Financial Daily from THE HINDU group of publications
Thursday, Feb 19, 2004
Industry & Economy
Logistics - Shipping
Oil industry seeks better port facilities
Mumbai , Feb. 18
HIGH port charges, increasing congestion and constraints for ship operations at ports are increasingly spreading ripples of concern across the oil industry, as these factors are gnawing at their bottom lines.
With the country likely to witness an increased movement of crude and petroleum products, the industry is seeking improvement in port facilities to keep pace with the growing output from the refinery sector.
Oil is at present being handled in 11 major ports and nine minor ports, with India's POL (petroleum, oil and lubricants) exports swelling from 8.36 million tonnes (m.t.) in 2000-01 to 10.08 m.t. in 2001-02 and 10.28 m.t. in 2002-03.
While port operations on the west coast are constricted by the shallow continental shelf, although the coast has adequate natural protection, the east coast ports, except Visakhapatnam, which is a natural harbour, require artificial breakwater to provide tranquillity in the harbour.
On the west coast, it is only the Gulf of Kutch, which has a deep continental shelf, due to which 70 per cent of the hydrocarbon requirement of the country is being met by the three major oil handling facilities in the region Vadinar, Jamnagar and Kandla. The Jamnagar facility handled the highest POL throughput of a little over 12 m.t. in 2002-03, followed by Visakhapatnam (about nine m.t.) and Mumbai (over eight m.t.).
The major factor worrying the oil industry is the high level of port charges. For example, industry sources said, the port charges at Visakhapatnam on the east coast and Vadinar on the west were in the region of $80,000 and $70,000, while those at Singapore, Rastanura and Mina Al Ahamadi were about $40,000, $45,000 and $45,000, respectively for a Suezmax vessel.
According to the sources, the element of port charges in freight was substantially high. For example, at Haldia on the east coast, the port charges work out to Rs 135 per tonne, as against the freight cost of Rs 635 per tonne, which means the port rate was as high as 21.25 per cent of the freight. Similarly, at Vadinar, the port charges of Rs 34 per tonne work out to be about 15 per cent of the freight cost of Rs 226 per tonne.
The sources said Indian Oil Corporation's crude transportation cost in 2002-03 was Rs 236 per tonne on the west coast and Rs 680 per tonne on the east coast. The higher cost on the east coast was due to lighterage to daughter vessels, which involved daughter vessels freight, detention of mother vessels, higher ocean loss and additional port charges.
Another factor hampering ship operations at the ports is the lack of night navigation in some of the ports. In fact, the sources said, the oil industry's constant representations had resulted only in partial introduction of night navigation in some of the ports even till date, the ports of Haldia and some other ports restrict the navigation to day time.
"Vadinar port recorded a demurrage of 850 hours in 2002-03, accounting for almost 29 per cent of the total tanker detention at Indian ports in that year," a source pointed out.
Inadequate strength of pilots is also causing delay to oil-laden ships, as these vessels require a local pilot to navigate them in the congested channels in the harbours. Further, most of the major ports have not been able to efficiently improve their drafts to match the expectations of the oil industry, which is resulting in dead-freighting or short loading which in turn leads to higher freight cost for the oil majors.
Against this background, the Indian oil industry has been seeking improvements in port facilities, especially in the light of increased oil traffic that has been projected for the coming years.
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