1. GAIL plan for ‘made in India’ ships runs into crisis

GAIL plan for ‘made in India’ ships runs into crisis

GAIL (India), which decided to buy one-third of the LNG ships it requires from Indian makers...

By: and | Published: November 21, 2014 4:36 AM

GAIL (India), which decided to buy one-third of the LNG ships it requires from Indian makers after pressure from the government, may not find it easy to get ‘made in India’ ships on time. This is because Indian shipyards are finding it difficult to tie up with Korean and Japanese companies — who monopolise the market — to build LNG carriers in India.

Petroleum minister Dharmendra Pradhan has written  to the Japanese ambassador and to the ministry of external affairs seeking help to build collaboration between Indian ship makers and their Japanese cuonterparts, but no headway has been made yet, sources told FE. 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.

After a government directive, GAIL was forced to take out a tender for nine LNG ships to ferry LNG from the US, out of which three have to be compulsorily built in India. However, the tender has had no takers and the public sector gas giant has been forced to extend the bid validity date from October 30 to December 4.

“The main reason for lack of interest is that Korean and Japanese shipyards are reluctant to transfer technology to Indian shipyards. They would rather not bid in 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,” the source explained.

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.

The only way out now is for the Indian government to reach out to Korean and Japanese governments to work out a deal for transfer of technology. It is looks like the Korean government is not likely to play ball and rescind its own orders debarring the transfer of sensitive LNG ship building technology.

India has more clout with the Japanese government but here again it is not known whether Tokyo will have enough clout to push an independent Japanese company to work against its own business interests.

On the other hand, GAIL has made it clear that the tender cannot wait beyond December. Or else the ships will not be ready on time and the gas major will end up paying billions of dollars in penalties under the take or pay clause with the American suppliers of LNG.

Korean companies including Samsung Heavy Industries, Daewoo Shipbuilding & Marine Engineering —Hyundai Heavy Industries, STX Shipbuilding, have already expressed their reluctance to collaborate with Indian companies.

Three Japanese ship builders Mitsubishi Heavy Industries, Mitsui Engineering and Shipbuilding, Imabari Shipyard, too, are stepping down from participating in the GAIL tenders. There are Indian shipyards that are lobbying for contracts to build ships in India including L&T Shipbuilding, Pipavav Defence and Offshore Engineering & Cochin Shipyard.

The public sector firm has tied up 5.8 million tonnes 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.

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    Bharat
    Nov 21, 2014 at 8:11 pm
    We have example of Indian shipyards like Bharati Shipyard which can't even build a normal ship stable enough to float in waters let alone building a specialised carrier like LNG ship. Gail can keep extending it tender deadline but it is not going find any takers. It's better to go for Korean n anese shipbuilders than to pay fine under take or pay clause with LNG companies.
    Reply
    1. A
      Avinash
      Nov 21, 2014 at 2:50 pm
      Can reverse engineering work. Chinese have mastered it. India can emulate. We have tech giants like L&T.
      Reply

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