OIL TANKER
In 1876, Ludvig and Robert Nobel, brothers of Alfred Nobel, founded Branobel (short for Brothers Nobel) in Baku, Azerbaijan. It was, during the late 19th century, one of the largest oil companies in the world.
Ludvig was a pioneer in the development of early oil tankers. He first experimented with carrying oil in bulk on single-hulled barges.[9] Turning his attention to self-propelled tankships, he faced a number of challenges. A primary concern was to keep the cargo and fumes well away from the engine room to avoid fires.[12] Other challenges included allowing for the cargo to expand and contract due to temperature changes, and providing a method to ventilate the tanks.[12]
The world's first successful oil tanker was Nobel's Zoroaster. He designed this ship in Gothenburg, Sweden, with Sven Almqvist.[12] The contract to build it was signed in January 1878, and it made its first run later that year from Baku to Astrakhan.[12] The Zoroaster design was widely studied and copied, with Nobel refusing to patent any part of it.[12] In October 1878, he ordered two more tankers of the same design: the Buddha and the Nordenskjöld.[12]
Zoroaster carried its 242 long tons of kerosene cargo in two iron tanks joined by pipes.[12] One tank was forward of the midships engine room and the other was aft.[12] The ship also featured a set of 21 vertical watertight compartments for extra buoyancy.[12] The ship had a length overall of 184 feet (56 m), a beam of 27 feet (8.2 m), and a draft of 9 feet (2.7 m).[12] Unlike later Nobel tankers, the Zoroaster design was built small enough to sail from Sweden to the Caspian by way of the Baltic Sea, Lake Ladoga, Lake Onega, the Rybinsk and Mariinsk Canals and the Volga River.[12]
Nobel then began to adopt a single-hull design, where the ship's hull forms part of its tank structure.[12] In November 1880, he ordered his first single-hulled tanker, the Moses.[12] Within a year, he ordered seven more single-hulled tankers: the Mohammed, Tatarin, Bramah, Spinoza, Socrates, Darwin, Koran, Talmud, and Calmuck.[12]
Branobel experienced one of the first oil tanker disasters. In 1881, the Zoroaster's sister-ship, the Nordenskjöld exploded in Baku while taking on kerosene.[12] The pipe carrying the cargo was jerked away from the hold when the ship was hit by a gust of wind.[12] Kerosene then spilled onto the deck and down into the engine room, where mechanics were working in the light of kerosene lanterns.[12] The ship then exploded, killing half the crew.[12] Nobel responded to the disaster by creating a flexible, leak proof loading pipe which was much more resistant to spills.[13]
In 1883, oil tanker design took a large step forward. Working for the Nobel company, Colonel Henry F. Swan designed a set of three Nobel tankers.[14] Instead of one or two large holds, Swan's design used several holds which spanned the width, or beam, of the ship.[14] These holds were further subdivided into port and starboard sections by a longitudinal bulkhead.[14] Earlier designs suffered from stability problems caused by the free surface effect, where oil sloshing from side to side could cause a ship to capsize.[15] But this approach of dividing the ship's storage space into smaller tanks virtually eliminated free-surface problems.[15] This approach, almost universal today, was first used by Swan in the Nobel tankers Blesk, Lumen, and Lux.[14][16]
In 1903, the Nobel brothers built two oil tankers which ran on internal combustion engines, as opposed to the older steam engines.[10] The Vandal and Sarmat — which were also the first diesel-electric ships — were each capable of carrying 750 long tons of refined oil and powered by 360 horsepower (270 kW) diesel motors.[17] This same firm soon went on to make much larger oil tankers, such as the Emanuel Nobel and Karl Hagelin, 4,600 long ton kerosene tankers with 1,200 horsepower (890 kW) engines.[18]
