The Hindu Business Line : LNG terminal: Kochi port, Petronet yet to resolve issues

The issues
The issue of wharfage charge is significant, as the Cochin Port Trust does not have any pre-decided wharfage charge for LNG.
Resolving of pending issues vital for Petronet to award engineering and shipping contracts.
Petronet looking at extending the land lease duration beyond the maximum 30-year period.

New Delhi June 5 Several issues remain to be sorted out between the Cochin Port Trust and Petronet LNG Ltd (PLL) before the proposed LNG terminal can come up. Senior Shipping Ministry officials said that an agreement needed to be reached on various issues including the exact cargo wharfage level that PLL would pay to the port trust for the period during which land lease agreement would be in operation.

In other words, the two parties need to work out the port access charges, which would be an actual income for the port maintenance. The issue of wharfage charge is significant in the context, as the Cochin Port Trust does not have any pre-decided wharfage charge for LNG, the official explained pointing out that this is the first LNG terminal project for the port.

However, the pilotage and other vessel related charges for this terminal would be the same as decided by Tariff Authority for Major Ports (TAMP) for the port.

Terminal planned

PLL has proposed setting up of a LNG terminal in Kochi comprising two LNG storage tanks of 155,000 cubic metre net capacity each. The Cochin Port Trust has allocated 32 hectare of land for the purpose. Both PLL and the port trust are trying to resolve the pending issues at the earliest because Petronet needs to have an agreement in place before it awards the engineering procurement contract (EPC) and shipping contracts.

Land lease duration

Certain issues in the concession agreement (the contract between PLL and the Cochin Port Trust) would need to be cleared by the Shipping Ministry as they differ from the guidelines prescribed for major ports. For instance, the duration of land lease.

The official said, while a port trust is allowed to lease out land for a maximum period of 30 years to a company, in this case PLL is looking at extending the duration.

The computation of lease period from the port perspective would begin from the date the land is handed over.

Long-term contracts

"However, customers of PLL - users and shippers - with whom it would also ink long-term contracts (about 25 years) for LNG would prefer the land lease to end only after the duration of their contracts with Petronet expires.

The period of contract between PLL and its customers would begin only once the terminal is in place (2010)," he said.

International companies such as IHI, SN Technigaz, and Sofregaz have qualified the technical bids for the total EPC of the LNG terminal Petronet. PLL is expecting to open the price bids by June 30 for the proposed 2.5-million-tonne-per-annum Kochi terminal.

The construction of a terminal takes about four years.

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