Lloyds List: India digs in over Shell bid to ship LNG to Hazira: “INDIA has rejected a Royal Dutch'Shell proposal to use its own vessels for transporting 2.5m tonnes of LNG a year into the oil giant's receiving terminal at Hazira, on the Gujarat coast.” (ShellNews.net) 13 Jan 05

Shirish Nadkarni in Mumbai

Jan 13, 2005

INDIA has rejected a Royal Dutch'Shell proposal to use its own vessels for transporting 2.5m tonnes of LNG a year into the oil giant's receiving terminal at Hazira, on the Gujarat coast.

The Shipping Ministry has reiterated that it would allow LNG transportation on a foreign ship only if it were jointly owned by an Indian consortium, with the latter's equity participation in the vessel's ownership being not less than 26%.

'We do not wish to discourage Shell, but LNG to India can only be transported by an Indian consortium in partnership with Shell India, or using an Indian company's vessel flying the national flag,' said Shipping Secretary D T Joseph.

'Shell will have to act in conformity with the guidelines issued by the Directorate-General of Shipping, which are specific that no licence will be granted to any chartered LNG vessel unless it is an Indian-flag vessel, or at least 26% Indian owned.'

Shell had petitioned the ministry that it had already spent Rs30bn ($682m) on the receiving terminal, which was originally scheduled to have been commissioned by end-December 2004; and that it was too late to alter its shipping plans at this juncture.

However, the Indian ministry has remained firm in its stand and suggested to Shell that it could form joint ventures with an Indian shipowner, using the special purpose vehicle route to launch companies that would be able to charter Shell's LNG ships.

At the moment, no Indian shipowner owns an LNG carrier; and if a newbuilding order were to be placed, a delivery could only be effected by 2009. No acquisition of second-hand vessels is possible, since all of them are tied up on 20-25 year time charters.

That leaves only the joint venture route for the Indian shipping community to enter the field of LNG carriage. It is understood that the state-owned Shipping Corporation of India, and private sector shipowners Great Eastern Shipping and Varun Shipping, are keen to bid for Shell's Hazira LNG transportation contract. 

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