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, 14 January 15
MARKET INSIGHT - TIMOS PAPADIMITRIOU
In Oil we trust! The Barrel price has declined by almost a third in comparison to the 2014 January and has being on the downhill since early last s ...
Wednesday, 14 January 15
COMMODITIES AREN'T PRIMED FOR A REBOUND DURING 2015: SHIPPING COULD BENEFIT FROM LOWER PRICES - ROUSSANOGLOU, HELLENIC SHIPPING NEWS
In the recent past, higher commodity prices were driven by an increase in demand from developing countries, which spelled good news for ship owners ...
Wednesday, 14 January 15
SUB-BIT FOB INDONESIA COAL SWAP FOR Q1 DELIVERY CLOSED AT US$ 46.97 PMT
COALspot.com: Indonesian coal swaps for delivery Q1' 2015 declined month on month and week over week.
The Q1 swap has fell US$ 1.53 (-3.15 ...
Wednesday, 14 January 15
Q4' 15 FOB NEWCASTLE COAL SWAP CLOSED 4.51% LOWER COMPARED TO Q1' 15 PRICE
COALspot.com: API 5 FOB Newcastle Coal swap for Q1’ 2015 delivery lost US$ 1.56 per MT (-3.0%) month over month and US$ 1.03 (-2.0%) week ove ...
Tuesday, 13 January 15
MORE PITFALLS FOR OWNERS LOOKING TO TERMINATE FOR UNPAID HIRE - INCE & CO
KNOWLEDGE TO ELEVATE
It is a debatable point whether or not the obligation to pay hire under a time charter is a condition of the contract or ...
|
|
|
Showing 3256 to 3260 news of total 6871 |
|
 |
|
|
|
|
| |
|
 |
|
|
| |
|
- Krishnapatnam Port Company Ltd. - India
- Thiess Contractors Indonesia
- Singapore Mercantile Exchange
- Manunggal Multi Energi - Indonesia
- PNOC Exploration Corporation - Philippines
- PowerSource Philippines DevCo
- Oldendorff Carriers - Singapore
- Ministry of Transport, Egypt
- VISA Power Limited - India
- Pendopo Energi Batubara - Indonesia
- Banpu Public Company Limited - Thailand
- Port Waratah Coal Services - Australia
- Rio Tinto Coal - Australia
- Bukit Asam (Persero) Tbk - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Romanian Commodities Exchange
- Maharashtra Electricity Regulatory Commission - India
- Petron Corporation, Philippines
- Kideco Jaya Agung - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Kobexindo Tractors - Indoneisa
- Kartika Selabumi Mining - Indonesia
- Bangladesh Power Developement Board
- CIMB Investment Bank - Malaysia
- Baramulti Group, Indonesia
- Electricity Authority, New Zealand
- GVK Power & Infra Limited - India
- GN Power Mariveles Coal Plant, Philippines
- Carbofer General Trading SA - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Price Waterhouse Coopers - Russia
- Indika Energy - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Holcim Trading Pte Ltd - Singapore
- Xindia Steels Limited - India
- Leighton Contractors Pty Ltd - Australia
- Indonesian Coal Mining Association
- Wood Mackenzie - Singapore
- Jorong Barutama Greston.PT - Indonesia
- Power Finance Corporation Ltd., India
- Malabar Cements Ltd - India
- Tamil Nadu electricity Board
- Kohat Cement Company Ltd. - Pakistan
- Grasim Industreis Ltd - India
- Aditya Birla Group - India
- Savvy Resources Ltd - HongKong
- Parry Sugars Refinery, India
- Global Business Power Corporation, Philippines
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Sree Jayajothi Cements Limited - India
- San Jose City I Power Corp, Philippines
- Attock Cement Pakistan Limited
- Binh Thuan Hamico - Vietnam
- ICICI Bank Limited - India
- Cigading International Bulk Terminal - Indonesia
- Uttam Galva Steels Limited - India
- Global Green Power PLC Corporation, Philippines
- Sinarmas Energy and Mining - Indonesia
- Trasteel International SA, Italy
- Mintek Dendrill Indonesia
- Ind-Barath Power Infra Limited - India
- Madhucon Powers Ltd - India
- Orica Mining Services - Indonesia
- Commonwealth Bank - Australia
- Kumho Petrochemical, South Korea
- Pipit Mutiara Jaya. PT, Indonesia
- AsiaOL BioFuels Corp., Philippines
- Semirara Mining Corp, Philippines
- Electricity Generating Authority of Thailand
- Bhoruka Overseas - Indonesia
- Indian Oil Corporation Limited
- Sakthi Sugars Limited - India
- IEA Clean Coal Centre - UK
- Salva Resources Pvt Ltd - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Kapuas Tunggal Persada - Indonesia
- Ministry of Mines - Canada
- Economic Council, Georgia
- Jindal Steel & Power Ltd - India
- Makarim & Taira - Indonesia
- Bukit Baiduri Energy - Indonesia
- Ambuja Cements Ltd - India
- Coastal Gujarat Power Limited - India
- Kepco SPC Power Corporation, Philippines
- Borneo Indobara - Indonesia
- Mjunction Services Limited - India
- The State Trading Corporation of India Ltd
- Latin American Coal - Colombia
- Medco Energi Mining Internasional
