"The new company is likely to be set up within two months," sources said while adding that a meeting is convened towards December-end to thrash-out the exact nature of the entity.

Presently, various options are being weighed by Petronet LNG including setting up a subsidiary or a holding company. The consortium is yet to decide on the stake it will hold in the new company. Here again, the consortium is considering two options--either to hold 51 per cent or 49 per cent.

According to sources, the Petronet LNG is also open to private companies picking up stake in the new shipping venture. Top officials in the SCI confirmed that the company is in talks with few internationalcompanies including one from Japan and some Indian companies.

It is learnt that the UK-based Foresight group has also evinced interest in picking up stake in the new venture.

The shipping outfit will be entrusted with exclusive rights to transport LNG into India for various projects coming up. Since the contracts would be for a period ranging from 20 years to 25 years, the shipping entity would stand to benefit as it will get an assured income against a volatile freight market.

According to sources, the decision for setting up the new company cannot be delayed further as the first consignment of the LNG has to come by 2002. "The decision has to be taken within few months as thereafter, we will be involved in placing orders for the first two LNG vessels," a SCI official said.

The companies are likely to go in for a new LNG vessel as these are specialized kinds of ships mostly bound with long contracts. "There are very little chances for getting second-hand LNG vessels during 2001-2, hence, order fornew ships have to be placed soon as the construction itself will take around two years," sources said.

SCI is confident that the company alongwith with its partners in the new shipping outfit would be able to raise enough money for buying new LNG vessels. The rates for a newly built LNG ships which were hovering around $ 220 million per vessel till few months ago, have come down to $190 million.

The consortium have also not ruled out possibility of hiring the LNG vessels in case of any financial crunch. Around 12 LNG vessels will be required for transportation of the product in view of upcoming projects.

Makes little sense

Petronet LNG was set up primarily to transport LNG by pipelines, however, even before the first pipeline could be commissioned the company has decided to enter into transportation business by tying up with SCI, as has been the trend with PSUs.

For SCI, there makes little sense in entering this joint venture as the revenue will be contractual which will remain constant for aperiod of 20 to 25 years. The company is planning another joint venture with other shipping companies like Varun Shipping for tapping the LNG and LPG traffic. As the freight rates are currently low, the company could do better by entering into a joint venture with private sector shippers.