Indian shippers want IOC to ease tanker hire condition

To increase their chances in the latest tender floated by state-run Indian Oil Corporation (IOC) for hiring of tankers, domestic shipping companies are asking for an easing of the vessel-age criteria.

Early this month, separate tenders were floated by two state-owned oil refiner-marketer companies, IOC and Bharat Petroleum Corporation (BPC). They want to hire a VLCC (very large crude oil carrier) and a Suezmax tanker, respectively, for a contract period of five years.

Among the several terms, the refiners have a new clause that the vessel’s age should be not more than 10 years on the date of delivery. Out another way, a maximum age of 15 years at the end of the contract.

In the case of Suezmax tankers, Shipping Corporation of India (SCI) and Great Eastern Shipping (GES) have tankers under 10 years in age. For the VLCC tender, SCI is the only one eligible among domestic companies to participate.

Several international loading terminals have a clause that vessels over 15 years of age will not be accepted there. It is due to this global norm that oil refiners have introduced the age condition in their tender, floated on December 1.

“Without changing the age criteria, a clause that the vessel should remain acceptable all through the five years should be also explicitly mentioned in the tender. This will raise domestic participation. This clause means you allow me and I make sure I remain acceptable with my ship or a substitute till this five-year tenure of contract ends. The idea is to not get rejected at an international terminal in these five years,” said an official of a domestic company.

Among Indian companies, Essar Shipping has two VLCCs above the age of 10 years. GES has no VLCC in its 48-vessel fleet.

“VLCC is a difficult business; volatility and risk are higher. Unless there is a long-term assurance of revenue, it does not make sense to plunge into this segment,” said an official with another domestic company.

The vessel age condition would mean domestic companies losing to foreign fleets for five years at a time when the business climate is already not buoyant for the sector. Indian companies are trying to get long-term cargo supply contracts for securing bank funding.

The contract in question also requires the lifting of 265,000 tonnes a month, amounting to 3.18 million tonnes a year. India imported 215 mt of crude oil in 2016-17.

Indian Oil Corporation