DNB, one of the world’s leading shipping banks, opened an office in India at a time when many other global banks were in retreat. It was 2008, but the global financial crisis did not mask the prospects for the country as far as Derick Dias was concerned. Derick is Chief Representative Officer of the Norwegian bank’s Indian Representative Office, and he considers India one of the most promising markets in Asia for two main reasons:
Trade potential: India has huge potential to develop its terminal infrastructure. For a country of comparable size to China, its container terminal capacity is only five percent of China’s (10m TEUs versus 200m TEUs).
Growing energy needs from an expanding consumer and manufacturing base: India is heavily reliant on both coal and crude oil to fire its power stations. This is driving exponential growth in shipping tonnage and offshore activities – both areas in which DNB has core competence.
“Our offshore portfolio has grown in four years both in terms of number of transactions and in terms of new clients,” says Derick. “We believe the sector will continue to hold good potential for us in the future due to the strong focus of India’s government on increasing domestic oil and gas production, thereby increasing the need for offshore support vessels and rigs. Also, with the increase in deepwater exploration, the need for specialized vessels is likely to increase.”
Energy Information Administration figures indicate that India was the fourth largest energy consumer in the world in 2011 after the U.S., China and Russia. India’s economy has grown at a rate of around seven percent since 2000, and it proved to be relatively resilient to the global financial crisis.
Early in 2013 India signalled its intention to be energy independent by 2030. “To increase India’s energy security, there is a twofold strategy being followed by the Indian government,” Derick explained. “First, increase domestic oil and gas production through licenses under the New Exploration Licensing Policy. And second, secure oil and gas production/equity in offshore projects. This is evident in the recent large acquisition announcements made by Indian companies in overseas oil and gas projects, including shale gas in the U.S.”
LNG is a segment that is becoming very interesting, too. “Many Indian companies are tying-up LNG through long-term contracts with large overseas suppliers and also setting up LNG terminals in India,” he added. “With strong financial positions and cash flow, we believe Indian companies are well positioned to benefit from these emerging opportunities.”
Derick confirms that DNB is among the main foreign currency lenders to several Indian offshore service providers which own and operate rigs and supply vessels both in India and overseas. He has helped the bank establish key relationships with many Fortune 500 companies in India in the oil and gas sector and provided both short-term (trade-related) and long-term facilities to these customers.
“We have excellent relationships with large exploration and production companies in India, both state-owned and privately owned, and we are looking to support new bankable projects. We have already participated in the past in reserve-based lending projects in India and are always looking to support similar projects as they arise.”
DNB has global offshore expertise and is one of the main lenders in the U.S. oil and gas market – in which many Indian companies are actively looking to invest. “There is scope for us to support their growth ambitions through both traditional lending products and capital market products such as placement of bonds and risk management products (for example, commodity hedging),” Derick states. “We can also assist Indian companies looking to acquire assets in the North Sea and in the other main sector locations where DNB has a strong presence.”
The Norwegian Connection
Indian offshore service companies with ambitions in the North Sea, Brazil and Australia have acquired and are increasingly looking to acquire more high-end vessels suitable for such markets. Norwegian yards and associated companies have a leading market position in this segment, and DNB has relationships with most of these companies. “We are also increasingly seeing Norwegian vessel owners building offshore vessels in Indian shipyards. Through trade finance products, we support the sales of these vessels.”
Looking ahead, Derick is optimistic about prospects in India. “We have a substantial market share in Nordic and particularly Norwegian-related export business. This is one of the main pillars of our business in India. We will work hard to continue being the leading banking service provider of inbound Nordic exports to India.” – MarEx
Wendy Laursen can be reached at email@example.com.
The opinions expressed herein are the author's and not necessarily those of The Maritime Executive.