The Hindu Business Line : Essar pitches for Shell LNG shipping contract

SORE at being left out by the Government from an emerging consortium of Shipping Corporation of India, Great Eastern Shipping and Varun Shipping for transporting LNG to Shell's re-gasification terminal at Hazira, the Ruias-promoted Essar Shipping has offered to undertake the contract along with a foreign partner.

"We are always interested in energy transportation which is our core area of competence. Essar has the capability of doing the LNG shipping deal for Hazira ourselves. There is no point in bringing in other Indian partners," Mr Sanjay Mehta, Managing Director, Essar Shipping Ltd, told Business Line.

Essar Shipping has submitted a letter to the Shipping Ministry expressing its willingness to undertake the job on its own and not as part of the proposed three-member consortium though Mr A.R. Ramakrishnan, Chief Operating Officer, Essar Shipping, attended a meeting convened by the Shipping Secretary, Mr D.T. Joseph, on November 24 to discuss ways to remove the transportation hurdle facing the Hazira LNG terminal.

The Shipping Ministry is keen on forming a consortium of SCI, Varun and GE Shipping (termed the cryogenic club) to take up the LNG transportation contract for Shell. Sources involved in the exercise said that Essar might have been left out of the consortium for its lack of cryogenic (gas carrier) ownership and experience, though it has the requisite hydrocarbon (product and/or crude tanker) ownership and experience.

As per the guidelines issued by the Director General of Shipping, an Indian partner keen on entering the LNG shipping sector should be "any shipping entity incorporated/registered under relevant Indian statutes having vessels licensed/registered with the DGS under the Merchant Shipping Act, 1958 having sound financial position and having either a minimum of 5 years of cryogenic (gas carrier) ownership and experience or a minimum of 10 years of hydrocarbon (product and/or crude tanker) ownership and experience."

As per the proposal under discussion, the Indian consortium will buy two LNG vessels from Shell, convert them into Indian flags and charter them out to Shell for hauling LNG to Hazira. Shell has more than 20 LNG tankers being one of the largest LNG vessel operators with participation in the management, manning and construction supervision of over 15 per cent of the world's LNG fleet.

In 2002, the 135,000 cubic metre capacity LNG carrier S.S. GALEA (the first in a series of four), utilising the moss containment system, was added to Shell's fleet. Unlike any of the previous LNG vessels that Shell has commissioned, this tanker is not committed to a specific project. Instead, it will be used to facilitate the development of a portfolio of upstream and downstream LNG projects involving Shell in the Asia Pacific, Mediterranean and Atlantic Basin.

Shell could deploy these vessels while redirecting surplus LNG cargoes from its liquefaction plants in these areas to Hazira. Ministry officials say that Shell could think of selling any two of these four carriers to the Indian consortium for shipping gas to its re-gasification facility in Hazira.