Reality hits as GAIL plans to hire LNG tankers

Vol 20, PW 5 (17 Nov 16) Midstream & Downstream

GAIL confirms it has woken up to reality and is thinking of issuing a tender for the short-term hire of six to eight LNG tankers to transport US LNG after it was forced to cancel a tender to hire nine or 11 new-builds in October.

"We're looking into this as a temporary measure lasting three to four years," says a GAIL source. Shipping industry sources believe the tender will be out next month (December) or by early January and that GAIL might ask the Shipping Corporation of India (SCI) to manage the whole process.

SCI currently manages LNG tankers Disha and Rahi which ferry Petronet-LNG's long-term supplies from RasGas to Dahej. LNG tanker hire rates are likely to double to $80,000/day by early 2017 but for now are still much lower than the 2012 peak of over $140,000/day.

GAIL needs the tankers for deliveries in mid-2017 from Cheniere Energy's Sabine Pass liquefaction facility under a 20-year deal linked to the Henry Hub benchmark signed in December 2011. Elsewhere, hopes are fading that Narendra Modi's Make In India dreams for LNG tankers will come true anytime soon.

Cochin Shipyard, the only yard eligible to build LNG tankers, needs at least three years before it is even ready to begin constructing a LNG tanker. On November 9, Cochin won EC permission to set up new dry dock facilities for Rs1799cr ($265m).

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