We welcome article submissions from experts in the areas of coal, mining,
shipping, etc.
To Submit your article please click here.
|
|
|
Friday, 30 January 15
CONTANGO AND TANKERS - SKULD
 KNOWLEDGE TO ELEVATE
Like an invitation to a dance, the word contango may have some people flustered, but for tanker owners this market phenomenon is a serious matter of securing revenue for their vessels, while ensuring that they remain safe when employing them as floating storage facilities.
The Association is grateful to Messrs. London Offshore Consultants and Andrew Moore & Associates for providing input towards this advisory.
Contango
This word encapsulates a specific situation on the commodity markets where the future price of a given commodity is above the expected future spot price.
It arises where buyers are willing to pay more for a commodity, in the future, than the actual expected price.
A driving factor may be due to a willingness to pay a premium for the commodity in the future, without incurring storage and transportation costs of buying it today.
The fall in oil prices, contango and the impact on the tanker market
The last time oil prices fell dramatically was during the financial crisis of 2008, when it dropped from a record USD145 per barrel to under USD40. While this led to a lot of financial losses, enterprising parties seized the opportunity to buy cheap oil and given the shortage of land based storage they used tankers as floating tank farms. When the price rebounded, the oil was likely sold at a profit.
Oil prices fell significantly at the end of last year and at present they remain very low. The impact of this is felt across the world particularly when a number of oil economies as well as development projects work towards a price of USD100. The current price of below USD50 per barrel puts them under pressure while providing a boost to intensive oil consumers.
Again this market situation has given rise to contango, and again this has meant that tankers found themselves in great demand towards the end of last year. At first this was due to the rush to buy perceived cheap oil, but as shore side storages started to fill up, increasingly tankers were hired to act as floating storage facilities. Either way this was a welcome development to tanker owners and long term period charterers who saw their vessels fetch a solidly improved rate in the spot market.
Risks arising from the use of a tanker as a floating storage facility
How long will this period of low oil prices last? That is a question on which a lot of money will turn. Not least because buying and storing oil now is based on the goal of being able to sell it at a profit in the future, but that requires oil prices to rise by more than the cost of shore or ship storage and subsequent transport to the actual receiver.
The future development of oil prices is beyond the scope of this advisory, but events in the middle east will no doubt have a bearing on it.
For tanker owners, however, there are a number of issues that need to be considered before fixing a vessel out as a floating storage facility. Issues include:
- the vessel may engage in multiple STS operations if cargo is sold off in parcels, this may lead to shortages given that sea conditions can make exact ullages difficult
- if the cargo on board is bunker fuel, there may be requests for blending on board to achieve particular specifications (this may specifically be in breach of SOLAS)
- the origin of the cargo needs to be carefully checked, as in some places in the world there have been issues with smuggling and sanctions breaches
- cargo quality may be affected by long term storage at sea and therefore a full understanding of the cargo specifications and the cargo properties is important: cargo may become unstable, produce sediment, have significant microbial activity, there may be settling of contaminants and sludge, separation of water content or otherwise deteriorate over time
- particularly with sludge / wax formation (made up of both organic and inorganic materials) may lead to very significant pumping and ROB issues
- tank coatings, pumps, lines and valves may be affected if cargo becomes unstable, separates or on loading contains a significant amount of aggressive materials, including any prolonged contact with hydrogen sulphide (H2S)
- tank cleaning: long term storage of crude is likely to mean that the tanks will need more than a usual COW wash and a full tank cleaning may be necessary
- otherwise routine tank vapour management may become an issue, as venting may not be possible in all locations, and this is exasperated if the oil had a high (H2S) content, say greater than 15 ppm
- temperature fluctuations can cause venting during afternoons which may be followed by a drop in pressure at night, thus necessitating the running of the TUG (Top Up Generator) to avoid air being sucked in to the tanks or risk the atmosphere reaching the explosive zone
- if the vessel will be at anchorage, suitable preparation and maintenance of the main engine and auxiliaries will be necessary
- the hull may become fouled if the vessel stays at any location for a significant amount of time, and that may occur during drifting as well as short voyages followed by lengthy stays at anchorage or drifting
- the vessel’s class will need to be consulted, at least for the arrangement of periodic surveys and maintenance of certificates
- manning will be important, including compliance with SOLAS, SCTW and the MLC, as well as arrangements for appropriate crew rotations and shore leave
- vessels drifting or at outer anchorages need to maintain safe levels of fuel, water and provisions
This is not meant to be an exhaustive list, but it should highlight some of the key issues that will need to be addressed if the planned operation as a floating storage facility is to be performed safely and successfully.
