The Hindu Business Line : Garware Offshore to tap African oil exploration market

Vessels in tow
In July ’08, a 60-tonne tug had been deployed for up to three years in Vietnam
In Jan ’09, it will take delivery of $30-m platform supply vessel
In Feb, it will take delivery of a 60-tonne anchor handling tug costing $16 m

Amit Mitra

Mumbai, Sept. 19 Offshore service provider Garware Offshore, for the first time, will be dipping into the African oil exploration market.

The company’s new anchor handling tug and supply vessel, which is scheduled for delivery by 2008-end, has been contracted by an African oil exploration company for a three-year deployment in South Africa.

The vessel, which will be the company’s ninth, will be earning about $13,500 a day — that is about Rs 22 crore annually. The contract will begin from January or February 2009.

“The delivery of this vessel will bring us closer to our target of expanding our fleet size to 13 or 14 by 2009-10,” Mr Aditya Garware, the company’s Vice-Chairman and Managing Director, said.

In July this year, the company had deployed a similar 60-tonne tug in Vietnam for a contract period of up to three years.

Apart from this vessel, Garware will be taking delivery of a $30-million platform supply vessel in January next year and a similar 60-tonne anchor handling tug costing $16 million in February. Additionally, the company is acquiring another tug and a work barge through a bareboat charter funding for its Singapore arm, Garware Offshore International Services Ltd, next fiscal.

“These five vessels will together cost about $100 million and will take our fleet strength to 13,” Mr Sandeep Akolkar, President (Finance) told Business Line.

Out of its existing four platform supply vessels, three are deployed off the Indian coast and one in the North Sea. While those in the Indian market are in long-term contracts, earning between $15,500 and $17,000 a day, the vessel deployed in the North Sea fetches $34,000 a day.

“The earnings from North Sea are higher as the vessel is in the spot market. Also, North Sea rates (for such vessels) are very volatile,” he pointed out.

The company has not yet decided where to deploy the two vessels that are scheduled for delivery early next year.

Firmer markets

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 a day.

For the two vessels of its Singapore arm, the company has negotiated a unique package with a Singapore-based bank that exclusively deals with financing of marine assets — the two vessels are worth about $41 million.

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.

After a period of two years of operations, Garware will have the option to buyback the vessels from the bank at rates already determined. It will be paying a certain amount of charter rate to the bank for the two assets every month.

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,” Mr Akolkar said.