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.
|
|
Tuesday, 05 September 17
COAL: A STRONG MOVEMENT IN THE COAL MARKET OVER THE SUMMER MONTHS - GEORGE LAZARIDIS
We have been witnessing a strong movement in the coal market over the summer months something that has not only helped boost prices for the commodi ...
Friday, 01 September 17
U.S COAL OUTPUT DIPS WEEK OVER WEEK, SAYS EIA
COALspot.com – U.S., the world’s second largest coal producers have produced approximately totalled an estimated 16.7 million short ton ...
Thursday, 31 August 17
SUPRAMAX: INDO TO CHINA COAL TRIPS AT AROUND $9000, DELIVERY THAILAND - FEARNLEYS
Supramax
A bit slow start to the week with UK holidays on Monday. Still strong rates for cargoes out of Black Sea, where front hauls where done $ ...
Tuesday, 29 August 17
WEEKLY SHIPPING MARKET ANALYSIS - ALLIED
In the aftermath of Hurricane Harvey, one of the worst disasters to hit Texas, we are now looking to get a clearer picture of the possible disrupti ...
Tuesday, 29 August 17
U.S WEEKLY COAL OUT UP 3.4% WEEK OVER WEEK TO APPROX. 17 MMST, SAYS EIA
COALspot.com – U.S., the world’s second largest coal producers have produced approximately totalled an estimated 17 million short tonne ...
|
|
|
Showing 1956 to 1960 news of total 6871 |
|
 |
|
|
|
|
| |
|
 |
|
|
| |
|
- Electricity Authority, New Zealand
- Cement Manufacturers Association - India
- Thai Mozambique Logistica
- Meralco Power Generation, Philippines
- TNB Fuel Sdn Bhd - Malaysia
- Essar Steel Hazira Ltd - India
- Aboitiz Power Corporation - Philippines
- Kepco SPC Power Corporation, Philippines
- Cigading International Bulk Terminal - Indonesia
- Leighton Contractors Pty Ltd - Australia
- AsiaOL BioFuels Corp., Philippines
- Power Finance Corporation Ltd., India
- Lanco Infratech Ltd - India
- Petrochimia International Co. Ltd.- Taiwan
- Kohat Cement Company Ltd. - Pakistan
- Videocon Industries ltd - India
- Madhucon Powers Ltd - India
- Renaissance Capital - South Africa
- Pipit Mutiara Jaya. PT, Indonesia
- Sarangani Energy Corporation, Philippines
- Romanian Commodities Exchange
- Africa Commodities Group - South Africa
- GN Power Mariveles Coal Plant, Philippines
- Ministry of Transport, Egypt
- Gujarat Sidhee Cement - India
- Banpu Public Company Limited - Thailand
- IEA Clean Coal Centre - UK
- Deloitte Consulting - India
- Global Green Power PLC Corporation, Philippines
- LBH Netherlands Bv - Netherlands
- Economic Council, Georgia
- Metalloyd Limited - United Kingdom
- Eastern Energy - Thailand
- Singapore Mercantile Exchange
- Chamber of Mines of South Africa
- PNOC Exploration Corporation - Philippines
- Billiton Holdings Pty Ltd - Australia
- Ind-Barath Power Infra Limited - India
- Ministry of Mines - Canada
- Gujarat Mineral Development Corp Ltd - India
- Tamil Nadu electricity Board
- Independent Power Producers Association of India
- Anglo American - United Kingdom
- Toyota Tsusho Corporation, Japan
- Interocean Group of Companies - India
- Siam City Cement PLC, Thailand
- Directorate General of MIneral and Coal - Indonesia
- Formosa Plastics Group - Taiwan
- Siam City Cement - Thailand
- India Bulls Power Limited - India
- Central Java Power - Indonesia
- Meenaskhi Energy Private Limited - India
- Orica Australia Pty. Ltd.
