Shipping Ministry frames norms to set up floating LNG storage units at major port trusts.

The Shipping Ministry has issued guidelines for setting up Floating Storage Regasification Units (FSRU) for handling liquefied natural gas (LNG) cargo at major port trusts.
The land licence model will be followed under a single stage e-tendering for implementing FSRUs with private funds wherein the bid reserve price will be the water area charges set as per the land policy prevailing at a particular port. The entity quoting the highest premium above the reserve price to be paid to the port will win the contract, typically for 30 years.
The total licence rental for the licence-period is to be paid upfront, the Ministry said in a March 7 circular. The FSRU project will not be bound by any minimum guaranteed throughput (MGT) till five years after commercial operations date. Thereafter, 30 per cent of the project capacity will be prescribed as MGT.
The licence agreement could be terminated for defaulting on MGT for three consecutive years. However, the licensee may be given an option to continue with the project by paying wharfage for the shortfall in MGT.
Scope of project
The scope of an FSRU project includes discharge of LNG, regasification, storage for the required period and supply/transportation — through pipelines, smaller vessels, bunkering vessels or trucks — to the importer.
The FSRU operator will also be allowed to handle its own LNG; it can buy LNG, handle it and sell at market determined rates. The operator will have to pay port dues, berth hire, pilotage and wharfage to the port trust at prevalent scale of rates as is currently followed in the case of single point mooring (SPM) or single buoy mooring (SBM). For transporting LNG through barges, vessel-related charges pertaining to barges has to be paid to the port trust.
“The demand for LNG has been increasing and it is the stated policy of the Government of India to double the share of LNG in the energy mix of the economy in the near future,” said the circular. “LNG imports are substantial since domestic supply of LNG is not able to meet the demand for which supporting infrastructure requires to be developed. FSRU within port limits offer a low-risk, fast-track and flexible option compared to traditional on-shore LNG terminals.”
Since an FSRU project typically costs around Rs. 500 crore (excluding vessel cost), the operator has to submit bank guarantee equal to 10 per cent of the project cost (subject to a maximum of Rs. 50 crore) as performance security to ensure timely commissioning of the project.
The performance security shall be forfeited by the FSRU operator if the project is not completed within two years or an extended period — not exceeding six months — as approved by the port.
HBL