GAIL to purchase a third of LNG vessels from Indian builders

28 July 2014 (Last Updated July 28th, 2014 18:30)

GAIL (India) has decided to purchase a third of liquefied natural gas (LNG) ships built by Indian ship makers, with an aim to boost shipbuilding in the country.

GAIL (India) has decided to purchase a third of liquefied natural gas (LNG) ships built by Indian ship makers, with an aim to boost shipbuilding in the country.

The company is planning to invest $7.6bn into hiring the vessels and using them to import 5.8 million tonnes a year of LNG gas from the US to India over a period of 20 years starting from 2017, reported the Financial Express.

A senior GAIL official told the news agency that: "The tender may specify the exact time lines for delivery of vessels, Indian shipyards need to be given more time, as they first need to upgrade the manufacturing facilities."

GAIL is also planning to buy a 10% equity stake in the ships.

Meanwhile, some analysts fear that Indian shipbuilders may not have the experience to undertake such a huge project.

"Indian shipyards need to be given more time, as they first need to upgrade the manufacturing facilities."

According to government sources, the challenge will force Indian shipbuilders such as L&T and Pipavav to shape up.

Lloyd’s Register, which assessed Indian shipyards’ capability of building LNG carrier, said both L&T and Pipavav would need to create new infrastructure to build these vessels.

When compared with Japanese and Korean companies, which build LNG ships in around 30 months, the Indian players may take six to seven years to build their first one.

India Petroleum Minister Dharmendra Pradhan told the local newspaper: "Someday [large and sophisticated] shipbuilding has to start in India."

Currently, there are around 379 LNG ships in operation across the world and another 105 are being built or ordered.