GDF Suez and GAIL Team Up to Build India's First Floating LNG Import Terminal

NEW DELHI (Dow Jones)–French power company GDF Suez SA (GSZ.FR), GAIL (India) Ltd. (532155.BY) and the southern Indian state of Andhra Pradesh Tuesday agreed to set up the South Asian nation’s first floating terminal to import liquefied natural gas.

The terminal, on India’s east coast, will have an annual capacity of 3.5 million tons and will likely be commissioned by the end of 2013.

GDF Suez will hold a 26% stake in the import terminal and Andhra Pradesh Gas Distribution Corp. will have the remainder, the companies said in a statement. The companies didn’t give any investment projections for the project.

Andhra Pradesh Gas Distribution is owned jointly by GAIL Gas Ltd.–a 100% unit of pipeline utility GAIL (India)–and Andhra Pradesh Gas Infrastructure Corp.

India’s annual LNG capacity is estimated to reach 50 million tons by 2017 from about 13.5 million tons, as local gas shortages are driving demand for the imported fuel.

A floating LNG terminal is a low-cost solution to imports as it can be set up quickly–within 18 months compared with about six years for an onland terminal–and also needs lesser capital investment as it doesn’t involve purchase of assets such as land.

GAIL would source LNG for the terminal from GDF Suez, GAIL Director Marketing Prabhat Singh told reporters.

The deal reflects GDF’s focus on India where it already holds a 10% stake in Petronet LNG Ltd., the nation’s largest LNG importer by volume.

Jean-Marie Dauger, executive vice president at GDF, said that India, “and more generally Asia,” is a core development region for the company’s LNG business.

-By Rakesh Sharma, Dow Jones Newswires