- SMC Global Power, Philippines
- European Bulk Services B.V. - Netherlands
- Independent Power Producers Association of India
- Siam City Cement - Thailand
- Tata Chemicals Ltd - India
- Bahari Cakrawala Sebuku - Indonesia
- Riau Bara Harum - Indonesia
- Meralco Power Generation, Philippines
- IHS Mccloskey Coal Group - USA
- Bukit Makmur.PT - Indonesia
- Formosa Plastics Group - Taiwan
- Edison Trading Spa - Italy
- Vedanta Resources Plc - India
- London Commodity Brokers - England
- Gujarat Electricity Regulatory Commission - India
- PTC India Limited - India
- Interocean Group of Companies - India
- Central Electricity Authority - India
- Videocon Industries ltd - India
- Bhatia International Limited - India
- ASAPP Information Group - India
- Jaiprakash Power Ventures ltd
- Rashtriya Ispat Nigam Limited - India
- Minerals Council of Australia
- Ceylon Electricity Board - Sri Lanka
- Indo Tambangraya Megah - Indonesia
- Deloitte Consulting - India
- Marubeni Corporation - India
- Australian Coal Association
- Gujarat Sidhee Cement - India
- Larsen & Toubro Limited - India
- Thai Mozambique Logistica
- Maheswari Brothers Coal Limited - India
- Ministry of Finance - Indonesia
- Georgia Ports Authority, United States
- Sindya Power Generating Company Private Ltd
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Petrochimia International Co. Ltd.- Taiwan
- Star Paper Mills Limited - India
- Indogreen Group - Indonesia
- Agrawal Coal Company - India
- Directorate General of MIneral and Coal - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- GAC Shipping (India) Pvt Ltd
- CNBM International Corporation - China
- Dalmia Cement Bharat India
- Bayan Resources Tbk. - Indonesia
- Bulk Trading Sa - Switzerland
- Energy Link Ltd, New Zealand
- Asmin Koalindo Tuhup - Indonesia
- The University of Queensland
- GMR Energy Limited - India
- South Luzon Thermal Energy Corporation
- Goldman Sachs - Singapore
- Directorate Of Revenue Intelligence - India
- Standard Chartered Bank - UAE
- SMG Consultants - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Miang Besar Coal Terminal - Indonesia
- Bharathi Cement Corporation - India
- Parliament of New Zealand
- Orica Australia Pty. Ltd.
- International Coal Ventures Pvt Ltd - India
- Indian Energy Exchange, India
- PetroVietnam Power Coal Import and Supply Company
- Semirara Mining and Power Corporation, Philippines
- Sarangani Energy Corporation, Philippines
- Posco Energy - South Korea
- Vizag Seaport Private Limited - India
- Coal and Oil Company - UAE
- LBH Netherlands Bv - Netherlands
- Straits Asia Resources Limited - Singapore
- Mercuria Energy - Indonesia
- Antam Resourcindo - Indonesia
- Intertek Mineral Services - Indonesia
- OPG Power Generation Pvt Ltd - India
- Eastern Energy - Thailand
- Anglo American - United Kingdom
- Chamber of Mines of South Africa
- Merrill Lynch Commodities Europe
- MS Steel International - UAE
- Eastern Coal Council - USA
- Billiton Holdings Pty Ltd - Australia
- Kalimantan Lumbung Energi - Indonesia
- Sical Logistics Limited - India
- Metalloyd Limited - United Kingdom
- Siam City Cement PLC, Thailand
- White Energy Company Limited
- Gujarat Mineral Development Corp Ltd - India
- Toyota Tsusho Corporation, Japan
- New Zealand Coal & Carbon
- Simpson Spence & Young - Indonesia
- Africa Commodities Group - South Africa
- Karaikal Port Pvt Ltd - India
- Samtan Co., Ltd - South Korea
- Aboitiz Power Corporation - Philippines
- SN Aboitiz Power Inc, Philippines
- Coalindo Energy - Indonesia
- The Treasury - Australian Government
- Altura Mining Limited, Indonesia
- Globalindo Alam Lestari - Indonesia
- Iligan Light & Power Inc, Philippines
- Planning Commission, India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Wilmar Investment Holdings
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Timah Investasi Mineral - Indoneisa
- McConnell Dowell - Australia
- Cement Manufacturers Association - India
- Lanco Infratech Ltd - India
- Sojitz Corporation - Japan
- TeaM Sual Corporation - Philippines
- Kaltim Prima Coal - Indonesia
- Barasentosa Lestari - Indonesia
- Global Coal Blending Company Limited - Australia
- Meenaskhi Energy Private Limited - India
- India Bulls Power Limited - India
- Mercator Lines Limited - India
- Heidelberg Cement - Germany
- Central Java Power - Indonesia
- Bhushan Steel Limited - India
- Essar Steel Hazira Ltd - India
- Therma Luzon, Inc, Philippines
- Australian Commodity Traders Exchange
- Chettinad Cement Corporation Ltd - India
- Energy Development Corp, Philippines
- Renaissance Capital - South Africa
|
| |
| |
|
