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, 12 November 14
PANAMAX: WITNESSED A FAIRLY STABLE MARKET IN THE ATLANTIC
COALspot.com: Despite the fact that the Dry Bulk market noted another weekly increase, clouds of uncertainty returned mid-week onwards, as the mini ...
Wednesday, 12 November 14
SHIPPING MARKET INSIGHT - CHRISTOPHER T. WHITTY
COALspot.com: The fight continues between the low-cost iron ore producers and the big three: Vale, Rio Tinto and BHP Billiton. We are moving into a ...
Tuesday, 11 November 14
FACING CHALLENGES AND MEETING OPPORTUNITIES - INTERNATIONAL EPC CONFERENCE & EXHIBITION
Press Release: SKYCONNECTION and TRANSEVENT, which is fully supported by the Institution of Engineers Indonesia and Ministry of Industry of the Rep ...
Tuesday, 11 November 14
NEWCASTLE COAL SWAP CLOSED AT $ 52.65 FOR Q1' 15 DELIVERY
COALspot.com: API 5 FOB Newcastle Coal swap for Q1’ 2015 delivery decreased US$ 2.83 (-5.10%) month over month and US$ 1.35 (-2.50%) week ove ...
Tuesday, 11 November 14
PORT OF NEWCASTLE'S OCTOBER COAL SHIPMENTS SLIPPED 7.40% M-O-M
COALspot.com: The Port of Newcastle, Australia’s major trading ports and the world’s largest coal export port, has shipped $1,115.7 mil ...
|
|
|
Showing 3381 to 3385 news of total 6871 |
|
 |
|
|
|
|
| |
|
 |
|
|
| |
|
- Renaissance Capital - South Africa
- Gujarat Mineral Development Corp Ltd - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Posco Energy - South Korea
- Deloitte Consulting - India
- McConnell Dowell - Australia
- Maharashtra Electricity Regulatory Commission - India
- Essar Steel Hazira Ltd - India
- Carbofer General Trading SA - India
- London Commodity Brokers - England
- Sakthi Sugars Limited - India
- Ministry of Mines - Canada
- Miang Besar Coal Terminal - Indonesia
- Global Green Power PLC Corporation, Philippines
- Indo Tambangraya Megah - Indonesia
- Petron Corporation, Philippines
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Indika Energy - Indonesia
- VISA Power Limited - India
- Meenaskhi Energy Private Limited - India
- San Jose City I Power Corp, Philippines
- Alfred C Toepfer International GmbH - Germany
- Kartika Selabumi Mining - Indonesia
- Dalmia Cement Bharat India
- Meralco Power Generation, Philippines
- Cigading International Bulk Terminal - Indonesia
- Siam City Cement - Thailand
- South Luzon Thermal Energy Corporation
- Timah Investasi Mineral - Indoneisa
- Manunggal Multi Energi - Indonesia
- Salva Resources Pvt Ltd - India
- The University of Queensland
- The State Trading Corporation of India Ltd
- Mercuria Energy - Indonesia
- New Zealand Coal & Carbon
- Videocon Industries ltd - India
- Mercator Lines Limited - India
- Ministry of Finance - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Energy Link Ltd, New Zealand
- International Coal Ventures Pvt Ltd - India
- PNOC Exploration Corporation - Philippines
- Global Coal Blending Company Limited - Australia
- Binh Thuan Hamico - Vietnam
- The Treasury - Australian Government
- Banpu Public Company Limited - Thailand
- GAC Shipping (India) Pvt Ltd
- Orica Australia Pty. Ltd.
