Cochin Shipyard Pulls Ahead with LNG Certification

Published Dec 25, 2015 4:35 PM by The Maritime Executive

Indian shipbuilder Cochin has gained another leg up on its domestic competitors by garnering the nation's first license for LNG carrier construction.

The yard built a mockup vessel to the specifications of French LNG technology firm GTT and passed all tests, achieving status as an “official licence holder of GTT technology from Monday," a shipping ministry official told Indian media.

The certification could lead to orders in as little as a few months. The Gas Authority of India Limited (GAIL) has purchased LNG contracts from Cheniere for delivery of 3.5 mtpa over the next 20 years, and will need nine ships to transport the gas. “Since the government is keen that three of the nine ships required for GAIL should be made in India, [Cochin and its partner Samsung Heavy Industries] will have the advantage in this bidding process," the official said. GAIL has already held back closing of the $7 billion tender twice for lack of a qualified Indian yard.

"GAIL . . . could have transported [LNG] by hiring vessels or taking them on rent from international market but it decided to participate in Made in India" through its tender requirement, Petroleum and Natural Gas Minister Dharmendra Pradhan told the Economic Times. “Made in India” is a broader campaign by Prime Minister Narendra Modi’s government to promote domestic industry and create jobs.

The yard also hopes to compete with dominant South Korean shipbuilders for a share of the global LNG carrier market. It may face headwinds in growing that segment of its business: day rates are already well below profitability for LNG tankers, experts say, and existing worldwide orders will increase fleet size by ten percent per year through 2017. Consolidation and scrapping are in the forecasts, as in other shipping sectors. But international customers of yards like Cochin will benefit from new government subsidies of 20 percent of vessel price, improving the attractiveness of Indian-made ships in a tight, competitive market.

Separately, the government is preparing an IPO for the Cochin yard, which has little debt to service and a strong domestic orderbook of defense and civilian newbuilds.

“Government defense orders, as well as those from state-owned Shipping Corporation of India (SCI), will flow to Cochin Shipyard, which is like business flowing from one government department to another,” an industry observer told media.

The funds raised in the offering will be used in the construction of an International Ship Repair Facility (ISRF) and a drydock for very large vessels, rigs and semi-submersibles.