GAIL’s LNG plan could be Holy Grail for shipyards

Jan 20 2014, 00:14 IST
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GAIL will also consider engaging SCI as its post-fixture manager to manage the carriers on its behalf GAIL will also consider engaging SCI as its post-fixture manager to manage the carriers on its behalf
SummaryA new robust market is opening up for Indian shipyards —public and private.

A new robust market is opening up for Indian shipyards —public and private. GAIL India’s intention to invite a global tender from shipping lines for arranging a host of liquefied natural gas carriers is likely to ensure domestic shipbuilding firms’ participation in the same.

Having firmed up plans to import 5.8 million tonnes per annum (mtpa) of LNG from the US over 20 years starting 2017, GAIL will require as many 12 LNG vessels at its disposal for this business, implying tenders worth $2.4 billion would need to be floated soon. Sources said the public sector gas utility would ask shipping lines to ensure that foreign shipyards partner with their Indian counterparts as they place bids. These tie-ups, GAIL reckons, would enable Indian shipbuilders to get the know-how for making these specialised vessels.

The helping hand for Indian shipyards comes at a time when many of them — especially those in the private sector which don’t enjoy the privilege of assured orders from the Indian Navy and Coast Guard — are facing flat revenues due to the economic slowdown.

In June last year, GAIL and Shipping Corporation of India signed a memorandum of understanding (MoU) for transporting LNG sourced from Sabine Pass and Cove Point terminals in the US. Under the MoU, SCI would assist GAIL in the charter hiring of LNG ships and GAIL would assign step-in rights to SCI to take a 26% equity stake in each LNG carrier while GAIL would retain a similar right for a 10% equity participation.

Besides, GAIL will also consider engaging SCI as its post-fixture manager to manage the carriers on its behalf.

Over the past seven years, foreign shipyards delivered five membrane-type LNG ships each of a capacity not less than 135,000 cubic metres to GAIL India.

Oil ministry sources say that assurances were given to Indian shipyards of their participation in these tenders at a meeting called by petroleum secretary Vivek Rae on December 24. Pipavav Shipyard, L&T Shipyard and ABG Shipyard, among others, were present at the meeting, also attended by senior GAIL officials.

“Indian shipyards have no experience in building LNG containers. The government aims to boost the expertise of domestic shipyards through this effort,” said an oil ministry official. Apart from the private firms, public-sector Mazagon Dock, Cochin Shipyard and Garden Reach Shipbuilders and Engineers could benefit from the petroleum ministry-GAIL move.

ABG

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