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Lloyds List: India gets in on the act with pipeline talks

India gets in on the act with pipeline talks

 

Petronet mulls shipping subsidiary, writes Shirish Nadkarni
Lloyds List; Apr 19, 2006

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INDIA has started buying natural gas from Qatar and has initiated talks to build pipelines to bring it from Iran, Turkmenistan, Bangladesh and Myanmar.

State-owned Petronet LNG has also woken up to the possibilities of having its own shipping subsidiary to transport LNG to its 2.5m tonnes per annum regasification terminal coming up at Kochi.

Tender conditions for the contract insist on Petronet's holding up to 49% equity in the company formed by the successful shipowning and operating consortium. The other 51% would be distributed among the shipowners and operators who would actually procure the LNG vessel.

The subsidiary, to be registered in a tax haven such as the Cayman Islands or Malta, would thus become a deemed Indian shipping company.

This is a major departure from the first two shipping tenders finalised by Petronet for hauling 5m tpa of LNG from RasGas in Qatar to its revamped 7.5m tpa Dahej terminal in Gujarat.

Petronet holds a 15% equity stake in each of the first two tankers finalised for the project, and 23% in the third tanker. National carrier Shipping Corp of India has an equity stake in all three ships, along with its long-standing three Japanese partners, Mitsui OSK Lines, NYK Line and K-Line.

The vessels will haul LNG from RasGas in Qatar to Dahej. Earlier, two newly constructed LNG tankers from the same consortium, Disha and Rahi, were hired by Petronet for moving 5m cu m of gas per annum from Qatar.

For the third Dahej contract, the four partners will deploy a 155,000 cu m capacity LNG tanker. Petronet will take the vessel on long-term time charter.

The most recent tender floated by Petronet to ship gas to Kochi for 25 years has attracted 14 bidders, of which seven have been pre-qualified.

After the Indian cabinet granted flexibility to LNG importers last November to import gas either on free-on-board or cost-insurance-freight basis and to deploy foreign flag vessels for transporting the cargo, the presence of an Indian shipping firm in the shipowning and operating consortium is no longer mandatory.

Apart from SCI, other leading domestic shipowners including Great Eastern Shipping, Varun Shipping and Essar Shipping have stayed away from submitting their requests for qualification, either by themselves or in consortium with experienced global LNG shipping firms.

The problems of trying to distribute and market LNG in India have not been lost on Royal Dutch/Shell, which has put up a 2.5m tpa terminal at Hazira, also on the Gujarat coast.

Shell lost its only customer, Gujarat State Petroleum Corp, in January and has been idle since. It is now in talks with state-owned gas utility GAIL India to hire out its capacity for four years.

GAIL plans to use the merchant terminal's entire capacity from June, to provide a crucial link in the chain for future gas supply of 700,000 tonnes to the Enron-built, 2,184 mw power plant at Dabhol, near Ratnagiri.

The plant has been in mothballs since a payment dispute with the Maharashtra State Electricity Board in 2001 but it is expected to be re-started shortly. GAIL expects to obtain LNG on its own and pay regasification charges to Shell.

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