OIL TRANSPORTATION / SHIPPING:
The technology of oil transportation has evolved over the last century alongside the oil industry. It is generally divided into two categories:
• Land transportation (pipelines, trucks, rail)
• Water transportation (oil tankers and barges)
The ocean transportation segment creates our industry – the international seaborne transportation of oil, products and petrochemicals. Roughly two thirds of oil and oil products are transported on water using tankers and barges.
There are around 3,000 crude and product tankers in the world’s fleet (larger than 35,000 dwt). They are all built to a specific structural and design specification to fit world ports and terminals, narrow canals and passages, trading patterns and water depths, among other tailored dimensions. These are broken into three major categories:
DIRTY – is generally referred to larger oil tankers designed to carry crude oil and dirty petroleum products (the cargo actually looks dirty – black and brownish in color and often thick);
CLEAN – is generally referred to clean petroleum product tankers which are medium in size and designated to carry refined oil products such as gasoline, diesel, naphtha, among others (clean products are lighter in color and density from dirty cargoes);
SPECIALTY – is generally referred to smaller vessels built for carrying specialty cargoes such as benzene, styrene, sulfuric acid, veg and palm oils, among others (chemical cargoes vary in density, some can be as thick as candle wax and some are very light).
Ocean going oil tankers are employed on different trading routes around the world. On every route they earn different freight rates which are standardized globally in usd/ton units. The cost of freight is driven by interaction of supply and demand for a particular tanker in a specific region (or time frame) in the world. For example: If there are three cargo stems that need to be transported and only one oil tanker in position to do so – the market will strengthen. Reciprocally, if there is one cargo stem to be transported and three tankers available to lift the stem – the market will weaken. The market can swing on a daily basis, sometimes minute-by-minute, or stay stagnant for days without a significant change. Interestingly, no one knows exactly when it will move and there is no research organization in the world that can accurately forecast the market on a consistent basis.
In addition to the freight market, there are a few other segments within the tanker industry worth noting. For example:
Newbuilding market – vessels are constructed in industrial shipbuilding yards across the globe. The newbuilding market dictates the prices of new vessels when ordered for construction.
Secondhand market – after a vessel is built and joins the world fleet, the sale and purchase market dictates its price throughout the lifetime.
Demolition market – at the end of their trading life, vessels are sold for demolition. The scrap market dictates the value of vessels sold for their final destination.
The unique side of our industry is the international aspect of it. English is the official transacting language, US dollar is the official transacting currency and market participants come from all over the world. To put it into perspective: it is common for an oil tanker to be owned by a company based in Greece, registered in Liberia, transporting cargoes from Middle East to China for a Swiss based shipper on a charter facilitated by a New York based broker. That same tanker can be insured by a UK insurer, commercially managed from Denmark, technically managed by a Singapore based company and staffed by a crewing company in India. That same oil tanker is generally built by Korean engineers and naval architects, financed by a German bank and will be scrapped by an Indian recycling yard. Furthermore, there is a good chance it changed hands a few times over its lifetime and every owning company used a different set of companies – from different parts of the world – to finance, manage and insure it.
• Oil tankers are traded over the phone. It is not unusual to commit millions of dollars in freight over one phone call.
• ‘Fixed’ means two parties are committed to a contract.
•The largest tanker ever built was mt Knock Nevis – 564,763 dwt and a length of 458.45 meters. It was longer than the Empire State building.
• It takes about 20 minutes for a fully loaded large tanker to stop after turning engines off. Engineers typically start shutting engines off 15 miles away from the stopping point.
• Measurement in barrels originated in Pennsylvanian oil fields, where oil products were stored and transported in wooden barrels.
• The first ship built to carry oil (in barrels) was Elisabeth Watts built in 1861 in the US.
• The first ship to carry oil in bulk was Zoroaster built in 1878 in Sweden.
• Sighting of very large oil tankers is rare in the Western Hemisphere as they mostly stay offshore and discharge into smaller tankers or off shore receiving terminals.
• On average 70% of steel from a scraped vessel is comprised of re-rollable scrap which is converted into rods and bars and used in construction applications.
In order to envision the size of international trade on global basis please click on the following link (you will be re-directed). www.shipmap.org