As Varun Resources flounders, fleet-owners move in to grab LPG transportation deals

      03/28/2018

Three Indian shipping companies have quickly and separately moved in to occupy the space left by the collapse of Varun Resources – once India’s biggest liquefied petroleum gas (LPG) ship owner – to tap the rising demand for transporting LPG imported by oil firms, and on local routes.

Eight LPG ships owned by Varun are set to be auctioned by a consortium of 12 banks, led by State Bank of India (SBI), to recover their dues worth 2,000 crore. Varun was referred to the National Company Law Tribunal (NCLT) under the Insolvency and Bankruptcy Code (IBC) in June 2017.

State-run oil firms, are by law, mandated to extend a so-called right of first refusal (RoFR) to Indian shipowners – if Indian fleet owners are not the lowest bidder in tenders floated by public sector undertakings (PSUs) to haul their cargo, including LPG, they are offered an opportunity to match the lowest rate quoted by a foreign ship-owner and take the contract.

Varun’s contribution: While it was operational, Varun’s ships carried 70 per cent of India’s LPG. This meant that 70 per cent of India’s LPG was carried by a domestic shipping company, providing energy security to the country, and jobs to 500 Indian seafarers. Indian flag ships, are by law, mandated to employ Indian nationals as crew.

“It’s a good business opportunity for sure,” said a spokesperson for The Great Eastern Shipping Co Ltd, India’s largest private fleet-owner, after signing a contract on Monday to buy a medium gas carrier, its second this fiscal, taking the firm’s LPG fleet to four.

India is the world’s third-biggest LPG importer after China and Japan.

The vacuum in Indian LPG tonnage has been filled to a large extend by Global United Shipping Company (India) Pvt Ltd, which is backed by Japanese trading group Mitsui & Co.

Global United runs eight LPG ships, seven of them registered under the Indian flag, Rajesh Unni, founder and chief executive officer of Global United, told.

Last year, Singapore’s BW LPG Ltd, a unit of BW Group, and Global United Shipping, set up an equal joint venture in India to own and operate gas carriers for transportingLPG within Indian waters.

BW LPG is the world’s top owner and operator of LPG vessels by the number of very large gas carriers (VLGCs) and LPG carrying capacity.

As part of the deal, BW LPG sold two of its gas carriers – BW Boss and BW Energy – to the JV company BW Global United LPG India Pvt Ltd.

“The joint venture will allow BW LPG to create a strong base in India, which is one of the world’s largest LPG import markets. LPG growth in India is driven primarily by increased retail demand and strong support for LPG consumption from the government. Investments in import infrastructure, biomass displacement and continued government support also looks favourable for the LPG market,” said Martin Ackermann, CEO, BW LPG.

State-run Shipping Corporation of India Ltd – India’s biggest fleet owner – runs three gas carriers, one of which was purchased in September 2017.

Unni said that three Indian shipping companies will now compete on tenders floated by state-run oil firms. “Earlier, only Varun was there. The competition is good for ship charterers and consumers,” he added.