OPEN APP
Home >Companies >Petronet plans to pick up stake in Kochi LNG shipping venture


Petronet plans to pick up stake in Kochi LNG shipping venture

Petronet plans to pick up stake in Kochi LNG shipping venture

Bangalore: Petronet LNG Ltd, India’s biggest importer of liquefied natural gas (LNG), is diversifying into shipping by taking a stake of up to 49% in the venture planned to haul gas to its new regasification terminal coming up at Kochi in Kerala.

The Kochi terminal will have a capacity for 5 million tonnes per annum (mtpa) of LNG. Regasification is the process by which LNG is heated and converted into a gaseous state.

The tender conditions say that Petronet may hold up to 49% of the company formed by the successful ship-owning and operating consortium.

The balance 51% will be distributed among the shipowners and operators.

“This is a diversification plan," said Sanjay Gupta, vice-president, shipping, at Petronet LNG.

Petronet is part-owned by Oil and Natural Gas Corp. Ltd, GAIL (India) Ltd, Indian Oil Corp. Ltd and Bharat Petroleum Corp. Ltd.

The firm plans to hire one ship for 20 years with a capacity to load as much as 216,000 cu. m of LNG to ship the fuel from the Gorgon project in Australia.

Among the local fleet owners, only state-run Shipping Corp. of India Ltd submitted initial bids for the tender that closed on 5 June.

Shipping Corp. bid for the tender along with Japanese firms Mitsui OSK Lines Ltd, NYK Line Ltd and Kawasaki Kisen Kaisha Ltd. This consortium owns three LNG ships that have been leased to Petronet LNG to transport LNG from Qatar to its Dahej facility in Gujarat.

Great Eastern Shipping Co. Ltd, Essar Shipping Ltd and Varun Shipping Co. Ltd, among India’s largest shipowners, stayed away from the bidding.

Shipowners say India’s LNG policy is not conducive for their participation.

“Policy encouragement in the form of mandatory holding of certain percentage of equity in the LNG shipping venture by Indian shipping companies and transfer of technology has not come from the government," said A.R. Ramakrishnan, managing director of Essar Shipping.

The Indian National Shipowners’ Association, an industry lobby, has submitted a representation to the government seeking a review of the LNG shipping policy framed in 2005, Ramakrishnan said.

The policy, approved by the cabinet committee on economic affairs in November 2005, gives LNG importers the flexibility to transport cargo either on free-on-board or cost-insurance-freight basis by deploying foreign or Indian flagships.

In free-on-board contracts, the responsibility of making the shipping arrangement rests with the buyer, whereas in the case of cost-insurance-freight deals, the seller has to make the arrangements for transporting the cargo.

The cabinet decision reversed earlier guidelines issued by India’s maritime regulator, the Directorate General of Shipping (DGS), in July 2004, which stipulated that licences for chartering LNG tankers into the country will be granted only if the vessels are registered under the Indian flag and owned wholly by an Indian entity or by an Indian partner holding not less than 26% equity in the joint venture company owning the LNG carrier(s).

The DGS norms indirectly made it mandatory to buy LNG only on free-on-board basis.

“The position may be reviewed on need basis (but at least once a year before the announcement of the foreign trade policy) by an inter-ministerial committee comprising secretaries of commerce, petroleum and natural gas, power, shipping as well as DG (shipping), which may keep track of the changing market situation and suggest appropriate changes in the policy as and when required," the 2005 cabinet decision said. “In the case of a difference of opinion, the matter may again be placed before the cabinet by the department of commerce in the shortest possible time."

“We want the earlier policy (of DGS) to be reinstated," Ramakrishnan said.

p.manoj@livemint.com

Subscribe to Mint Newsletters
* Enter a valid email
* Thank you for subscribing to our newsletter.

Click here to read the Mint ePaperMint is now on Telegram. Join Mint channel in your Telegram and stay updated with the latest business news.

Close
×
Edit Profile
My Reads Redeem a Gift Card Logout