Indian Oil, Great Eastern form LNG shipping JV

The board of state-owned Indian Oil Corp. has cleared a proposal for the company to enter into a joint venture with India�s largest private-sector shipowner, Great Eastern Shipping Co., for LNG transport. IOC went ahead with the JV despite the objections of its parent, the Ministry of Petroleum and Natural Gas, which felt that the company should not venture outside its areas of core competence.


MUMBAI�The board of state-owned Indian Oil Corp. has cleared a proposal for the company to enter into a joint venture with India�s largest private-sector shipowner, Great Eastern Shipping Co., for LNG transport. IOC went ahead with the JV despite the objections of its parent, the Ministry of Petroleum and Natural Gas, which felt that the company should not venture outside its areas of core competence.

The decision spells bad news for several other Indian shipowners desiring to enter the potentially lucrative field of LNG transportation. Companies such as Essar Shipping and Varun Shipping also were hopeful of a tie-up with IOC, because the public-sector company�considered a crown jewel�is one of the four promoters of the national LNG procurement firm, Petronet LNG Ltd. The others are Bharat Petroleum Corp., Gas Authority of India Ltd., and Oil & Natural Gas Corp.

Even the national carrier, Shipping Corp. of India, was keen to forge a JV with IOC, because the latter automatically becomes a suitor for any of the nine foreign bidders that have qualified for the Petronet LNG transportation deal and will have to form a JV with a domestic firm.

Petronet has prequalified nine bidders for moving 5 million tonnes/year of LNG purchased from Ras Laffan Liquefied Natural Gas Co. of Qatar on an fob basis for its planned LNG terminals at Dahej and Kochi. The prequalified bidders 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.

That consortium, in which Mitsui has a 60% equity stake and the other partners 20% each, is having a new LNG carrier, the LNG Lakshmi, built in Japan (OGJ, July 5, 1999, p. 29). The vessel will be used exclusively to carry LNG from the Persian Gulf to Enron�s 2,184-Mw power plant at Dabhol in southern Maharashtra (OGJ, Oct. 4, 1999, p. 25).

There is a strong possibility that the IOC-Great Eastern combine will partner with the Samsung-SK Line JV of South Korea. The short-listed bidders will shortly be given the documents that will specify the minimum criteria for selecting their JV partner. The criteria include ownership and experience in operating and handling cryogenic cargo such as LPG and hydrocarbons such as crude. The criteria have been relaxed for ensuring wider participation by domestic companies.

As it happens, the JV between IOC and Great Eastern possesses the requisite experience. IOC has strong financial capabilities and experience importing crude for its refineries, while Great Eastern has experience transporting cryogenic cargo and petroleum products.

The new combine will also be in a position to bid for other LNG transportation contracts in the country.

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