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Amit Mitra

The shipping industry will have to play a major role in offshore and port services to cater to the requirements of the oil and gas industry, says Amit Mitra.

BUOYED by strong sentiments sweeping the freight market and the reports that a tonnage tax regime has come significantly closer to becoming a reality, the Indian shipping industry is gearing up to meet the new challenges that will emerge in the realm of oil and gas transportation.

The focus of both the shipping and the oil & gas industries at present is on how to increase the share of the Indian fleet in the transportation of crude and petroleum products. The present share of Indian flag tonnage in the transportation of oil and gas is about 55 per cent, which is significantly better than the 30 per cent share the Indian fleet has in carrying India's total cargoes.

Let us take a look at the demand-supply projections for petroleum products. Based on the end-use analysis of different sectors, it has been projected that the demand for petroleum products would rise from an estimated 111.1 million tonnes in the current fiscal to 123.3 mt by 2006-07. At the upper limit, the demand may go up to 133 mt by 2006-07, if there were to be an ACGR of 5.7 per cent.

According to the projections, refining capacity is likely to rise from 114.67 mt in 2002-03 to 220.75 mt by 2006-07. This includes the proposed Greenfield projects and refinery expansion projects by both the Government-owned and private refineries.

As far as crude is concerned, the indigenous crude oil production is likely to increase from 29.33 mt last fiscal to 31.58 mt by 2006-07. Thus, considering these projections, imported crude oil requirement is expected to go up from the present level of about 85 mt per annum to 147 mt per annum by 2006-07, which means a greater dependence on import of crude.

In regard to the natural gas segment, the Hydrocarbon Vision 2025 has projected the demand of gas to increase from about 150 million cubic metres per day in 2001-02 to 391 million cubic metres per day in 2024-25. The share of gas in the energy basket of the Indian economy is also estimated to increase from the present level of 9 per cent to about 15 per cent by 2006-07.

In fact, the Government has put in place a policy framework on development of pipelines and terminals for import of gas and LNG. So far, according to the Indian School of Petroleum, 15 projects for setting up of LNG import terminals have been approved.

Against this background, it is clear that the shipping industry will have to play a major role in transportation of crude and petroleum products. Not only this, but the industry has to play a major role both in the offshore services and port services to cater to the requirement of the oil and gas industry.

Shipping analysts feel that coastal shipping should be given a greater thrust to meet the energy transportation requirement. Says Mr S.K. Diwan, Deputy General Manager (Shipping) of Indian Oil Corporation Ltd, This is mainly based on economics; while pipeline transportation and road movement involve a cost of 75 per cent and 180 per cent of rail freight, respectively, coastal shipping would cost barely 41 per cent of rail freight."

Mr Diwan was of the opinion that the bottlenecks in the coastal shipping sector, including slow pace of port infrastructure development, inadequate drafts at ports, especially at Kolkata, Haldia, Kandla and Kochi, and the age profile of coastal vessels, should be eliminated.

Security concerns related to energy shipments also should be given adequate priority. "A major challenge for India's maritime security is the assurance of sufficient and secure energy shipments from West Asia, with secure vessels in the Persian Gulf and the Arabian Sea," points out a report prepared by the Tata Energy Research Institute (TERI) recently.

Along the west coast, Kandla, JNPT and Mumbai ports together handle about 40 mt of crude and POL products, account for 39 per cent of the total POL products handled by different ports in India. Along the East coast, Chennai, Visakhapatnam, Haldia and Kolkata ports handle 41 mt of crude and POL products, which is 40 per cent of the total quantity handled in India.

"India would require a 15-day reserve of POL and products and these reserves would have to be carried safely in Indian bottoms. This task can only be performed by vessels under the national flag in times of emergency," the TERI report concludes.

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