- Global Business Power Corporation, Philippines
- Larsen & Toubro Limited - India
- Aditya Birla Group - India
- Rio Tinto Coal - Australia
- Makarim & Taira - Indonesia
- McConnell Dowell - Australia
- Sical Logistics Limited - India
- Sinarmas Energy and Mining - Indonesia
- Vizag Seaport Private Limited - India
- Indika Energy - Indonesia
- SN Aboitiz Power Inc, Philippines
- Pendopo Energi Batubara - Indonesia
- Krishnapatnam Port Company Ltd. - India
- The University of Queensland
- Globalindo Alam Lestari - Indonesia
- Mercuria Energy - Indonesia
- Indo Tambangraya Megah - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Australian Commodity Traders Exchange
- Minerals Council of Australia
- Altura Mining Limited, Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Alfred C Toepfer International GmbH - Germany
- Coastal Gujarat Power Limited - India
- Price Waterhouse Coopers - Russia
- Eastern Coal Council - USA
- Energy Development Corp, Philippines
- Barasentosa Lestari - Indonesia
- Georgia Ports Authority, United States
- Standard Chartered Bank - UAE
- European Bulk Services B.V. - Netherlands
- Kideco Jaya Agung - Indonesia
- Sindya Power Generating Company Private Ltd
- PetroVietnam Power Coal Import and Supply Company
- Star Paper Mills Limited - India
- Iligan Light & Power Inc, Philippines
- Bahari Cakrawala Sebuku - Indonesia
- Uttam Galva Steels Limited - India
- Heidelberg Cement - Germany
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- The State Trading Corporation of India Ltd
- Bulk Trading Sa - Switzerland
- MS Steel International - UAE
- Rashtriya Ispat Nigam Limited - India
- Tata Chemicals Ltd - India
- TeaM Sual Corporation - Philippines
- Jaiprakash Power Ventures ltd
- Salva Resources Pvt Ltd - India
- Kalimantan Lumbung Energi - Indonesia
- Karaikal Port Pvt Ltd - India
- Marubeni Corporation - India
- PTC India Limited - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Petron Corporation, Philippines
- Oldendorff Carriers - Singapore
- Bhatia International Limited - India
- GMR Energy Limited - India
- Dalmia Cement Bharat India
- International Coal Ventures Pvt Ltd - India
- Riau Bara Harum - Indonesia
- Therma Luzon, Inc, Philippines
- Holcim Trading Pte Ltd - Singapore
- Asmin Koalindo Tuhup - Indonesia
- Coal and Oil Company - UAE
- Bayan Resources Tbk. - Indonesia
- CIMB Investment Bank - Malaysia
- Sojitz Corporation - Japan
- Bukit Asam (Persero) Tbk - Indonesia
- Indonesian Coal Mining Association
- Jindal Steel & Power Ltd - India
- PowerSource Philippines DevCo
- Neyveli Lignite Corporation Ltd, - India
- Bharathi Cement Corporation - India
- New Zealand Coal & Carbon
- Chettinad Cement Corporation Ltd - India
- Bangladesh Power Developement Board
- Ambuja Cements Ltd - India
- Miang Besar Coal Terminal - Indonesia
- Coalindo Energy - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Mjunction Services Limited - India
- Bhushan Steel Limited - India
- Maheswari Brothers Coal Limited - India
- Xindia Steels Limited - India
- Energy Link Ltd, New Zealand
- Parry Sugars Refinery, India
- Malabar Cements Ltd - India
- Jorong Barutama Greston.PT - Indonesia
- Ministry of Finance - Indonesia
- Antam Resourcindo - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Kumho Petrochemical, South Korea
- Indian Energy Exchange, India
- Central Electricity Authority - India
- VISA Power Limited - India
- Simpson Spence & Young - Indonesia
- SMC Global Power, Philippines
- SMG Consultants - Indonesia
- Manunggal Multi Energi - Indonesia
- Planning Commission, India
- London Commodity Brokers - England
- Bukit Makmur.PT - Indonesia
- Edison Trading Spa - Italy
- Australian Coal Association
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Attock Cement Pakistan Limited
- White Energy Company Limited
- CNBM International Corporation - China
- Medco Energi Mining Internasional
- Agrawal Coal Company - India
- Baramulti Group, Indonesia
- Kobexindo Tractors - Indoneisa
- Trasteel International SA, Italy
- Port Waratah Coal Services - Australia
- Intertek Mineral Services - Indonesia
- Directorate Of Revenue Intelligence - India
- Kaltim Prima Coal - Indonesia
- Bukit Baiduri Energy - Indonesia
- Electricity Generating Authority of Thailand
- Parliament of New Zealand
- Latin American Coal - Colombia
- Bhoruka Overseas - Indonesia
- ICICI Bank Limited - India
- ASAPP Information Group - India
- Mintek Dendrill Indonesia
- Commonwealth Bank - Australia
- Semirara Mining and Power Corporation, Philippines
- Borneo Indobara - Indonesia
- Semirara Mining Corp, Philippines
- Carbofer General Trading SA - India
- Thiess Contractors Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Savvy Resources Ltd - HongKong
- South Luzon Thermal Energy Corporation
- Orica Mining Services - Indonesia
- Vedanta Resources Plc - India
- Goldman Sachs - Singapore
- Vijayanagar Sugar Pvt Ltd - India
- GAC Shipping (India) Pvt Ltd
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- San Jose City I Power Corp, Philippines
- Maharashtra Electricity Regulatory Commission - India
- Sree Jayajothi Cements Limited - India
- Global Coal Blending Company Limited - Australia
- Wood Mackenzie - Singapore
- Timah Investasi Mineral - Indoneisa
- Binh Thuan Hamico - Vietnam
- Wilmar Investment Holdings
- Merrill Lynch Commodities Europe
- IHS Mccloskey Coal Group - USA
- Indogreen Group - Indonesia
- Straits Asia Resources Limited - Singapore
- Mercator Lines Limited - India
- OPG Power Generation Pvt Ltd - India
- GVK Power & Infra Limited - India
- Gujarat Electricity Regulatory Commission - India
- Samtan Co., Ltd - South Korea
- Ceylon Electricity Board - Sri Lanka
- Kartika Selabumi Mining - Indonesia
- Grasim Industreis Ltd - India
- Indian Oil Corporation Limited
- Sakthi Sugars Limited - India
- Posco Energy - South Korea
- The Treasury - Australian Government
|
| |
| |
|
