The Hindu Business Line : Shipping cos to invest more in offshore sector

On the block
GE Shipping has on order six new offshore supply vessels involving a cost of $86 million in the current fiscal.
Varun Shipping has plans to invest between $80 million and $100 million for acquiring offshore assets
Mercator Lines has just forayed into offshore business by placing an order for construction of a premium offshore jack-up oil rig at a cost of Rs 810 crore with Keppel FELS

Mumbai April 20

With the boom in the oil and gas exploration sector, fuelled by the recent awarding of new blocks under NELP VI, Indian shipping companies are tanking up to sharpen their focus on the offshore segment.

Since offshore installations are away from shore, these require various kinds of support services such as delivering drilling supplies, fuel, water and food, moving personnel to and from the installations, towing rigs from one location to the other and supporting offshore construction projects. Hence, the installations need to deploy various support vessels such as Anchor Handling Tugs and Platform Support Vessels.

ONGC tender

Only last month, Oil and Natural Gas Corporation (ONGC) came out with a tender for chartering of around 26 offshore supply vessels, with mobilisation requirement up to the third week of November. "This only indicates the emerging business opportunities for shipping companies in this sector. Currently, offshore drilling, as measured by rig count, is roughly 30 per cent of all international drilling," an industry analyst said.

More investments

Shipping companies such as Great Eastern Shipping, Varun Shipping and Mercator Lines have lined up significant investments in this sector in the current fiscal.

In fact, the boom in the offshore sector is one of the reasons that prompted GE Shipping to de-merge its offshore division into a separate company, Great Offshore Ltd, to get higher valuations from this business. The company, which has a fleet of 33 offshore supply vessels, has on order six new offshore supply vessels involving a cost of $86 million in the current fiscal.

Varun Shipping, which is primarily in the LPG transportation business, also has plans to invest between $80 million and $100 million for acquiring offshore assets, including platform supply vessels and specialised vessels. "We are looking at the Indian (offshore exploration) market, but we will also look out for overseas orders," a senior company official said.

Mercator Lines has forayed into offshore business by placing an order for construction of a premium offshore jack-up oil rig at a cost of Rs 810 crore with Keppel FELS. Scheduled to be delivered by March 2009, the rig will meet operations requirements in water depths of up to 350 feet.

"In view of the rising oil prices, oil companies are ramping up exploration activities. We see significant potential in this sector," according to a company official.

NELP discoveries

In the last four years, ONGC and Oil India Ltd made 25 significant hydrocarbon discoveries, including 10 offshore, while the private sector has made 32 significant discoveries, both in NELP and pre-NELP blocks. These discoveries were made in five major areas — Mahanadi-NEC offshore, Krishna-Godavari offshore, Gulf of Cambay, on-land Rajasthan and Cambay basin.

Under the first five rounds of NELP, a total of 109 blocks were awarded — 36 onshore, 40 deep water and 33 shallow water blocks. Under the recently announced NELP VI, as many as 55 blocks are on offer for bidding — 25 onshore, 24 deep water and six in the shallow water. The closing date for bids under this round has been fixed on September 15, 2006 and the award announcement is scheduled to be made four months after that.