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.
|
|
Wednesday, 19 July 17
SHIPPING MARKET INSIGHT - NASSOS SOULAKIS
Referring back to a previous Intermodal insight that was written in the first quarter of 2017, the author at the time had claimed that MR tanker ra ...
Tuesday, 18 July 17
CHINA'S ECONOMY HAS BOOSTED OPTIMISM IN THE MARKET - GEORGE LAZARIDIS
COALspot.com: China’s economy has boosted optimism in the market as its recently announced GDP growth for the second quarter of the year exce ...
Friday, 14 July 17
IMPORTED COAL IS STILL A SAFE AND RELIABLE SOURCE OF ENERGY IN GERMANY - VDKI
COALspot.com: Imported coal is still a safe and reliable source of energy in Germany. World coal mining has reached a high plateau, but not yet a t ...
Friday, 14 July 17
U.S. WEEKLY COAL-OUTPUT IN SIGNIFICANT DECLINE, EIA FIGURES SHOW
COALspot.com – U.S., the world’s second largest coal producers have produced approximately totaled an estimated 13.4 million short tonn ...
Thursday, 13 July 17
BELT AND ROAD SHIPPING INDICES OFFICIALLY RELEASED - XINHUA
COALspot.com: The Shanghai Shipping Exchange (SSE) Tuesday officially launched the Belt and Road shipping indices to track freight trade data among ...
|
|
|
Showing 2001 to 2005 news of total 6871 |
|
 |
|
|
|
|
| |
|
 |
|
|
| |
|
- Bangladesh Power Developement Board
- Bulk Trading Sa - Switzerland
- Merrill Lynch Commodities Europe
- GN Power Mariveles Coal Plant, Philippines
- Heidelberg Cement - Germany
- Baramulti Group, Indonesia
- Australian Coal Association
- Videocon Industries ltd - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Cigading International Bulk Terminal - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Karbindo Abesyapradhi - Indoneisa
- Altura Mining Limited, Indonesia
- Malabar Cements Ltd - India
- Makarim & Taira - Indonesia
- The Treasury - Australian Government
- Central Java Power - Indonesia
- Rio Tinto Coal - Australia
- Maheswari Brothers Coal Limited - India
- Price Waterhouse Coopers - Russia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Indian Energy Exchange, India
- Thiess Contractors Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Indonesian Coal Mining Association
- Minerals Council of Australia
- Petron Corporation, Philippines
- TNB Fuel Sdn Bhd - Malaysia
- Kobexindo Tractors - Indoneisa
- Madhucon Powers Ltd - India
- SMG Consultants - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Chettinad Cement Corporation Ltd - India
- Indo Tambangraya Megah - Indonesia
- Parry Sugars Refinery, India
- VISA Power Limited - India
- Toyota Tsusho Corporation, Japan
- Port Waratah Coal Services - Australia
- Bhushan Steel Limited - India
- Indika Energy - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Aditya Birla Group - India
- Karaikal Port Pvt Ltd - India
- Maharashtra Electricity Regulatory Commission - India
- India Bulls Power Limited - India
- Petrochimia International Co. Ltd.- Taiwan
- New Zealand Coal & Carbon
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Attock Cement Pakistan Limited
- Bahari Cakrawala Sebuku - Indonesia
- Deloitte Consulting - India
- Edison Trading Spa - Italy
- Metalloyd Limited - United Kingdom
- Commonwealth Bank - Australia
- Billiton Holdings Pty Ltd - Australia
- Sinarmas Energy and Mining - Indonesia
- GMR Energy Limited - India
- Siam City Cement PLC, Thailand
- Latin American Coal - Colombia
- ICICI Bank Limited - India
- Wilmar Investment Holdings
- Intertek Mineral Services - Indonesia
- Bhoruka Overseas - Indonesia
- ASAPP Information Group - India
- Marubeni Corporation - India
- SN Aboitiz Power Inc, Philippines
- Mintek Dendrill Indonesia
- Interocean Group of Companies - India
- South Luzon Thermal Energy Corporation
- Independent Power Producers Association of India
- White Energy Company Limited
- Kaltim Prima Coal - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Kumho Petrochemical, South Korea
- Manunggal Multi Energi - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Global Business Power Corporation, Philippines
- Essar Steel Hazira Ltd - India
- Barasentosa Lestari - Indonesia
- Indogreen Group - Indonesia
- Samtan Co., Ltd - South Korea
- Central Electricity Authority - India
- Therma Luzon, Inc, Philippines
- Renaissance Capital - South Africa
- Siam City Cement - Thailand
- Sical Logistics Limited - India
- Star Paper Mills Limited - India
- Uttam Galva Steels Limited - India
- Singapore Mercantile Exchange
- Orica Australia Pty. Ltd.
