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.
|
|
Monday, 31 July 17
KOMIPO INVITES BIDS FOR 750K MT OF 5,700 KCAL/KG NAR COAL
COALspot.com: South Korea state-owned utility Korea Midland Power (KOMIPO) issued a new tender for 750,000 Metric Tons of Bituminous coal for its B ...
Monday, 31 July 17
THE PORT OF NEWCASTLE SHIPPED 17.08 PERCENT LESS COAL IN JUNE 2017 COMPARED TO ITS MAY LOADING
COALspot.com: The Port of Newcastle, Australia’s major trading ports, and the world’s largest coal export port has shipped $AU 1,442.8 ...
Monday, 31 July 17
THE FREIGHT MARKET DECLINE THIS PAST WEEK
COALspot.com: The Freight market decline this past week compared to the previous week, as BDI and Panamax indexes show a negative trend week over w ...
Friday, 28 July 17
U.S. WEEKLY COAL PRODUCTION UP 1.4% WEEK OVER WEEK - EIA
COALspot.com – U.S., the world’s second largest coal producers have produced approximately totaled an estimated 15.5 million short tonn ...
Thursday, 27 July 17
CAMPBELL SHIPPING APPOINTS ISS FOR GLOBAL HUSBANDRY REPRESENTATION SERVICES CONTRACT - ISS
COALspot.com: Inchcape Shipping Services (ISS) is delighted to announce that it has secured a global husbandry representation contract with Campbel ...
|
|
|
Showing 1991 to 1995 news of total 6871 |
|
 |
|
|
|
|
| |
|
 |
|
|
| |
|
- Independent Power Producers Association of India
- GMR Energy Limited - India
- Trasteel International SA, Italy
- Baramulti Group, Indonesia
- Australian Coal Association
- Indogreen Group - Indonesia
- Riau Bara Harum - Indonesia
- Bharathi Cement Corporation - India
- Sical Logistics Limited - India
- Kepco SPC Power Corporation, Philippines
- Bhushan Steel Limited - India
- Parliament of New Zealand
- Karaikal Port Pvt Ltd - India
- Romanian Commodities Exchange
- Orica Australia Pty. Ltd.
- SMC Global Power, Philippines
- Electricity Generating Authority of Thailand
- Indika Energy - Indonesia
- Thiess Contractors Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Ceylon Electricity Board - Sri Lanka
- Sree Jayajothi Cements Limited - India
- Formosa Plastics Group - Taiwan
- Altura Mining Limited, Indonesia
- Tata Chemicals Ltd - India
- Kumho Petrochemical, South Korea
- Heidelberg Cement - Germany
- The Treasury - Australian Government
- South Luzon Thermal Energy Corporation
- Planning Commission, India
- Kaltim Prima Coal - Indonesia
- McConnell Dowell - Australia
- Oldendorff Carriers - Singapore
- Banpu Public Company Limited - Thailand
- Leighton Contractors Pty Ltd - Australia
- Vijayanagar Sugar Pvt Ltd - India
- Makarim & Taira - Indonesia
- Energy Link Ltd, New Zealand
- Port Waratah Coal Services - Australia
- Bayan Resources Tbk. - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Mercuria Energy - Indonesia
- Deloitte Consulting - India
- Ministry of Finance - Indonesia
- Metalloyd Limited - United Kingdom
- Mercator Lines Limited - India
- Lanco Infratech Ltd - India
- Wilmar Investment Holdings
- Aditya Birla Group - India
- Krishnapatnam Port Company Ltd. - India
- Maheswari Brothers Coal Limited - India
- Miang Besar Coal Terminal - Indonesia
- MS Steel International - UAE
- Malabar Cements Ltd - India
- Standard Chartered Bank - UAE
- SMG Consultants - Indonesia
- Power Finance Corporation Ltd., India
- Alfred C Toepfer International GmbH - Germany
- Vizag Seaport Private Limited - India
- Electricity Authority, New Zealand
- Sinarmas Energy and Mining - Indonesia
- Edison Trading Spa - Italy
- White Energy Company Limited
- Ind-Barath Power Infra Limited - India
- Coalindo Energy - Indonesia
- Pendopo Energi Batubara - Indonesia
- Siam City Cement PLC, Thailand
- Meenaskhi Energy Private Limited - India
- Straits Asia Resources Limited - Singapore
- Africa Commodities Group - South Africa
- Kapuas Tunggal Persada - Indonesia
- Parry Sugars Refinery, India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- PTC India Limited - India
- Jaiprakash Power Ventures ltd
- Ambuja Cements Ltd - India
- Bukit Asam (Persero) Tbk - Indonesia
- Jindal Steel & Power Ltd - India
- GVK Power & Infra Limited - India
- Anglo American - United Kingdom
- Petron Corporation, Philippines
- Savvy Resources Ltd - HongKong
- Sindya Power Generating Company Private Ltd
- International Coal Ventures Pvt Ltd - India
- Merrill Lynch Commodities Europe
- Karbindo Abesyapradhi - Indoneisa
- Toyota Tsusho Corporation, Japan
- Economic Council, Georgia
- The University of Queensland
- Manunggal Multi Energi - Indonesia
- Global Green Power PLC Corporation, Philippines
