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.
|
|
Thursday, 27 July 17
A VOLATILE WEEK IN THE CAPE MARKET - FEARNLEYS
Supramax
The black sea still performing well although bit fewer fixtures concluded/reported. Rates lie somewhere around 18 -19 on front-haul . Bo ...
Wednesday, 26 July 17
SHIPPIPNG MARKET INSIGHT - KONSTANTINOS KONTOMICHIS
After an admittedly challenging 2016, the Dry Bulk market kicked off this year on a much more positive note, with all indices steadily increasing u ...
Monday, 24 July 17
THE FREIGHT MARKET ROSE THIS PAST WEEK COMPARED TO THE PREVIOUS WEEK
COALspot.com: The Freight market rose this past week compared to the previous week, as BDI and Cape indexes show a positive trend week over week.
...
Friday, 21 July 17
ESTIMATED WEEKLY U.S. COAL PRODUCTION TOTALED APPROXIMATELY 15.3 MMST; UP 13.5% W/W
COALspot.com – U.S., the world’s second largest coal producers have produced approximately totaled an estimated 15.3 million short tonn ...
Thursday, 20 July 17
SUPRAMAX: INDO COAL ROUNDS ARE TRADING AROUND MID/HIGH $11K WITH SINGAPORE DELIVERY - FEARNLEYS
Supramax
A positive week again in the Pacific with rates moving upwards.
According to Fearnleys Weekly Dry bulk report, Nopac rounds are pay ...
|
|
|
Showing 1996 to 2000 news of total 6871 |
|
 |
|
|
|
|
| |
|
 |
|
|
| |
|
- Kaltim Prima Coal - Indonesia
- Interocean Group of Companies - India
- Chettinad Cement Corporation Ltd - India
- Carbofer General Trading SA - India
- Baramulti Group, Indonesia
- Mjunction Services Limited - India
- McConnell Dowell - Australia
- Wood Mackenzie - Singapore
- Edison Trading Spa - Italy
- Kepco SPC Power Corporation, Philippines
- Vedanta Resources Plc - India
- Rashtriya Ispat Nigam Limited - India
- GVK Power & Infra Limited - India
- SMG Consultants - Indonesia
- Therma Luzon, Inc, Philippines
- Siam City Cement PLC, Thailand
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Kartika Selabumi Mining - Indonesia
- Petron Corporation, Philippines
- Jindal Steel & Power Ltd - India
- TeaM Sual Corporation - Philippines
- LBH Netherlands Bv - Netherlands
- Ind-Barath Power Infra Limited - India
- Central Java Power - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Riau Bara Harum - Indonesia
- Bukit Makmur.PT - Indonesia
- Cement Manufacturers Association - India
- Mercator Lines Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Global Business Power Corporation, Philippines
- Thai Mozambique Logistica
- Gujarat Sidhee Cement - India
- Mintek Dendrill Indonesia
- Economic Council, Georgia
- Indian Energy Exchange, India
- Kideco Jaya Agung - Indonesia
- ASAPP Information Group - India
- Dalmia Cement Bharat India
- Chamber of Mines of South Africa
- Orica Australia Pty. Ltd.
- Australian Coal Association
- PNOC Exploration Corporation - Philippines
- Holcim Trading Pte Ltd - Singapore
- ICICI Bank Limited - India
- Sarangani Energy Corporation, Philippines
- Ministry of Transport, Egypt
- Bhatia International Limited - India
- Bulk Trading Sa - Switzerland
- GN Power Mariveles Coal Plant, Philippines
- The Treasury - Australian Government
- Global Coal Blending Company Limited - Australia
- Indonesian Coal Mining Association
- VISA Power Limited - India
- Africa Commodities Group - South Africa
- Indian Oil Corporation Limited
- New Zealand Coal & Carbon
- Commonwealth Bank - Australia
- Coalindo Energy - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Port Waratah Coal Services - Australia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Central Electricity Authority - India
- Asmin Koalindo Tuhup - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Attock Cement Pakistan Limited
- Gujarat Electricity Regulatory Commission - India
- Metalloyd Limited - United Kingdom
- Thiess Contractors Indonesia
- White Energy Company Limited
- Essar Steel Hazira Ltd - India
- Petrochimia International Co. Ltd.- Taiwan
- Gujarat Mineral Development Corp Ltd - India
- AsiaOL BioFuels Corp., Philippines
- Global Green Power PLC Corporation, Philippines
- Energy Link Ltd, New Zealand
- Jaiprakash Power Ventures ltd
- Timah Investasi Mineral - Indoneisa
- Altura Mining Limited, Indonesia
- PowerSource Philippines DevCo
- Planning Commission, India
- Merrill Lynch Commodities Europe
- Jorong Barutama Greston.PT - Indonesia
- Star Paper Mills Limited - India
- Ambuja Cements Ltd - India
- Electricity Authority, New Zealand
- Semirara Mining and Power Corporation, Philippines
- SN Aboitiz Power Inc, Philippines
- CIMB Investment Bank - Malaysia
- SMC Global Power, Philippines
