SSG No 20 - Shipgaz

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Aframax market steeped in over-supply If and when VLCC tonnage begins liftings from Primorsk, a new era will dawn on the eastern half of the North European tanker market and it will affect the trading pattern in the whole area. Meanwhile, no doubt, aframax tonnage will continue to dominate the North European market for crude liftings. Nevertheless, these are worrying developments for hard-pressed aframax owners, operating in an extremely volatile market. In the past 18 months the cross North Sea rate has ranged from a top of WS 320 to a low of WS 80. Since the top in December last year, the development has been one of diminishing returns. With lower exports from Norway and the United Kingdom all eyes are on Russia and the increase in shipments through the Baltic and through the Barents Sea. Main push in the Baltic While plans for increased oil and product shipments in the north are rather vague and some years into the future, the prospects for more activity from oil terminals like Primorsk, the smaller Ust-Luga and the Lukoil oil and product terminal Vysotsk are fairly good. Generally the Russian central government has proposed to redirect oil volumes, that presently moves through Belarus to Baltic ports. Implementation means laying a 1,000 kilometres pipeline to circumvent Belarus and connecting on to Russia’s Baltic Pipeline System (BPS) with a 74 million tons annual capacity. Plans are now afoot to double the throughput of the BPS to around 150 million tons per year. To accommodate the increased capacity, oil terminals have to be expanded. Exports are currently well over 100 million tons annually at the Russian and Estonian terminals. According to Leningrad Oblast deputy governor Grigory Dvas the central government is considering two options; BPS capacity could be increased to 120 million or 150 million tons per annum. In either case, the export capacity of the terminals OECD EurOpE DEManD By prODuCt Lundqvist Rederierna’s aframax tanker the Thornbury on the river Elbe. needs to be expanded. Primorsk can only handle tankers with a maximum capacity of 120,000 tons. In fact it can only load 107,000 tons because of draft restrictions. The plan now is to deepen the channel at Primorsk to accommodate tankers with at least 200,000 tons capacity. A variety of crude and petroleum products are exported through a great many terminals. Russian crude is shipped through Primorsk, Vysotsk, Tallinn, Butinge and (million barrels per day) 2006 2007 Mar ‘07 apr ‘07 May ‘07 LPG & Ethane 0.96 0.93 0.99 0.94 0.95 Naphtha 1.11 1.12 1.22 1.05 1.06 Motor Gasoline 2.57 2.53 2.53 2.61 2.59 Jet & Kerosene 1.28 1.30 1.20 1.23 1.28 Gas/Diesel Oil 6.24 6.19 6.27 5.67 5.71 Residual Fuel Oil 1.85 1.78 1.72 1.71 1.70 Other Products 1.55 1.52 1.27 1.40 1.49 Total Products 15.56 15.37 15.20 14.61 14.78 EurOpE & Fsu Oil DEManD 2006–2008 Oil prODuCtiOn russia, uK anD nOrway PäR-HEnRik SjöSTRöm Source: IEA Oil Market Report (million barrels per day) 2006 2007 2008 3 Qt ‘07 4 Qt ‘07 Europe 16.3 16.1 16.5 16.4 16.6 FSU 4.0 3.9 4.0 3.9 4.5 Source: IEA Oil Market Report (million barrels per day) 2006 2007 2008 May ‘07 Jun ‘07 Jul ‘07 Russia 9.69 9.92 10.10 9.86 9.91 9.93 United Kingdom 1.66 1.64 1.50 1.73 1.60 1.53 Norway 2.78 2.51 2.37 2.46 2.17 2.48 Source: IEA Oil Market Report 22 SCAnDinAViAn SHiPPinG GAZETTE • OCTOBER 26, 2007
Ventspils, while products are shipped through Vysotsk, St Petersburg, Tallinn, Riga, Ventspils, Klaipeda and Kaliningrad. The eight European Union countries and Russia, all bordering in the Baltic Sea, are concerned by the potential environmental impact by spills and by the sheer volume of traffic. That is why they are working together within HELCOM co-operation for protecting the Baltic Sea. aframax volatility The bulk of Northern European crude exports are carried in aframax size vessels. Exports to the US and Canada are also shipped in VLCCs and suezmax tankers. However, the most important type of crude tanker in North Europe is the aframax, which, as we noted earlier, has experienced an extremely volatile market, particularly in the past twelve months. At present there is too much aframax tonnage around at approximately 74.0 million DWT, hence the freight volatility, which has caused owners some grief of late. With the volatile market at least in the past 18 months, it is important to see the North European market as part of a whole Atlantic market, including the Caribbean, the Mediterranean and the Black Sea. The inter-play between the markets is interesting, and we can see a certain “slush-effect”, as tonnage interchanges between the areas. time to weed out tonnage The transport bank DVB says in its latest market outlook for aframaxes that there are plenty of single hull vessels, which are up to their fifth special survey. Owners might choose to scrap at more than USD 500 per light weight ton, or even find alternative employment as conversion to FPSOs. The bank also believes that high oil prices might provide more employment as more marginal fields come into production. DVB highlights healthy, long-term prospects for aframaxes by forecasting a demand growth of between six and seven per cent because of increasing trade to North America and Europe. All in all, the bank expects demand to be 26 per cent higher by 2010 compared with 2006. net fleet growth DVB estimates that the aframax fleet will have a net growth of nine per cent next year and eleven per cent in 2009, and admits that this is likely to weigh down the market, before the conditions improves North European clean tanker rates 2006–2007 Worldscale � Clean MR, 37,000 tons, UKCont–TA � Clean, Baltic–UKCont, 30,000 tons � Clean, Baltic–TA, 65,000 tons 400 350 300 250 200 150 100 Qt 1 ‘06 2 ‘06 when single-hull vessels are phased out from 2010. The orderbook of more than ten million DWT in 2009 will be particularly difficult to accommodate, and in 2010 there are nearly seven million DWT on order. The bank also talks of the 150 or so coated aframaxes currently in the market and another 90 on order. the magical ws 100 3 ‘06 4 ‘06 As we noted earlier owners work in an extremely volatile market. The worrying bit is when the market remains below WS 100 1 ‘07 2 ‘07 North European dirty tanker rates 2006–2007 Worldscale 350 300 250 200 150 100 50 Qt 1 ‘06 2 ‘06 3 ‘06 4 ‘06 1 ‘07 3 ‘07 4 ‘07 Source: Scandinavian Shipping Gazette � Suexmax,135,000 tons, North Sea–TA � Aframax, 100,000 tons, Primorsk–UKCont � Aframax, 80,000 tons, NS–UKCont � Aframax, 100,000 tonnes, Murmansk–UKCont 2 ‘07 3 ‘07 4 ‘07 Source: Scandinavian Shipping Gazette in North Europe for any length of time. Except for the last two weeks of September the market has been lodged below the magical line since the beginning of August. There was another less profitable period in March this year and at the beginning of December last year. However, since the turn of the year, the cross North Sea market only reached WS 200 in one week in late January and once in late March. Since then the market has shown a falling trend (see graph). petter arentz SCAnDinAViAn SHiPPinG GAZETTE • OCTOBER 26, 2007 23
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SSG No 20 - Shipgaz

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