SCI, GAIL in talks for $3-bn LNG ships' deal

Under the tie-up the latter will acquire nine LNG ships and the former will run them

Shipping Corporation of India (SCI) and GAIL (India) Limited are currently in discussion to forge a tie-up under which the latter will acquire nine liquefied natural gas (LNG) ships for almost $3 billion and the former will operate these, a senior official of the shipping firm said.

SCI Director (liner and passenger services) Sarveen Narula said the shipper will have an option to pick up 25 per cent stake once a joint venture company is formed for the purpose and talks are held through respective ministries.

“We are trying to buy nine LNG ships, not through SCI but through GAIL. SCI will run those ships in partnership with GAIL. We are actively working with GAIL in selection of (other) partners. We may have the right to take up to 25 per cent of the stake in that (venture),” Narula said.

“The memorandum of understanding (MoU) is being finalised. We are already been in talks with them...very soon it will be done. It is being brokered through the government,” he added.

SCI is currently running four LNG ships through joint venture companies with Japanese partners, among others, in which the Indian public sector undertaking holds 26 per cent stake.

“That is why we are tying up with GAIL. We will have the technical expertise. The funding will be though GAIL. So this becomes a new business for us. Each ship would cost around $300-350 million,” Narula said when asked about the capital requirement for buying the vessels.

He spoke on the sidelines of the flagging off ceremony of SCI’s direct container services to Yangon from Krishnapatnam port container terminal on October 3. The shipping company has already approached the central government seeking permission to start a foreign subsidiary in Singapore for LNG shipping to India, he said.

According to the latest annual report of GAIL, the total Indian LNG imports required to meet the demand-domestic supply gap was 29.56 million standard cubic metres per day (mscmd) in 2008, which further rose to 48.8 mscmd in 2013.

GAIL has imported 25 LNG cargoes (equivalent to approximately 1.50 million tonnes per annum of LNG) during the last financial year from various international sources on short term as well as spot basis to meet immediate domestic gas requirement.

SCI currently has an MoU with GAIL for transporting LNG from the US to India in 2016-17 wherein it has step-in right up to 26 per cent and also providing technical consultancy.

According to the 2013-14 annual report of SCI, India was the fifth largest importer of LNG in 2013 accounting for 5.5 per cent of the total trade. Domestic natural gas supply is expected to grow at 5.6 per cent over FY13-15, while gas demand is expected to grow at 18 per cent thereby causing a demand-supply mismatch.

Narula further said another focused area for the company would be providing services to oil and gas companies in offshore activities.

Currently, SCI has been offering services to ONGC and is looking for opportunities in other parts of the world, he added.