Indian Oil Corp into Shipping Business

A VLCC can carry some two million barrels of crude oil per trip. In the current market, a second-hand VLCC costs some $125 million. IOC will either buy the VLCC’s or lease them for long tenures of 8-10 years and a deal will be finalised in 6-8 months.

“In principle it has been approved, ‘yes we can get into this business’ but when the specific proposal comes again, we have to go to the board,” said a company source with knowledge of the matter.

The refiner said it will only buy or lease a ship which is five years old or less. “. IOC is a big charterer of oil tankers to transport crude, spending millions of dollars in freight annually.

IOC’s preference for second-hand VLCC’s stems from its desire to enter the business quickly as the new building market has tightened with most of the global yards booked fully for the next three years. IOC will also look at owning or leasing barges that support its single point mooring (SPM) operations.

IOC is keeping the options open regarding the flag of the VLCC’s. It could consider both – Indian flag and foreign flag ships – but feels that flying the Indian flag is preferable as it would come with the advantage of availing the so-called right of first refusal (RoFR) during public tenders, per government rules.

 “We need to have the Indian flag for the ships, then only the RoFR will be available,” the source said.

IOC, he said, has also started discussions with some Indian companies to explore the possibility of forming a joint venture company to enter the shipping business. The only glitch is that being a state-owned company, IOC will have to prefer another government company as a partner in this exercise.