The Hindu Business Line : Ministry mulls new tonnage policy for LNG shipping

LNG project promoters importing cargo on spot basis may be allowed to ship the cargo on foreign flag tankers only if they registered equivalent LNG tonnage under Indian flag, according to the `principle of equivalence' being considered by the Shipping Ministry as part of a LNG shipping policy.

The `principle of equivalence' is being evolved to accommodate the Royal Dutch Shell Group, which is setting up an LNG terminal at Hazira port with a minimum, permanent capacity of 2.5 million tonnes per annum (mtpa). The terminal is slated to become operational by the end of the year.

Shell has sought an exemption from the Shipping Ministry to bring the LNG cargo only on Indian flag LNG carriers, a stipulation that forms part of the draft LNG shipping policy.

The LNG required for Hazira is expected to be sourced on spot basis from any of the LNG supply projects involving Shell across the globe.

And, the LNG cargo is to be shipped, according to availability, on one of more than 20 LNG carriers managed, operated and manned by Shell International Trading & Shipping Company Ltd (STASCO), the principal trading and shipping arm of the Shell Group.

In the absence of a long-term sales purchase agreement (SPA) and particularly when the point of origin of gas is not pre-determined, Shell has told the Ministry that it was averse to following a shipping model which will require the company to hire Indian flag LNG tankers on long-term time charter basis to haul the cargo.

Shell has sought flexibility to bring the LNG cargo on any of the foreign flag LNG ships that are available with the company without hiring dedicated Indian flag tankers to ferry the cargo to Hazira, a Shipping Ministry official said.

" We have no objections to this proposal. If Shell does not want dedicated Indian flag LNG carriers to transport the cargo to Hazira, it is fine by us. But, Shell should at least register equivalent LNG shipping tonnage under Indian flag. Such Indian flag LNG tonnage need not necessarily cater to Shell's requirement in India, but can cater to its needs elsewhere," the official said.

The methodology of calculating equivalent Indian flag LNG tonnage to be registered by Shell or other promoters importing gas on spot basis under the `principle of equivalence' would depend upon the quantity of cargo and the location of the terminal.

"For instance, if a 2.5 mtpa capacity LNG terminal is set up on the east coast, it may require two LNG tankers to ship the cargo, say from the Middle East or Persian Gulf. Whereas, for a similar terminal on the west coast, it may require only a single tanker to ferry the cargo," the official disclosed.

Last week, top brass from Shell India had met senior officials in the Shipping Ministry to discuss the plan. "A final decision on the proposal would be taken soon," he said adding that there would be no relaxations to the proposal for transporting the LNG cargo only on dedicated Indian flag ships hired on long-term time charter basis in case promoters resort to long-term SPAs for importing LNG into the country.