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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
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Thursday, 10 August 17
ANOTHER ACTIVE WEEK FOR THE PANAMAXES WITH INCREASING RATES IN BOTH HEMISPHERES - FEARNLEYS
Supramax
Both basins have remained fairly flat, could say slightly to the negative. A quiet start of the week in the Pacific with holidays in Sin ...
Wednesday, 09 August 17
THE KEY IMPORTERS OF U.S. COAL FOR THE FIRST FIVE MONTHS OF 2017 ARE THE NETHERLANDS, INDIA AND JAPAN - PETER SAND, BIMCO
US seaborne coal exports have turned years of negative growth around and seem to be climbing for a third quarter in a row. The increase in total vo ...
Wednesday, 09 August 17
INDONESIAN COAL PRICE REFERENCE INCREASE COULD CONTINUE IN THE COMING MONTHS
COALspot.com: Indonesian coal benchmark price rose 6.36% in August, government data showed.
The benchmark price of Indonesian thermal ...
Wednesday, 09 August 17
COAL HAS GAINED AROUND 40% OVER THE PAST TWELVE MONTHS; IRON ORE HAS MOVED FROM AROUND $50/T IN AUGUST 2016 TO OVER $70/T TODAY - INTERMODAL
During the summer’s peak, and with the markets remaining relatively quiet, we can argue that most markets have built solid foundations to enj ...
Tuesday, 08 August 17
THE BULLISH RIDE CONTINUES ON FOR THE IRON ORE MARKET - GEORGE LAZARIDIS
The bullish ride continues on for the iron ore market, with most in the market now eyeing the possibility for further gains to be had as Chine ...
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Showing 1976 to 1980 news of total 6871 |
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- Indo Tambangraya Megah - Indonesia
- Thiess Contractors Indonesia
- Thai Mozambique Logistica
- Wilmar Investment Holdings
- Globalindo Alam Lestari - Indonesia
- Medco Energi Mining Internasional
- Australian Coal Association
- South Luzon Thermal Energy Corporation
- Miang Besar Coal Terminal - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Baramulti Group, Indonesia
- Coastal Gujarat Power Limited - India
- Iligan Light & Power Inc, Philippines
- Jindal Steel & Power Ltd - India
- Kapuas Tunggal Persada - Indonesia
- Simpson Spence & Young - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Indian Oil Corporation Limited
- Directorate Of Revenue Intelligence - India
- McConnell Dowell - Australia
- Maharashtra Electricity Regulatory Commission - India
- Banpu Public Company Limited - Thailand
- Central Java Power - Indonesia
- IHS Mccloskey Coal Group - USA
- Kumho Petrochemical, South Korea
- Aboitiz Power Corporation - Philippines
- Ministry of Mines - Canada
- Latin American Coal - Colombia
- Videocon Industries ltd - India
- Aditya Birla Group - India
- Timah Investasi Mineral - Indoneisa
- Energy Development Corp, Philippines
- Siam City Cement PLC, Thailand
- Central Electricity Authority - India
- Marubeni Corporation - India
- Parliament of New Zealand
- GAC Shipping (India) Pvt Ltd
- Barasentosa Lestari - Indonesia
- Essar Steel Hazira Ltd - India
- Xindia Steels Limited - India
- Kartika Selabumi Mining - Indonesia
- New Zealand Coal & Carbon
- Sical Logistics Limited - India
- Karbindo Abesyapradhi - Indoneisa
- Meralco Power Generation, Philippines
- Posco Energy - South Korea
- Interocean Group of Companies - India
- Electricity Authority, New Zealand
- Samtan Co., Ltd - South Korea
- Indonesian Coal Mining Association
- Semirara Mining Corp, Philippines
- Lanco Infratech Ltd - India
- Karaikal Port Pvt Ltd - India
- Meenaskhi Energy Private Limited - India
- Wood Mackenzie - Singapore
- Romanian Commodities Exchange
- Independent Power Producers Association of India
- Indogreen Group - Indonesia
- Mintek Dendrill Indonesia
- Jaiprakash Power Ventures ltd
- Goldman Sachs - Singapore
- Cigading International Bulk Terminal - Indonesia
- GVK Power & Infra Limited - India
- Gujarat Sidhee Cement - India
- Chettinad Cement Corporation Ltd - India
- Kohat Cement Company Ltd. - Pakistan
- Madhucon Powers Ltd - India
- Ministry of Finance - Indonesia
- Carbofer General Trading SA - India
- Asmin Koalindo Tuhup - Indonesia
- Kaltim Prima Coal - Indonesia
- Electricity Generating Authority of Thailand
- CNBM International Corporation - China
- PTC India Limited - India
- Trasteel International SA, Italy
- Anglo American - United Kingdom
- Heidelberg Cement - Germany
- Australian Commodity Traders Exchange
- Kobexindo Tractors - Indoneisa
- Jorong Barutama Greston.PT - Indonesia
- Energy Link Ltd, New Zealand
- Metalloyd Limited - United Kingdom
- Price Waterhouse Coopers - Russia
- London Commodity Brokers - England
- Minerals Council of Australia
- Planning Commission, India
- Eastern Coal Council - USA
