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Indian State Oil Refiners Look to Boost Domestic Shipping

Two of India’s state-owned oil refiners have issued tenders seeking to charter tankers for at least five years with the right of first refusal to Indian shipping lines as asked by the government, according to sources familiar with the matter.

 This deal would give millions of dollars in tanker contracts to the Indian carriers and certainly it would help companies like Shipping Corp of India, Mercator Ltd, Great Eastern Shipping Co and Essar Shipping particularly in a depressed market with imbalance between supply and demand of ships, having resulted in dismal freight rates.

 According to the tender documents sent out by Bharat Petroleum Corp, they are only seeking bids from Indian-flagged Suezmax tankers capable of carrying up to 1 million barrels of oil for a five-year period.

Indian Oil Corp’s (IOC) tender document includes similar language but is seeking global bids for VLCCs capable of carrying Iraqi Basra Light crude for five years and grants Indian shippers the right of first refusal.

The prices for the charters will be linked to the average of the one-year time charter rate published in Clarkson Research’s Shipping Intelligence Weekly, the documents showed.

The country’s shippers are pleased with the move.

“Granting five year shipping tenders to Indian companies will help the growth of India’s fleet.. It will help us in arranging funds for acquisition of new vessels,” said Capt. Anoop Kumar Sharma, chairman of India’s top shipper SCI.

 Shares of some Indian shipping firms rose. SCI climbed as much as 11.8 percent, its biggest intra-day gain in a month. Mercator rose as much as about 4 percent while the overall market was down.

The companies, however, may have to face some challenge in fulfilling the tender requirement that stipulates that the vessels should not be more than 10 years old at the time of the charter.

SCI has only two VLCCs that satisfy the condition, the Desh Viraat and Desh Vishal, which were built in 2008 and 2009, respectively, according to fleet data on its website. While Great Eastern Shipping does not have any VLCCs in its fleet, according to its website, Essar Shipping has only one eligible for the tender, being 12 years old.                                                                                                                 

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