Moving LNG: Petronet plans joint ventures with shipping cos

Petronet LNG Ltd (PLL) is all set to float a shipping subsidiary to haul gas to its liquefied natural gas (LNG) terminals. The move has already been cleared by the Petronet board and is expected to create more synergy between its businesses, a senior PLL official told Business Line.

Elaborating the business pattern, the official said Petronet proposes to have joint ventures with shipping companies and operators selected for transporting gas. The new subsidiary would hold 49 per cent stake in such ventures and the balance 51 per cent would be held by the ship owners and operators.

Initially, Petronet had two joint ventures for transporting gas to Dahej from Qatar. In the first joint venture, PLL held a 15 per cent stake each in two tankers, which it subsequently offloaded to RasGas of Qatar as per agreement. Currently, PLL has 3 per cent stake in the third tanker. The new subsidiary being set up would invest in the joint venture entities.

More Ships Needed

The official said that the company would require 10 new ships in the coming years. To begin with, it requires two new LNG ships for its greenfield re-gassification terminal of 2.5-million-tonne-per-annum (mtpa) capacity proposed at Kochi. With plans to raise the terminal capacity to 5 mtpa, PLL would require two more LNG ships depending on the quantity being sourced. For its existing Dahej terminal, the company would require additional three ships taking the total number to six once the capacity expansion is completed.

Currently, PLL is utilising 6.5 mtpa of capacity at its Dahej terminal, which is expected to expand up to 12 mtpa by 2009-10. PLL is optimistic about meeting the investment requirements for its shipping business through internal accruals. Funds required for building a ship would be about $260 million, and investments would be made depending on the equity stake, the official said, adding that the debt-equity scenario in this business was 85 per cent debt and 15 per cent equity.

Petronet unveiled its diversification plan in the tender conditions for time chartering two LNG tankers of 1,65,000 to 1,75,000 cubic-metre capacities each from ship owners and operators to ship gas to Kochi for 25 years. Brushing aside the market buzz that the extension of deadline for these tenders from March 15 to June 30 would adversely affect the company's business plans, the official said the extension was at the request of the ship owners.

Besides, the company has time on its side, as the ships would be required only after the terminal is ready. While construction of a ship takes about two-and-half years, a terminal takes about four years. The Kochi terminal is expected to come up by 2010.

Source: Business Line, April 9, 2007
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