rapidly growing energy demand due to the increasing middle class population boom, urbanization, solid economic &
GDP growth over the past few years and electricity price fluctuations.
Energy shortages in India, Pakistan
and Bangladesh
For instance, severe energy shortages are common in
Pakistan and the situation has been ongoing for several
years. The country has an installed electricity capacity
of 22,797 megawatts (MW), but production stands at
a dismal 12,000 MW. As it stands, parts of the country
already face electricity cuts for up to 20 hours a day.
Unless the shortages are addressed, the deficits are
expected to get worse as Pakistan’s electricity demand
is estimated to hit 50,000 MW by 2030.
The situation is equally grim over in
neighbouring India. While its compound
annual growth rate (CAGR) has grown Pakistan’s
by around 7-8 percent yearly, positioning
the country as one of the rising stars in
electricity
the world economy, the steep growth demand is
has been accompanied by an equally
sharp increase in electricity consumption
estimated to
from almost every sector in the country, hit 50,000
pushing its energy infrastructure to the
limits. MW by 2030
As for Bangladesh, total installed power
generation capacity stood at about
12.3 GW daily as of 10 April 2016 and it was producing
around 8.3 GW. Only 60% of Bangladesh’s population of
around 160 million has access to electricity, even while
the country’s power demand is growing at a rate of 10
percent annually.
That said, it is not as if the region is devoid of energy
resources. There is a huge diversity of resources in
the region including oil, gas, coal, hydro power, wind,
and solar energy. However, the governments of these
countries are pushing for increased use of natural
gas, partly due to the global commitment to reduce
greenhouse gases.
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At the 2015 COP21 climate talks in Paris, an informal
agreement was signed to keep global temperatures from
rising less than two degrees. Natural gas, which has up
to half the carbon dioxide emissions profile as coal, has
been identified as a suitable replacement to coal.
In India, government has been trying to alter the primary
energy mix as more oil and coal-fired power plants are
replaced by natural gas-fired ones. It is expected that
natural gas will account for 20% of India’s
energy mix in 2025 as compared to only
9% in 2005 and 11% in 2010, respectively.
Another more important consideration
for the increased push for natural gas is
more economical in nature. For instance,
the market dynamics of the LNG industry
has changed substantially over the past
few years with the price of LNG falling
considerably, making it a less-expensive
substitute for coal.
Traditional major LNG importers such
as Japan and South Korea are reducing
their LNG imports as more of their nuclear power plants
come back online. While Japan has been known to
procure quite regularly on spot market over the past few
years and paying premium prices, importers there now
prefer to bring forward some of their delivery schedule
from their long-term supply contracts instead.
This has resulted in increased supply availability from
traditional sources of LNG such as Qatar, Indonesia and
Nigeria, and matters are exacerbated further now as
more mega LNG plants come online, including Australia’s
Gorgon.
This downward pressure on LNG prices and huge supply
availability has resulted in more new entrants into the
LNG importer club. Countries such as India, Pakistan
and Bangladesh, who are traditionally price-sensitive,
are seeing more value deals and are starting to import
massive amount of LNG from suppliers worldwide.
These countries are already grappling with massive
energy deficits and the current state of the LNG market
makes it more attractive, efficient and cost-effective to
import LNG to meet their individual natural gas demand.
Suppliers are also seeing these markets with renewed
optimism. Previously, most exporters used to target the
premium and high-paying Japanese and South Korean
importers but they are now seeing India, Pakistan and
Bangladesh as a “kitchen sink” of sorts, an increasingly
attractive destination for their uncontracted LNG
cargoes.
According to a report published by Citi Research, India
is the largest LNG importer after Japan, Korea, and
China and its import capacity over the next four years
is expected to double to 45 million tonnes per annum
(MTPA) against 22 MTPA currently.
The report adds that India’s LNG demand increased
from 14 to 16 million metric tonnes (MMT) from FY15-
FY16, and has the potential to touch 30 MMT by FY20.
Another factor which makes South Asia a good
destination for LNG is its distance from traditional
suppliers. At the moment, it takes three days to ship
LNG to western India from Qatar, the biggest producer
of the fuel, compared with two weeks to get it to the UK.

Stretched infrastructure
All these increased demand and impending imports appears to be in abundance. Within the next five years,
have stretched the existing LNG receiving infrastructure more than 140 MTPA of new LNG supply is expected to
in India while Bangladesh and Pakistan have announced enter the market, or the equivalent of around 45 FSRUs.
multi-million dollars investment into the necessary
facilities needed for receive LNG. These countries are Although it is relatively unclear how the FSRU market
also committed to get them ready as soon as possible will pan out in these three countries, the already massive
to tap on the low LNG prices and abundant supplies that investment made or earmarked for the LNG sector seems
are available on short-term contracts or on spot basis. to bode well for the industry. The challenge will be to
see how the respective governments of India, Pakistan
That is where floating storage and Bangladesh react if and when LNG
regasification units (FSRUs) become prices climb up to the heady days of a
more attractive. FSRUs allows for a few years ago.
Within the next
faster development timeline and lower
upfront capex outlays compared to five years, more This is when the true acid test will
onshore regasification, and have thus than 140 MTPA of come as coal will once again become a
been the preferred solution for many new LNG supply is cheaper alternative to LNG. And for a
new countries entering the LNG market region that is trying its best to reduce its
or those who are seeking to expand
expected to enter energy deficit but without the bulging
their receiving infrastructure at the the market, or coffers of more industrial and developed
shortest time possible. the equivalent of countries such as Japan and South
Korea, it will be hard to justify importing
FSRUs play a vital role for bridging new
around 45 FSRUs LNG, even if operating costs are lower
energy demand at a time where LNG through FSRUs.

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 FSRU
Actualising FSRU Projects
and Uncovering New Market
Opportunities in Asia

21 - 22 June 2017
Equarius Hotel, Resorts World
Sentosa, Singapore

Laura Saguin U Soe Myint Nazery Khalid

Division Chief, Director General (R) Head of Panning &
Natural Gas Energy Planning Development
Management Department Boustead Heavy
Division Ministry of Industries
Philippine Electricity and Corporation
Department of Energy, Myanmar
Energy

Ajay Kumar Sampe Purba Syed Ammar Shah

Chairman and Vice President Head of Business
Managing Director of Gas Development
Fox Petroleum Commercialisation Engro Elengy
Limited SKK Migas Terminal

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