Indian Government’s Plans to Build LNG Ships in Doldrums

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The Indian Government is abandoning a four-year effort to build LNG ships locally after GAIL (India) Ltd said that it no longer needed to hire around nine new sophisticated tankers (for 19 years) in view of a potential change in the sourcing of natural gas purchased from the US.

GAIL stated that it has swapped small quantities and was in the process of swapping larger quantities of “costly” LNG purchased from the US suppliers with other sellers. GAIL has hired one LNG ship from the spot market for three years to start lifting the cargo from January 1, 2018.

Under this arrangement, GAIL would sell a large portion of the US LNG to buyers who would be responsible for shipping the cargo. In turn, GAIL would buy similar quantities from other suppliers such as Qatar who will take care of transporting the cargo. The swap deals would free GAIL from making transportation arrangements.

“GAIL won’t need such large number of LNG ships estimated initially as it would not be in a position to employ them due to swapping of cargo,” a Shipping Ministry official said.

“What will we do if GAIL doesn’t want the ships any more,” he said, asking not to be named. A technology collaboration pact signed between South Korea’s Samsung Heavy Industries Co Ltd and state-run Cochin Shipyard Ltd, ended on December 31. The pact was signed in 2015 and was valid till December 2017. “There should have been some valid reason to extend the pact, but, with no hope on the horizon, the pact ended,” the official said.

Cochin Shipyard also secured a licence from Gaztransport and Technigaz (GTT), France to use its patented Mark-III LNG containment systems. Together with technology support from Samsung, Cochin Shipyard emerged as the only local shipyard eligible to build LNG carriers.

A shipping industry official described the development as embarrassing given that Prime Minister Narendra Modi and Shipping Minister Nitin Gadkari were keen on the plan as part of Modi’s ‘Make in India’ initiative.

Modi had taken a keen interest in shipbuilding due to its potential for employment generation and had even visited the main yard of Hyundai Heavy Industries, the world’s largest shipbuilder, at Ulsan during a trip to South Korea in May 2015.

Samsung Heavy also put “time and effort” into the project to make it work by making several trips to India while Cochin Shipyard sent some of its workers to Samsung to be trained in LNG shipbuilding activities.

The high cost — at least USD 100 million more — of building an initial set of LNG tankers in India and the prospect of having to extend government counter-guarantees to the project had led to a rift within the government’s policy managers on the viability of the project. GAIL also wanted Samsung to stand guarantee on the quality of LNG ships built locally.

Sea News, January 1

Baibhav Mishra
Author: Baibhav Mishra

Associate Editor, Sea News