Tanker talk

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One of Nakilat’s growing fleet of LNG tankers.

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Ton van Schie, GM, Bluewater Technical.

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Atle Sebjornsen, MD, Stolte Nielsen.

Oil and Gas Middle East finds out how the tanker industry has faced up to the threats of piracy and dwindling demand.

If you are transporting oil, or gas products over long distances, there is nothing more economically viable and efficient as a tanker. Approximately two trillionmetric tonnes of oil alone is moved by tankers every year. On VLCC's the average cost of this transportation is estimated to be just two or three US cents per gallon. Demand for tankers depends heavily on production levels, as well as other factors.

According to a report by Jefferies & Company, tanker demand in the crude oil sector is expected to remain weak over the next several months while crude oil inventories are de-stocked, but demand should improve slightly in 2010 after de-stocking is complete and new non-OPEC production comes online to satisfy improving oil demand.

Douglas Mavrinac, maritime group head, Jefferies, reveals the current state of play: "As OPEC maintains reduced crude oil production levels during the inventory de-stocking period expected to last into 2010, we expect crude oil tanker demand to remain weak through the remainder of this year.

Demand varies depending on what cargo a company specialises in. Soren Huscher, CEO of Norient Product Pool, a company which predominantly manages product tankers, paints a bleak picture of the current market: "Demand is too low unfortunately, we have started to see idle time on our ships and we haven't seen this for the past five years. All of a sudden we are in a situation of great oversupply of tonnage."

The major reason for this is, unsurprisingly, the economic downturn, which Huscher believes has had a delayed impact on the tanker industry.

"It has had a great effect on us, particularly over the last five or six months," says Huscher.

"The economic crisis came somewhat later to the tanker business but it certainly has hit us very forcefully now, and to be honest with you I don't see an immediate recovery in this market just yet, it's something we are going to have to get used to for the immediate future."

Other industry figures agree, Atle Sebjornsen, managing director, Stolte Nielsen, reports: "I believe we are in for some tough sledding for the next two years.   That's what industry analysts are saying, that's what our competitors are saying and that's what we believe.  It's a straightforward issue of supply and demand: there are too many ships and demand is likely to be uneven at best in the future."

In the gas transportation industry, the situation looks a little rosier, at least in Qatar. Nakilat (which means "carrier" in Arabic), an liquified natural gas  (LNG) transporter, currently jointly owns 29 ships and fully owns 25. Further ships are being built as the company attempts to put together the largest LNG fleet in the world.

Muhammad Ghannam, managing director, Nakilat, reveals getting the financing for the ships was not a big problem, even in these turbulent economic times: "We are fortunate because we raised the initial phase of our funding then we went to the market in July 2008 and we raised another 1.5 billion. This year in June we were fortunate enough to raise the remaining funding requirements. We got really good participation from the commercial banks and from two Chinese banks as well."

Somali security

While demand is undoubtedly the biggest issue affecting the tanker business currently, the most high profile issue is that of piracy. The capture of huge tankers off the Gulf of Aden has been widely covered in the international media and the industry has been forced into sometimes drastic security measures in order to deter the Somalian pirates who have been responsible.

"Our policy currently permits transit only under the direct protection of warships, naval patrol boats or shipboard security personnel.  Our crews also receive specialised training and frequent drills." reports Sebjornsen.

 "Ultimately, of course, the issue of piracy and the conditions that enable it must be decisively addressed by governments.  The costs, of security measures, voyage delays and the anguish to those threatened and taken, cannot be tolerated indefinitely."

Some believe more should be done to counter these piracy threats.

"In regards to that particular area in the Gulf of Aden , one thing I would like to see is some participation from the immediate surrounding countries in the Middle East, which seem to be doing very little in solving the problems regarding piracy, either by directly fighting it or by assisting in identifying the root cause of the problem within the neighboring countries," states Huscher.

He added that a lot of the oil which passes through the Gulf of Aden originates from Middle Eastern countries, therefore more responsibility must be taken by governments of these countries in fighting the piracy.

"It seems to be naval ships from far away that are going there to protect the commercial fleet and very little from countries around there, which I think is a shame."

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