GAIL to offer foreign shipbuilders five years for making LNG carriers

NEW DELHI: State-run GAIL India will offer foreign shipbuilders five years to make liquefied natural gas ( LNG) carriers in India, double the time allowed to deliver ships from their home shipyards — a concession it hopes will attract foreign firms to locally manufacture ships proposed to be chartered by the Indian gas company.

As part of Prime Minister Narendra Modi’s ‘ Make in India’ initiative, GAIL is insisting foreign shipbuilders to build in India at least a third of the 11 LNG carriers it plans to charter for about 20 years beginning 2017 to transport LNG from the US. GAIL plans to charter these carriers from one or more shipping lines, which will have to purchase LNG carriers from the shipbuilders that meet the local production criteria prescribed by the Indian firm.

GAIL had floated a tender for the purpose in February but scrapped it following no response from foreign companies reluctant to manufacture in India and transfer technology to local firms. To avoid a similar fate again, GAIL is now holding discussions with probable foreign bidders to address their concerns and make the proposition lucrative to them. The company is likely to refloat the tender sometime this month.




“They will get five years to build an LNG carrier in India. We have already agreed to that,” said BC Tripathi, chairman of GAIL. A foreign shipbuilder will get two-and-a-half years to supply an LNG carrier from the shipyard in its home country.

After GAIL’s initial bid failed in February, the Indian government took up the matter with the Korean government to persuade shipbuilders in that country to collaborate with Indian shipyards. Following negotiations between the government and the companies, an understanding has been reached between Samsung Shipyard and Cochin Shipyard; Hyundai Heavy Industries and L&T Shipbuilding; and Korea’s Daewoo Shipbuilding and Reliance’s Pipavav shipyard. These three possible alliances will soon bid for multi-billion dollar contracts to build GAIL’s LNG carriers.

The Modi government is pushing for the ‘Make in India’ initiative in the oil and gas sector and hopes its shipyards will gain competence and access to technology through GAIL’s LNG carriers deal. This insistence of local production can potentially lead to more manufacturing activity in the ancillary sectors. But the company’s inability to finalize contracts for LNG carrier quickly can potentially harm its business plans to evacuate LNG from America in time.