GAIL extends LNG ship deadline by over one month

GAIL (India) Ltd, the nation's biggest natural gas distributor, has extended by over a month the deadline for submission of bids for 9 newly built LNG ships it wants to hire to transport liquid gas from the US.

In a notice, GAIL said the last date for bidding has been extended till December 4 from October 30 previously.

The company has asked ship builders to quote daily hire charges for the freshly built LNG tankers in lots of three. It has conditioned that one ship out of every lot of three ships each would be built in India.

In the tender, GAIL has given Indian shipbuilders six years to deliver the ships as opposed to two-and-half year deadline for foreign firms.

Worldwide, about 379 LNG ships are operating and another 105 ships are being built/ordered. The specialised carriers are mostly built in South Korea and Japan by companies such as Samsung and Daewoo.

In recent years, China has also started making LNG ships.

In two deals, GAIL has contracted 5.8 million tonnes per annum of LNG from US for 20 years, beginning 2017-18. It has to arrange for ships for transportation of the liquefied natural gas (LNG).

Transportation of 5.8 million tonnes a year of LNG would require 9 vessels.

As GAIL is also exploring the possibility of swapping as well as marketing part of the LNG in international markets, exact number of ships would be decided at the time of award.

According to the tender document, each of the LNG ships will be registered as a Special Purpose Vehicle (SPV) for ownership and management of such vessel.

The tender conditions provide that both GAIL and Shipping Corp of India (SCI) will have the option to take equity ownership in each SPV to the extent of up to 10% and 26%, respectively.

The ships will, however, remain under long-term charter with GAIL, irrespective of its equity participation in the SPVs. After the charter hire period, the SPVs will be free to deploy the ships elsewhere.

GAIL and SCI had in June last year signed MoU for transportation of US LNG.

The MoU has provisions that SCI will help GAIL in charter hiring of LNG ships and the gas utility shall offer the national flag carrier a step-in right of up to 26% equity ownership in all the LNG ships to be chartered by GAIL for supporting its US LNG volumes.