The Hindu Business Line : ONGC mulls investing in very large crude carrier

The company, which favours buying a very large crude carrier (VLCC), is doing a feasibility study on the cost effectiveness of such an investment. The vessel would be used to bring oil into the country from its overseas locations or sell it to other countries.

"There are certain statutory issues which need to be resolved before we take a plunge," sources said. Currently, the company hires vessels for product transportation and supply. It has around 20 supply vessels.

"It makes a lot of business sense to have our own crude transportation vessel instead of paying premium price to other companies. However, there are issues such as international shipping insurance, pay-back time (how long will it take for ONGC to recover its investments), and availability of large quantity of crude, that need to be sorted out," ONGC sources told Business Line.

A new VLCC with a capacity of 200,000-300,000 dead weight tonnage would cost around $120 million. "Therefore, seeing the kind of investment involved in buying a VLCC or a Suezmax, we have to see whether enough crude is available or not, as we would be using the carrier for our products alone," the sources added.

The company expects to recover its investments in the vessel, when made, in two-three years. Agreeing that having its own vessel would make the operations more flexible for the company while transporting crude oil, the sources said that it would also cut the freight costs by almost 30 per cent. The amount spent on freight could be substantial once imports from Russia start.

Certain other advantages of transporting through its own vessel include making the product more price competitive, the sources said.

The overseas arm of the company, ONGC Videsh, is already has 15 foreign assets — in Vietnam, Russia, Sudan (three), Iran, Iraq, Libya (two), and one each in Myanmar, Syria, Ivory Coast, Australia, Qatar and Egypt. Besides, the company is also looking at prospective oil blocks in Africa and Latin America.

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