GAIL extends LNG ship deadline again by a month

GAIL extends LNG ship deadline again by a month

GAIL (India), which decided to buy one-third of the LNG ships from Indian makers after pressure from government, has extended for second time the closing date for the tender. This is because the PSU firm is not able to get responses from Japanese and Korean firms, who monopolise the market.

“It (closing date) has been extended by a month,” one of the directors on board of GAIL told FE. The tender would now close on January 6 next year, revised from earlier closing day of December 4. The delay in finalising the tender could make GAIL land up in a crisis for not having LNG vessels on time to import gas from the US, which is expected to start from 2017.

The tender continues to hang in limbo and the public sector gas giant was earlier forced to extend the bid validity date from October 30 to December 4.

Petroleum Minister Dharmendra Pradhan on Monday met Korean ambassador Joon-gyu Lee to discuss his country’s tie up with Indian shipyards.

Pradhan impressed upon the ambassador that GAIL’s tender is a very good opportunity to expand Korean business in India.

GAIL (India), under a petroleum ministry directive, has decided to buy a third of the LNG ships it plans to acquire to ferry the fuel from the US to India, from Indian shipbuilders. Considering that the PSU, whose massive LNG imports from the US would start in 2017, has lined up investments to the tune of $7.6 billion for hiring the required specialised vessels, the move would give a big boost to the Indian shipbuilding industry.

Domestic players such as L&T and Pipavav are among the obvious beneficiaries of the government’s decision, which is in line with the Prime Minister Narendra Modi government’s thrust on the domestic manufacturing sector.

The Korean and Japanese shipyards are reluctant to transfer technology to Indian shipyards. They would rather not bid for the tender if they are forced to transfer technology outside their own shipyards. The Koreans claim that government regulations keep them from transferring technology. And the Japanese are more discreet.

Earlier, Pradhan had written to the Japanese ambassador and to the ministry of external affairs seeking help to build collaboration between Indian ship makers and their Japanese counterparts, but no headway has been made yet. Going by the schedule of LNG ship acquisition by GAIL, only few weeks are left for finding a suitable collaboration partner for the Indian ship industry.

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.

FE reported that when contacted for a collaboration, Mitsubishi, a qualified manufacturer of LNG vessels, said it would not be participating in the tender as it had a full order book position but the real reason could well be that the Japanese giant is not willing to get into a technology transfer deal with an Indian company. GAIL has tied up 5.8 million tonne per annum (mtpa) of LNG imports from the US starting 2017.

Indian firms would require six to seven years to deliver the first LNG ship, which does not meet GAIL’s requirement. Generally, it takes 30 months for Japanese and Korean companies to deliver an LNG ship.

In December 2011, GAIL signed a deal with Cheniere Energy Partners to buy 3.5 mtpa of LNG from the Sabine Pass Terminal in Louisiana on FoB basis. Deliveries would start between March and August 2018. In April 2013, GAIL booked another 2.3 mtpa capacity to export LNG from the Dominion Cover Point terminal in Maryland, delivery of which is expected from September 2017.

Share Button