- Sree Jayajothi Cements Limited - India
- Gujarat Mineral Development Corp Ltd - India
- Standard Chartered Bank - UAE
- Riau Bara Harum - Indonesia
- Mjunction Services Limited - India
- Thai Mozambique Logistica
- Timah Investasi Mineral - Indoneisa
- Energy Link Ltd, New Zealand
- Neyveli Lignite Corporation Ltd, - India
- Eastern Coal Council - USA
- Ind-Barath Power Infra Limited - India
- Formosa Plastics Group - Taiwan
- Mercuria Energy - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Iligan Light & Power Inc, Philippines
- McConnell Dowell - Australia
- Miang Besar Coal Terminal - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Bayan Resources Tbk. - Indonesia
- Electricity Authority, New Zealand
- Semirara Mining and Power Corporation, Philippines
- Romanian Commodities Exchange
- Medco Energi Mining Internasional
- Indian Oil Corporation Limited
- Antam Resourcindo - Indonesia
- Global Coal Blending Company Limited - Australia
- Sindya Power Generating Company Private Ltd
- Jaiprakash Power Ventures ltd
- Ambuja Cements Ltd - India
- Pipit Mutiara Jaya. PT, Indonesia
- Globalindo Alam Lestari - Indonesia
- Agrawal Coal Company - India
- Gujarat Sidhee Cement - India
- London Commodity Brokers - England
- Energy Development Corp, Philippines
- Bukit Asam (Persero) Tbk - Indonesia
- Salva Resources Pvt Ltd - India
- Kapuas Tunggal Persada - Indonesia
- Kartika Selabumi Mining - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Cement Manufacturers Association - India
- Orica Mining Services - Indonesia
- Vizag Seaport Private Limited - India
- The University of Queensland
- Vedanta Resources Plc - India
- Carbofer General Trading SA - India
- Ministry of Transport, Egypt
- Goldman Sachs - Singapore
- Coastal Gujarat Power Limited - India
- Kepco SPC Power Corporation, Philippines
- The State Trading Corporation of India Ltd
- Pendopo Energi Batubara - Indonesia
- OPG Power Generation Pvt Ltd - India
- Larsen & Toubro Limited - India
- Krishnapatnam Port Company Ltd. - India
- Kalimantan Lumbung Energi - Indonesia
- Anglo American - United Kingdom
- IEA Clean Coal Centre - UK
- MS Steel International - UAE
- Sakthi Sugars Limited - India
- Jindal Steel & Power Ltd - India
- Wood Mackenzie - Singapore
- Ministry of Finance - Indonesia
- SMC Global Power, Philippines
- Electricity Generating Authority of Thailand
- Economic Council, Georgia
- Eastern Energy - Thailand
- Bukit Makmur.PT - Indonesia
- Posco Energy - South Korea
- Tamil Nadu electricity Board
- Semirara Mining Corp, Philippines
- Trasteel International SA, Italy
- Bhatia International Limited - India
- Alfred C Toepfer International GmbH - Germany
- LBH Netherlands Bv - Netherlands
- TeaM Sual Corporation - Philippines
- IHS Mccloskey Coal Group - USA
- PowerSource Philippines DevCo
- Australian Commodity Traders Exchange
- Bukit Baiduri Energy - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Power Finance Corporation Ltd., India
- Sarangani Energy Corporation, Philippines
- Borneo Indobara - Indonesia
- Tata Chemicals Ltd - India
- Straits Asia Resources Limited - Singapore
- Banpu Public Company Limited - Thailand
- Aboitiz Power Corporation - Philippines
- GAC Shipping (India) Pvt Ltd
- CNBM International Corporation - China
- Xindia Steels Limited - India
- CIMB Investment Bank - Malaysia
- Africa Commodities Group - South Africa
- Bharathi Cement Corporation - India
- Kideco Jaya Agung - Indonesia
- Mercator Lines Limited - India
- Directorate Of Revenue Intelligence - India
- San Jose City I Power Corp, Philippines
- European Bulk Services B.V. - Netherlands
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Simpson Spence & Young - Indonesia
- Chamber of Mines of South Africa
- Lanco Infratech Ltd - India
- International Coal Ventures Pvt Ltd - India
- PTC India Limited - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Grasim Industreis Ltd - India
- Meenaskhi Energy Private Limited - India
- Planning Commission, India
- Dalmia Cement Bharat India
- Meralco Power Generation, Philippines
- Parliament of New Zealand
- GVK Power & Infra Limited - India
- Savvy Resources Ltd - HongKong
- Ministry of Mines - Canada
- PNOC Exploration Corporation - Philippines
- Offshore Bulk Terminal Pte Ltd, Singapore
- Binh Thuan Hamico - Vietnam
- Global Green Power PLC Corporation, Philippines
- Rashtriya Ispat Nigam Limited - India
- Sojitz Corporation - Japan
- Coalindo Energy - Indonesia
- Coal and Oil Company - UAE
- Georgia Ports Authority, United States
- Gujarat Electricity Regulatory Commission - India
- Oldendorff Carriers - Singapore
|
| |
| |
|
