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Tuesday, Jun 04, 2002

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Coastal crude movement -- IOC deal fails to reflect market mood

P. Manoj


THE maiden attempt by Indian Oil Corporation (IOC) to award its annual contract for movement of crude along the coast on the basis of competitive bidding in a de-regulated era has failed to reflect truly the market sentiments prevailing in the crude tanker business.

According to shipping industry sources, IOC has to pay charter rates to some of the vessels taken from the domestic shipping companies, which were higher than the prevailing market rates.

For instance, it is understood that IOC has hired one Aframax tanker — Jag Laxmi of 1,05,000 dead weight tonne — from Great Eastern Shipping Company (GESCO) at around $18,000 per day.

However, GESCO was believed to have in-chartered a foreign flag Aframax tanker of similar size at about $15,500 per day to replace Jag Laxmi and fulfil its contractual obligations with Mangalore Refineries and Petrochemicals Ltd (MRPL) for transporting crude from the Persian Gulf, market sources said.

``IOC has thus hired an Aframax tanker of 1,05,000 dwt from GESCO at a rate which was higher than the ruling market rates for undertaking a part of its coastal crude movement '', the sources said.

Though IOC had invited bids for two Aframax tankers in the 95,000 to 1,05,000 dwt category as part of the tender, only GESCO had offered its Aframax tanker at the rate of about $18,000 per day.

SCI, the largest domestic shipping company had decided against offering any of its vessels in this category, the sources said. Whereas, IOC's decision to hire the oil, bulk and ore (OBO) carrier `Nandshivachand' of 65,000 dwt falling under the LR I category from Essar Shipping Ltd at $12,500 per day has raised a few eyebrows in view that the ship was not technically up to the mark.

While SCI had offered three of its LR I tankers of 67,000 dwt each to IOC for a charter hire rate of $15,500 per day, IOC had asked SCI to match the rate quoted by Essar for Nandshivachand, being the lowest in the 65,000 to 70,000 dwt range.

SCI was willing to lower its rate for the LR I tankers to about $14,000 per day, but said that matching Essar's rate was not possible. IOC had paid $15,400 to SCI for hiring LR I tankers last year.

Consequently, IOC had hired only Nandshivachand in this category.

Industry sources said that Essar has now sought time from IOC for chartering out Nandshivachand in view of the technical snags facing the vessel, further upsetting IOC's schedule for the coastal movement of crude imported from the Persian Gulf.

Till last year, SCI was undertaking the coastal movement of crude for IOC on negotiated basis, which is now being discarded in favour of open competitive bidding with the dismantling of the administered price mechanism (APM) for the oil sector from April 1 this year.

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