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Ministry of Transport, Egypt
- European Bulk Services B.V. - Netherlands
- Salva Resources Pvt Ltd - India
- Bahari Cakrawala Sebuku - Indonesia
- Cement Manufacturers Association - India
- Petrochimia International Co. Ltd.- Taiwan
- LBH Netherlands Bv - Netherlands
- Tamil Nadu electricity Board
- Bhatia International Limited - India
- PetroVietnam Power Coal Import and Supply Company
- Georgia Ports Authority, United States
- GMR Energy Limited - India
- Attock Cement Pakistan Limited
- Therma Luzon, Inc, Philippines
- Agrawal Coal Company - India
- Toyota Tsusho Corporation, Japan
- Sree Jayajothi Cements Limited - India
- Tata Chemicals Ltd - India
- Billiton Holdings Pty Ltd - Australia
- Indika Energy - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Economic Council, Georgia
- Standard Chartered Bank - UAE
- ICICI Bank Limited - India
- Ambuja Cements Ltd - India
- Krishnapatnam Port Company Ltd. - India
- Global Green Power PLC Corporation, Philippines
- Kideco Jaya Agung - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Sojitz Corporation - Japan
- Grasim Industreis Ltd - India
- Port Waratah Coal Services - Australia
- Vizag Seaport Private Limited - India
- India Bulls Power Limited - India
- Mjunction Services Limited - India
- Bharathi Cement Corporation - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Global Coal Blending Company Limited - Australia
- Semirara Mining and Power Corporation, Philippines
- CIMB Investment Bank - Malaysia
- Antam Resourcindo - Indonesia
- VISA Power Limited - India
- Bayan Resources Tbk. - Indonesia
- Coalindo Energy - Indonesia
- Mercator Lines Limited - India
- PowerSource Philippines DevCo
- Orica Mining Services - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Intertek Mineral Services - Indonesia
- Bhoruka Overseas - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Commonwealth Bank - Australia
- Oldendorff Carriers - Singapore
- Petron Corporation, Philippines
- GN Power Mariveles Coal Plant, Philippines
- Riau Bara Harum - Indonesia
- Parry Sugars Refinery, India
- Malabar Cements Ltd - India
- Vedanta Resources Plc - India
- IEA Clean Coal Centre - UK
- Altura Mining Limited, Indonesia
- Chamber of Mines of South Africa
- Coal and Oil Company - UAE
- Sarangani Energy Corporation, Philippines
- TNB Fuel Sdn Bhd - Malaysia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Rashtriya Ispat Nigam Limited - India
- SMG Consultants - Indonesia
- Manunggal Multi Energi - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Gujarat Electricity Regulatory Commission - India
- Bukit Baiduri Energy - Indonesia
- Ind-Barath Power Infra Limited - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- MS Steel International - UAE
- Edison Trading Spa - Italy
- Gujarat Mineral Development Corp Ltd - India
- Dalmia Cement Bharat India
- Power Finance Corporation Ltd., India
- Uttam Galva Steels Limited - India
- PNOC Exploration Corporation - Philippines
- Kepco SPC Power Corporation, Philippines
- Eastern Energy - Thailand
- Savvy Resources Ltd - HongKong
- OPG Power Generation Pvt Ltd - India
- White Energy Company Limited
- Borneo Indobara - Indonesia
- Rio Tinto Coal - Australia
- Holcim Trading Pte Ltd - Singapore
- Larsen & Toubro Limited - India
- SMC Global Power, Philippines
- Makarim & Taira - Indonesia
- San Jose City I Power Corp, Philippines
- The University of Queensland
- Maheswari Brothers Coal Limited - India
- AsiaOL BioFuels Corp., Philippines
- Indian Energy Exchange, India
- Star Paper Mills Limited - India
- Bangladesh Power Developement Board
- SN Aboitiz Power Inc, Philippines
- Renaissance Capital - South Africa
- Pendopo Energi Batubara - Indonesia
- Bhushan Steel Limited - India
- Straits Asia Resources Limited - Singapore
- Kalimantan Lumbung Energi - Indonesia
- Sindya Power Generating Company Private Ltd
- Binh Thuan Hamico - Vietnam
- The Treasury - Australian Government
- Deloitte Consulting - India
- Sinarmas Energy and Mining - Indonesia
- Bulk Trading Sa - Switzerland
- Pipit Mutiara Jaya. PT, Indonesia
- Global Business Power Corporation, Philippines
- ASAPP Information Group - India
- TeaM Sual Corporation - Philippines
- Bukit Makmur.PT - Indonesia
- Formosa Plastics Group - Taiwan
- Directorate General of MIneral and Coal - Indonesia
- Singapore Mercantile Exchange
- Mercuria Energy - Indonesia
- International Coal Ventures Pvt Ltd - India
- The State Trading Corporation of India Ltd
- Bukit Asam (Persero) Tbk - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Siam City Cement - Thailand
- Sakthi Sugars Limited - India
- Africa Commodities Group - South Africa
- Merrill Lynch Commodities Europe
- Orica Australia Pty. Ltd.
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