Shipping cos eye offshore services to boost revenues

Rising oil prices and heightened exploration & production activity are drawing more Indian shipping companies to invest in the offshore business.

Shipping Corporation of India (SCI), Great Eastern (GE) Shipping and Essar Shipping are on an asset buying spree to augment capabilities and boost revenues from the segment, from 10-15% of sales now to 20-25% by the fiscal end.

International crude oil prices are around $80 per barrel. With increased exploration and production activities, rig utilization is expected to improve significantly to about 80%. This is expected to rise to 87.1% in 2012 fiscal.

Global oil demand is estimated to grow from 84 million barrel per day to 94 million barrel per day by 2015, adding to the opportunity. North America is also back on track.

"The offshore segment has witnessed a revival in this June 2010 quarter and will be stable throughout the year now. In the offshore business, the volatility is less. As a company, we are trying to get bigger in this segment. Of the 29 new ships that we have ordered, eight are for this segment," said Umesh Grover, director, technical and offshore services, SCI.

Industry analysts say rig day rates will remain buoyant at about $150,000-165,000 in 2010 and more than $180,000 in 2011, compared with about $135,000 in 2009. Rigs demand growth of 20% and 8% expected in 2010 and 2011, respectively. Demand for rigs went up by 22% in the year 2000, immediately following the downturn cycle in 1998-99.

GE Shipping subsidiary, Great ship had committed to invest around $600 million in offshore supply vessels of which around 70-80% is already used up. Analysts say the company is listing its subsidiary for the purpose of raising more money, to buy more assets in the offshore segment. "Offshore will be our bigger focus this year, and probably will contribute majorly to our revenues," said a GE Shipping official. For the June 2010 quarter, offshore segment contribution to total revenues jumped from Rs 159 crore to Rs 231 crore, up 45%.

Offshore is a capital intensive business and the company employed a capital of Rs 3,130 crore for the June 2010 quarter.
Essar Shipping Ports & Logistics Limited (ESPLL) through its wholly owned subsidiary, Essar Oilfields Services Limited (EOSL), provides onshore and offshore oilfields drilling services. It has two new building jack up rigs on order with ABG Shipyard which will be delivered by year end.

Source: The Financial Express, Delhi, Saturday, 7th August 2010
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