- Electricity Generating Authority of Thailand
- Grasim Industreis Ltd - India
- Sree Jayajothi Cements Limited - India
- Eastern Coal Council - USA
- Planning Commission, India
- Makarim & Taira - Indonesia
- Parliament of New Zealand
- Straits Asia Resources Limited - Singapore
- Medco Energi Mining Internasional
- Bayan Resources Tbk. - Indonesia
- European Bulk Services B.V. - Netherlands
- Thai Mozambique Logistica
- Semirara Mining Corp, Philippines
- Kalimantan Lumbung Energi - Indonesia
- Minerals Council of Australia
- Karbindo Abesyapradhi - Indoneisa
- Sindya Power Generating Company Private Ltd
- IHS Mccloskey Coal Group - USA
- Xindia Steels Limited - India
- PetroVietnam Power Coal Import and Supply Company
- Central Java Power - Indonesia
- OPG Power Generation Pvt Ltd - India
- ASAPP Information Group - India
- TeaM Sual Corporation - Philippines
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Merrill Lynch Commodities Europe
- Wood Mackenzie - Singapore
- Mjunction Services Limited - India
- Wilmar Investment Holdings
- Orica Mining Services - Indonesia
- White Energy Company Limited
- Australian Coal Association
- Chamber of Mines of South Africa
- Goldman Sachs - Singapore
- Coastal Gujarat Power Limited - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Barasentosa Lestari - Indonesia
- SN Aboitiz Power Inc, Philippines
- Karaikal Port Pvt Ltd - India
- Kepco SPC Power Corporation, Philippines
- Marubeni Corporation - India
- Savvy Resources Ltd - HongKong
- Romanian Commodities Exchange
- Anglo American - United Kingdom
- Gujarat Sidhee Cement - India
- Central Electricity Authority - India
- Ceylon Electricity Board - Sri Lanka
- MS Steel International - UAE
- Antam Resourcindo - Indonesia
- Singapore Mercantile Exchange
- Indonesian Coal Mining Association
- LBH Netherlands Bv - Netherlands
- Kaltim Prima Coal - Indonesia
- Tamil Nadu electricity Board
- Indian Oil Corporation Limited
- Uttam Galva Steels Limited - India
- Independent Power Producers Association of India
- Economic Council, Georgia
- Indogreen Group - Indonesia
- SMC Global Power, Philippines
- Port Waratah Coal Services - Australia
- Heidelberg Cement - Germany
- Lanco Infratech Ltd - India
- Metalloyd Limited - United Kingdom
- Bukit Makmur.PT - Indonesia
- PowerSource Philippines DevCo
- Sinarmas Energy and Mining - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Baramulti Group, Indonesia
- Australian Commodity Traders Exchange
- Sarangani Energy Corporation, Philippines
- Pendopo Energi Batubara - Indonesia
- Indian Energy Exchange, India
- Energy Development Corp, Philippines
- Bulk Trading Sa - Switzerland
- Kapuas Tunggal Persada - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Riau Bara Harum - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Kumho Petrochemical, South Korea
- Directorate Of Revenue Intelligence - India
- Jindal Steel & Power Ltd - India
- Sojitz Corporation - Japan
- Iligan Light & Power Inc, Philippines
- ICICI Bank Limited - India
- Africa Commodities Group - South Africa
- Sical Logistics Limited - India
- Trasteel International SA, Italy
- Bharathi Cement Corporation - India
- Asmin Koalindo Tuhup - Indonesia
- Chettinad Cement Corporation Ltd - India
- Bukit Asam (Persero) Tbk - Indonesia
- Madhucon Powers Ltd - India
- Globalindo Alam Lestari - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Siam City Cement PLC, Thailand
- Attock Cement Pakistan Limited
- Intertek Mineral Services - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Ind-Barath Power Infra Limited - India
- India Bulls Power Limited - India
- Directorate General of MIneral and Coal - Indonesia
- Kideco Jaya Agung - Indonesia
- IEA Clean Coal Centre - UK
- CIMB Investment Bank - Malaysia
- Coal and Oil Company - UAE
- Simpson Spence & Young - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Standard Chartered Bank - UAE
- Jorong Barutama Greston.PT - Indonesia
- Oldendorff Carriers - Singapore
- Malabar Cements Ltd - India
- GVK Power & Infra Limited - India
- Formosa Plastics Group - Taiwan
- SMG Consultants - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Tata Chemicals Ltd - India
- Agrawal Coal Company - India
- Parry Sugars Refinery, India
- Jaiprakash Power Ventures ltd
- AsiaOL BioFuels Corp., Philippines
- Rio Tinto Coal - Australia
- Aditya Birla Group - India
- Ministry of Transport, Egypt
- Mintek Dendrill Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Larsen & Toubro Limited - India
- Holcim Trading Pte Ltd - Singapore
- Maheswari Brothers Coal Limited - India
- Petrochimia International Co. Ltd.- Taiwan
- Therma Luzon, Inc, Philippines
- Kohat Cement Company Ltd. - Pakistan
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Commonwealth Bank - Australia
- PTC India Limited - India
- Latin American Coal - Colombia
- Georgia Ports Authority, United States
- Kobexindo Tractors - Indoneisa
- Bangladesh Power Developement Board
- GN Power Mariveles Coal Plant, Philippines
- Price Waterhouse Coopers - Russia
- Aboitiz Power Corporation - Philippines
- Borneo Indobara - Indonesia
- CNBM International Corporation - China
- Leighton Contractors Pty Ltd - Australia
- Coalindo Energy - Indonesia
- Star Paper Mills Limited - India
- Krishnapatnam Port Company Ltd. - India
- Bukit Baiduri Energy - Indonesia
- Vedanta Resources Plc - India
- Eastern Energy - Thailand
- Interocean Group of Companies - India
- Toyota Tsusho Corporation, Japan
- Thiess Contractors Indonesia
- Cement Manufacturers Association - India
- Gujarat Electricity Regulatory Commission - India
- Power Finance Corporation Ltd., India
- TNB Fuel Sdn Bhd - Malaysia
- Altura Mining Limited, Indonesia
- Edison Trading Spa - Italy
- Electricity Authority, New Zealand
- GMR Energy Limited - India
- Bhatia International Limited - India
- Bhushan Steel Limited - India
- Bhoruka Overseas - Indonesia
- Samtan Co., Ltd - South Korea
- Ambuja Cements Ltd - India
- Global Business Power Corporation, Philippines
- Vizag Seaport Private Limited - India
|
| |
| |
|
