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Regasification Terminals on “Tolling Model” in India – Contractual Issues
(Oct – Dec 2017)

Introduction:

India is one of the major growing economies of the world. To sustain the growth rate of its gross domestic product, India needs an environmentally friendly and economically viable energy supply – Natural Gas being one such potential source of energy. With stagnant domestic gas production and limited future prospects, liquefied natural gas (‘LNG’) imports are required to bridge the demand-supply gap. As such, there is a requirement to commensurate LNG import infrastructure in the country. Accordingly, several LNG regasification terminals have been planned/ announced in India. While some terminals like Ennore of Indian Oil Corporation Limited (‘IndianOil’) are planned on “Merchant Model” wherein terminal operator sells Regasified LNG (RLNG) to the consumers, there are other terminals like Mundra Terminal which are likely to operate on “Tolling Model”, wherein the terminal operator is only a service provider. It is however easier to get project finance for projects under the “Tolling Model” on the basis of the firm “Use or Pay” capacity agreements with credit-worthy shippers. This paper examines some of the techno-commercial issues, which bear legal implications and may need to be suitably addressed in the contract documents to ensure proper working of the “Tolling Model”.

Regasification Terminals on “Tolling Model” in India – Contractual Issues (Oct – Dec 2017)