GAIL plans to buy LNG ships from Indian firms in limbo

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New Delhi | Published: January 7, 2015 12:55:24 AM

GAIL (India), which plans to buy a third of LNG ships from Indian shipbuilders under a government...

GAIL (India), which plans to buy a third of LNG ships from Indian shipbuilders under a government diktat, has extended for the third time the closing date for the tender.

This is because the PSU firm is not able to get responses from international shipbuilders, given the condition that they should lend their technology to Indian firms.

There is a mandatory provision in the tender that one ship in each lot has to be built in partnership with Indian shipyards. This is a part of the ‘Make in India’ effort. The tender needs to be finalized and awarded by May to start supplies from December 2017. According to sources, the tender will now close on February 17, revised from the earlier date of January 6. The delay in finalising the tender — it is already behind schedule by five months — could land GAIL in a crisis — for not having LNG vessels in time to import gas from the US, which is expected to start from 2017.

The public sector gas giant was earlier forced to extend the bid validity date first from October 30 to December 4 and then to January 6. A global tender has been floated by GAIL for hiring of nine LNG ships in three lots of three ships.

In December, during external affairs minister Sushma Swaraj’s maiden trip to Seoul, she discussed with Korean minister of trade, industry and energy Yoon Sang-jick co-production of LNG ships here, as part of the ‘Make in India’ programme. Reports also said Swaraj offered to outright purchase giant LNG tankers from Korea, given its growing energy needs.

On December 8, a meeting was held between petroleum minister Dharmendra Pradhan and the ambassador of the Republic of Korea Joon-gyu Lee in New Delhi to apprise the envoy of GAIL’s requirement for charter hiring of nine LNG ships for transporting LNG from the US. However, these efforts from India do not seem to have yielded result.

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 could have been a big boost to the Indian shipbuilding industry, if global giants participated in the tender.

Four Korean shipyards qualify for GAIL’s tender requirements including: Samsung Heavy Industries; Daewoo Ship Building and Marine Engineering; Hyundai Heavy Industries and STX Offshore & Shipbuilding. Three Indian shipyards are interested in the project, however there is need for collaboration with Korean shipyards. Korean shipyards have cited government restrictions in technology transfer.

One of the restrictions cited is that technology of LNG ship design and construction has been registered as Korea’s national core technology and is handled at the national level and controlled by the Korean government. Domestic players such as L&T and Pipavav are among obvious beneficiaries of the government’s decision, which is in line with the Narendra Modi government’s thrust on domestic manufacturing.
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.

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