India looks to tap South Korean expertise to build crude, LNG carriers at home

India is seeking to collaborate with South Korean companies to domestically construct crude and LNG carriers, as rising energy demand drives the need to expand its shipping infrastructure, Petroleum Minister Hardeep Singh Puri said Nov. 14.

Puri's comments followed a series of meetings on Nov. 13 and 14 with top South Korean shipping industry leaders, including a meeting with officials from HD Korea Shipbuilding and Offshore Engineering, during his visit to Seoul.

"I have discussed leveraging India's growing energy demand and South Korea's advanced shipbuilding technologies to boost domestic manufacturing of LNG and crude carriers to further strengthen India's efforts toward achieving energy self-sufficiency by expanding our infrastructure and capabilities and establishing India as a global maritime shipping hub," Puri said.

"We also discussed how the combination of South Korea's advanced shipbuilding technologies and India's manufacturing base and lower production costs will lead to a mutually beneficial partnership that can serve our rising domestic needs as well as global markets for ships," he added.

Puri said India's rapid economic growth is closely linked to the advancement of its energy and shipping sectors, which together serve as strong pillars of national development.

India's gross domestic product has reached about $4.3 trillion, with nearly half derived from the external sector, including exports, imports and remittances, underscoring the critical role of trade, and consequently shipping, in driving economic progress, according to Puri.

He said India currently consumes about 5.6 million b/d of crude oil, up from 5 million b/d four and a half years ago.

"At the present rate of growth, the country will soon reach 6 million b/d. This growing energy requirement will naturally increase India's need for ships to move oil, gas and other energy products across the world," he said.

According to Puri, the oil and gas sector alone accounts for nearly 28% of India's total trade by volume, making it the largest single commodity handled by ports. India currently meets about 88% of its crude oil needs and 51% of its gas requirements through imports, emphasizing the crucial role of the shipping industry in ensuring the country's energy security, he said.

With India's demand for crude oil, LPG, LNG and ethane rising rapidly, and Oil and Natural Gas Corp. alone projected to require nearly 100 offshore service and platform supply ships by 2034, there is a strong impetus to build ships in India in partnership with global leaders, he added.

Rising freight costs

Freight costs constitute a substantial portion of India's total energy import bill, with oil marketing companies, for instance, paying about $5/b to transport crude oil from the US, according to Puri.

"Over the past five years, Indian state-owned oil refiners have spent nearly $8 billion on chartering ships, an amount that could have built a new fleet of Indian-owned tankers," Puri said.

He added that only about 20% of India's external trade is transported on ships that are either Indian-flagged or Indian-owned.

"This presents both a challenge and an opportunity for India to increase its ship ownership and manufacturing capacity," Puri said. "The government is working on steps like aggregating public sector undertakings' cargo demand to give long-term charters to Indian carriers, advancing the ship-owning and leasing model, setting up a maritime development fund for affordable vessel financing and implementing shipbuilding financial assistance policy 2.0 with higher support for LNG, ethane and product tankers."

He said the shipbuilding industry requires long-term planning and a steady flow of orders to sustain infrastructure and skilled manpower. With many global shipyards already booked for the next six years, he suggested that India should encourage them to invest and build ships within the country.

"India sees its oceans not as barriers but as pathways to growth and prosperity. The country is modernizing ports, building more ships, promoting green shipping and creating jobs for its youth," Puri said. "India is ready to work with global partners to make the maritime sector a strong driver of a developed and self-reliant India."

Scope for growth

According to Rahul Kapoor, global head of shipping analytics at S&P Global Energy, the Indian shipbuilding industry accounts for less than 1% of the global shipping market. This contrasts with China, which holds a 61% market share in the order book of major commercial shipping sectors.

South Korea and Japan also have significant global influence, with advanced technological capabilities and robust export pipelines, Kapoor said. India's commercial fleet is much smaller than China's massive merchant marine, underscoring the growth potential for Indian shipyards. India has pledged to secure 1,000 commercial ships over the next decade as part of a national push to grow its shipbuilding industry and maritime sector, he added.

"India's shipbuilding industry is at a pivotal historical moment. With a clear national vision, substantial government backing and a focus on specialized, high-value markets, the sector is well positioned for robust growth," Kapoor said. "With higher capital allocation, India's competitiveness should significantly improve, allowing it to seize opportunities and benefit from challenges faced by the global shipbuilding market."

New Delhi is also promoting the development of integrated shipbuilding clusters. These are industrial parks with state-of-the-art facilities and skill development centers designed to stimulate innovation and productivity, Kapoor added.

India plans to create eight maritime clusters, consisting of five new facilities and three expanded ones. Backed by state governments and with pre-secured land, these clusters will host everything from manufacturing and equipment production to insurance and leasing services, he said.

"For South Korean and Japanese shipbuilders encountering increased price competition from China, collaborating with shipbuilding companies in India provides an additional manufacturing location and access to an emerging market," Kapoor added.