Hyundai’s GAIL tender under threat after L&T exit

Hyundai’s GAIL tender under threat after L&T exit

South Korean shipbuilder Hyundai Heavy Industries (HHI) has been landed in a crisis to win orders from global fleet owners after its Indian partner, engineering and construction firm Larsen & Toubro Ltd (L&T), pulled out of a collaboration.

This was for building nine new LNG carriers to be used by India’s state-run natural gas firm GAIL (India) Ltd for transporting 5.8 million metric tonnes per annum of LNG from the US beginning January 2019.

HHI has become stranded as L&T, with whom the company had finalised a technical collaboration pact, decided not to participate in the tender floated by GAIL on 15 September to hire nine new LNG tankers on long-term basis.

GAIL plans to timecharter the carriers from global fleet owners who will have to construct three of the nine LNG tankers in India as part of prime minister Narendra Modi’s ‘Make in India’ plan.

Even then, GAIL’s tender for nine LNG newbuildings stipulates that an overseas yard “must have provided a duly executed technical collaboration agreement with an Indian shipyard” to become eligible to qualify for the tender for building the six carriers overseas, according to the tender documents reviewed by IHS Maritime.

GAIL has incorporated this condition to help local shipyards get technology collaboration from global LNG shipbuilding specialists to build the three tankers in line with the Make in India plan.

Following L&T’s decision to opt out of the tender, HHI’s options are limited because two other Indian yards that are considered capable of taking three of the nine ships orders – Cochin Shipyard Ltd and Pipavav Defence and Offshore Engineering Co Ltd – have already teamed up with Samsung Heavy Industries Co Ltd and Daewoo Shipbuilding & Marine Engineering Co Ltd respectively.

Neither HHI nor L&T participated in a pre-bid meeting called by GAIL on 30 September to discuss and clarify doubts on the tender, confirming L&Ts exit and HHI’s predicament on the tender.

“L&T departure leaves Hyundai without an Indian yard to strike a technology collaboration pact necessary to meet the qualification criteria set by GAIL,” a Hong Kong-based shipbuilding consultant told IHS Maritime.

HHI’s chances of participating in the newbuilding project will now hinge on a financially-strapped Daewoo deciding to give the tender a miss. This would help HHI go with Pipavav as a potential collaborator, the consultant said, adding that the collaboration between Cochin and Samsung had no chance of falling through.

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