India's Aegis Logistics to Invest $90 Million in Oil Terminal Facility at Gujarat's Pipavav Port

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Researched by Industrial Info Resources (Sugar Land, Texas)--Aegis Logistics Limited (BSE:500003) (Mumbai), one of India's leading private-sector port facilities and logistics services providers, has signed an agreement with AP Moller Maersk Terminals Management BV (The Hague, Netherlands) to secure a sub-lease of 100 acres of land for its proposed $90 million oil terminal, which will have a capacity of 600,000 kiloliters, and other allied facilities at the Pipavav port in Gujarat. Confirming media reports, Anish Chandaria, the managing director and CEO of Aegis Logistics, indicated that the oil terminal and associated infrastructure would help in augmenting the importing and exporting of oil, gas and petrochemical products. The investment funds would be raised through a debt-equity ratio of 40:60.

Chandaria said that the project would make India an important link in the oil and gas supply chain network and improve facilities for contango and arbitrage trading. While arbitrage trading provides the advantage of the difference in value of securities in different markets, contango refers to the time when, due to the cost of insurance or storage, the delivery prices of futures become higher than the spot prices. Prakash Tulsiani, the managing director of APM Terminals, said that the liquid storage infrastructure at the Pipavav port would provide full-spectrum services to customers and connect markets in the Far East, the eastern coast of the U.S., and European countries. The port, which is in the Gulf of Khambhat, has 108,100 square meters of container storage and a 735-meter-long berth. The facility includes 15 warehouses, leased by the Central Warehousing Corporation (New Delhi), with a combined capacity of 50,259 square meters.

Presently, Aegis Logistics operates two oil terminals at Mumbai, another at Kochi, and a gas terminal each at Mumbai and the Pipavav port. These facilities handle a combined capacity of 2 million tons of petrochemical products, gas and oil, and 400,000 tons of propane and liquefied petroleum gas (LPG). Through 2016-17, the company is planning to invest $20 billion on new terminals and port infrastructure projects. Aegis Logistics is also augmenting the capacity of its Kochi facility to 82,000 kiloliters from the current 55,000 kiloliters, and is proposing a new terminal at Haldia in West Bengal with a capacity of 80,000 kiloliters. About $6.5 million will be invested on the Haldia project. By 2012-13, Aegis Logistics has forecast profit earnings in the range of $175 million to $218 million from the Haldia and Pipavav projects. In the next couple of months, the company is expected to proceed with the institutional placement of funds to raise $21.8 million for its projects. Motilal Oswal Financial Services Limited (BSE:532892) (Mumbai) and Centrum Capital (BSE :501150) (Mumbai) have been selected as the lead arrangers.

In April, the company acquired Shell Gas (India) Limited (Navi Mumbai, Maharashtra), a subsidiary of Royal Dutch Shell plc (NYSE:RDS.A) (The Hague). Shell Gas (India) owns an LPG-filling facility in Gujarat and other infrastructure in the Pipavav port. The acquisition is also expected to boost Aegis Logistics' entry into the commercial LPG supply, as well as the company's auto gas businesses.

Aegis Logistics' port infrastructure projects are critical as India's private-sector oil storage capacity is almost negligible on the global map. Presently, in comparison to 16 million kiloliters of storage capacity in Singapore, India's private-sector oil-storage capacity is about 3.8 million kiloliters. Although India's oil storage market has witnessed slow growth in the past, in the next few years, this sector is expected to grow at an annual rate of 5% to 7%.

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