GAIL outlines $7.8-bn fleet-hire strategy to import LNG from US

Apr 28 2014, 01:25 IST
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The PSU will soon float tenders to award contracts by November. The PSU will soon float tenders to award contracts by November.
SummaryTies up 5.8 mtpa starting 2017.

GAIL (India) has drawn up a plan to invest an estimated $7.57 billion for hiring a fleet of sophisticated LNG ships to ferry gas from the US to India for 20 years from 2017. The PSU will soon float tenders to award contracts by November. The cost excludes fuel, canal and port call charges, which, again to be borne by GAIL, will be $30 million.

The public sector firm has tied up 5.8 million tonnes per annum (mtpa) of LNG imports from the US starting 2017.

“It’s been decided to charter ‘new build’ ships to transport gas from the US. Step-in right (to GAIL) in the ownership of LNG ships would only be possible for new build ships. Since fuel and other charges are to the charterer's account, GAIL is looking at chartering fuel-efficient ships,” said an official.

GAIL is considering taking up equity stakes of up to 10% in the ships with a seat at the owners’ table to facilitate the company to have an insight into on-board happenings (the cost of this equity is included in the GAIL's estimated total budget for the LNG contracts). There is also a plan to partner Shipping Corporation of India in the venture with the option of the state-run entity taking up stakes (up to 26%) in the ships.

The ministry of petroleum and natural gas, the sources added, had suggested to GAIL to consider awarding one-third of the contracts to Indian ship makers. However, this is unlikely to materialise as Indian shipyards don’t have any track record of building large ships. Guarantee for performance of LNG ships for a 20-year period is part of the contracts and inducting Indian ship makers at this stage might not be viable, sources said.

Currently, about 379 LNG ships are operating globally and another 105 ships are being built/ordered. The specialised carriers are built mostly in South Korea and Japan by companies such as Samsung Heavy Industries, Daewoo Shipbuilding and Marine Engineering, Hyundai Heavy Industries, Mitsubishi Heavy Industry, STX and Hanjin Shipyard. In recent years, China has also started making LNG ships.

Domestic players such as L&T and Pipavav had expressed interests in taking orders to build LNG vessels. GAIL appointed Lloyd's Register to carry out assessments if Indian shipyards have the requisite capability of building LNG carrier. The consultant, however, said both L&T and Pipavav would need to create new infrastructure to build these vessels.

Moreover, the Indian firms would

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