- Maharashtra Electricity Regulatory Commission - India
- Xindia Steels Limited - India
- Aditya Birla Group - India
- Vizag Seaport Private Limited - India
- India Bulls Power Limited - India
- Manunggal Multi Energi - Indonesia
- GMR Energy Limited - India
- Uttam Galva Steels Limited - India
- MS Steel International - UAE
- Sindya Power Generating Company Private Ltd
- Heidelberg Cement - Germany
- Karaikal Port Pvt Ltd - India
- Toyota Tsusho Corporation, Japan
- Singapore Mercantile Exchange
- Cigading International Bulk Terminal - Indonesia
- CNBM International Corporation - China
- Borneo Indobara - Indonesia
- Kapuas Tunggal Persada - Indonesia
- IEA Clean Coal Centre - UK
- Banpu Public Company Limited - Thailand
- Deloitte Consulting - India
- Oldendorff Carriers - Singapore
- Medco Energi Mining Internasional
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Sojitz Corporation - Japan
- Sinarmas Energy and Mining - Indonesia
- Latin American Coal - Colombia
- Sree Jayajothi Cements Limited - India
- Simpson Spence & Young - Indonesia
- Eastern Coal Council - USA
- The University of Queensland
- Ministry of Mines - Canada
- Rio Tinto Coal - Australia
- Krishnapatnam Port Company Ltd. - India
- Romanian Commodities Exchange
- Meralco Power Generation, Philippines
- Energy Development Corp, Philippines
- Sical Logistics Limited - India
- Semirara Mining Corp, Philippines
- Pendopo Energi Batubara - Indonesia
- Kobexindo Tractors - Indoneisa
- Standard Chartered Bank - UAE
- South Luzon Thermal Energy Corporation
- Parry Sugars Refinery, India
- Trasteel International SA, Italy
- Australian Commodity Traders Exchange
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Minerals Council of Australia
- Leighton Contractors Pty Ltd - Australia
- Salva Resources Pvt Ltd - India
- Globalindo Alam Lestari - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Renaissance Capital - South Africa
- Parliament of New Zealand
- Meenaskhi Energy Private Limited - India
- Antam Resourcindo - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Indogreen Group - Indonesia
- Makarim & Taira - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Barasentosa Lestari - Indonesia
- Binh Thuan Hamico - Vietnam
- Marubeni Corporation - India
- Bhoruka Overseas - Indonesia
- Madhucon Powers Ltd - India
- The State Trading Corporation of India Ltd
- Price Waterhouse Coopers - Russia
- Kumho Petrochemical, South Korea
- Bharathi Cement Corporation - India
- Eastern Energy - Thailand
- OPG Power Generation Pvt Ltd - India
- Posco Energy - South Korea
- Tata Chemicals Ltd - India
- Iligan Light & Power Inc, Philippines
- Neyveli Lignite Corporation Ltd, - India
- Pipit Mutiara Jaya. PT, Indonesia
- Bangladesh Power Developement Board
- Siam City Cement - Thailand
- Billiton Holdings Pty Ltd - Australia
- Kohat Cement Company Ltd. - Pakistan
- Agrawal Coal Company - India
- TNB Fuel Sdn Bhd - Malaysia
- Grasim Industreis Ltd - India
- Georgia Ports Authority, United States
- Coastal Gujarat Power Limited - India
- Intertek Mineral Services - Indonesia
- Tamil Nadu electricity Board
- Maheswari Brothers Coal Limited - India
- PTC India Limited - India
- Electricity Generating Authority of Thailand
- Indika Energy - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Coal and Oil Company - UAE
- Lanco Infratech Ltd - India
- Videocon Industries ltd - India
- London Commodity Brokers - England
- Bukit Asam (Persero) Tbk - Indonesia
- Sakthi Sugars Limited - India
- Directorate Of Revenue Intelligence - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- European Bulk Services B.V. - Netherlands
- Ministry of Finance - Indonesia
- Malabar Cements Ltd - India
- Karbindo Abesyapradhi - Indoneisa
- San Jose City I Power Corp, Philippines
- Anglo American - United Kingdom
- Goldman Sachs - Singapore
- Bayan Resources Tbk. - Indonesia
- Aboitiz Power Corporation - Philippines
- Miang Besar Coal Terminal - Indonesia
- Larsen & Toubro Limited - India
- Mercuria Energy - Indonesia
- Independent Power Producers Association of India
- Vijayanagar Sugar Pvt Ltd - India
- Bhushan Steel Limited - India
- Bukit Baiduri Energy - Indonesia
- Samtan Co., Ltd - South Korea
- Orica Mining Services - Indonesia
- Power Finance Corporation Ltd., India
- Straits Asia Resources Limited - Singapore
- Savvy Resources Ltd - HongKong
- Wilmar Investment Holdings
- Indo Tambangraya Megah - Indonesia
- GAC Shipping (India) Pvt Ltd
- Formosa Plastics Group - Taiwan
- IHS Mccloskey Coal Group - USA
- International Coal Ventures Pvt Ltd - India
|
| |
| |
|
