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Govt decision to allow foreign flag vessels — Petronet LNG calls for re-bids to haul gas

Amit Mitra

Mumbai , Dec. 10

PETRONET LNG has quashed the bids submitted by Varun Shipping, Great Eastern Shipping and Shipping Corporation of India, along with their consortium partners, for chartering an LNG tanker for a period of 25 years.

This follows a Government decision to allow chartering of foreign flag vessels for import of LNG.

The parties have been asked to submit fresh bids, said an official with one of the bidding lines.

The Petronet's decision dealt a setback to Varun Shipping, along with its consortium partners, Indian Oil Corporation, Exmar Marine and Tecto of Belgium, as it had been short-listed by Petronet on December 1, for the Rs 3,200-crore contract.

The other two consortia in the race for the contract were SCI, along with its partners Mitsui OSK Lines, NYK Lines and K Line; and Great Eastern Shipping Company with Teekay Association. An official with one of the bidding companies said Petronet LNG has asked the parties to submit fresh bids next week as they now have the freedom to employ a foreign flag vessel.

The Government had issued a directive on December 9, keeping its Shipping Development Circular No 3, dated July 5, 2004, in abeyance. This decision now gives freedom to shipping companies to employ foreign flag vessel for LNG import, said a shipping company official.

"This is an unfortunate decision by the Government. It is in no way going to help anyone as LNG imports are on long-term basis. The county has lost an opportunity to develop an LNG fleet," said Mr S.S. Kulkarni, Secretary-General, Indian National Shipowners' Assocaition.

Petronet LNG is a joint venture company promoted by GAIL, ONGC, IOC and BPCL with an authorised capital of Rs 1,200 crore to import LNG and set up LNG terminals in the country. It has set up its first terminal at Dahej in Gujarat with a capacity of five million tonnes (mt).

Petronet is in the process of increasing its Dahej terminal capacity by another five mt, apart from planning to set up a new LNG terminal at Kochi with a capacity of 2.5 mt. It buys LNG from Ras Laffan Gas of Qatar at a pre-determined price, which is fixed for five year, using chartered LNG carriers.

Petronet had initially floated a tender for three LNG tankers, but it subsequently whittled down its requirement to one tanker of 1.54 lakh cubic mt capacity with the expected delivery date being fixed on September 2009.

The Government's policy, as stated in its Shipping Development Circular No. 3 dated July 5, 2004, was to promote Indian tonnage for LNG imports.

As per this policy, the vessel employed to import LNG has to be an Indian flag vessel and the Indian partner either has to own the vessel wholly or not less than 26 per cent of the company owning the vessel.

Also, the LNG vessel fixed on long-term charter basis should employ minimum two Indian officers — one on engineering side and the other on deck side.

Further, the LNG transportation technology should be transferred to the Indian partner within five years from the date of registration of the vessel. In a sudden development, the Government on December 9, decided to keep this circular and the subject guidelines for grant of licence to LNG vessels in abeyance.

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