Tanker transport

zoom

GEM CEO Ahmed Al Falahi.

Regional tanker business healthy and enjoying growth in oil industry.

The oil industry is dependent on the transport industries to reach its markets.

Vast quantities of the region's crude and refined products travel to market on tankers, some of which are owned by regional groups.

The sate of this regional shipping industry, specifically the tanker business, was the subject of a speech made by Ahmed Al Falahi, CEO, Gulf Energy Maritime (GEM).

"Gulf Energy Maritime's expertise has been in the clean products and chemical transportation business and I must say, without sounding boastful, that GEM has had a great record so far - be it profits, time charters, newbuilding delivery schedules, health, safety and environment or the overall business," said Al Falahi.

Al Falahi cited the increasing investment in oil refining capacity as one of the key reasons.

"Regional oil refineries are stepping up their production to meet rising demand - these projects are valued at US $122 billion, due for completion before 2013," said Al Falahi.

"Reports say that once completed these GCC projects alone will have the total capacity to produce the equivalent of six million barrels of petrochemicals a day."

"The Middle East accounts for the highest increase in commodity chemical plant capacity."

"By 2010 the potential capacity for this region is expected to be 45 million tonnes, as against 16 million tonnes last year - a direct reflection will be an increase in refining capacity."

Al Falahi said that with new refineries being announced so often, ship owners have been encouraged to order new vessels in anticipation of the growing demand for energy transportation.

These circumstances influenced GEM's decision to place an order to take its fleet strength to 19 by end of 2009, growth that will make it the largest private commercial tanker operator in the region.

"This decision was based on the demand for new oil and chemical tankers due to the gap created by IMO's regulations on phasing out single-hulled tankers by 2010 and the forecast of new refineries being established," said Al Falahi.

GEM's venture into the new building market is not a lone one. Other companies are following a similar path thanks to the relative ease of acquiring funding for high capital investments.

"Among the largest ‘shipping banks' approximately US $150 billion is outstanding to the shipping industry - and expected to increase due to the finance requirements of ongoing orders being placed," said Al Falahi.

"Regional banks even provide attractive and lower interest rates for ship financing as compared to say real estate financing. Margins range from 0.65% to 1.25%."

"Even the terms are attractive - 7 to 10 years for tankers with balloon payment at the end of the tenure. I have seen deals made for up to 25 years for gas carriers."

Despite the fact that new ship orders cost considerably more than those ordered three years ago, and with the increase in bunker costs, and operating costs, the industry is still able to achieve a profit.

Print | Email | Discuss this article |

READERS' COMMENTS

View all comments (1)

Have your say

Tanker Rates Running Amuck
Posted by Prof Philbert, Salmiya/ Kuwait on Wednesday 20 February 2008 at 17:52 UAE time


It is a fascinaiting analysis by GEM that triggered my interest in tanker transport - which is a vital transport line on several routes today.

According to Baltic Dirty Freight Index, the volatile prices of oil crossing now over USD 100 today, the day-rates for tanker ships tend to be higher at certain times of the year. Late in 2004, however, tanker rates spiked to new historic highs. And right now, tanker rates are running at more than double the springtime levels two years ago. The Baltic Dirty Freight Indes shows the index of tanker rates charged on many different routes around the world.

Stocks of petrochemicals are soaring reflecting the healthy state of energy markets in Middle East today

Click here to post a comment

Add your Comment All posts are sent to the administrator for review and are published only after approval. ArabianBusiness.com reserves the right to remove any comment at any time for any reason. Please keep your responses appropriate and on topic.
Name *
Remember me on this computer
Email *	(Your email address will not be published)
City
Country
Subject *
Comment *
Notify me of further comments
Security Code *
Please click post only once - your comment will not be published immediately.

MORE FROM ARABIANBUSINESS.COM