Reliance Industries said Thursday it has signed a long-term agreement with Japan's biggest shipping company Mitsui OSK Lines for transportation of liquefied ethane from North America to India.
Mitsui will manage six very large ethane carriers (ships) that the Indian conglomerate is building at Samsung Heavy Industries. It will supervise the construction of 87,000 cubic meter ships and upon vessel delivery, manage the ships.
"Reliance, with this strategic tie-up with Mitsui, has achieved a key milestone for the successful implementation of Ethane import project to feed crackers in India," the company said in a statement.
Mitsui, in a separate statement, said the very large ethane carriers (VLECs), being built by Samsung, are expected to be delivered in the last quarter of 2016.
Neither of the companies disclosed the value of the deal.
Ethane, a natural gas component, is expected to be produced in large volumes in North America due to the shale gas revolution, which has generated an abundance of liquefied natural gas (LNG) and cooking gas LPG.
Ethane is primarily used as a petrochemical feedstock to produce ethylene by steam cracking.
RIL plans to ship 1.5 million tonnes a year of ethane from its US shale joint ventures to its chemical complex in Gujarat.
The firm has two joint ventures in Pennsylvania's Marcellus Shale - one with Chevron, in which it has invested $1.7 billion, and another with Houston-based Carrizo Oil & Gas, in which it has invested $392 million.
It has a third JV, in which it invested $1.5 billion, in Texas' Eagle Ford Shale with Dallas-based Pioneer Natural Resources.
The world's richest energy billionaire Mukesh Ambani-led RIL's business spans petrochemicals, exploration and production, retail and telecommunications.
Samsung will deliver the ships to be used for ethane transportation, from October 2016 to January 2017. Each ship is priced at $120 million.
Mitsui said: "VLECs, being a hybrid of LNG carrier and LPG carrier, required the expertise in both the LNG carriers and LPG carriers. Considering Mitsui's rich experience for both type of carriers it is in better position to leverage on its existing capabilities to tap this new opportunity."
Due to the expectation of competitively priced ethane as opposed to naphtha, a crude oil byproduct, petrochemical producers are hoping to lower their production costs by using ethane.
"Mitsui will supervise the construction of six Very Large Ethane Carriers (VLECs), ordered by Reliance. Mitsui will also operate and manage the vessels after they are built and delivered," the RIL statement said.