The Glückauf represented a large step forward in tanker design.[19] Another design of Colonel Swan, the ship has been called the "true progenitor of all subsequent tanker tonnage."[19] Its features included cargo valves operable from the deck, cargo main piping, a vapor line, cofferdams for added safety, and the ability to load seawater ballast when empty of cargo.[19] Wilhelm Anton Riedemann, an agent for the Standard Oil Company purchased Glückauf and several of her sister ships.[19] After the Glückauf was lost in 1893, Standard Oil purchased the sister ships.[19]
[edit] Breaking the Standard Oil monopoly
The 1880s also saw the beginnings of the Asian oil trade.[20] The idea that led to moving Russian oil to the Far East via the Suez Canal was the brainchild of two men: importer Marcus Samuel and shipowner/broker Fred Lane.[20] Prior bids to move oil through the canal had been rejected by the Suez Canal Company as being too risky.[20] Samuel approached the problem a different way: asking the company for the specifications of a tanker it would allow through the canal.[20]
Armed with the canal companies specifications, Samuel ordered three tankers from William Gray in northern England.[20] Named the Murex, the Conch and the Clam, each had a capacity of 5,010 long tons of deadweight.[20] These three ships were the first tankers of the Tank Syndicate, forerunner of today's Royal Dutch Shell company.[20]
With facilities prepared in Jakarta, Singapore, Bangkok, Saigon, Hong Kong, Shanghai, and Kobe, the fledgling Shell company was ready to become Standard Oil's first challenger in the Asian market.[20] On August 24, 1892, the Murex became the first tanker to pass through the Suez Canal.[20] By the time Shell merged with Royal Dutch Petroleum in 1907, the company had 34 steam-driven oil tankers, compared to Standard Oil's four case-oil steamers and 16 sailing tankers.[20]
[edit] World War I
The fleet oiler USS Maumee, launched on April 17, 1915, pioneered the technique of underway replenishment.[21] A large ship at the time, with a capacity of 14,500 long tons of deadweight, Maumee began refuelling destroyers en route to Britain at the outset of World War I.[21] This technique enabled the Navy to keep its fleets at sea for extended periods, with a far greater range independent of the availability of a friendly port.[21] This independence proved crucial to victory in World War II by the ships commanded by Fleet Admiral Nimitz who, as Maumee’s executive officer, had played a key role in developing underway replenishment.[21]
Underway replenishment was quickly adopted by other navies. One example of this is the Australian fleet oiler HMAS Kurumba which provided underway replenishment services in the United Kingdom's Royal Navy from 1917 to 1919.[22]
During World War I, unrestricted submarine warfare caused a shortage of tankers. The United States ambassador to the United Kingdom, Walter Hines Page, wrote "The submarines are sinking freight ships faster than freight ships are being built by the whole world. In this way, too, then, the Germans are succeeding. Now if this goes on long enough, the Allies' game is up. For instance, they have lately sunk so many fuel oil ships, that this country may very soon be in a perilous condition — even the Grand Fleet may not have enough fuel".[23] Georges Clemenceau wrote to US president Wilson "Gasoline is as vital as blood in the coming battles…a failure in the supply of gasoline would cause the immediate paralysis of our armies".[24] Wilson reacted strongly.[25] The War Shipping Board commandeered all ships in the United States and also took over all yards.[25] An unprecedented budget of $US1.3 billion was used for this end.[25] At Hog Island, the largest shipyard in the world was built, known for the Hog Islander.[25]
Between 1916 and 1921, 316 tankers were built with a total capacity of 3.2 million long tons of deadweight, where the entire world fleet before WW I was just above 2 million tons.[25] In 1923 about 800,000 long tons were laid up, which gave enormous opportunities for speculators, such as Daniel Keith Ludwig.[25] In 1925 he had bought the freighter Phoenix and put tanks in the holds.[25] These riveted tanks leaked, which resulted in a explosive mixture.[25] The resulting explosion killed two crew members and badly injured Ludwig. After this, he was a strong believer in welding.[25]
