In Gujarat’s Alang, more oil rigs are arriving at ship graveyard than ever; here’s why

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Updated: May 8, 2018 9:54:59 AM

A slump in global crude oil price between 2014 and 2017 led to an influx of rigs and tanks in Gujarat's Alang for dismantling.

The connection between low oil price and Gujarat's Alang; here's why high number oil rigs hereA slump in global crude oil price between 2014 and 2017 led to an influx of rigs and tanks in Gujarat?s Alang for dismantling. (Image: IE)

A slump in global crude oil price between 2014 and 2017 led to an influx of rigs and tanks in Gujarat’s Alang for dismantling. Known as world’s biggest graveyard of ships, Alang witnessed more owners scraping their ageing tankers and rigs as crude oil slumped, The Indian Express reported. Data show that in last one year more rigs and tankers arrived at Alang for dismantling.

Gujarat Maritime Board (GMB) data shows that of 253 vessels that arrived in Alang, 61 were oil tankers and rigs between April 2017 and March 2018. Between January and March 2018, 30 of the 87 vessels that arrived to be recycled were tankers and rigs.

At Alang, in over the last year, it was not just ships that were being dismantled, but “idle oil rigs” too, a ship-breaker working in the town told the newspaper. Low crude oil prices along with rising iron price make dismantling of oil rigs and tanks viable.

“As the oil prices went down, the price of iron improved in India and so it became viable to bring some of these idle rigs to be broken. There has been a continuous flow of oil rigs to Alang and it is still continuing,” says Haresh Parmar of Ship Recycling Industries Association (SRIA) told The Indian Express. When crude oil dipped to $40 a barrel, it led to more rigs lying idle.

Another reason for more oil tankers arriving in Alang is the ban imposed by Pakistan on scrapping of oil and LPG tankers after accidents in its Gadani yard last year, which led to more tankers being diverted in India for recycling. The ships, oil tankers, and rigs that arrive in Alang are mostly from South America and South Asia.

“There has been a phenomenally high number of oil rigs and tankers that are coming to be broken at Alang. We have never seen such influx in the past,” said Captain Sudhir Chaddha, a port officer from the GMB. Currently, scrap steel from Alang fetches Rs 32,000 per tonne, while the price in 2015 stood at Rs 20,398 per tonne.

Oil price, after hitting a high of $115 a barrel began slumping in 2014 until 2017. Mainly on production cuts by OPEC members and non-member led by Russia, and other geopolitical activities, the oil price began rallying last October. Currently, benchmark Brent crude oil is hovering above $75 a barrel, while WTI is hovering above $70 a barrel.

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