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, 05 February 15
ULTRAMAX LEVELS FROM INDIA TO CHINA IN THE MID US$ 5000'S - FEARNLEYS AS
Handy
Despite the overall weak sentiment, there is a scent of optimism in the Atlantic market for ppt dates. Continent is still struggling with o ...
Wednesday, 04 February 15
MARKET INSIGHT - LINOS KOGEVINAS
It has been just about over 2 months since, in a move that surprised many and caused widespread apprehension, OPEC decided to maintain its producti ...
Tuesday, 03 February 15
Q1'15 FOB INDONESIA COAL SWAP CLOSED $ 3.29 HIGHER COMPARED TO Q4'15 DELIVERY PRICE
COALspot.com: Indonesian coal swaps for delivery Q1' 2015 rose week over week and month on month.
The Q1 swap up US$ 0.68 (+1.41%) month o ...
Tuesday, 03 February 15
FOB NEWCASTLE COAL SWAP FOR Q4 DELIVERY CLOSED 5.86% LOWER THAN Q1 PRICE
COALspot.com: API 5 FOB Newcastle Coal swap for Q1’ 2015 delivery rose US$ 0.26 per MT (+0.51%) week over week and declined US$ 0.02 (-0.04%) ...
Monday, 02 February 15
API 4 FOB RICHARDS BAY COAL SWAP ROSE WEEK OVER WEEK
COALspot.com: API 4 FOB Richards Bay Coal swap for delivery Q1' 2015 declined month over month and day on day.
The Q1 swap has decli ...
|
|
|
Showing 3216 to 3220 news of total 6871 |
|
 |
|
|
|
|
| |
|
 |
|
|
| |
|
- Karbindo Abesyapradhi - Indoneisa
- Semirara Mining Corp, Philippines
- Kalimantan Lumbung Energi - Indonesia
- Edison Trading Spa - Italy
- PNOC Exploration Corporation - Philippines
- Anglo American - United Kingdom
- Bharathi Cement Corporation - India
- Alfred C Toepfer International GmbH - Germany
- Kideco Jaya Agung - Indonesia
- Toyota Tsusho Corporation, Japan
- The Treasury - Australian Government
- Carbofer General Trading SA - India
- Riau Bara Harum - Indonesia
- Meenaskhi Energy Private Limited - India
- Sojitz Corporation - Japan
- Antam Resourcindo - Indonesia
- Indika Energy - Indonesia
- Binh Thuan Hamico - Vietnam
- Economic Council, Georgia
- Grasim Industreis Ltd - India
- Siam City Cement - Thailand
- Intertek Mineral Services - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Mercuria Energy - Indonesia
- Central Java Power - Indonesia
- Mjunction Services Limited - India
- India Bulls Power Limited - India
- PTC India Limited - India
- PetroVietnam Power Coal Import and Supply Company
- Minerals Council of Australia
- ASAPP Information Group - India
- Lanco Infratech Ltd - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- SMG Consultants - Indonesia
- Timah Investasi Mineral - Indoneisa
- Coal and Oil Company - UAE
- Jorong Barutama Greston.PT - Indonesia
- Formosa Plastics Group - Taiwan
- Tata Chemicals Ltd - India
- GMR Energy Limited - India
- IEA Clean Coal Centre - UK
- Meralco Power Generation, Philippines
- Global Green Power PLC Corporation, Philippines
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Bukit Makmur.PT - Indonesia
- Kobexindo Tractors - Indoneisa
- Simpson Spence & Young - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Kapuas Tunggal Persada - Indonesia
- Singapore Mercantile Exchange
- Gujarat Sidhee Cement - India
- CIMB Investment Bank - Malaysia
- GAC Shipping (India) Pvt Ltd
- Heidelberg Cement - Germany
- Banpu Public Company Limited - Thailand
- Renaissance Capital - South Africa
- Altura Mining Limited, Indonesia
- Global Business Power Corporation, Philippines
- Coalindo Energy - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Petron Corporation, Philippines
- Directorate General of MIneral and Coal - Indonesia
- Larsen & Toubro Limited - India
- Asmin Koalindo Tuhup - Indonesia
- Kepco SPC Power Corporation, Philippines
- Therma Luzon, Inc, Philippines
- Electricity Authority, New Zealand
- IHS Mccloskey Coal Group - USA
- Power Finance Corporation Ltd., India
- Chamber of Mines of South Africa
- South Luzon Thermal Energy Corporation
- Krishnapatnam Port Company Ltd. - India
- Gujarat Mineral Development Corp Ltd - India
- Sical Logistics Limited - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Videocon Industries ltd - India
- TNB Fuel Sdn Bhd - Malaysia
- Wilmar Investment Holdings
- Independent Power Producers Association of India
- Eastern Coal Council - USA
- Vedanta Resources Plc - India
- Bayan Resources Tbk. - Indonesia
- Orica Australia Pty. Ltd.
