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Local shipyards didn’t bid for the previous tender because they are inexperienced in building LNG carriers and failed to get expert LNG shipbuilders to share technology for the same. Photo: Bloomberg
Local shipyards didn’t bid for the previous tender because they are inexperienced in building LNG carriers and failed to get expert LNG shipbuilders to share technology for the same. Photo: Bloomberg

GAIL to invite bids again for building three LNG carriers

Gas transporter to issue tenders in new format, scraps an older one due to lack of interest from shipbuilders

New Delhi: GAIL (India) Ltd will reinvite bids for the construction of three liquefied natural gas (LNG) carriers by July, easing certain conditions for bidders after India’s largest gas transporter had to scrap a previous tender because of lack of interest from shipbuilders.

“We are inviting bids in days to come in the new format. We recently invited the shipyards, shipping lines and Indian shipyards for a pre-tender meeting. Some changes in the tender conditions have been requested. While one ship is to be built in India, the balance two can be built elsewhere," B.C. Tripathi, chairman and managing director of the state-owned GAIL, told reporters.

The tender, which was floated on 1 August 2014, was aimed at hiring nine LNG carriers, with the condition that three of them be made in India.

However, there were no takers for the tender, since local yards, inexperienced in building such ships, failed to get expert LNG shipbuilders to share technology for the same.

The technology for building LNG ships is currently available with Japanese and South Korean shipyards.

Tripathi added that he “has been given to understand" that Cochin Shipyard Ltd, Pipavav Defence & Offshore Engineering Co. Ltd and Larsen & Toubro Ltd (L&T) shipyards have signed memoranda of understanding (MoUs) with Korean shipyards for the same.

Mint on 19 February reported L&T Shipbuilding had signed a non-disclosure agreement with South Korea’s Hyundai Heavy Industries Co. Ltd for a potential technology tie-up to build LNG ships. Cochin Shipyard was also holding talks with Hyundai Heavy Industries and Daewoo Shipbuilding and Marine Engineering Co. Ltd for collaboration.

“We will meet the timeline of January 2018. That date is sacrosanct," said Tripathi while adding that the public-sector undertaking (PSU) may look at mid-term or short-term charters for hire to meet the offtake.

GAIL needs the carriers for a period of 20 years for transporting LNG from the US to India.

Natural gas is shipped as a liquid and is reconverted at LNG terminals.

These deals for imported LNG are take-or-pay contracts, which means it has to pay the supplier even if it doesn’t take the supply. Major domestic consumers have refused to buy the fuel at current prices, which they perceive to be high. LNG that may be sold to the domestic consumers will be less than $9 per million British thermal unit (mmBtu).

GAIL has been aggressively expanding its global presence to secure long-term gas supplies, as India’s demand for LNG is growing, and the country is facing a fuel scarcity, as gas production from Reliance Industries Ltd’s (RIL) D6 field in the Krishna-Godavari basin has dropped.

“We are not nervous, we are cautious," said Tripathi, at a time when his firm had cut supplies from Qatar by around 30-35% in the wake of lower demand in the Indian markets.

Already, with a gas consumption of 51 billion cubic metres (bcm), India is the world’s 15th largest consumer and the fourth largest importer of LNG, sourcing 18 bcm. While 1 mtpa of LNG is equivalent to 4 million metric standard cubic metres per day (mmscmd), 1 bcm is equivalent to 2.8 mmscmd.

GAIL has already inked an agreement with Royal Dutch Shell Plc for the US gas and is in discussions with others for the same. Tripathi declined to elaborate on the matter.

GAIL has entered into 20-year gas sales and purchase agreement (GSPA) with Sabine Pass Liquefaction Llc, a unit of Cheniere Energy Partners LP in the US, for supply of 3.5 million tonnes per annum (mtpa) of LNG. It also has a terminal service agreement for 2.3 mtpa LNG liquefaction capacity with Dominion Cove Point LNG in the US. In addition, it has a 20-year LNG supply contract for 2.5 mtpa with Gazprom Marketing and Trading Ltd.

GAIL (India) on Wednesday registered a 47% drop in profit to 511 crore in the quarter ended 31 March as compared to 972 crore in corresponding period last financial year. In the 2014-15 financial year, GAIL’s net profit came down by 31% to 3,039 crore compared to 4,375 crore in 2013-14. The company’s turnover came down 1% in 2014-15 to 56,569 crore.

“The whole oil and gas sector is passing through an unprecedented situation and so are we," said Tripathi.

GAIL is hopeful that its volumes and margins will improve in the backdrop of the central government announcing a bailout plan for the gas-based power projects and their lenders, under which LNG will be imported and the cash-strapped state power distribution firms extended financial support to buy electricity from gas-based power producers. Under the plan, India will import 10 mmscmd of LNG, going up to 18 mmscmd after the monsoon.

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