[edit] World War II
Oil tankers, particularly the T2 tanker, played an important part in World War II. The T2-SE-A1 with a capacity of 16,613 long tons of deadweight, was the most popular variant with nearly 500 built during the war.[26] After the war, these tankers were used commercially for decades, and many were sold on the international market.[26]
Until 1956, tankers were designed to be able to navigate the Suez Canal.[26] This size restriction became much less of a priority after the closing of the canal during the Suez Crisis of 1956.[26] Forced to move oil around the Cape of Good Hope, shipowners realized that bigger tankers were the key to more efficient transport.[26]
[edit] The supertanker era
Tankers have grown significantly in size since World War II.[27] A typical T2 tanker of the World War II era was 532 feet (162 m) long and had a capacity of 16,500 DWT.[28] A modern ultra-large crude carrier (ULCC) can be 1,300 feet (400 m) long and have a capacity of 500,000 DWT.[28] Several factors encouraged this growth. Hostilities in the Middle East which interrupted traffic through the Suez Canal contributed, as did nationalization of Middle East oil refineries.[27] Fierce competition among shipowners also played a part.[27] But apart from these considerations is a simple economic advantage: the larger an oil tanker is, the more cheaply it can move crude oil, and the better it can help meet growing demands for oil.[27]
In 1958, United States shipping magnate Daniel K. Ludwig broke the barrier of 100,000 long tons of heavy displacement.[29] His Universe Apollo displaced 104,500 long tons, a 23% increase from the previous record-holder, Universe Leader which also belonged to Ludwig.[29][30]
The world's largest supertanker ever was built in 1979 at the Oppama Shipyard of Sumitomo Heavy Industries, Ltd. as the Seawise Giant. This ship was built with a capacity of 564,763 DWT, a length overall of 458.45 metres (1,504.1 ft) and a draft of 24.611 metres (80.74 ft).[31] She has 46 tanks, 31,541 square metres (339,500 sq ft) of deck, and is too large to pass through the English Channel.[32]
Seawise Giant was renamed Happy Giant in 1989, Jahre Viking in 1991.[31] From 1979 to 2004, she was owned by Loki Stream, at which point she was bought by First Olsen Tankers, renamed Knock Nevis and converted into a permanently moored storage tanker.[31][32]
As of 2008, the worlds four largest working supertankers are the TI class supertankers , currently known as the TI Asia, TI Europe, TI Oceania, and TI Africa.[33][34] These ships were built in 2002 and 2003 as the Hellespont Alhambra, Hellespont Metropolis, Hellespont Tara and Fairfax for the Greek Hellespont Steamship Corporation.[35] Hellespont sold these ships to Overseas Shipholding Group and Euronav in 2004.[36]
Each of the four sister ships has a capacity of over 441,500 DWT, a length overall of 380 metres (1,247 ft) and a cargo capacity of 3,166,353 barrels (503,409,900 l).[37] The first ULCC tankers to be built for some 25 years, they were also the first ULCCs to be double-hulled.[35] To differentiate them from smaller ULCCs, these ships are sometimes given the V-Plus size designation.[38][37] In February 2008, their owners announced plans to convert TI Africa and the TI Asia into stationary floating storage and offloading units to be placed in the Al Shaheen oilfield near Qatar in late 2009.[33]
With the exception of the pipeline, the tanker is the most cost-effective way to move oil today.[39] Worldwide, tankers carry some 2 billion barrels (3.2×1011 l) annually, and the cost of transportation by tanker amounts to only US$0.02 per gallon at the pump.[39]
[edit] Size categories
| AFRA Scale[40] | Flexible market scale[40] | ||||
| Class | Size in DWT | Class | Size in DWT | New price[41] |
Used price[42] |
|---|---|---|---|---|---|
| General Purpose tanker | 10,000 - 24,999 | Product tanker | 10,000 - 60,000 | $43M | $42.5M |
| Medium Range tanker | 25,000 - 44,999 | Panamax | 60,000 - 80,000 | ||
| LR1 (Large Range 1) | 45,000 - 79,999 | Aframax | 80,000 - 120,000 | $58M | $60.7M |
