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Thursday, September 20, 2018

The modern VLCC segment

The modern VLCC segment

Johan G. Olsen’s latest VLCC fleet list shows that out of a total of 431 existing VLCCs (including 2 combos), oil majors or state-owned companies own 123. In addition they control 99 tankers on period employment to 2005 and beyond. This means that independent owners own 71% of the VLCC fleet but only control 48% of it.

Of the total of 68 newbuilding VLCCs on order, independent owners own 45 while oil majors or state-owned companies own 23 and also have 9 of the independently-owned newbuildings committed on period employment. This leaves the independent owners with 53% control of VLCC newbuildings, a similar proportion to the existing fleet.

The four largest oil majors (BPAmoco, ChevronTexaco, ExxonMobil, Shell) and Tokyo Tankers, have a combined owned fleet of 29 VLCCs, plus 37 on period charter until 2005 or later, giving them control over 15% of the VLCC fleet. VELA has the biggest single fleet, owning 21 VLCCs, including 17 single hulled (SH) built 1989 and later, 4 on charter from the National Shipping Company of Saudi Arabia plus 8 on charter from Gulf Management Services and 2 from LM Lemos.

NITC operates 13 VLCCs, all double hulled (DH), plus 2 on order. ExxonMobil operates 9 VLCCs plus 10 on period charter, the biggest oil company VLCC fleet. Shell operates 7 plus 9 on period charter. ConocoPhilips (Polar tankers) operates 6 plus 2 on order for the Alaskan trade.

The biggest independent VLCC owner/operator is Frontline with 29 VLCCs, 16 of which are double-hulled and two of which are double sided. 8 of these VLCCs are bare boat (BB) chartered out to AMCL and Shell. In addition, Frontline has 4 VLCCs on period charter in until 2005 from BP, which operates these for the Fredriksen company Hemen Holding, and 10 VLCCs on period charter in until 2006-16 from Dr. Peters. That gives Frontline a grand total commercially-controlled fleet of 43 VLCCs.

Mitsui OSK has 29 VLCCs, 8 of which are SH, plus 9 on order. NYK has 27 VLCCs, 11 of which are SH, plus 5 on order. World Wide has 26 VLCCs, 11 of which are SH, plus 5 on order.

Click here for Owned VLCC Fletts.

There are only 84 VLCCs trading which were built before 1990, 31 of which were built in the 1970s and 26 built 1988/89. The peak building years were 1993 and 2000, when 39 and 41 VLCCs respectively were delivered. There are 68 VLCCs on order for delivery end 2003-2006.

The average size of VLCCs is increasing, as in other segments. The average size of those built before 1980s was 264,299 dwt, whereas the average size of those built in the 1990s was 285,759, and the average size of those built later was 304,745. Only 25 of the VLCCs on order are below 300,000 dwt.

The LRFairplay database contains some 241 VLCCs with DH and 8 with double bottom (DB) or double sides (DS). This means that 44% are SH (or SH with DB or DS) and 56% DH. By end 2005, when all the 1970s-built VLCCs have been sold for recycling, some 65% will be DH.

If we look at the phase-out of VLCCs, 23 of the trading ships have already been denied access to the US (except dedicated lightering areas and LOOP). The EU has denied access to 26 as of 21 October. According to MARPOL, only 1 is due for phase-out this year and 7 next year. Under the latest IMO phase-out regime, 22 Category 1 units will have to go by the 2005 deadline.

The peak in 2010 will be similar for the EU and OPA phase-out. 24 of the 47 tankers to be denied access to Europe in 2010 will be less than 20 years of age.

Click here for Phase out VLCCs.


1. Still possible to trade SH to LOOP/ designated lightering areas until 2015

2. Ultimate deadline for single hulls without DB/DS as 2010 as per EU Reg. 1726/2003 and MARPOL with no flag state extensions

3. Ultimate deadline for single hulls without DB/DS 25 years and 2015 assuming maximum life under specific flag and trading region

4. Single hulls with DB/DS may trade on past 2015 to 25 years

We have recorded 29 VLCCs sold for decommissioning so far in 2003 ranging from 22 to 31 years old. 23 were older than 25 years old. The average age of the VLCCs sold for decommissioning was 27.7 years.

VLCC trades

The total VLCC trade 2002 was calculated by Fearnleys to be some 849 m dwt, of which 397 m dwt were SH tankers and 437m dwt DH tankers.

Some 77% of the VLCC trade originated in the Middle East areas, and VLCC trades represented some 36% of total crude oil tanker trade including panamaxes (8%), aframaxes (34%), and suezmaxes (22%).

The three single biggest trades were:

1.             Middle East to Japan                          178.0 m dwt     21% of total
2.             Middle East to Other Far East              153 “               18% “
3.             Middle East to N America East/Gulf       92 “                 11% “

Some 77% of the VLCC trade is from the Middle East.

The main trades with the greatest proportion of DH tankers were

1.            Middle East to other America East/Gulf 49 m dwt DH     53% of this trade
2.            Middle East to SE Asia                        34 “                 53% “
3.            Middle East to Japan                          92 “                 48% “

The main trades with the largest proportion of SH tankers were

  1. Middle East to other S Asia                   21 m dwt SH     77% of this trade
  2. Middle East to S Africa                         29 “                 54% “
  3. Middle East to other Far East                53 “                 53% “

INTERTANKO has recorded only 16 period charters of 6 months and longer in 2003. Most of the VLCCs taken on period charter were modern tankers built in 1992 and later and 6 were DH, but there were also two charters for 1970s-built ships. The average rate across the board was USD 21,904 per day, which is less than half the average obtained in the spot market in 2003. This probably explains the relatively low number of charters from owners keen to work on a firm spot market.

The positive factors for the VLCCs:

  • Increasing US oil imports. According to DOE/EIA, the US crude oil imports until 1 November 2003 were almost 7% higher than for the same period in 2002 and the highest ever for this period - 9.5 mbd compared to the previous record in 2001 of 9.2 mbd
  • Increasing OPEC exports amounting to some one million barrels per day extra in 2003 compared to 2002
  • Tight tonnage supply and fragmented market
  • Japanese nuclear plant closures
  • Relatively low US commercial crude oil stocks

Negative aspects for the VLCCs are:

  • Increasing Russian oil exports from the Black Sea and the Baltic: FSU is projected by IEA to increase oil production by almost one million barrels per day in 2003 to 10.3 mbd and by a further 0.6 mbd in 2004.
  • Increasing Algerian oil exports: the start-up of a new field has increased oil production from 0.85 mbd in 2002 to 1.2 mbd in September 2003 and it will probably continue to increase somewhat. This oil is likely to go to Europe and the US, backing out longer-haul oil.
  • Increasing Mexican oil exports (will increase by 0.3 mbd in 2003 but then fall back marginally, according to IEA) bolstering the short-haul aframax market rather than the long haul VLCC market.
  • There are few candidates for decommissioning and replacement, as only 25 ships (8% of the fleet) were built in 1978 or earlier and only 35 ships (11% of the fleet) were built in 1981 or earlier.
  • Potential resumption of Iraqi oil exports from Ceyhan will back out crudes loading in the Middle East.


Contact: Erik Ranheim