oil shipping today peter m swift 26 april 2005 center for maritime economics & logistics erasmus...
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Oil Shipping Today
Peter M Swift26 April 2005
Center for Maritime Economics & Logistics Erasmus University Rotterdam
Global primary energy consumption by fuelmillion tonnes oil equivalents
Source: BP
24 %
25 %
6 % 6 %
39 %
Oil: 3563
Gas: 2286
Coal: 2412
Nuclear: 611
Hydro: 593
World oil supply 1900-2005mbd
0102030405060708090
1900
1910
1920
1930
1940
1950
1960
1970
1980
1990
2000
ROW
Middle East
Western Europe
USA
Crude oil seaborne trade
Oil consumption per capita (Litres/day - 2003)
02468
1012
US
Korea
Norway
Japa
n
OECD
Italy
Franc
e UK ME
World
FSU
L Am
er
China
Africa In
dia
Litre
The world needs tankers
Tanker Fleet Ownership
Source: SSY Consultancy & Research Ltd
0
10
20
30
40
50
60
70
80
90
100
1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000
pe
rce
nta
ge
Independent Owner Company (End User)
AS AN INDUSTRY WE MAY NOT BE LOVED BUT WE ARE NEEDED
• World Oil World Oil Consumption 3.6 Consumption 3.6 billion tsbillion ts
• Transported by sea Transported by sea 2.2 2.2 billion tsbillion ts
• 6060% transported by sea.% transported by sea.
Regular supply critical
Daily VLCC spot rates
0
10
20
30
40
50
60
70
80
90
100
J ul-9
9
Oct-9
9
J an-
00
Apr-0
0
J ul-0
0
Oct-0
0
J an-
01
Apr-0
1
J ul-0
1
Oct-0
1
J an-
02
Apr-0
2
J ul-0
2
Oct-0
2
J an-
03
Apr-0
3
J ul-0
3
Oct-0
3
J an-
04
Apr-0
4
'000 U
SD
/day
Source: INTERTANKO
Tanker spot market - average monthly freight ratesJ an 2000 - Nov 2004
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
180,000
200,000
J an-
00
Apr-0
0
J ul-0
0
Oct-0
0
J an-
01
Apr-0
1
J ul-0
1
Oct-0
1
J an-
02
Apr-0
2
J ul-0
2
Oct-0
2
J an-
03
Apr-0
3
J ul-0
3
Oct-0
3
J an-
04
Apr-0
4
J ul-0
4
Oct-0
4
$/d
ay
VLCC: AG - J apan 250' dwt
Suezm: WAFR - USAC 130' dwt
Afram: N Sea - Cont 80' dwt
Clean: Caribs - USAC 30' dwt
Clean: Cont - USAC 33' dwt
Oil price and tanker freight rate 1970-2004
0
10
20
30
40
50
60
70
80
70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02
Max
04
US
D p
er b
arr
el Nominal Price Arabian Light
Real Price Arabian Light
Nominal Freight Rates PG-West
Real Freight Rates PG-West
Deflated by Consumer Price Index (USD)
T H E T A N K E R R O L L E R C O A S T E R 1945 - 2001
0
1 0 0
2 0 0
3 0 0
4 0 0
5 0 0
6 0 0
1945
1950
1955
1960
1965
1970
1975
1980
1985
1990
1995
2000
Sc
ale
- I
nte
rsc
ale
- W
orl
ds
ca
le
<3 0 00 0 D w t 3 0-4 0 ,0 00 D w t 9 0 -10 0 ,0 00 D w t V L C C
War in Palestine
Korean WarSuez Canal Zone
Conflict
Suez Canal Closure
1973 Oil Crisis
Suez canal reopens
Market Doldrums
Kuwait 1990-1
Asian Financial
Crisis
¥
Source: E.A. Gibson Shipbrokers
5254
5658
6062
6466
6870
7274
7678
8082
8486
8890
9294
9596
9799
20012002
2004
Years
$0.00
$0.50
$1.00
$1.50
$2.00
$2.50
$3.00
$3.50
$4.00
$4.50
$5.00
$5.50
$6.00Freight cost ($/bbl)
$0
$5
$10
$15
$20
$25
$30
$35
$40
$45
$50
$55
$60Crude oil price ($/bbl)
Freight Oil Price
Freight and Oil Price Movement - 1950-2004
Suez Crisis
'67 M E war
'73 M E war
OPEC price
power
Kuwaitoccupation
After Erika
Gasoline price at the pump
0,0
0,3
0,5
0,8
1,0
1,3
1,5
USA Japan Germany UK
Long haul freight,$3/bbl
Marketing etc
Oil price (FOB)OPEC basket Jan2003 IEA table 8Tax
Cost elements making the: gasoline price:
$ per litre
Oil into the Sea Annual Releases, best estimates
Average 1990-1999, '1000 ts
Natural seeps
Extraction of oil
Tanker accidents
Tanker operation
Other transportation
River and run-offs
Other shipping
Other consumption related
Source: National Academy of Science
47%
21%
11%
8%
3%
3%
• Meeting Society’s expectations ( “ our licence to trade”)- including the environmental challenges
Key issues for Tanker Owners
The world expects us to have 0 accidents.