| LR2 (Large Range 2) | 80,000 - 159,999 | Suezmax | 120,000 - 200,000 | ||
| VLCC (Very Large Crude Carrier) | 160,000 - 319,999 | VLCC | 200,000 - 320,000 | $120M | $116M |
| ULCC (Ultra Large Crude Carrier) | 320,000 - 549,999 | ULCC | 320,000 - 550,000 | ||
In 1954 Shell Oil developed the average freight rate assessment (AFRA) system which classifies tankers of different sizes. To make it an independent instrument, Shell consulted the London Tanker Brokers’ Panel (LTBP). At first, they divided the groups as General Purpose for tankers under 25,000 tons deadweight (DWT); Medium Range for ships between 25,000 and 45,000 DWT and Large Range for the then-enormous ships that were larger than 45,000 DWT. The ships became larger during the 1970s, which prompted rescaling.[40]
The system was developed for tax reasons as the tax authorities wanted evidence that the internal billing records were correct. Before the New York Mercantile Exchange started trading crude oil futures in 1983, it was difficult to determine the exact price of oil, that could change with every contract. Shell and BP, the first ones to use the system, abandoned the AFRA system in 1983, later followed by the US oil companies. However, the system is still used today. Besides that, there is the flexible market scale, that takes typical routes and lots of 500,000 barrels.[43]
Merchant oil tankers carry a wide range of hydrocarbon liquids ranging from crude oil to refined petroleum products.[2] Their size is measured in deadweight metric tons (DWT). Crude carriers are among the largest, ranging from 55,000 DWT Panamax-sized vessels to ultra-large crude carriers (ULCCs) of over 440,000 DWT.[44]
Supertanker is an informal term used to describe the largest tankers. Today it is applied to very-large crude carriers (VLCC) and ULCCs with capacity over 250,000 DWT. These ships can transport two million barrels of oil.[44] By way of comparison, the combined oil consumption of Spain and the United Kingdom in 2005 was about 3.4 million barrels (540,000 m3) of oil a day.[45]
Because of their great size, supertankers can often not enter port fully loaded.[27] These ships can take on their cargo at off-shore platforms and single-point moorings.[27] On the other end of the journey, they often pump their cargo off to smaller tankers at designated lightering points off-coast.[27] A supertanker's routes are generally long, requiring it to stay at sea for extended periods, up to and beyond seventy days at a time.[27]
Smaller tankers, ranging from well under 10,000 DWT to 80,000 DWT Panamax vessels, generally carry refined petroleum products, and are known as product tankers.[44] The smallest tankers, with capacities under 10,000 DWT generally work near-coastal and inland waterways.[44] Although they were in the past, ships of the smaller Aframax and Suezmax classes are no longer regarded as supertankers.[46]
[edit] Chartering
The act of hiring a ship to carry cargo is called chartering. Tankers are hired by four types of charter agreements: the voyage charter, the time charter, the bareboat charter, and contract of affreightment.[47] In a voyage charter, the charterer rents the vessel from the loading port to the discharge port.[47] In a time charter, the vessel is hired for a set period of time, to perform voyages as the charterer directs.[47] In a bareboat charter, the charterer acts as the ship's operator and manager, taking on responsibilities such as providing the crew and maintaining the vessel.[48] Finally, in a contract of affreightment, or COA, the charterer specifies a total volume of cargo to be carried in a specific time period and in specific sizes, for example a COA could be specified as "one million barrels of JP-5 in a year's time in 25,000 barrel shipments."[49] A completed chartering contract is known as a charter party.[49]
