You were recently awarded the TMS Lifetime Achievement Award 2017. What are your thoughts on being the first person in Oman Shipping Co to receive this prestigious award? What do you attribute to your success?
The TMS Lifetime Achievement Award 2017 is given for the contribution made by an individual who has worked in the maritime industry for a long period of time.
Though Oman Shipping Co has won a number of awards in other categories, I am the first person from the company to receive this accolade. I am quite happy for receiving this award as it is a recognition of my work. It is nice to be honoured towards the fag end of my career. I sincerely thank all my colleagues for their valuable support that I received all throughout.
How has Oman Shipping Co evolved and grown since its inception in 2003?
Established as a small company in 2003, Oman Shipping Co grew out of the Omani government’s vision to develop a national fleet catering to the maritime transportation requirements of the country’s rapidly growing hydrocarbon, petrochemical and metallurgical industries.
The company’s first vessel was a LNG ship, which was the ultimate for shipping that time, and later the company built a fleet of LNG ships. Following this we acquired very large crude carriers (VLCCs), which are huge ships with a capacity of more than 318,000 tonnes per ship. A VLCC normally carries 2mn barrels of crude.
At present, we have 16 of these VLCCs and our well diversified fleet now also includes product tankers, LPG carriers, chemical tankers, bulk carriers and container vessels. So today Oman Shipping has big operational capabilities.
In the past 14 years, the company has grown to manage a large fleet of 49 ships, of which 42 ships are owned by Oman Shipping Co and remaining ships are chartered vessels. We technically manage 38 ships (all types) in-house through our fully-owned subsidiary Oman Ship Management Company.
After witnessing rapid growth in past few years, what are the potential areas for future growth of the company?
Though oil and oil-related products account for around 70 per cent of our business, we do carry large quantities of iron ore and aggregates.
We are also looking at expanding our container business and have started operations in this segment by connecting Jebel Ali port in Dubai to ports in Oman. The company is also expanding into mineral segment. These are low value products but huge quantities are being exported to India and other Asian countries. So there is a good opportunity to expand our business in this segment, particularly in Supramax category (vessels that have capacity between 50,000 to 60,000 deadweight tonnage).
Moreover, we are also expanding our fleet to cater to the needs of the Duqm oil refinery. Apart from the refinery, Duqm, as a region, offers tremendous shipping opportunities for the future.
There are some indications that freight rates are softening. What is your outlook?
Tanker freight rates have started declining now because of the excess supply of ships and also due to rise in the crude prices. Freights in other sectors as well are not too encouraging.
When oil prices fell, people thought this will be a temporary phase and they bought as much as they could and began storing crude. This led to an increase in demand for both transportation and storage of oil. So lots of tonnage got stuck up in storage which led to reduced availability of ships and a rise in transportation rates. However, fuel prices have now recovered to some extent.
The previous boom in the shipping industry was caused by a steep rise in global commodities trade such as crude oil, iron ore and LNG. Going forward, it is likely to change as finished products are likely to be a dominant sector.
As freight rates are likely to remain soft going forward, do you believe it will have an impact on Oman Shipping Co’s growth and profitability?
Next year, due to softening of global crude prices, we might see somewhat a muted growth in the top-line. We are not fully dependent on spot market rates because we have balanced our contracts. Around 60 per cent of our fleet is engaged in long term contracts. So our bottom-line will not get impacted as much. Some of the long-term contracts will be up in the next four-five years.
Shipping contracts are generally long-term contracts but in the future less people will be going for it. The concept of long term has gradually come down from 15-20 years to five to ten years and hardly anyone is thinking beyond five-seven years. So the concept of long term is changing and therefore the horizon for looking at returns has reduced considerably.