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ONGC takes charter route for offshore supply vessels

(Will hire 10 OSVs in 2014, another 10-12 in 2015)

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Oil and Natural Gas Corp (ONGC) will continue to depend on chartered offshore supply vessels (OSV) as against its earlier plans of increasing share of owned vessels to bring down logistic costs.
The company had plans to double its fleet of owned OSVs, to avoid vagaries related to hired OSVs. OSVs are primarily used to service rigs, carry essential cargo and supplies to offshore installations, including drill pipes, drilling water, chemicals, equipment, and food.
While the company continues to aim for having 60% OSVs under charter and rest under ownership, it is nowhere near the target. "We will never achieve (60:40 ratio), we will hire more. In total, we need around 70 OSVs. We will not acquire, it is not our core skill, we can't operate," a senior company official told dna on condition of anonymity.
Back in 2008, ONGC had realised that due to its over dependence on chartered OSVs it had to pay erratic sum of hiring charges being quoted by its vendors. Also, shortage of OSVs was impacting its supplies on rig and offshore platforms. To avoid this, in 2009, ONGC gave a bulk contract of around Rs 550 crore or ($112 million) to acquire 12 OSVs from Pipavav Defence and Offshore Engineering, which operates a shipyard in Gujarat's Pipavav. They were to replace ONGC's aged Sindhu series. ONGC has received four OSVs through this contract over the past 2-3 years.
While flagging of the third OSV, L J Johnson, in November last year, the company's previous chairman and MD Sudhir Vasudeva had said the company needs a fleet of around 70 OSVs to comfortably provide supplies to Bombay High platforms on the west coast and other offshore blocks on the Gujarat and east coasts. Vasudeva had also stressed that remaining nine new ships from Pipavav would be inducted by December 2014.
However, above quoted official said that Pipavav would be delivering a maximum of eight vessels by December and remaining four would be delivered only in 2015. "Share of hired vessels will remain higher as compared to owned vessels. Achieving 60:40 is difficult," he said.
Even after adding 12 new OSVs from Pipavav (replacing the existing old fleet), the Maharatna company would need 14 more OSVs to achieve its target of 40% owned vessels. ONGC was earlier considering fresh round of vessels acquisition in 2014, however the company's immediate needs have called for change in strategy.
Another senior official from the company said that ONGC currently operates a fleet of 53 OSVs, of which 15 are owned and 38 are chartered. "We are now more keen on chartered hire route because of flexibility of operations. Now our requirement is huge and immediate. Owned vessels take lot of time to develop and there are several approvals required, we don't have such luxury at this moment." he said.
Charter cost of OSVs with dynamic positioning cost stand at around $9,000-$10,000 per day, down from $14,000-$15,000 earlier. Platform supply vessels attract a higher charter rate at $13,000-$14,000 per day.
The upstream major has already issued tender for hiring 10 new vessels and negotiations are under final stage. These vessels will join its fleet of OSVs as early as possible. The company plans to hire 10-12 more OSV on charter basis in 2015. Following this, by next year, ONGC would have 56 vessels through the charter route as against 14 owned.

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