Physical and commercial loss prevention advice
Vessel suitability
The starting point for any long term storage will be an assessment of the vessel’s suitability for this purpose. An important factor will be whether the vessel will be at sea or anchorage or otherwise operating. The state of the tanks will also be key, as the long term storage of cargo may put strains on the coating and lead to deterioration and corrosion.
STS operations
There are a number of issues that must be considered with any STS operation, and a full exposition goes beyond the scope of this advisory, but ensuring that it can done safely is paramount (factors include weather, sea states, fendering, the compatibility between vessels, etc.).
If many STS operations are envisaged, with cargo being parcelled out then there is an added risk of shortage issues, as it may not be easy to ensure that ullages are accurate and that only the correct amount is transferred. Paying extra attention to this issue will be important.
Smuggling and sanction breaches
An additional factor is that in some locations it has been known that smuggling may occur or that sanctions breaching activities are undertaken. Members should at all times ensure that the cargo they are taking is legitimate and fully documented. More information can be found here: Origin of cargo and Iranian oil STS.
Blending
If members are asked to engage in blending of cargo, it is important to remember that this is not permitted under SOLAS for any time the vessel is on a sea voyage. Further information on this regulation can be found here: SOLAS and blending.
Blending can also be an issue for P&I cover, as a new product is created (as opposed to co-mingling the same cargo / grade from different sources), and may also pose bill of lading challenges.
It may be necessary to have a laboratory set up on the vessel with a suitable expert in attendance to ensure that repeat operations result in the desired outcome, or risk possible contamination claims.
Cargo quantity
Even if the vessel does not engage in frequent STS operations, it will be necessary to monitor the volume of the cargo on board with periodic dipping and ROB calculations.
If the cargo is of the kind that can lose significant volume over time then this must be understood as an on-going issue.
Cargo quality
While some cargo types are stable, and not easily affected by long term storage at sea, others may be very sensitive or otherwise suffer deterioration over time. The particular cargo to be laden and stored must be properly understood, as well as the time frame for the proposed storage.
Should storage exceed the safe “shelf life” of the cargo, then action may be necessary to ensure it does not deteriorate significantly or risk potentially dramatic claims from ultimate cargo receivers.
Contractual risk apportionment
Owners and charterers should ensure that before fixing, the parties work out the full range of risk scenarios that come with the use of the vessel as a floating storage facility and make sure these are addressed appropriately in the final fixed charterparty.
That includes apportionment of risks, extra costs, hull and tank cleaning as well as insurance coverage issues, which will need to be addressed. Otherwise these are likely to be fertile ground for disputes.
Failing to contract carefully can be financially devastating
Insurance implications
Using a vessel as a long term oil storage facility may impact insurance coverages, as this may not be the trade for which she is normally insured, and indeed this operation is not like a hot or cold lay-up situation. It would be prudent consult with underwriters about the potential impact before fixing the vessel for this purpose.
For vessel specific enquiries, members are asked to contact their usual Skuld business unit.
Source: SKULD | Hellenic Shipping
If you believe an article violates your rights or the rights of others, please contact us.
|
|
Friday, 08 September 17
MIXED SIGNALS ON REFINERY PREPARATIONS FOR 2020 FUEL CHANGES - IBIA
A recent consultancy survey has suggested that some 85% of refiners have not made plans for how to deal with the expected dramatic fall in g ...
Thursday, 07 September 17
CAPESIZE: EARNINGS FOR THE BIG SHIPS KEEP UP NICELY AS DIPS ARE MODERATE AND SHORT-LIVED - FEARNLEYS
Supramax
Fewer activities in the Atlantic in start of the week with the US holidays. Owners were asking around low USD 20k for trip ex USG to Far ...
Thursday, 07 September 17
TALK OF CONSTRAINTS ON CHINESE COAL OUTPUT PUSHED PRICES HIGHER - DANIEL HYNES
Commodity markets were largely higher as a weaker USD boosted investor appetite.
According to Daniel Hynes, Senior Commodity Strategist at ANZ ...
Wednesday, 06 September 17
LAYTIME - CHARTERERS' RIGHTS & PORT COSTS - NORTH P&I CLUB
KNOWLEDGE TO ELEVATE
In a recent London Arbitration decision (18/17) the Tribunal had to consider whether the owners were entitled to recover ...