Even though 99.9997% of oil is delivered safely
It takes only one accident to change the industry
Ballast Water Management - invasive species
Air Emissions - Engine and Cargo (VOCs)
Ship RecyclingShip Recycling – ship breaking, scrapping, demolition
• Meeting Society’s expectations ( “ our licence to trade”)- including the environmental challenges
• & addressing the “image” issue
Key issues for Tanker Owners
The image ?
OWNER CHARTERER CLASS
IMAGE PROBLEM !
The Rogues of the Tanker Industry
• Meeting Society’s expectations ( “ our licence to trade”)- including the environmental challenges - managing our “image”
• Maintaining International versus Regional and Local legislation
Key issues for Tanker Owners
Threats to international maritime law
• Escorting of single hull tankers out of EEZ by Spain, France et al, in contravention of MARPOL and UNCLOS obligations
• Detention of seafarers, e.g. in Spain and Pakistan in contravention of UNCLOS
• Adoption of Criminal Penalties Directive for ship-source pollution
• European Commission suggestion that UNCLOS might be revised to alter the balance between flag states and coastal states.
• Willingness of EU to implement measures in conflict with MARPOL
• Canadian Bill C-15 in conflict with MARPOL and UNCLOS
But ALL Politics are local
Threats to US federal law pre-eminence• INTERTANKO vs. State of Washington (2000)• - overturning state laws on manning, design, construction and
operation
• USCG vs. State of Massachusetts (pending)
• State of California – vetoed on Escort Tugs, etc. (2004)
• New Jersey (possibly Delaware) threatening to ban single hulls (2005)
• EPA challenged on Ballast Water discharge exemptions (2005)
• Local and state air emission legislation (ongoing)
• State ballast water regulations (ongoing)
But ALL politics are local
CHALLENGES TO INDUSTRY GOVERNANCE
International vs. local, national and regional
• Liability – EU Penal Sanctions vs. International Conventions
• Safety & Environment – EU (Post Erika & Prestige) vs. IMO/Marpol & SOLAS
• Sulphur Levels / Air Emissions – EU, USA vs. IMO
• Security – MTSA vs. ISPS
• Ballast Water Management – US et al vs. IMO
EU Maritime Safety Package III
• Amendment to Directive on Vessel Traffic Monitoring and Information
• Liability and Compensation (principally Passengers)
• Recasting of Legislation on Port State Control
• Role of Classification Societies
• Marine Casualty Investigations in the EU
• Maritime Labour Standards
• Flag State Initiative
But how about earlier programmes – Places of Refuge, Ratification of Conventions, Reception facilities
• Meeting Society’s expectations ( “ our licence to trade”)- including the environmental challenges
• Maintaining International versus Regional and Local legislation
• Overhauling the governance structure of the industry:- Class, Flag, Port State Control
Key issues for Tanker Owners
• EU Challenge on Role of Class – perceived conflict of interest between statutory and classification activities
• Joint Tanker Rules – good rules, common rules, as quickly as possible,freely available, with process for further development/harmonisation
• Role relative to Goal Based Standards – IMO/Flag states versus IACS control of Goal Based Standards
• Who sets class agenda – owners, builders, flag states or class managers ?Example coatings standards (IMO – DE discussion)
Challenges for Classification Societies
Tripartite Dialogue on Newbuilding Standards
IACS
Joint Tanker Project
Common Structural Rules 2005
Tanker Fleet by Flag
Source: SSY Consultancy & Research Ltd
0
10
20
30
40
50
60
70
80
90
100
1946 1950 1960 1970 1980 1990 2000
pe
rce
nta
ge
USA UK Norway Panama Greece Japan Liberia Bahamas Other
The good, the bad and … all legitimate
Flag State Guidelines- industry advice
• Meeting Society’s expectations ( “ our licence to trade”)- including the environmental challenges
• Maintaining International versus Regional and Local legislation
• Overhauling the governance structure of the industry:- Class, Flag, Port State Control
• Reversing the trend to increased criminalisation
Key issues for Tanker Owners
Increasing Criminalization
• Imprisonment of seafarers (Captain Mangouras et al)
• Detention of Tasman Spirit crew and salvors
• EU Directive on Criminal Penalties (including accidental damage)
Should this man have been detained for more than two years without trial ?