- Kobexindo Tractors - Indoneisa
- Sarangani Energy Corporation, Philippines
- Vedanta Resources Plc - India
- CNBM International Corporation - China
- Billiton Holdings Pty Ltd - Australia
- Rashtriya Ispat Nigam Limited - India
- Jorong Barutama Greston.PT - Indonesia
- Renaissance Capital - South Africa
- Carbofer General Trading SA - India
- Intertek Mineral Services - Indonesia
- Global Coal Blending Company Limited - Australia
- New Zealand Coal & Carbon
- Simpson Spence & Young - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Eastern Coal Council - USA
- Dalmia Cement Bharat India
- Central Java Power - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Indonesian Coal Mining Association
- Pipit Mutiara Jaya. PT, Indonesia
- OPG Power Generation Pvt Ltd - India
- Coal and Oil Company - UAE
- ASAPP Information Group - India
- Semirara Mining Corp, Philippines
- Directorate Of Revenue Intelligence - India
- Petrochimia International Co. Ltd.- Taiwan
- IEA Clean Coal Centre - UK
- Global Business Power Corporation, Philippines
- Antam Resourcindo - Indonesia
- Chamber of Mines of South Africa
- Binh Thuan Hamico - Vietnam
- San Jose City I Power Corp, Philippines
- Bukit Baiduri Energy - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Orica Mining Services - Indonesia
- Mjunction Services Limited - India
- IHS Mccloskey Coal Group - USA
- CIMB Investment Bank - Malaysia
- Ministry of Mines - Canada
- Thai Mozambique Logistica
- Gujarat Sidhee Cement - India
- Indian Oil Corporation Limited
- Minerals Council of Australia
- Medco Energi Mining Internasional
- Mintek Dendrill Indonesia
- Sakthi Sugars Limited - India
- Central Electricity Authority - India
- VISA Power Limited - India
- Globalindo Alam Lestari - Indonesia
- Chettinad Cement Corporation Ltd - India
- Singapore Mercantile Exchange
- Madhucon Powers Ltd - India
- Bahari Cakrawala Sebuku - Indonesia
- Georgia Ports Authority, United States
- Aboitiz Power Corporation - Philippines
- Uttam Galva Steels Limited - India
- SN Aboitiz Power Inc, Philippines
- AsiaOL BioFuels Corp., Philippines
- Australian Commodity Traders Exchange
- Goldman Sachs - Singapore
- India Bulls Power Limited - India
- TeaM Sual Corporation - Philippines
- Semirara Mining and Power Corporation, Philippines
- Cigading International Bulk Terminal - Indonesia
- Kartika Selabumi Mining - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Tamil Nadu electricity Board
- Gujarat Electricity Regulatory Commission - India
- Indo Tambangraya Megah - Indonesia
- Therma Luzon, Inc, Philippines
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Maharashtra Electricity Regulatory Commission - India
- Energy Development Corp, Philippines
- Sojitz Corporation - Japan
- Bhatia International Limited - India
- Star Paper Mills Limited - India
- Meralco Power Generation, Philippines
- Coastal Gujarat Power Limited - India
- Ministry of Transport, Egypt
- ICICI Bank Limited - India
- Bulk Trading Sa - Switzerland
- The State Trading Corporation of India Ltd
- Kalimantan Lumbung Energi - Indonesia
- Borneo Indobara - Indonesia
- Wood Mackenzie - Singapore
- Kohat Cement Company Ltd. - Pakistan
- Marubeni Corporation - India
- Agrawal Coal Company - India
- Interocean Group of Companies - India
- Kideco Jaya Agung - Indonesia
- Iligan Light & Power Inc, Philippines
- Commonwealth Bank - Australia
- PowerSource Philippines DevCo
- Bhoruka Overseas - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Neyveli Lignite Corporation Ltd, - India
- Bukit Makmur.PT - Indonesia
- London Commodity Brokers - England
- Siam City Cement - Thailand
- Salva Resources Pvt Ltd - India
- Gujarat Mineral Development Corp Ltd - India
- Rio Tinto Coal - Australia
- Attock Cement Pakistan Limited
- GAC Shipping (India) Pvt Ltd
- Essar Steel Hazira Ltd - India
- Indian Energy Exchange, India
- Larsen & Toubro Limited - India
- Cement Manufacturers Association - India
- Barasentosa Lestari - Indonesia
- Eastern Energy - Thailand
- European Bulk Services B.V. - Netherlands
- Posco Energy - South Korea
- Timah Investasi Mineral - Indoneisa
- Bangladesh Power Developement Board
- Xindia Steels Limited - India
- Videocon Industries ltd - India
- Samtan Co., Ltd - South Korea
- Asmin Koalindo Tuhup - Indonesia
- Latin American Coal - Colombia
- Price Waterhouse Coopers - Russia
- PNOC Exploration Corporation - Philippines
- LBH Netherlands Bv - Netherlands
- Grasim Industreis Ltd - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Holcim Trading Pte Ltd - Singapore
|
| |
| |
|
