PNSC, ABM AMRO SIGN $135MN FINANCING DEAL
Planned induction of two double-hull and one bulk carrier
SYED M. ASLAM
May 28 - Jun 03, 2007
The expected signing of $ 135 million financing deal between Pakistan National Shipping Corporation (PNSC) and ABN AMRO Bank would help the state-owned, and the only, shipping company of the country induct two double-hull Aframax class oil tankers and one Panamax class bulk carrier by the end of this year. The acquisition of three additional vessels will cost around $ 150 million, the remaining $ 15 million of which will be provided by the PNSC.
For the first time since 1970s, the PNSC is looking at inducting new vessels into its ageing fleet that comprises 10 multipurpose cargo vessels, 4 Aframax tankers and one bulk carrier. About two-third of the fleet is over 26 years old while the remaining one-third is between 18-23 years old. The PNSC fleet, thus, has become highly uneconomical due to increased costs of repairs and maintenance thereby rendering them highly uneconomical.
In the last three years PNSC purchased four used oil tankers; MT Shalamar, MT Swat, MT Johar and MT Lalazar, the first three at $ 21.9 million each and the fourth for $ 13.5 million, respectively, as well as a bulk carrier MV Kaghan for $ 15 million. PNSC had also added three used container vessels in its fleet in 1996 for which it secured a $ 50 million loan from the National Bank of Pakistan (Bahrain). PNSC chartered these vessels outside Pakistan and they were only started lifting the national cargoes years as PNSC did not bring them to the country for what it called high import duty. Thus more most of their lives these used container vessels did not play any role in meeting the shipping needs of the country.
PNSC's decision to procure oil tankers at this point in time is driven by the necessity to replace its aging fleet of four oil tankers which have long past their economic life and are quite old by world standard. As is, one of its oil tankers would be out of business this year as Condition Assessment Scheme of global shipping watchdog International Maritime Organisation this year, while the remaining three of its oil tankers would have to be put off the business under the same provision in 2010. It may be mentioned here that IMO slapped a ban on the use of single hull containers exactly ten years ago in 1997 but developing countries like Pakistan were given extended period up to this year to replace single hull containers with double hull by 2007. However, interestingly the approaching ban did not discourage the PNSC to induct four used container vessels in its fleet during the last three years thereby necessitating the induction of double-hull containers by the PNSC at this point in time. According to the IMO rules single hull containers are not allowed to enter the ports in the developed countries since 1997 and would no longer be enter the countries where they were still allowed to operate starting this year.
As mentioned earlier, the four oil tankers in the PNSC fleet are over 20 years old and are thus becoming increasing costly to repair and maintain thereby rendering them extremely uneconomical. That also highlights the need for replacing almost one-third, or ten of the total 15 vessels, of the PNSC fleet within the next few years.
PNSC claims to be lifting around 20 per cent of the national sea-borne cargoes of 55 million tonnes. Though this shows a substantial improvement in PNSCís performance compared to around negligible lifting of just around 6 per cent of national cargo lifting in last five years the figures still donít represent a true figure because the bulk of this increase has been made possible by increase in crude oil cargoes while only small increase has come from dry and containerized cargoes. This has been so primarily because almost the entire fleet of dry, bulk and container cargo vessels of the PNSC is in extremely dilapidated state having long past its economic life. These dilapidated vessels are not able to undertake long voyages, are uneconomic to run and require frequent and costly repair and maintenance.
The PNSC depends heavily on the captive crude oil shipments as it enjoys a 10-year ëcontract of affreightmentí to exclusively transport, on its own as well as on chartered vessels, crude oil for the three oil refineries of the country that include National Refinery Limited, Pakistan Refinery Limited and Pak-Arab Refinery Limited.
The exclusive 10-year crude oil shipment contract for the three national refineries explains why the Shipping Policy announced by the government about six years ago failed to attract new shipping companies. PAGE highlighted the plight of an investor ready to make substantial invest in the shipping sector who had to shelf his plan because he said that ěthe ten year exclusive contract to the PNSC for the shipment of crude oil to the three national refineriesî just leave no business available for him.
The expected induction of two Aframax oil tankers this year clearly shows that PNSCís fleet replacement and acquisition plan primarily revolves around crude oil segment of the shipping vessel with little priority given to dry and container segment of the business. PNSC aims to improve its performance by solely focusing on the crude oil cargo thereby heading towards a loop-sided growth by leaving the dry, bulk and containerized cargoes open to the foreign shipping companies.
It is time for the PNSC to also focus on improving the health of its dry, bulk and container fleet that forms a major portion of its fleet. It should induct bulk and container vessels to help lessen the countryís dependence on foreign shipping companies that keep on lifting a large portion of dry, bulk and container cargoes that is costing the country billion of dollars annually- an expense which is second only to defence expenditure. In the long run, PNSC would be better off without the loop-sided growth driven mainly by crude oil business which contribute the bulk of revenue to the PNSC but does not help lessen countryís dependence on foreign shipping companies for the lifting of non-liquid cargoes.
PNSC used to have 71 large ocean going vessels in 1971. The failure to induct fresh tonnage and lack of vessel acquisition and replacement plans over the years has cut the size of its fleet by almost one-fifth to 15 vessels presently. It has not inducted any new vessels in the last three decades and has only acquired used containers and oil tankers to sit on a fleet that is long past its economic life. It has managed to increase its share in crude oil business but its share in the overall dry, bulk and container cargoes still remain low. It seems to be solely focusing on the crude oil segment of the business with little or no attention paid to dry cargo business. Itís time for the PNSC to start paying attention to the vast dry cargo segment of the business the bulk of which is being lifted by foreign shipping companies at a big cost to national economy.