Tender documents reviewed by Reuters showed, which would boost domestic shipping firms battered by slumping tanker rates.
India’s Ministry of Shipping asked the refiners to issue long-term crude import tenders on a pilot basis and include a right of first refusal for Indian shipping lines, a government source familiar with the matter said on Monday.
The shift to the five-year contracts would give millions of dollars in tanker contracts to the Indian carriers, the source said.
This would help companies like Shipping Corp of India, Mercator Ltd, Great Eastern Shipping Co and Essar Shipping. The global tanker industry is grappling with an oversupply of ships that has depressed rates, with the benchmark Middle East to Japan route for Very Large Crude Carriers dropping 43 percent since the start of the year.
According to the tender documents sent out by Bharat Petroleum Corp, they are only seeking bids from Indian-flagged Suezmax tankers capable of carrying up to 1 million barrels of oil for a five-year period.
Indian Oil Corp’s (IOC) tender document includes similar language but is seeking global bids for VLCCs capable of carrying Iraqi Basra Light crude for five years and grants Indian shippers the right of first refusal.
The prices for the charters will be linked to the average of the one-year time charter rate published in Clarkson Research’s Shipping Intelligence Weekly, the documents showed.
An IOC spokesman confirmed this is the first long-term VLCC tender the company has issued. There was no immediate response from BPCL.
India has in the past two years overtaken Japan to become the world’s third biggest oil consumer.
India’s international trade has surged since the turn of the century but Indian-owned vessels carried only 7 percent of that trade in the 2015 to 2016 fiscal year, government reports showed.
The country’s shippers are pleased with the move.
“Granting five year shipping tenders to Indian companies will help the growth of India’s fleet.. It will help us in arranging funds for acquisition of new vessels,” said Capt. Anoop Kumar Sharma, chairman of India’s top shipper SCI.
Shares of some Indian shipping firms rose. SCI climbed as much as 11.8 percent, its biggest intra-day gain in a month. Mercator rose as much as about 4 percent while the overall market was down.
However, the companies may struggle to meet the tender requirements which stipulate that the vessels be no more than 10 years old at the time of charter.
SCI only has two VLCCs that are less than a decade old, the Desh Viraat and Desh Vishal, which were built in 2008 and 2009, respectively, according to fleet data on its website.
Great Eastern Shipping does not have any VLCCs in its fleet, according to its website, and Essar Shipping only has one VLCC, which is 12 years old.