Wednesday, 06 September 17
SHIPPING MARKET INSIGHT - STELIOS KOLLINTZAS
The impact of Hurricane Harvey, which made landfall on 25th of August in South East coastline of Texas area has been the major concern of the shipp ...
|
|
|
Showing 1951 to 1955 news of total 6871 |
|
 |
|
|
|
|
| |
|
 |
|
|
| |
|
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Bank of Tokyo Mitsubishi UFJ Ltd
- Bukit Makmur.PT - Indonesia
- Electricity Generating Authority of Thailand
- Samtan Co., Ltd - South Korea
- Simpson Spence & Young - Indonesia
- Chamber of Mines of South Africa
- Semirara Mining Corp, Philippines
- Madhucon Powers Ltd - India
- PowerSource Philippines DevCo
- Neyveli Lignite Corporation Ltd, - India
- Banpu Public Company Limited - Thailand
- Therma Luzon, Inc, Philippines
- Australian Commodity Traders Exchange
- Orica Australia Pty. Ltd.
- Timah Investasi Mineral - Indoneisa
- Indian Oil Corporation Limited
- Central Electricity Authority - India
- Commonwealth Bank - Australia
- Malabar Cements Ltd - India
- PetroVietnam Power Coal Import and Supply Company
- Indogreen Group - Indonesia
- Manunggal Multi Energi - Indonesia
- Global Green Power PLC Corporation, Philippines
- Bukit Baiduri Energy - Indonesia
- Energy Development Corp, Philippines
- The Treasury - Australian Government
- Krishnapatnam Port Company Ltd. - India
- Electricity Authority, New Zealand
- Chettinad Cement Corporation Ltd - India
- Kohat Cement Company Ltd. - Pakistan
- GMR Energy Limited - India
- Edison Trading Spa - Italy
- Kideco Jaya Agung - Indonesia
- Ministry of Mines - Canada
- LBH Netherlands Bv - Netherlands
- Tamil Nadu electricity Board
- Australian Coal Association
- Altura Mining Limited, Indonesia
- Toyota Tsusho Corporation, Japan
- Bangladesh Power Developement Board
- Indonesian Coal Mining Association
- The State Trading Corporation of India Ltd
- Planning Commission, India
- Maheswari Brothers Coal Limited - India
- Savvy Resources Ltd - HongKong
- Sakthi Sugars Limited - India
- Goldman Sachs - Singapore
- Standard Chartered Bank - UAE
- Riau Bara Harum - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Parliament of New Zealand
- Aditya Birla Group - India
- Dalmia Cement Bharat India
- Baramulti Group, Indonesia
- Indo Tambangraya Megah - Indonesia
- Kumho Petrochemical, South Korea
- Directorate General of MIneral and Coal - Indonesia
- San Jose City I Power Corp, Philippines
- Sinarmas Energy and Mining - Indonesia
- Mercator Lines Limited - India
- Posco Energy - South Korea
- Siam City Cement PLC, Thailand
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Carbofer General Trading SA - India
- Rashtriya Ispat Nigam Limited - India
- International Coal Ventures Pvt Ltd - India
- Power Finance Corporation Ltd., India
- Videocon Industries ltd - India
- Sree Jayajothi Cements Limited - India
- Maharashtra Electricity Regulatory Commission - India
- Eastern Energy - Thailand
- Latin American Coal - Colombia
- Singapore Mercantile Exchange
- Kobexindo Tractors - Indoneisa
- SMG Consultants - Indonesia
- Ind-Barath Power Infra Limited - India
- GN Power Mariveles Coal Plant, Philippines
- Indika Energy - Indonesia
- IEA Clean Coal Centre - UK
- Rio Tinto Coal - Australia
- Cigading International Bulk Terminal - Indonesia
- IHS Mccloskey Coal Group - USA
- Jorong Barutama Greston.PT - Indonesia
- Petron Corporation, Philippines
- Ministry of Finance - Indonesia
- Marubeni Corporation - India
- SMC Global Power, Philippines
- Bahari Cakrawala Sebuku - Indonesia
- Wilmar Investment Holdings
- Energy Link Ltd, New Zealand
- Meenaskhi Energy Private Limited - India
- McConnell Dowell - Australia
- Metalloyd Limited - United Kingdom
- Economic Council, Georgia
- Bhoruka Overseas - Indonesia
- TeaM Sual Corporation - Philippines
- GVK Power & Infra Limited - India
- Africa Commodities Group - South Africa
- Central Java Power - Indonesia
- ICICI Bank Limited - India
- Kaltim Prima Coal - Indonesia
- Star Paper Mills Limited - India
- Aboitiz Power Corporation - Philippines
- Grasim Industreis Ltd - India
