The Hindu Business Line : Gas transportation in full sail

Reports have it that Petronet LNG is planning to acquire two more — fourth and fifth — LNG carriers and has shortlisted international shipping firms from among the bids it has received.

The two vessels, each of 165,000 cubic metre capacity, will be deployed for transportation of gas (source yet to be identified) to meet the requirement of Petronet's Kochi terminal, proposed to be set up in a few years.

Already two vessels, "Disha" and "Rahi" are in operation catering to the Petronet's Dahej terminal and the third one, for which contract has been awarded to a consortium of shipping lines including Shipping Corporation of India, will be ready for operation 2009.

The third vessel too will serve the Dahej terminal whose capacity is being expanded. Shell too has delivered two parcel loads of LNG through its Hazira terminal commissioned recently.

Rising demand

In short, the demand for LNG in India is rising. According to one estimate, the volume of commercial gas available for sale in India, from all sources, will rise to 135 million cubic metres by 2008 from 90 m cubic metre now. No wonder, Petronet LNG has brought forward the expansion of its Dahej terminal by six months to June 2008.

The capacity of the Dahej terminal is to be expanded from the present five million tonnes per annum (mtpa) to 12.5 mtpa, instead of 10 mtpa as earlier envisaged.

In another development, Petronet's discussion with Qatar is believed to have reached an advanced stage for buying 2.1 mtpa of LNG for the power project in Ratnagiri, originally developed as Dabhol power project by Enron in the late 1990s.

The associated LNG terminal was never completed and the power plant itself ran into difficulties as Enron got embroiled in a host of problems and ultimately withdrew from it.

The Ratnagiri power plant has been brought back on stream using naphtha as a fuel.

However, the cost of naphtha being twice that of LNG in terms of energy generated (BTUs or British thermal units), there is a demand for running Ratnagiri power plant on LNG. If there is an agreement on price, the supply of LNG from Qatar perhaps will start from the beginning of 2007 and continue till 2009 when the supply from Oman will become available.

Meanwhile, GAIL (I) Ltd, the country's natural gas grid operator and one of the four companies that promoted Petronet, too is understood to have decided to import LNG from Algeria on a spot basis. The consignments will be delivered at Petronet's Dahej terminal.

World LNG trade

Worldwide, the LNG sector is poised for a large-scale expansion, so much so that trade volumes are projected to increase by a massive 71 per cent by 2010 and 172 per cent by 2020. The aggregate level of world LNG trade has continued to expand, with over 10 per cent growth in 2000 followed by 5-6 per cent annual growth in subsequent years.

The world fleet of LNG carriers has expanded from eight vessels in 1970 to more than 150 now, and the growth in the capacity of the fleet is currently at a faster rate ever, with nearly 60 vessels on order.

This will happen because of the projections for large-scale demand growth; the emergence of new supply sources such as Iran, Yemen, Bolivia, Venezuela, Peru, Egypt, Angola, Norway and Russia; the emergence of new markets such as the UK, Latin American countries, China and India; the increasing contract flexibility and the changes in vessel size and cargo propulsion systems.

However, a few things deserve careful attention. According some experts, the LNG trade will be marked by a rise in spot market deals and short-term contracts. But others hold a different view, that gas importers will not risk their million-dollar LNG investments by not firming up their transportation strategies. Nearly 90 per cent of the world LNG trade is still tied to long-term transport contracts with dedicated vessels operating on dedicated circuits. The importers, it is therefore felt, will not overlook the need to charter vessels on long-term contracts with experienced operators.

Insurance aspect

The issue of experienced operator is critical because some insurance brokers have warned that, as more and more LNG ships come into the market, the shortage and inexperience of crew will show up, influencing insurance rates. The new operators might face problems in the early stages of crewing a new vessel.

Also, the safety record of LNG shipping could be at risk if increased competition encourages operators to cut costs. Finally, compressed natural gas (CNG) is set to emerge as an alternative to LNG. CNG, it is felt, has several advantages, particularly for medium-range transportation.

A CNG system does not require a gas liquefaction plant or storage tanks at the production and the loading site, nor any storage or re-gasification at the discharge point.

A senior official of Det Norske Veritas, the Norwegian classification society, was recently quoted as saying that, "A fleet of CNG ships could serve as both storage and transport vessels for natural gas and could discharge their cargo directly into land-based grids through an offshore or onshore terminal".

Thus looking at the complete transport chain from the gas reservoir to the consumer, there is a potential for large savings.

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