Speaking ahead of the LNG Shipping & Terminals Conference in London in November, Adani Total and Dhamra LNG Terminal chief executive Satinder Pal Singh explains the challenges faced bringing an LNG terminal to fruition
Mr Singh list four significant challenges encountered when developing the Dhamra LNG Terminal.
“There are a few factors which made the execution of Dhamra LNG challenging,” he said. “First, is a technical aspect that required an engineering solution – the peculiarities of the soil and marine conditions prevalent in that geography – clay soil with poor load-bearing characteristics which required extensive piling and a cyclone-prone region with often accompanying disruptions. Most other risks were non-technical – second on the list was upskilling local regional subcontractors to meet global LNG standards which required investment in training and process development. Third, the pandemic and Russian-Ukraine conflict, which brought work to a grinding halt, disrupted supply chains and upended commodity markets.”
“Finally,” he said, “Aligning timelines of the downstream pipeline and the regulatory approvals required for the successful start-up of the terminal.
Aside from these challenges, market forces have shaped the development of the terminal in terms of pricing and demand. “These terminals are, at the end of the day, all about meeting user requirements to service demand,” he said.
However, when FID was taken, there were expectations of long term and spot pricing, and the time required to make brownfield demand centres gas ready. For various reasons, those boundary conditions are not all as per expectations today.
Getting predictions right in the commodities space is notoriously hard and global events usually offer a curve ball that requires dealing with.
The ongoing Russian conflict, coupled with the pandemic, changed the LNG trade dynamics considerably in the short term as several upstream projects were delayed and more volumes are pointed presently at Europe.
Indian LNG demand, which is met about 50% by spot, has been affected by the higher prices as the Indian customer is price sensitive.
In the short term, demand could be dampened but the mid to long-term outlook remains robust. Local factors have also played a role in influencing the demand-supply balance.
Converting industries to switch to gas in eastern India has taken longer than planned and rights of way for pipelines in certain areas in eastern India have taken longer to come through, delaying the efforts at network creation.
At the same time, merchant terminal developers have opportunities to create value. “As an example, if receiving infrastructure is developed in a manner that allows a wide range of vessels to berth and allows LNG to be stored and re-exported, then reloading services and break-bulking could become a business opportunity. Sufficient storage could allow a terminal to attract users who see arbitrage as an area they want to play in – via time swaps and re-export options,” he said.
Mr Singh noted one area deserved focus, “Regas in my opinion, is now also an opportunity to differentiate from other terminals by considering injection of hydrogen, cold chain developments and using environmentally appropriate technologies such as Shell tube vaporisers in Dhamra.” He added small-scale LNG should also be considered – distribution via road trucks and bunkering is another value-added service.
When asked to comment on the fundamentals for success, he noted a ‘one-size-fits-all’ approach could not work as each project is uniquely designed with its own set of techno-commercial realities, with the economic landscape driving a diverse range of outcomes. At the same time, he offered some generic observations that could help:
LNG infrastructure is increasingly interconnected and benchmarked across all options available. Accordingly, Mr Singh said, “It was very important for us to ensure we remain competitive and resilient across a wide range of economic outcomes and are confident of creating considerable value for shareholders in the years ahead”. He added, “This should not be a cause for complacency - we are working on additional ways to create value which include expansion and providing value-added services,” he concluded.
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