Oman Shipping Company (OSC) is the nation's marine carrier, owned by the Ministry of Finance (80 per cent) and Oman Oil Company (20 per cent). Initially created to transport Omani liquefied natural gas (LNG) exports in 2003, OSC has diversified to cargo, containers and iron ore and owns 34 vessels.
In what way does OSC align its investments with the aims of the government?
It comes down to why we are here. We are here to support the national economy. We are here to import and export goods to and from the country. We are here to develop the Omani seafaring tradition.
Some of the investments in the past may not have necessarily followed that pattern strictly. But going forward, that will be the guide to where we participate. We support Omani businesses and getting Omani products to international markets.
Why did the company delay the delivery of new vessels in 2012?
We delayed some deliveries in 2011, mainly for very large crude carriers (VLCC), for a number of financial and market reasons.
The VLCC market is in a very bad state and has been for a while, with severe excess capacity. The returns that can be obtained from working in the VLCC market are not attractive. But if the orders for new ships have already been placed, as they were for the company in 2008, and the orders are on their way, then the best that can be done is to try to slow them down or turn them into something else. If the process of building the ships is beyond its initial stages, they cannot be converted. So we slowed down the deliveries for that reason. These ships will be delivered in 2012.
How have market conditions influenced decisions to purchase ships?
It is all about speculation. If you place an order with a guarantee of a long-term contract then everyone is happy. In case of the tanker market, the market is very fluid, and we have a large number of tankers without long-term contracts. Companies are stuck with the price from the time the order was made, but there was a peak in 2008, and you are not able to make money from the vessel. The cost of ship construction has gone down. Because of that, people are now placing orders in the ship market.
If you look historically at OSC's investment in ships, there has been some trigger for purchases, such as partnerships, strategies through government initiatives or collaborations with other projects in the country. A coordinated initiative between the government and private industries, such as the Vale iron ore pelletising plant in Sohar, can trigger investments in vessels.
How is OSC's VLCC pool performing?
In our own pool, a joint venture with Singapore-based Navig8 and Cyprus-based VTN Shipping Group companies, called VL8 Pool, we expect better earnings than some other pools, by virtue of the type of vessels that we have in the fleet. They are relatively young and fuel efficient, so we can earn a better rate.
The majority of our projects are long-term contracts. We have fixed agreements on revenue and that makes a solid business case. Like any shipping market, we have good times and bad times. The VLCC business actually carries very few Omani cargos. You may not directly take Omani goods to or from the market, but it still benefits the national economy.
Despite the oversupply globally, we will continue to operate our VLCCs commercially in the international market. They are a good product and well-liked by the oil majors. That is a relationship that we want to continue.
OSC started as an LNG transport company. How important is this business today?
LNG is the mainstay of the company. It will continue to contribute at least 30 per cent of returns as we go forward. Any increased investment in LNG ships would most likely springboard off an increase in LNG production.
How important are green credentials in today's shipping industry?
Environmental considerations are extremely important. In tonnes transported and miles travelled, shipping is still the greenest form of transportation on the planet. Green credentials are governed by international convention, which have a direct consequence on the investment required for your fleet.
Older ships now have to move away from certain markets, because they can no longer comply with the legislation introduced there. New laws force you to either become green or lose out on the market. Our fleet needs to be capable of trading worldwide.
How has piracy in and around Omani waters affected OSC?
Obviously we take the appropriate steps to keep up with international standards. We provide training and education in terms of arming the vessels. If we need to and our customers want it, we place armed guards on the ships to protect the lives of our seafarers, primarily, and the asset. To date, no ship has been taken that had guards on board.
The international community is actively involved in preventing piracy as well as governments in the region. We have ships running up and down the Omani coast every day. And many of those crews are living in fear, and rightly so, because of the unknown risk despite adequate protection on board. The company needs to make sure that we abide by international regulations and standards to protect our crew.
The number of successful pirate attacks has decreased dramatically in 2012. There is a whole industry that is based on piracy, including insurance and private security, and the stakes are raised everywhere. There are not enough warships in the world to control this problem. It is like patrolling the whole of France with two police cars. We have a very good intelligence picture - we know what the problem is, but unfortunately there will be lives lost in this battle and it will be very difficult to bring to an end.
© Muscat Daily 2012
