Welcome to Shipping Online!   [Sign In]
Back to Homepage
Already a Member? Sign In
News Content

India’s LNG shipbuilding plans turn uncertain

A government-backed plan to build locally at least three of the nine new liquefied natural gas (LNG) carriers to be hired by GAIL (India) Ltd from fleet owners to haul gas from the US is in jeopardy, as LNG shipbuilders in South Korea and Japan are not keen to share technology with Indian yards, a key requirement for local yards to qualify for the tender. Indian yards have never built LNG ships and need a tie-up with overseas yards to qualify. An LNG ship costs more than $200 million to build in today’s market, according to a Mumbai-based shipbroker.

With a fortnight left for the tender to close, the development may potentially derail India’s plan to get started in the LNG shipbuilding business as part of the larger ‘Make in India’ campaign of Prime Minister Narendra Modi. “Nobody wants to tie-up with Indian yards,” said an executive familiar with the details of the LNG shipping tender issued by the state-run natural gas firm.

The executive who does not work with GAIL didn’t want to be named. “LNG shipbuilding yards in Korea and Japan are not showing interest in collaborating with Indian yards to share technology for constructing the three LNG carriers in India. We have asked the government to intervene in the issue,” said an executive with one of the Indian yards looking to qualify for the tender. He, too, declined to be identified. “We are talking to these guys, but they seem to be non-committal about the tie-up,” the chief executive of another yard said on condition of anonymity.

“They are saying we will come back to you…we have this concern and that concern and so on, but are not articulating what their real concerns are.” An LNG shipbuilding expert said the stiff qualification criteria set forth by GAIL for shipyards will allow only a tiny number of yards mainly from South Korea to build the LNG carriers. “It’s only the strongest yards which will qualify as per the strict criteria put forth by GAIL. And, the strongest yards have the least incentive to share technology. They don’t want to create competition for themselves,” he said, asking not to be named. He said there were many smaller yards that have the technology to build LNG carriers, but won’t qualify for the work due to the strict criteria. “Indian yards need to seek out those yards, but for that GAIL has to first relax the criteria to make a greater number of yards qualify,” the expert added. India’s state-run natural gas firm will not order the nine ships directly at shipyards both overseas and Indian.

It plans to time charter or hire the carriers for 20 years starting September 2017 from fleet owners who will have to construct three of the nine ships in India, according to the 1 August tender issued by GAIL. The price of the ship is crucial for ship owners because it is a big factor in calculating the daily hire rates, which in turn, is one of the criteria for deciding the contract. Prospective bidders are required to quote for lots of three vessels with a provision that under each lot, one of the vessels shall be built in an Indian yard. The last date to submit the technical and commercial bids is 30 October. The condition for the tender designed to help Indian yards enter the LNG shipbuilding business was written in the wake of a directive issued by India’s oil ministry that controls GAIL. Ship owners winning the contract will have to deliver six ships under the first two lots to GAIL in two batches: four built at overseas yards within a period of eight months between 1 August 2017 and 31 March 2018, and two ships constructed at Indian yards within six years from the award of contract.

The balance three ships have to be delivered to GAIL in two batches: two of them built at overseas yards between 1 February 2018 and 30 September 2018 and one ship from an Indian yard within six years of award of contract. In effect, overseas yards will have to construct and deliver six LNG carriers for the GAIL contract within two-and-a-half years while Indian yards will get six years to build three ships. “Shipbuilding is a big opportunity today,” Modi said on 16 August at Jawaharlal Nehru port near Mumbai. “India’s contribution to global shipbuilding has been very low. South Korea, a very small country, smaller than the state of Maharashtra today alone has a 40% share of global shipbuilding.

We want to encourage shipbuilding and foreign investment in shipbuilding,” Modi added. South Korea’s state-run Korea Gas Corp, the world’s largest LNG buyer, issued a tender recently to hire six LNG ships which is open only to South Korean fleet owners and shipyards because the carriers must be run by local ship owners and built domestically.
Source: LiveMint

About Us| Service| Membership and Fee| AD Service| Help| Sitemap| Links| Contact Us| Terms of Use