‘DG Shipping guidelines for granting licence to LNG vessels should be kept in abeyance'
Keeping in mind the continued shortfall in the domestic gas production and the mounting demand for gas, an inter-Ministerial Committee has pitched for flexibility in transportation of Liquified Natural Gas (LNG) and keeping in abeyance the guidelines of Director General (Shipping) for grant of license to LNG vessels.
This decision was taken following the report of the inter-ministerial on “review of existing LNG shipping policy” which felt that the DG Shipping guidelines for grant of license to LNG vessels should not be implemented at this juncture as it could hamper the free import of much needed LNG. The guidelines stated that LNG vessel should be Indian flag vessel; Indian shipping entity to own 26 per cent; employ minimum 2 Indian officers and two trainee officers/cadets; LNG importer cannot fix spot vessels for more than 10 per cent of the total annual imports and transfer technology to Indian partner within 5 years.
However, the Inter ministerial committee of the Central government decided that in order to provide flexibility in transportation of LNG, the DG Shipping guidelines for grant of licence to LNG vessels should be kept in abeyance. “Flexibility in transportation of LNG has been beneficial to LNG consumers. We propose that this flexibility to import LNG on FOB basis or CIF basis should continue with the buyers and there should be no restriction in this trade,” the committee report said. The inter-ministerial group comprised of Petroleum Ministry, Commerce Ministry and Shipping Ministry officials.
It was pointed out that LNG market is driven by seller. Significant number of sellers own LNG carriers and therefore offer LNG for sale from far off places such as Trinidad and Tobago, Algeria, Egypt, Nigeria, Malaysia and Australia on CFR or CIF basis. “Any attempt to introduce procurement of LNG only on FOB basis, will restrict our ability to import LNG at competitive rates with very limited choice. Further for spot cargos, location of loading is not certain, owning vessel will be very expensive since most of the time it will be unutilised or underutilised,’’ it added.
The worldwide spot trade was only 5 per cent in 2004 which has increased to 25 per cent in 2011. Petronet LNG is also operating its plant at 11 metric tonne per annum (mmtpa), out of which only 7.5 mmpta is on long term agreement. “Spot trade is increasing exponentially. Price of LNG at present is significantly less on spot trade compared to long term. Therefore, there should not be any restriction in quantity of importing LNG on CIF or CFR basis,’’ it further said.