One of the key aspects of any charter party is the freight rate, or the price specified for carriage of cargo.[50] The freight rate of a tanker charter party is specified in one of four ways: by a lump sum rate, by rate per ton, by a time charter equivalent rate, or by Worldscale rate.[50] In a lump sum rate arrangement, a fixed price is negotiated for the delivery of a specified cargo, and the ship's owner/operator is responsible to pay for all port costs and other voyage expenses.[51] Rate per ton arrangements are used mostly in chemical tanker chartering, and differ from lump sum rates in that port costs and voyage expenses are generally paid by the charterer.[52] Time charter arrangements specify a daily rate, and port costs and voyage expenses are also generally paid by the charterer.[52]
The Worldwide Tanker Normal Freight Scale, often referred to as Worldscale, is established and governed jointly by the Worldscale Associations of London and New York.[50] Worldscale establishes a baseline price for carrying a metric ton of product between any two ports in the world.[53] In Worldscale negotiations, operators and charterers will determine a price based on a percentage of the Worldscale rate.[53] The baseline rate is expressed as WS 100.[53] If a given charter party settled on 85% of the Worldscale rate, it would be expressed as WS 85.[53] Similarly, a charter party set at 125% of the Worldscale rate would be expressed as WS 125.[53]
[edit] Recent markets
| Recent time charter equivalent rates | |||||
| Ship size |
Cargo | Route | 2004 | 2005 | 2006 |
|---|---|---|---|---|---|
| VLCC | Crude | Persian Gulf - Japan[54] | $95,250 | $59,070 | $51,550 |
| Suezmax | Crude | West Africa – Caribbean or East Coast of North America[55] |
$64,800 | $47,500 | $46,000 |
| Aframax | Crude | Cross-Mediterranean[56] | $43,915 | $39,000 | $31,750 |
| All product carriers | Caribbean – East Coast of North America or Gulf of Mexico[56] |
$24,550 | $25,240 | $21,400 | |
As of 2007, the chartering market is persistently volatile across all tanker sectors.[54] The market is affected by a wide variety of variables such as the supply and demand of oil as well as the supply and demand of oil tankers. Some particular variables include winter temperatures, excess tanker tonnage, supply fluctuations in the Persian Gulf, and interruptions in refinery services.[54]
In 2006, the sustained rise in oil prices had only a limited impact on demand.[57] It was a good year across all segments of the tanker market segments, but not as good as 2004 and 2005.[57] Amidst high oil prices, geopolitical tension, and fears of disruptions to the oil supply, growing demand was the main driving force in the tanker shipping market for the year.[57] As demand grew moderately in the United States and Western Europe, expanding economies such as China fueled exponential growth in demand.[57] Despite these strengths, each of the five tanker freight indices dropped during 2006.[57] Product tanker demand increased in 2006 due to economic expansion in Asia, especially China and India, however, average time charter equivalent earnings for these ships decreased compared with the two prior years.[56]
In 2006, time-charters tended towards long term. Of the time charters executed in that year, 58% were for a period of 24 or more years, 14% were for periods of 12 to 24 years, 4% were from 6 to 12 years, and 24% were for periods of less than 6 years.[56] The average one-year time charter rate for a 5-year-old tanker of 280,000 metric tons of deadweight varied from $56,500 per day in December 2005 to $53,000 per day in September 2007 with a high of $64,500 per day in September 2006.[56]
The first half of 2007 was relatively strong, but in the second half rates dropped significantly. A sudden rise in oil production, longer transport routes, and slow steaming because of high bunker prices led to a shortage in tonnage towards the end of the year. Overnight, VLCC rates climbed from $20,000 per day to $200-$300,000 per day, and even higher numbers were recorded.[58]
Since 2003, the demand for new ships has started to grow, in 2007 resulting in a record breaking order backlog for shipyards, exceeding their capacity with rising newbuilding prices as a result.[59]
Owners of large oil tanker fleets include Teekay Corporation, Frontline, MOL Tankship Management, Overseas Shipholding Group, and Euronav.[60]".[
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