Shipping Corp lines up big Liquefied Natural Gas push

Shipping Corporation of India (SCI), the only Indian company to have Liquefied Natural Gas (LNG) transportation capability, is expanding operations to rapidly grow the business as a separate vertical.

The state-owned company is in talks with foreign companies to offer technical and commercial management. “We are also in talks with few like-minded companies where we are venturing towards technical and commercial management of ships,” Sunil Thapar, director, bulk carrier and tanker division, told dna.

SCI, in a consortium with three Japanese companies, owns three LNG ships which have been leased to Petronet to transport LNG from Qatar to its Dahej facility in Gujarat. 

“We have offered to do manning and technical management for their (foreign) ships because it has been proven that SCI's operations are much cheaper than foreign company's operations and competent as well,” Thapar said.

Thapar refused to divulge details about the foreign companies it is in talks with and size of contracts it was discussing. However, he said the company was targeting to manage at least 20 ships eventually. The company would gradually progress towards this target as at present it does not have enough manpower to meet such huge requirement.

In December 2013, the Mumbai-based company won its fourth long-term LNG shipping contract from Petronet in an over $200 million deal. SCI will be managing this ship as well, which is likely to be used for transporting LNG from Gorgon in Australia to Kochi in Kerala or Dahej in Gujarat.

Apart from this, in June 2013 SCI had signed a memorandum of understanding with GAIL India to co-operate for transportation of 5.8 million tonne per annum of LNG from Sabine Pass and Cove Point terminals in the US. The MoU provides Indian ship maker a step-in right for owning up to 26% stake in the LNG ships. The transportation of LNG is expected to begin mid-2017, by when SCI plans to develop a separate vertical within the company to manage LNG shipping.

“That intention is still there. We have diversified from pure LNG transport carrier to terminal management. We are doing terminal management at Dabhol near Ratnagiri power plant. Once the GAIL project starts we will have more orders. Also, if we are able to finalise the talks with foreign shipping companies for manning and technical management, then we will have to employ more floating staff, and also people in the office,” Thapar said.

“Certainly, with that our throughput and numbers for LNG business as such will go up, so automatically that will get reflected separately in our results.” 

Currently, LNG trade world over is about 50 million tonne, which is likely to go up to 400 million tonne. Increasing trade would mean demand for additional ships and sizeable increase in ship management activities. 

The company is hoping that if GAIL comes up with its tender for LNG ships before end of this fiscal for transporting the fuel from the US to India, then LNG operations would start contributing in a big way. GAIL, the largest gas transporter in the country, is likely to come up with this tender by end of this month. SCI also wishes to offer supervision of construction of LNG ships to Indian companies in future. The company wants to utilise its expertise in building LNG tankers and offer it as consultancy. Currently, not a single Indian ship manufacturer has capability to build LNG ships. 

It was recently reported that the government in order to encourage domestic manufacturing could bring a presidential directive to ask GAIL to amend its upcoming tender for nine LNG ships. By this directive, the government can make it compulsory for GAIL to have at least three LNG ships built in India through technology transfer instead of completely handing out this tender to foreign companies. If this happens, SCI can get an opportunity to offer supervision services for LNG tanker building to Indian shipbuilders.