India sets terms for LNG transportation contracts

India has set a standard for the maximum participation of foreign firms in consortia that transport waterborne LNG shipments into the country. The government has ruled that the Indian partner in any foreign shipping consortium bidding to transport LNG for government-owned Petronet LNG Ltd. must be given at least a 26% equity throughout the contract period of 25 years.


MUMBAI�India has set a standard for the maximum participation of foreign firms in consortia that transport waterborne LNG shipments into the country. The government has ruled that the Indian partner in any foreign shipping consortium bidding to transport LNG for government-owned Petronet LNG Ltd. must be given at least a 26% equity throughout the contract period of 25 years.

Petronet had previously announced a bidding tender for the transportation of 7.5 million tonnes/year of LNG for 25 years�purchased from Ras Laffan Liquefied Natural Gas Co. of Qatar�on an fob basis for its planned LNG terminals at Dahej, Gujarat (2.5 million tonnes/year), and Cochin, Kerala (5 million tonnes/year).

�The foreign shipping lines will initially be permitted to hold up to 74% of the equity in the joint venture company formed for executing the Petronet contract,� said transport secretary R. Vasudevan. �However, the Indian shipping partner in the deal will have the right to raise its stake to 51% after the transfer of technology is completed and the vessel is registered in India by converting the flag from foreign to Indian.�

Petronet LNG has set a time frame of 5 years for transferring the technology on operating LNG vessels by the foreign partner to the Indian partner. Use of Indian crew and personnel will be mandatory within 5 years of registering the vessel.

High competition
Nine top foreign shipping bodies, some in consortia and others on a stand-alone basis, were short-listed and were issued bid documents June 15. Financial bids are to be called by Sept. 15, and the shipping contracts are to be awarded by Dec. 15.

Those in the race to bag the lucrative long-term contract are Mitsui OSK Line, the Leif-Hoegh-Foresight consortium, the Samsung-SK Line consortium, Osprey Maritime-al Manal, Hanjin, Hyundai Heavy Industries, Malaysia International Shipping Corp, Louis Dreyfus Corp., and Exmar. Of the nine, Mitsui OSK is the only one that already has a foothold in the Indian LNG arena, through its JV with SCI and Enron Corp. The group will ship LNG imports for use at the Enron-led Dabhol power project (OGJ Online, May 1, 2000).

Six of India�s top shipowners are scrambling to tie up with these consortia�the state-owned Shipping Corp. of India, Great Eastern Shipping Co., Pratibha Shipping, Varun Shipping, Essar Shipping, and ASM Shipping. The London-based Foresight Group is in the fray, both as a foreign flag owner and through its Indian subsidiary Amer Shipping.

�The government has said that an Indian shipping company will only become eligible to be part of the foreign consortium if it has a minimum net worth of 500 million rupees ($11.24 million),� said B.L. Mehta, executive director of Varun Shipping and former president of the Indian National Shipowners� Association.

�It has also been made compulsory for the Indian partner entering a foreign consortium to have a minimum standing of 5 years, either in owning vessels or having experience in operating liquefied petroleum gas carriers, hydrocarbons, product tankers, and general cargo vessels. This will help [separate] the chaff from the grain.�

Petronet LNG has appointed the London-based legal firm Ince & Co. to vet the bid documents. Bidders will be informed of any changes suggested by the consultants.

Petronet has asked the short-listed foreign bidders to send in their comments on the clauses mentioned in the documents by July 16. The prebid meeting has been scheduled for July 17 to discuss the suggestions made by the nine bidders.

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