India has decided to put in place a road map to encourage the domestic ship building industry to build LNG (liquefied natural gas) carriers to cater to the massive inflow of LNG expected to hit Indian shores from 2017 onwards from countries such as the U.S. and Australia.

“I have convened a meeting next week to discuss this important issue where we expect to finalise the details of how to go about this exercise. We want to encourage domestic shipyards to take up LNG carrier building, and they can enrol the services of foreign partners for this. But, we will maintain all international standards, and the carriers have to be ready by 2017 to transport first of the LNG consignments of GAIL from the U.S. to the Indian shores,’’ Petroleum Secretary Vivek Rae told The Hindu here.

GAIL will be sourcing 5.8 million metric tonnes per annum (mmtpa) of LNG from the U.S. from 2017 onwards along with some shipments from Australia. GAIL has already signed a memorandum of understanding with the Shipping Corporation of India (SCI) and has agreed to provide SCI with a step-in right to take up to 26 per cent equity in each of the LNG carriers that would be chartered by GAIL. GIAL would retain a similar right of up to 10 per cent equity participation for itself. GAIL has also agreed to consider engaging SCI as its post fixture manager for an initial period of three years to manage the carriers on its behalf, according to officials in the Petroleum Ministry.

Officials said GAIL was in the process of floating a tender for award of time charter contract, which would be evaluated on a lifecycle basis and bidders with least lifecycle cost will be awarded the time charter contract. Those selected will sign time charter party agreement (TCPA) with GAIL and, in turn, will execute ship building contracts with shipyards in a manner so as to be able to deploy the newly build LNG ships to meet LNG supplies which are likely to commence from September, 2017, onwards. The execution of TCPAs is targeted to be accomplished by the third quarter of 2014.

The next week’s meeting by Mr. Rae is expected to finalise a shipyard eligibility criteria to assure that only good quality LNG carriers are delivered. Officials said world over the domestic LNG ship building capability has developed based on a strong domestic demand. The Chinese insist that ships must be built in China if chartered on long term to Chinese oil majors and that is the reason the thrust is on domestic LNG carriers in India.

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