With younger vessels to help operate in the international market without facing age restrictions.
The Mumbai-listed company sold six older ships – four product tankers, one crude carrier and one dry bulk ship – for about $100 million and purchased five vessels – four product tankers and one dry bulk carrier – for some $160 million.
In the international oil trade, oil majors such as Exxon, Chevron, Shell, etc and many prominent ports in the Middle East and East Africa have age restrictions on the vessels they are willing to take, making it difficult to deploy a 20-year-old tanker.
“We operate in the international market. We want to continue operating in the international market. After the age of 20, for a tanker, it becomes difficult to operate in the international market, it becomes very restricted, many terminals and charterers will not take it. We will not have the flexibility. We don’t want to have a significant part of our fleet facing these restrictions due to age. So, to retain the ability to operate in the international market, we have sold our ships which are 20 years old, or which are turning 20 and have bought slightly younger ships which are 10 to 15 years old. That’s the basic premise,” G Shivakumar, Executive Director and Chief Financial Officer, said while explaining the rationale behind the recent sale and purchases.
“Otherwise, to fix the older ships, we will have to move from the international market to some coastal market. We don’t want to get into that market,” he stated.
“We don’t like to run ships that are beyond 20 years of age, it becomes technically difficult to operate, and it becomes expensive. So, we said we don’t want to take that hassle. We have got out of those old vessels which cannot be traded internationally and have got into vessels which can be traded internationally,” Shivakumar added.
The fleet renewal, though, comes with a “notional’ downside as the Great Eastern Shipping will lose a so-called “grandfathering” benefit given by the government to Indian shipping companies while tweaking a cargo support policy in 2021.
