The Hindu Business Line : Garware Offshore to buy 5 ships for $100 m

Mumbai July 31 Garware Offshore, which provides offshore support services to oil and gas exploration companies such as ONGC and Reliance, will be adding five more offshore vessels to its existing fleet within the next 12 to 18 months.

The five vessels involve a total cost of about $100 million, with two of these being purchased by the company’s Singapore subsidiary through the bareboat charter route.

The new vessels include two anchor handling tug supply vessels, one of which will be delivered in October this year, while the other is scheduled for delivery in February 2009.

“Both these vessels are new building orders and would cost about $32 million,” Mr Sandeep P. Akolkar, President (Finance), told Business Line.

The third vessel being procured is a $27-million platform supply vessel, which is likely to join the company’s existing fleet of seven vessels in January 2009.

The remaining two vessels — one anchor handling tug and a work barge — are being procured by the company’s Singapore arm, Garware Offshore International Services Pte Ltd.

These two vessels are worth about $41 million.

Mr Akolkar said that for these two vessels, the company had negotiated a unique package with a Singapore-based bank, which exclusively dealt with financing of marine assets.

Under the agreement, the bank will finance the entire fund requirement for the two vessels and hand them over to Garware for operation as bareboat charter.

unique package

After a period of two years of operations, Garware will have the option to buy-back the vessels from the bank at rates already determined — in fact, it can buy the vessels back anytime between two to 10 years of their operation.

Garware, which intends to exercise the option of buying the vessels back after two years of operation, will be paying a certain amount of charter rate for the two assets every month.

“The beauty of the deal is that we do not have to dilute our equity immediately to purchase these assets. And two years later, when we exercise the buy-back option, we would have enough seed capital to fund the buy-back due to the earnings we make in the two years,” Mr Akolkar said.

More exploration

The company will be going in for bigger platform supply vessels from 2009-10 onwards, when it expects the deep water exploration activities to gather significant momentum.

“Right now there is very little deep water exploration off the Indian coast, but after the NELP 5, 6 and 7, we expect exploration companies to hunt for oil and gas in deeper waters,” he said.

Rig services

The company is also open to the idea of getting into rig services, as part of its plans to provide offshore services for deep water exploration activities.

The market for platform supply vessels has been firming up in the wake of increased offshore exploration activities.

A 3,300 DWT vessel at present commanded a price of $17,000 to $20,000 a day — in early 2006, the rate had averaged $14,500 to $15,000 per day.