Varun Shipping to focus on oil & gas

Varun Shipping has decided to refocus on oil & gas transportation and offshore business. The company plans a capital expenditure of $150 million on acquiring new vessels this fiscal.

?We have signed a MoU for selling out the single dry bulk vessel that we had. Now our focus is to get into the new areas of oil & gas transportation and grow the offshore business,? said Yudhisthir Khatau, managing director, Varun Shipping.

Currently 95% of company?s revenue comes from the shipping, with offshore business contributing the rest.  It had a turnover of Rs 644.3 crore last year and controls over 76% of the domestic LPG capacity.

?The freight rates for LPG carriers are more stable as compared to crude or dry bulk carrying vessels due to the long-term nature of contracts and demand supply characteristics of business. The company is to an extent cushioned against a downside in international freight rates as 65% of its revenue comes from transportation of LPG,? said an analyst.

Moving away from dry bulk cargo, it plans to acquire a combination of modern vessels from the resale market to grow its offshore as well as oil & gas transportation business, said Khatau.

The company currently owns 18 vessels including 11 gas carriers, 3 product carriers, 2 crude carriers and 2 offshore vessels. Seeing the high capacity of gas carriers, the company?s purchases are most likely to be in the other three segments.

LNG transportation is a new focus area for the company. It recently lost a tender floated by Petronet for LNG transportation in re-bidding to a Japanese consortium that tied up with Shipping Corporation of India.

?We are planning to participate in future bids, but government?s policy is coming to the disadvantage of Indian flag carriers,? Khatau said. Currently, only the Shipping Corporation owns LNG vessels. The company is also planning to raise money with an issue of Singapore depository shares.

Source: Daily News & Analysis, Mumbai, September 4, 2006
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