Oman to spend megabucks on fleet expansion

Oman’s state shipping firm will spend up to $4 billion in the next three to four years to expand its fleet size, a senior company official said, as part of the sultanate’s efforts to upgrade its oil industry.

Oman Shipping Company (OSC) is looking to grow its fleet mainly to meet demand for energy transportation, chief financial officer Kuldeep Mathur said. “We are expanding the fleet with a view of the future demands for our export grade crudes and products.” Part of OSC’s multi-billion dollar expansion includes a recent order to build 10 VLCCs.

In February, OSC placed two separate orders with South Korea’s Hyundai Heavy Industries, to build five VLCCs, and with Daewoo Shipbuilding and Marine Engineering to build another five VLCC’s. The deals were valued at about $770 million each. OSC is in discussions with the National Iranian Tanker Company (NITC) on securing a long-term charter contract for at least five of the recently ordered supertankers, Mathur said.

International pressure and the implementation of broad-based sanctions on Iran, led by the United States, have made it difficult for the Islamic Republic to access funding from financial institutions. “Sleeving through Oman would make sense, because it allows for Iran to get around the issue of financing,” said a Singapore-based sales and purchase shipping broker, referring to the practice when one firm with limited credit uses another with better credit to do a trade on its behalf for a fee.

The expansion planned by OSC, whose stakeholders are the Ministry of Finance and Oman Oil Company, is part of the sultanate’s broader vision to upgrade its shipping and chartering sector and depend less on leased vessels. The plan includes growing the company’s clean tanker fleet, by adding between 15 and 20 refined product tankers.

“We are looking at new and considering buying second-hand clean product tankers as well… we have certain refineries in Oman and taking position on this to provide employment prospects for these vessels,” Mathur said, without giving details.

Oman, like other Gulf States, is also trying to diversify its economy away from oil, which generates almost half its gross domestic product but is seeing declining production. OSC boasts a current fleet size of seven LNG tankers and two clean tankers, with four oil tankers including a VLCC and a Very Large Gas Carrier on the order book.