Bangalore: India has relaxed tight hiring rules announced in April for ships registered outside the country that are used for exploring and drilling for oil and gas off its coast, on the back of lobbying by oil firms and foreign shipowners.
Companies can now hire offshore vessels that are more than 25 years old, subject to certain conditions, the country’s maritime regulator, the Directorate General of Shipping, said on 22 July.
Offshore vessels such as jack-up rigs, anchor-handling tugs, accommodation barges and supply vessels play a key role in the hunt for oil and gas.
In short supply: Offshore vessels such as jack-up rigs (above) play a key role in the hunt for oil and gas
The presence of older foreign ships had helped India’s biggest oil explorer, the state-run Oil and Natural Gas Corp. Ltd, or ONGC, to hire 30 offshore vessels in a five-year contract beginning March 2007 at 30-40% below market rates, according to industry body Indian National Shipowners Association, or Insa.
Currently, there are 165 ships operating off India’s coasts, mainly servicing the country’s oil and gas exploration and production firms. A majority—more than 90%—of these will reach 25 years in one-two years, Insa estimates.
Local laws give preference to India-registered ships, and foreign-registered ships can only be hired if Indian vessels are in short supply.
Local shipowners are unable to meet rising demand for vessels from oil explorers, including Reliance Petroleum Ltd, Gujarat State Petroleum Corp. Ltd, Hardy Oil and Gas Plc., Cairn India Ltd, British Gas India Pvt. Ltd and ONGC.
“Offshore vessels are not available because of increased activity globally due to high oil prices. The relaxation will make available more offshore vessels for hire,” said Sunil Arora, a deputy general manager looking after offshore logistics at ONGC. The state-run firm needs around 300 offshore vessels of various kinds for its oil exploration and drilling activities.
Only about 30% of India’s offshore vessel needs are supplied by Indian shipowners such as Shipping Corp. of India Ltd, Great Offshore Ltd, Greatship (India) Ltd, Garware Offshore Services Ltd, Tag Sealogistics Ltd and ABG group.
The shortage will rise further as India drills more wells, estimated at 498 by 2012 by the director general of hydrocarbons.
The maritime regulator had ruled on 25 April that foreign-registered ships working within India’s territorial waters have to be less than 25 years old. Ships that fulfilled this condition also needed to undergo inspection and rectification of deficiencies of hull, machinery, safety appliances and operational requirements such as staffing, before they were permitted entry into Indian waters, its order said.
The directorate had, however, exempted India-registered ships as they were already licensed to ply in Indian waters by the regulator.
The April order also made it mandatory for foreign-registered ships seeking employment in India to be classed with the country’s classification society, the Indian Register of Shipping, or IRS.
Classification societies set rules on safety and protection of ships, confirm that designs meet these rules, survey ships during construction and commissioning, and inspect vessels at regular intervals to ensure they continue to meet International Maritime Organization requirements.
The 22 July order says the offshore oil industry can now hire vessels regardless of age on the condition that they are classified either by IRS or any of the 10 full-time members of the International Association of Classification Societies, the global body of ship classification societies.
In case a vessel above 25 years is not classified by IRS, it must undergo inspection equivalent to an annual statutory survey and an intermediate audit by IRS.
Foreign shipowners had dubbed the earlier April order “discriminatory” and said the decision to ban older ships from operating along the country’s coast would add to the operational costs of oil exploration and production firms. The earlier rule would have meant that oil explorers had to spent more on logistics because hiring younger ships is costlier.