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Tuesday, December 12, 2017

The VLCC orderbook covers the market until 2008 – at least

Johan G. Olsen’s latest VLCC fleet list shows that out of a total of 440 existing VLCCs (including 2 O/Os) oil majors or state-owned companies own 129 VLCCs. In addition, they control 91 tankers on period employment to 2006 and beyond. This means that independent owners own 71% of the VLCC fleet, but only control 50% of it.

Of the total of 81 VLCCs on order for delivery until 2007, independent owners have contracted 62 while oil majors or state-companies have contracted 19. 13 of the independently-ordered VLCCs are committed on period employment. This leaves the independent owners with 58% control of VLCC newbuildings.

The traditional oil majors (BPAmoco, ChevronTexaco, ExxonMobil, Shell) and Tokyo Tankers have a combined owned fleet of 24 VLCCs, plus 31 on period charter until 2006 or later (including 18 to Tokyo Tankers), giving them control of only 13% of the VLCC fleet.

VELA has the biggest single oil company fleet, owning 21 VLCCs, including 17 single hulls (SH) built 1989 and later. It has 3 on charter from the National Shipping Company of Saudi Arabia, 8 on charter from Gulf Management Services and 1 from NS Lemos.

NITC owns 13 VLCCs, all double hulled (DH), plus a further 2 on order. KOTC has 8 VLCCs (including 6 SH VLCCs). Altogether Middle East companies own 61 VLCCs, and control 31 on period contracts.

The biggest independent VLCC owner is Mitsui OSK with 29 VLCCs, 8 of which are SH, plus 9 (DH) on order. NYK has 27 VLCCs, 9 of which are SH, plus 8 on order. Altogether Japanese owners have a fleet of 78 VLCCs (18% of the fleet) plus an orderbook of 27 VLCCs.

Frontline has reduced its fleet to 26 VLCCs, 12 of which are SH (including 1 DS). 4 of the VLCCs are bare boat (B/B) chartered out to AMCL and Shell. Frontline has sold a number of VLCCs to the German KG Dr. Peters and has 9 VLCCs on 10/13 year period contracts from Dr. Peters. Frontline is therefore the company that controls the largest number of VLCCs in the world. In addition, the Fredriksen controlled company Hemen Holding has four VLCCs on B/B to BP and 2 to ChevronTexaco.

The other major VLCC owner, World Wide, has 26 VLCCs, 11 of which are SH, plus 3 (DH) on order. The distribution of the largest VLCC owners are: five owners with 22-29 VLCCs, five with 12-16 VLCCs, and ten with 6-9 VLCCs.

There are only 56 VLCCs left that were built before 1990, 17 of which were built in the 1970s of which 5 are in storage. The peak building years were 1993 and 2000, when 39 and 41 VLCCs respectively were delivered.

The average size of VLCCs is increasing, as in other segments. The average size of those built before the 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 2 of the VLCCs on order are below 300,000 dwt.

The LRFairplay database contains some 254 VLCCs with DH and 8 with double bottom (DB) or double sides (DS). This means that 40% are SH (or SH with DB or DS) and 58% DH. By end 2005, when all the VLCCs built 1982 and earlier have been sold for recycling, some 65% will be DH and the fleet will have increased by 32 units to 472 VLCCs.

If we look at the phase-out of VLCCs, 12 of the trading ships have already been barred from US ports (except dedicated lightering areas and LOOP) according to OPA 90. The EU has denied access to 15 as of 21 October 2003 (including 3 in 2004). According to MARPOL, only 1 is due for phase-out this year and 13 next year. Only 4 more are then due for decommissioning before 2010.

Click here for Phase out VLCCs.

The positive factors for VLCCs:

  • Increasing US crude oil imports. According to DOE/EIA, US crude oil imports 2003 of 9.5 mbd were some 7% higher than in 2002 and the highest ever for this period - the previous record being 9.2 mbd in 2001.
  • Increasing Chinese crude oil imports. China increased consumption by 0.54 mbd in 2003 and production is projected to continue to increase by 0.58 mbd in 2004. Its domestic production is virtually flat.
  • Relatively low US commercial crude oil stocks and the building up of strategic stocks.

Negative aspects for VLCCs are:

  • OPEC exports to the US increased in 2003 partly due to problems in Venezuela. In 2004 the US may take more oil from closer sources.
  • There are only 19 VLCCs due for regulatory phase-out before 2010.
  • Japanese nuclear plants are about to be re-opened
  • Limited US refinery capacity may mean that the increasing US oil imports to a greater extent will be met by products imports
  • Increasing Russian oil exports from the Black Sea and the Baltic: FSU oil production increased by almost one million barrels per day in 2003 to 10.3 mbd and IEA project a further 0.7 mbd in 2004 to 11 mbd.
  • Increasing Algerian oil exports: the start-up of a new field has increased oil production from 0.85 mbd in 2002 to 1.1 mbd in 2003 and is projected to continue to increase somewhat. This oil is likely to go to Europe and the US, backing out longer-haul oil.
  • Resumption of Iraqi oil exports from Ceyhan in the Mediterranean may back out long-haul crudes loading in the Middle East.

We have recorded 22 VLCC period contracts of 6 months and longer since March 2003 and the typical rate has been some USD 30,000-34,000 per day for those built 1995 and later. The average period was two years. Petrobras has been the most active period charterer taking four suezmaxes for 2-3 year contracts over the last year.

Contact: Erik Ranheim