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Joint venture for transporting LNG from Qatar -- Petronet sets terms for Indian cos

P. Manoj

NEW DELHI, June 4

PETRONET LNG Ltd has stipulated a minimum net worth of Rs. 50 crores as the eligibility criteria for Indian shipping companies to become domestic joint venture partners along with a foreign shipping line for transporting its LNG purchased fr om Qatar's Rasgas for a period of 25 years.

Besides, only those domestic shipping companies having a minimum standing of five years either in owning vessels or experience in operating LPG carriers, crude and product tankers will qualify for the deal, official sources told Business Line.

Moreover, the Indian shipping company participating in the contract should be a public limited company registered in India for owning and operating LNG vessels.

Petronet has, however, omitted a minimum vessel size as one of the criteria due to sharp differences within the domestic shipping industry over the issue.

Petronet LNG Ltd has also stipulated that the successful foreign shipping line must give a minimum equity of 26 per cent to its Indian partner in the proposed joint venture LNG shipping company.

If an Indian shipping company ties up with another non-shipping domestic company as in the case of IOC-Gesco venture, the shipping company should have a majority stake, while the non-shipping company would only be a minority stake holder in such ventures .

Further, Petronet has set a minimum time-frame of five years for transferring the technology on owning and operating LNG vessels to the Indian partner. This implies that the foreign shipping line should hand over the reins of operating and managing the L NG vessels to Indian crew and other personnel within five years of registering the vessel.

Even though Petronet has allowed the successful foreign shipping company to register the LNG vessel as a foreign flag initially, the operator should convert the vessel into an Indian flag within one year of notifying the LNG shipping policy, which is cur rently under formulation.

The proposed LNG shipping policy is expected to announce several steps to promote LNG shipping in the country including a tonnage-based tax structure, infrastructure status and other tax incentives.

The guidelines form part of the draft bid document which will be issued to the nine pre-qualified foreign bidders this week, seeking their comments on the tender documents. ``The issue of draft bid documents to the nine shortlisted bidders will start the tendering process for the transportation contract,'' the sources said.

Simultaneously, Petronet will get the bid documents vetted by a reputed legal consultant. The comments of the pre-qualified bidders and the consultant would be incorporated in the final bid documents which were expected to be issued by June 30, the sourc es said.

Petronet has decided to issue the draft bid documents to the prospective LNG owners and operators before it is legally vetted in order to save time involved in this task.

The minimum criteria stipulated in the draft bid document is mostly based on the recommendation made by the Department of Shipping in the Ministry of Surface Transport on the issue.

Petronet has decided to set a tough minimum criteria for Indian companies so as to discourage non-serious players from entering the highly capital-intensive LNG sector where even a 26 per cent equity stake would run into millions of dollars.

Global shipping majors such as Mitsui OSK Line-K Line-NYK consortium, Hanjin Shipping company, Samsun-S.K. Shipping Line, Hyundai, Malaysian International Shipping Corporation, Osprey Maritime-Al-Manal combine, Exmar, Louis Dreyfus and Leif Hoegh-Foresig ht consortium are in the race to bag the contract for transporting 7.5 million tonnes per annum of LNG from Qatar on free-on-board (f.o.b.) basis.

The foreign bidder will have to take on a Indian shipping company to qualify for the deal. SCI, Gesco, Essar, Varun and Sanmar have thrown their hats to become the Indian joint venture partners in the deal.