Two Indian firms make joint bid for $7-bn LNG tender

Last month, state-owned Cochin Shipyard in consortium with Chennai-based Global United Shipping India have proposed a joint bid to build-own-operate (BOT) six new liquified natural gas (LNG) vessels for gas utility firm GAIL, making it the very first Indian bid for the country’s biggest shipping tender.

This shipping tender worth $7 billion has already received bids from two Japanese consortiums whose date for submission of offer was March 31, 2016. While Mitsui OSK Lines Ltd (MOL)-Nippon Yusen Kabushiki Kaisha Ltd (NYK Line) and Mitsui & Co Ltd form one consortium, the other comprises Mitsubishi Corporation-Kawasaki Kisen Kaisha Ltd (K Line) and GasLog.

The LNG vessels having cargo capacity of 150,000-180,000 cubic metres are meant to ferry gas cargo for GAIL from the US. An industry official close to the development claimed the terms attached to the bid by Japanese consortia were “in sharp deviation from the conditions set by GAIL in its tender”, making it difficult for India’s largest gas trader to take a decision on the contract.

Cochin Shipyard has recently been licensed by France-based Gaztransport & Technigaz (GTT) to build LNG ships for any client world-wide and meets all requirements of the GAIL tender.

The bid by Indian players is, however, late. “We are trying to talk to GAIL to consider late submission of this bid,” said a top official with Global United Shipping India. “The size and the magnitude of this project is large and, therefore, we faced some delays in being able to put together a formal offer,” he added.

As per the Cochin Shipyard-Global United bid proposal, two out of six vessels would be built in India at Cochin Shipyard and remaining four outside the country. “In order to meet the immediate requirement of GAIL, we will consider to provide bridge vessels to carry the cargo as required by GAIL until the new builds are ready,” said the official of Global United.

Global United Shipping is a subsidiary of Mitsui & Co which holds 45 percent stake in the former. This Chennai-based firm owns 11-12 vessels in tanker, LPG and gas segment all under Indian flag and recently were technical supervisors for LNG project overseas.

“We have the needed expertise to carry out this project and are hoping that GAIL allows the extension window,” said the official. The consortium is looking to meet GAIL officials next week for talks regarding the same. However, officials of GAIL were not available for comment till the time of filing the copy.

“If Cochin Shipyard consortium bags this contract, it will augur very well for its planned IPO (initial public offering) as it will give investor sentiment a very strong boost,” said Anil Devli, chief executive officer at Indian National Shipowners’ Association.

In November last year, the government approved the IPO proposal for Cochin Shipyard. About 34 million equity shares are expected to be offloaded, comprising a fresh issue of 22.6 million equity shares and sale of 11.3 million more as an offer-for-sale by the government. The government plans to sell 10 per cent of its stake in the company, which is planning to raise Rs 600-700 crore through the IPO.

Cochin Shipyard is one of the few profit making shipbuilding companies in the country with negligible debt on books.