- Marubeni Corporation - India
- Manunggal Multi Energi - Indonesia
- Indonesian Coal Mining Association
- Sree Jayajothi Cements Limited - India
- Australian Coal Association
- Port Waratah Coal Services - Australia
- Merrill Lynch Commodities Europe
- SMC Global Power, Philippines
- Ambuja Cements Ltd - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Offshore Bulk Terminal Pte Ltd, Singapore
- PowerSource Philippines DevCo
- Savvy Resources Ltd - HongKong
- Ind-Barath Power Infra Limited - India
- Mercator Lines Limited - India
- Eastern Energy - Thailand
- Miang Besar Coal Terminal - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Billiton Holdings Pty Ltd - Australia
- Sindya Power Generating Company Private Ltd
- Neyveli Lignite Corporation Ltd, - India
- Coastal Gujarat Power Limited - India
- Chettinad Cement Corporation Ltd - India
- London Commodity Brokers - England
- Siam City Cement PLC, Thailand
- Kaltim Prima Coal - Indonesia
- Ministry of Transport, Egypt
- Latin American Coal - Colombia
- Kohat Cement Company Ltd. - Pakistan
- Ministry of Mines - Canada
- Semirara Mining and Power Corporation, Philippines
- Holcim Trading Pte Ltd - Singapore
- Madhucon Powers Ltd - India
- Indian Oil Corporation Limited
- San Jose City I Power Corp, Philippines
- Indogreen Group - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Global Coal Blending Company Limited - Australia
- GN Power Mariveles Coal Plant, Philippines
- Oldendorff Carriers - Singapore
- Africa Commodities Group - South Africa
- Metalloyd Limited - United Kingdom
- Energy Link Ltd, New Zealand
- Sarangani Energy Corporation, Philippines
- Essar Steel Hazira Ltd - India
- Kumho Petrochemical, South Korea
- Posco Energy - South Korea
- Bulk Trading Sa - Switzerland
- Aditya Birla Group - India
- Electricity Generating Authority of Thailand
- OPG Power Generation Pvt Ltd - India
- VISA Power Limited - India
- MS Steel International - UAE
- ICICI Bank Limited - India
- Energy Development Corp, Philippines
- Bhatia International Limited - India
- Iligan Light & Power Inc, Philippines
- Pipit Mutiara Jaya. PT, Indonesia
- Price Waterhouse Coopers - Russia
- New Zealand Coal & Carbon
- Medco Energi Mining Internasional
- Dalmia Cement Bharat India
- Straits Asia Resources Limited - Singapore
- The State Trading Corporation of India Ltd
- The University of Queensland
- Globalindo Alam Lestari - Indonesia
- GVK Power & Infra Limited - India
- Rio Tinto Coal - Australia
- Samtan Co., Ltd - South Korea
- CNBM International Corporation - China
- Deloitte Consulting - India
- Indo Tambangraya Megah - Indonesia
- Thai Mozambique Logistica
- SN Aboitiz Power Inc, Philippines
- Salva Resources Pvt Ltd - India
- Aboitiz Power Corporation - Philippines
- Cigading International Bulk Terminal - Indonesia
- Georgia Ports Authority, United States
- Goldman Sachs - Singapore
- Mintek Dendrill Indonesia
- Star Paper Mills Limited - India
- Karaikal Port Pvt Ltd - India
- Planning Commission, India
- Sinarmas Energy and Mining - Indonesia
- Makarim & Taira - Indonesia
- Bhushan Steel Limited - India
- Directorate Of Revenue Intelligence - India
- Uttam Galva Steels Limited - India
- TeaM Sual Corporation - Philippines
- White Energy Company Limited
- Central Electricity Authority - India
- Tamil Nadu electricity Board
- Bahari Cakrawala Sebuku - Indonesia
- Thiess Contractors Indonesia
- Commonwealth Bank - Australia
- Barasentosa Lestari - Indonesia
- Xindia Steels Limited - India
- Parry Sugars Refinery, India
- Pendopo Energi Batubara - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Wood Mackenzie - Singapore
- Kartika Selabumi Mining - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Trasteel International SA, Italy
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Ceylon Electricity Board - Sri Lanka
- McConnell Dowell - Australia
- Jindal Steel & Power Ltd - India
- Borneo Indobara - Indonesia
- Bangladesh Power Developement Board
- Parliament of New Zealand
- Bukit Baiduri Energy - Indonesia
- Indian Energy Exchange, India
- Sakthi Sugars Limited - India
- Bhoruka Overseas - Indonesia
- Orica Mining Services - Indonesia
- Australian Commodity Traders Exchange
- LBH Netherlands Bv - Netherlands
- Malabar Cements Ltd - India
- Maheswari Brothers Coal Limited - India
- International Coal Ventures Pvt Ltd - India
- Attock Cement Pakistan Limited
- Vijayanagar Sugar Pvt Ltd - India
- Cement Manufacturers Association - India
- Jaiprakash Power Ventures ltd
- Vizag Seaport Private Limited - India
- European Bulk Services B.V. - Netherlands
- Bukit Asam (Persero) Tbk - Indonesia
- Interocean Group of Companies - India
- Romanian Commodities Exchange
- Agrawal Coal Company - India
- Baramulti Group, Indonesia
- Standard Chartered Bank - UAE
- Ministry of Finance - Indonesia
|
| |
| |
|
