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Time charter of LNG vessels makes major changes in bid terms

P. Manoj

NEW DELHI, Aug. 28

PETRONET LNG Ltd has delinked the shipping contract for its Dahej and Cochin terminals by scaling down the number of LNG vessels required to two from the earlier proposed three firm plus one optional vessels.

It had also reduced the capacity of the new LNG tankers to be time chartered from a consortium of foreign and Indian shipping companies to 1,38,000 cu. m from the initial plan of 1,42,000 cu. m, Government sources told Business Line.

Petronet is in the process of selecting ship owners and operators to time charter LNG vessels for transporting five million tonnes per annum (MTPA) of LNG to its Dahej terminal and 2.5 MTPA for the Cochin terminal from Qatar's Rasgas for a period of 25 y ears on free-on-board (f.o.b.) basis.

The original plan was to bunch the shipping requirement for the Dahej and Cochin terminals together and, accordingly, three firm and one optional LNG tankers were proposed to be time chartered.

By reducing the number of LNG tankers to two, Petronet LNG Ltd has clearly and quietly segregated the shipping contracts for the Dahej and Cochin terminals.

The two LNG vessels which Petronet plans to time charter now will take care of transporting 5 MTPA of LNG to the Dahej terminal, scheduled to go on stream by June 2003. One LNG vessel has the capacity to transport 2.5 MTPA of LNG.

The shipping contract for the Cochin terminal having a capacity of 2.5 MTPA would be decided later separately, the sources said.

In the case of the LNG shipping deal for the Dahej terminal, the eight short-listed foreign consortia have been given the option to bid for one LNG tanker only. This implies that the LNG transportation contract could be split between two consortia depend ing upon the outcome of the price bids.

The last date for submission of techno commercial bid and price bid has been extended to October 25 from the earlier proposed deadline of September 15.

Petronet has also dropped the clause whereby the ship owner and operator will have to transfer each LNG tanker to Petronet at a cost of $10 at the end of the charter-hire period of 25 years.

The pre-qualified bidders had told Petronet that this clause would have an impact on the time charter rates quoted by them since the residual value of the LNG tankers would be much more than the nominal value of $10 at which they were proposed to be tran sferred to Petronet.

Realising that this would have been factored in by the bidders while quoting the time charter rates which,in turn, would have made an impact on the final price of LNG sold to the end use customers, Petronet decided to delete this clause from the bid docu ment, the sources said.

Petronet has also reduced the speed of the LNG tankers from 20.5 nautical miles to 19.5 nautical miles following requests from the bidders.

The bidders had told Petronet that the number of voyages required to transport 5 MTPA for the Dahej terminal could be easily achieved with a speed of 19.5 nautical miles.

Moreover, all LNG vessels are constructed globally catering to a speed of 19.5 nautical miles. A speed stipulation of 20.5 nautical miles would unnecessarily push up the price of the vessel, they had opined.

The changes effected by Petronet had been communicated to the bidders as addendum to the bid documents which was issued to them from June 15. A pre-bid meeting of the short-listed bidders was held on July 27.

The changes have largely been welcomed by the bidders who feel that it would go a long way towards making the bid document bankable, setting the stage for the final round of the process of selecting the ship owner and operator for time chartering LNG tan kers.