Essar May Expand Supertanker Fleet as India Buys More Mexico Oil

By Karthikeyan Sundaram - Jul 11, 2011

Essar Shipping Ltd., controlled by billionaire Ruia brothers, plans to add as many as a dozen second-hand supertankers to benefit from Indian refiners’ rising need to haul crude oil from Mexico and Venezuela.

“We’re looking at the emergence of long-term contracts between Indian oil companies and suppliers from Latin America,” Managing Director A.R. Ramakrishnan said in a July 7 interview at the company’s headquarters in Mumbai. “We see a great scope for import of crude oil to feed all the refining expansion taking place in India.”

Essar may purchase six very large crude carriers, or VLCCs, as part of its tanker-fleet expansion, Ramakrishnan said without providing a timeframe or investments. Indian refiners including Reliance Industries Ltd. (RIL) are stepping up imports from Latin America as they add capacity to process the heavier and cheaper grades of crude from the continent.

“Diversification of the route network will definitely help shipping companies,” said Jyotsna Sawdekar, an analyst with Mumbai-based Jaypee Capital Services Ltd. “Going forward, charter rates are also expected to rise for VLCCs.”

The shipping line, spun off from Essar Shipping Ports & Logistics Ltd. (ESRS) in May, has 26 vessels, including two VLCCs and five capsizes, according to its website. Essar will also start taking delivery of 12 new bulk carriers valued at about $450 million in September, Ramakrishnan said.
$99 Billion

India, which imports almost 80 percent of its oil, spent a record $99 billion buying crude from overseas in the year ended March 31, as refiners expanded capacity to meet rising energy demand in the world’s second-fastest growing major economy.

Indian refiners including Indian Oil Corp. and Essar Oil Ltd. are also adding capacity to process heavy grades of crude oil, which are cheaper than light varieties. Essar’s expanded refinery will process 90 percent of heavy grades, Managing Director Naresh Nayyar said yesterday.

Reliance, owner of the world’s largest refining complex, boosted crude imports from Latin America 78 percent last year, according to JBC Energy GmbH, as processing the cheaper grade of oil helps boost refining margins. Bulk of the supplies were from Venezuela, the Vienna-based industry consultant said.

Essar, controlled by brothers Shashi and Ravi Ruia, separated the shipping business from its port operations so that the management can increase focus on the two units’s expansion plans. Essar Ports Ltd. began trading on May 31, while the listing of Essar Shipping is pending.

To contact the reporter on this story: Karthikeyan Sundaram in New Delhi at kmeenakshisu@bloomberg.net

To contact the editor responsible for this story: Vipin V. Nair at vnair12@bloomberg.net
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