AP Govt okays proposal to give Shell 26% stake in Kakinada gas project

Andhra Pradesh government has approved a proposal for offering 26 per cent stake to Europe's largest oil company Royal Dutch Shell in a gas project at Kakinada.

The AP government-owned AP Gas Infrastructure Corporation (APGIC) and state-owned GAIL floated AP Gas Distribution Company (APGDC) have set up a 3.5 million tonnes capacity (expandable up to 10 million tonnes) Floating LNG Storage Regasification Unit (FSRU) in the East Coast at Kakinada Deepwater Port.

According to a recent government order, the committee which was set up to look on the issue of allocating stake in the gas project to Shell, has recommended the proposal.

APGDC earlier tied up with the GDF Suez LNG UK Ltd by offering 26 per cent stake in the project.

‘The committee also noted that M/s Shell was an international market leader in the Natural Gas and LNG field with vast financial, technical and managerial expertise’, it said.

The order also said the JV would benefit from the participation of Shell and that Shell would add overall financial market value to the proposed FSRU Project.

The committee has recommended that Shell may be provided 26 per cent equity in the SPV at par with GDF Suez, it said.

The AP government has sought the opinion of Solicitor General of India with regard to the stake offer.

The equity structure of the APGDC will be restructured with APGIC holding 52 per cent equity and GAIL Gas Ltd having 48 per cent equity.

‘APGDC shall control the composition of the board of the SPV for which necessary safe guards are to be provided in the Share Holders Agreement (SHA) to be signed for SPV,’ the government order further said.