GAIL SCRAPS MULTI-BIL­LION DOL­LAR SHIPS TEN­DER

Resource Digest - - RESOURCE DIGEST -

GAIL (In­dia) has can­celled ten­der to hire newly built ships to ferry liq­ue­fied nat­u­ral gas (LNG) from the US as there have been few tak­ers for the multi-bil­lion dol­lar con­tracts. Sources said that even though two Ja­panese con­sor­tia par­tic­i­pated in the bid­ding process that lasted two years, they could not be fi­nally se­lected due to the strin­gent in­di­geni­sa­tion norms.

GAIL, sources said, would now look to char­ter LNG ships for short terms of three to four years, till a new pro­posal is made, a se­nior of­fi­cial told. There were no tak­ers for the ten­der even after an ag­gres­sive diplo­matic push from In­dia’s ex­ter­nal af­fairs min­is­ter Sushma Swaraj and petroleum min­is­ter Dhar­men­dra Prad­han. No In­dian ship­yard has ever built a ves­sel to trans­port LNG and for­eign gi­ants based in Korea and Ja­pan are not keen to ac­cept In­dia’s re­quest to form a joint ven­ture and trans­fer tech­nol­ogy here.

The de­lay in fi­nal­is­ing the ten­der could land GAIL in a cri­sis for not hav­ing LNG ves­sels on time to im­port gas from the US, which is ex­pected to start from 2017. Ac­cord­ing to the ini­tial plan, the ves­sels build over­seas are to be de­liv­ered be­tween Jan­uary-may 2019 and one out of three made lo­cally are to be ready be­tween July 2022 and June 2023.

GAIL has floated the lat­est ten­der for time-char­ter hir­ing of up to 11 ships for 15 to 18 years through in­ter­na­tional com­pet­i­tive bid­ding. Ex­act num­ber of ships to be char­tered will be de­cided in due course. The ten­der was floated on Septem­ber 15, 2015 with a due date of sub­mis­sion of De­cem­ber 14, which was later ex­tended till Fe­bru­ary 29, 2016. The ten­der was first launched with a cut off date of Oc­to­ber 30, 2014, which was later ex­tended sev­eral times to De­cem­ber 4, Jan­uary 6 and Fe­bru­ary 17 next year.

GAIL did not re­spond to an email seek­ing its com­ments on can­celling the ten­der.

The two Ja­panese bid­ders who par­tic­i­pated in the last bid in­clude – a con­sor­tium of Mit­sui OSK Lines (Mol)-nip­pon Yusen Kabushiki Kaisha (NYK Line) and Mit­sui & Co. The sec­ond con­sor­tium com­prises Mit­subishi Cor­po­ra­tion-kawasaki Kisen Kaisha Ltd (K Line) and Gaslog.

In­dus­try watch­ers feel the ten­der con­di­tions are too strin­gent to be met. This is at a time when most In­dian ship­mak­ers do not have the fi­nan­cial mus­cle to spent capex for upgra­da­tion of ship­yards. For the ship­yards there are two chal­lenges — to find the tech­nol­ogy as well as in­vestors. More­over, such an op­por­tu­nity has emerged for the first time in In­dia and hence it would take time to fruc­tify.

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 end-2017.

After a gov­ern­ment di­rec­tive, GAIL was forced to take out a ten­der with a clause that out of three LNG ves­sels one has to be built in In­dia. Gen­er­ally, it takes 30 months for Ja­panese and Korean com­pa­nies to de­liver an LNG ship.

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