SCI floats global tender for 4 VLCCs

State-run Shipping Corp. of India Ltd (SCI) has asked for bids to buy four VLCCs, which currently cost $160 million each, to meet rising demand for crude in India.

SCI currently owns two VLCCs.

“Unlike other shipping segments, the tanker market is firm,” said T.V. Shanbhag, former head of Transchart, the Central government?s ship chartering division, and now adviser to India?s largest ship broking firm, Mumbai-based Trans Ocean Agency Pvt. Ltd. “There is a huge requirement for VLCCs for the Indian market.” Currently, a VLCC can earn $90,000-95,000 a day on the spot market. When hired out for a year, it can earn a daily rate of between $70,000 and $75,000. The large size of the tankers is attractive to refiners, who can cut freight costs.

India depends heavily on imported crude for its energy requirements, bringing in 67% of its annual requirement of about 150 million tonnes. “This will only grow because India, along with China, is one of the lowest consumers of oil,” said SCI chairman and managing director S. Hajara.

SCI?s move to buy the tankers comes on the heels of a request to the Directorate General of Shipping (DGS) by state-run refiner Indian Oil Corp. Ltd (IOC), for a change in rules to allow it to charter foreign super tankers for up to five years.

Local entities now can only hire foreign ships for up to two years after they receive permission from DGS. Foreign ships also must obtain a no-objection certificate from the local industry body, the Indian National Shipowners Association. Hiring India-registered ships does not require this cumbersome process.

IOC spends some Rs1,400 crore a year in freight cost to import about 40mt of crude. “In future, we have decided to hire VLCCs for longer periods to transport crude to cut our freight bill. This will give some kind of shipping tonnage security to IOC and insulate us from spot market risks,” said an IOC executive.