- Mercuria Energy - Indonesia
- Jindal Steel & Power Ltd - India
- Global Coal Blending Company Limited - Australia
- Karbindo Abesyapradhi - Indoneisa
- Thiess Contractors Indonesia
- Deloitte Consulting - India
- Miang Besar Coal Terminal - Indonesia
- Makarim & Taira - Indonesia
- Mintek Dendrill Indonesia
- Directorate Of Revenue Intelligence - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Bhatia International Limited - India
- Bukit Asam (Persero) Tbk - Indonesia
- MS Steel International - UAE
- Eastern Coal Council - USA
- Cement Manufacturers Association - India
- Vizag Seaport Private Limited - India
- Renaissance Capital - South Africa
- Antam Resourcindo - Indonesia
- Bayan Resources Tbk. - Indonesia
- Kartika Selabumi Mining - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Oldendorff Carriers - Singapore
- Kalimantan Lumbung Energi - Indonesia
- SN Aboitiz Power Inc, Philippines
- Merrill Lynch Commodities Europe
- Kapuas Tunggal Persada - Indonesia
- Agrawal Coal Company - India
- Port Waratah Coal Services - Australia
- CIMB Investment Bank - Malaysia
- Pendopo Energi Batubara - Indonesia
- Parry Sugars Refinery, India
- Mjunction Services Limited - India
- Formosa Plastics Group - Taiwan
- Heidelberg Cement - Germany
- Bhushan Steel Limited - India
- Karaikal Port Pvt Ltd - India
- India Bulls Power Limited - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Leighton Contractors Pty Ltd - Australia
- Georgia Ports Authority, United States
- Minerals Council of Australia
- The University of Queensland
- Medco Energi Mining Internasional
- Larsen & Toubro Limited - India
- Jaiprakash Power Ventures ltd
- Billiton Holdings Pty Ltd - Australia
- Trasteel International SA, Italy
- Coastal Gujarat Power Limited - India
- Thai Mozambique Logistica
- PNOC Exploration Corporation - Philippines
- Ambuja Cements Ltd - India
- Globalindo Alam Lestari - Indonesia
- Coal and Oil Company - UAE
- Coalindo Energy - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Bharathi Cement Corporation - India
- OPG Power Generation Pvt Ltd - India
- European Bulk Services B.V. - Netherlands
- Vijayanagar Sugar Pvt Ltd - India
- TNB Fuel Sdn Bhd - Malaysia
- Uttam Galva Steels Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Anglo American - United Kingdom
- Sindya Power Generating Company Private Ltd
- Lanco Infratech Ltd - India
- Straits Asia Resources Limited - Singapore
- Intertek Mineral Services - Indonesia
- Independent Power Producers Association of India
- Ministry of Transport, Egypt
- Romanian Commodities Exchange
- ASAPP Information Group - India
- South Luzon Thermal Energy Corporation
- Gujarat Sidhee Cement - India
- Alfred C Toepfer International GmbH - Germany
- Global Business Power Corporation, Philippines
- New Zealand Coal & Carbon
- Siam City Cement - Thailand
- Salva Resources Pvt Ltd - India
- Sarangani Energy Corporation, Philippines
- Pipit Mutiara Jaya. PT, Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Iligan Light & Power Inc, Philippines
- Interocean Group of Companies - India
- Sojitz Corporation - Japan
- Gujarat Electricity Regulatory Commission - India
- White Energy Company Limited
- Sical Logistics Limited - India
- Orica Mining Services - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- AsiaOL BioFuels Corp., Philippines
- VISA Power Limited - India
- Meralco Power Generation, Philippines
- GAC Shipping (India) Pvt Ltd
- Semirara Mining and Power Corporation, Philippines
- CNBM International Corporation - China
- Xindia Steels Limited - India
- Bulk Trading Sa - Switzerland
- Vedanta Resources Plc - India
- Barasentosa Lestari - Indonesia
- Attock Cement Pakistan Limited
- PTC India Limited - India
- Tata Chemicals Ltd - India
- Petrochimia International Co. Ltd.- Taiwan
- Essar Steel Hazira Ltd - India
- Price Waterhouse Coopers - Russia
- Borneo Indobara - Indonesia
- London Commodity Brokers - England
- Binh Thuan Hamico - Vietnam
- Kepco SPC Power Corporation, Philippines
- Indian Energy Exchange, India
- Wood Mackenzie - Singapore
|
| |
| |
|
