On the lines of aircraft and ship leasing businesses, the International Financial Services Centres Authority (IFSCA) has now proposed to introduce oilfield equipment leasing business in GIFT City, Gujarat.

Earlier this week, the IFSCA released a public consultation paper proposing to introduce oilfield equipment leasing as a financial product in GIFT City, thus enabling operating and leasing of such equipment from the IFSC jurisdiction. These equipment are envisaged to be used both for offshore and onshore oilfield operations and the consultation paper seeks comments and suggestions from the public regarding the same. 

“We already have a notification for equipment leasing. Under that we have only enabled ship and aircraft leasing at this point of time. Some of the stakeholders had approached us enquiring about the permissibility of operating lease of oilfield equipment under the ship leasing framework issued by IFSCA, as the extant ship leasing framework allows leasing of off-shore drilling units which are also used in exploration of oil and gas in high seas. On examination of such requests, it is felt that enabling operating lease for oilfield equipment as distinct financial activity from IFSC can play a significant role in supporting the oil exploration activity within India and also develop GIFT-IFSC as the regional hub for oilfield equipment leasing services,” a senior IFSCA official told businessline.

Till date, IFSCA has specified ships, aircraft, aircraft ground support equipment, aircraft flight simulators and aviation training simulation devices as equipment that can be leased from GIFT City. As of December 2024, 30 aircraft operating lease entities, 15 ship leasing entities have been registered with IFSCA. So far these aircraft leasing entities have leased 196 assets, exhibiting 55 per cent annual growth rate. The total assets leased by ship leasing entities have tripled over a period of one year with 13 assets leased as on December-end 2024.

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“India is heavily dependent on import of oilfield equipment for meeting its domestic requirement for production of oil and gas. As per studies, by 2030 Oil & Gas (O&G) exploration area in India is set to increase from 0.5 mn sq km (2025) to 1 mn sq km (2030). It is envisaged that to the exploration activities in India, would lead to enhanced demand for oilfield equipment that are required for exploration and other incidental activities connected with exploration and production of mineral oils, fossil fuels, etc,” states IFSCA in the public consultation paper.

The International oilfield equipment leasing market accounts for approximately 6-7 per cent of the overall equipment leasing market. As per latest research studies available, the total volume of oilfield equipment leasing in 2022 was $85.9 billion. The segment is expected to grow at a compound annual growth rate of 4.91 per cent during the forecast period (2024 – 2032) which is higher than the growth rate for the overall equipment leasing market, states IFSCA.

Oilfield equipment leasing models have been adopted not only by the developed nations like USA, UK, France, Germany, Italy etc. but also by the developing countries like China, to improve their overall productivity, cash management, input cost savings, access to cutting-edge tailor-made technology, etc. To meet this growing demand of leasing for oilfield equipment, countries in the Asia-Pacific region and specifically jurisdictions like Labuan in Malaysia, Singapore, Dubai etc. have developed a thriving and robust oilfield equipment leasing and rental ecosystem. For example, in Malaysia the oil & gas equipment leasing market amounted to $370 million in 2022. The regulators in these jurisdictions have put in place tax incentives, enabling regulatory framework and infrastructure support to develop and regulate this market. 

“Looking at the world statistics, international practice and stakeholder consultations, it is evident that leasing of the oilfield equipment would be an efficient strategy for the Indian companies vis-a-vis purchasing such equipment,” the paper added.