• Meeting Society’s expectations ( “ our licence to trade”)- including the environmental challenges
• Maintaining International versus Regional and Local legislation
• Overhauling the governance structure of the industry:- Class, Flag, Port State Control
• Reversing the trend to increased criminalisation
• Ensuring the commitment of all stakeholders to continuous improvement
Key issues for Tanker Owners
Designers Shipbuilders Equipment Suppliers
Class
Charterers Operator/Manager
Financiers / Guarantors
Owner
Commitment to Continuous Improvement by all stakeholders in the maritime businesses
Cargo Owners BrokersP&I Hull insurers
Ports & Terminals
Coastal StatesWaterways authorities
Flag states
Bunker suppliers Pilots Tug operators Labour providers
Salvers RepairersPaint Suppliers Agents
Spill Response Ship Breakers
Oil Shipping Today
Tanker incidents: 1978-03
Source: LMIS, Informa, press, INTERTANKO
Number
0
200
400
600
800
1000
78 80 82 84 86 88 90 92 94 96 98 00 02
Grounded
War
Misc
Hull&Machinery
Fire/Expl
Collision
Development of tanker oil spills
Source: ITOPF. Number of spills above 700 tonnes.
Accidental oil pollution from tankers and tanker trade
Source: ITOPF, Fearnleys
1000 bn tmm ts spilt
0,0
0,7
1,4
2,1
2,8
3,5
1970s 1980s 1990s PR00s
0
22
44
66
88
110
132
m ts spilt
'0000 bntonne-miles
Port State ControlPercentage of inspected ships detained
0 %
2 %
4 %
6 %
8 %
10 %
12 %
14 %
200410m
2003200220012000199919981997
0 %
2 %
4 %
6 %
8 %
10 %
12 %
14 %
of which tankers
All ships
2004 10 months: Paris and Tokyo MoU only
Fleet by hullpercentage
622
6074
83
9478
4940
2617
49
0
20
40
60
80
100
1991 1997 End 02 End 03 End 05 End 10
SH* share (%)
DH share (%)
End 05, all tankers built 1982 and earlier goneEnd 10, all tankers built 1987 and earlier gonetrading beyond 2010 subject to administrations
“Oil should travel first class”- that is the aim of the oil shipping industry
Vision for the tanker industry:
“ A responsible, sustainable and respected industry able to influence its own destiny.”
Key industry goals- effective regulation
• Regulatory environment which supports safe shipping operations, environmental protection and adherence to internationally adopted standards and procedures
• Properly considered international regulation of shipping
• Global regulation for a global industry, adopted and implemented uniformly
www.shippingfacts.com
INTERTANKO Publications
• Guide to bunkering of ships for the purposes of Annex VI to MARPOL
• A Guide for correct entries in the Oil Record Book
• A Guide to Crude Oil Washing and Cargo Heating Criteria
• Tanker Bills of Lading - A Practical Guide
• Guiding Principles to Emergency Management and Crisis Communications
INTERTANKO Publications
• Tanker Specification Awareness Guide
• A Guide to the Vetting Process, 5th. Edition
• A Guide to Tanker Charters (2001)
