Aug. 8 (Bloomberg) -- Varun Shipping Co., an Indian carrier of oil and gas that counts BP Plc among its clients, plans to spend $300 million this year to buy ships that aid in deep-water oil exploration as crude prices surge.

Varun may add three so-called deep-water anchor handlers this year to its current fleet of 20 vessels, Managing Director Yudhishthir Khatau said in an interview yesterday in Mumbai, where the company is based.

Demand for vessels is increasing as a 66 percent surge in crude oil prices in the past year encourages more deep-sea exploration by Reliance Industries Ltd. and other clients. Varun expects revenue from chartering such vessels to rise to a quarter of its income this year from 3 percent two years ago.

``There is a lot of exploration happening around the world and you need vessels to service that,'' said Rachana Kothari, an analyst at Mumbai-based LKP Shares & Securities Ltd., who has a ``buy'' rating on the stock. Expanding offshore services is ``a diversification strategy for Varun. This space will see a boom in the next two to three years.''

Expansion in India's economy, the second-fastest growing in the world, is fueling the need to find more oil in a country that depends on imports for most of its needs. Mumbai-based Reliance Industries, operator of the world's third-largest refinery, said last month it plans to double the number of rigs operating in its exploration areas.

Brazil, India

Anchor-handling vessels are used to move and anchor oil rigs. Oil companies use such ships to service producing platforms and exploration rigs worldwide.

Brazil and India were the biggest users of offshore oil rigs in July as Petroleo Brasileiro SA drilled the Americas' biggest discovery in three decades and Reliance started developing a coastal field.

Brazil deployed 29 rigs, the most in 21 years, and India, the largest user of rigs in the Asia-Pacific region, ordered 28, adding two since June, Baker Hughes Inc., the world's third- biggest oilfield-services provider, said on its Web site today. The countries accounted for 18 percent of equipment used to drill in waters internationally, excluding the U.S. and Canada.

Crude oil in New York trading rose to a record close of $145.29 a barrel July 3. It fell 1.9 percent to $117.70 today.

``Vessels dedicated to deep-water operations will see better market rates,'' Khatau said. ``The ultra-deepwater segment has relatively very few players.''

The company's current fleet includes 11 gas carriers and three crude oil tankers. Varun's time charters will fetch an average of $60,000 a day this year, Khatau said.

Varun gained 1.3 percent to 69.75 rupees at the close of Mumbai trading today.

The company will raise funds for the expansion through debt and its own cash, Khatau said. Varun's net income in the year ended March 31 surged 56 percent to 2.26 billion rupees ($56 million).

``The outlook on rates remains strong,'' Khatau said. There is ``a strong incentive toward exploration.''

To contact the reporter on this story: Vipin V. Nair in Mumbai at vnair12@bloomberg.net.

Last Updated: August 8, 2008 07:03 EDT