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CHARTERING OF TANKERS

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Tanker Trade - History - 1859Crude produced commercially in USA in 1861 900 Elisabeth Watts carried wooden

barrels to London 1866 . German vsl Glukauf – 8 , tanks steam

engine 1913 first middle east refinery at Abadan started , Tankers were owned by Oil cos like Shell trading

trading between , London Europe USA & Russia 1920-1940 10000 – 12000 tankers of tons size

were built.

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1940 large oil finds in Saudi Arabia. 1950 tkr size increased to 40000 tons.1960 – VLCC over 2 lac DWT mostly

ordered by Shell.1979 largest tkr. / ship – 564843 tons ULCC

mt Seawise Giant (currently trading as mt Jehre Viking) was built. ULCCs are committed to major

producers/refiners

Tanker Trade – History

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Demand for tankers is measured in ton/mile.Political/economical factor like closure of suez,

source etc. influences no. /size of tankers required.

1939 to 1969 six fold increase in oil demand – 10 to 64 million Bbls/day.

Tanker trade got serious setback in 1973 due OPEC price increase

Four fold increase From $ 2.75 to $10.84/bbls in Jan 1974.

1982 increased to $ 34 which dropped below $10 in July 86 - due Iraq/Kuwait war?

Tanker Trade – History

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What is the Current price of crude per Bbls? Indian/ OMC basket? Where to look up for daily update ?

1974-84 depression in tkr mkt due OPEC price increase lead to vsl proceeding to lay up from new building yard - increased scrapping.

Oil & Tanker market operates within a framework formed by the crude oil reserves (Producing countries) vis-a-vis major consumers like USA, Europe, Japan, China, Korea & India.

Tanker Trade - History

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TYPE OF CHARTERVOYAGE CHARTER • FOR ONE VOYAGE

• 1 OR 2 LOAD PORT/ DISPORTS

• FREIGHT, DEMURRAGE DEAD FREIGHT

• BUNKER PORT CHARGES ON SHIP OWNERS A/C.

• CARGO RELATED CHARGES ON CHARTERERS A/C.

TIME CHARTER • FOR TIME/PERIOD.

• VESSEL AT CHARTERERS DISPOSAL.

• MONTHLY CHARTER HIRE IN ADVANCE.

• BUNKER & PORT CHARGES ON CHARTERERS ACCOUNT

• CARGO RELATED CHARGES ON CHARTERERS A/C.

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TANKER CHARTERING OPTIONS TIME CHARTER AND VOYAGE CHARTER

DETAILS

TIME CHARTER VOYAGE CHARTER

DEFINATION TANKER IS TAKEN ON CHATER BASIS TIME OR FOR A PERIOD. (MTH/YR)

TANKER IS TAKEN FOR A PARTICULAR VOYAGE OR CONSECUTIVE VOYAGES

DELIVERY EFF. TENDERING NOR - DT/TIME AT DESIGNATED PORT OF DELIVERY

EFFECTIVE TENDERING NOR AT DESIGNATED PORT OF LOADING WITHIN THE AGREED LAYDAYS.

PAYMENTS

CHARTER HIRE PAYABLE IN ADVANCE - 1ST OF THE MONTH

FREIGHT PER METRIC TON NORMALLY PAYABLE ON COMPLETION OF 3 DAYS AFTER DISCHARGE.

DEMURRAGE NO DEMURRAGE PAYMENT. NON UTILISATION OF TKR BY CHARTERS LEADS TO PAYMENT OF DETENTION AS THE S/OWNERS GETS C/HIRE FOR THE ENTIRE PERIOD,

EXTRA TIME TAKEN BY CHARTERERS THAN THE AGREED LAYTIME ALLOWED FOR LOADING/DISCHARGE LEADS TO PAYMNET OF DEMURRAGE TO SHIPOWNERS

PAYMENT OF DUES : BUNKER COST PORT EXPEN. PORT DUES PILOTAGE TUGGAGE ETC

BY CHARTERERS BY CHARTERERS

BY SHIPOWNERS BY SHIPOWNERS

WHARFAGE

ON CARGO - BY CHARTERERS ON CARGO - BY CHARTERER.

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DETAILS TIME CHARTER VOYAGE CHARTER CHOICE OF EMPLOYEMENT BY CHARTERERS

WHEN THE REQUIREMENT IS FOR A LONGER TIME - CONTINUOUS BASIS

WHEN A REQUIREMENT IS FOR SHORT PERIOD - SPECIFIC VOYAGE OR CONSECUTIVE VOYAGES

MONITORING / VOYAGE INSTRUCTIONS ETC.

BY CHARTERERS BY SHIPOWNERS

OFFHIRE/UNDER PERFORMANCE ETC

TO BE DEDUCTED FROM C/HIRE BY CHARTERERS IN LINE WITH C/P

TO BE DEDUCTED FROM FREIGHT/DEMURRAGE PAYABLE TO S/OWNERS.

DEADFRT/DEVIATION CHARGES

NOT SEPARATELY PAYABLE AS S/OWNER GETS FULL C/HIRE

PAYABLE BY CHARTERERS IF DUE LIMITATIONS OF CHARTERERS.

INSURANCE – CARGO -- SHIP

ON CHARTERERS A/C ON SHIPOWNERS A/C

ON CHARTERERS A/C ON SHIPOWNERS A/C

EXTRA INSURANCE DUE OLD AGE/WAR ETC

NEGOTIABLE - AS PER C/P

NEGOTIABLE - AS PER C/P

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SHIP OWNERS POINT OF VIEW

TYPE OF CHARTER

ADVANTAGE DISADVANTAGE

TIME CHARTER PAYMENT OF C/HIRE IN ADVANCE- FIXED AMOUNT

DOES NOT GET THE ADVANTAGE OF UPGOING FREIGHT TANKER MARKET AND GET PAID ON FIXED CHARTER HIRE RATE FOR A GIVEN PERIOD.

NO HASTLES OF DAY TO DAY MONITORING OF TKR

SUSTAINED EMPLOYMENT -LOWER RISK LOWER GAIN

NO PAYMENTS ON ACCOUNT OF BUNKERS/.PORT ETC

NO BOTHERATION ON EMPLOYMENT DURING THE CURRENCY OF TIME CHARTER.

VOYAGE CHARTER GETS BENEFITS OF RISING MARKET AS EVERY VOYAGE HE GETS PAID BASIS CURRENT FREIGHT RATES.

CONTINUOUS BOTHERATION OF FIXING THE VESSEL ON VOYAGE TO VOYAGE BASIS - DELICATE NEGOTIATIONS

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FROM CHARTERES POINT OF VIEW:

TYPE OF CHARTER

ADVANTAGE DISADVANTAGE

TIME CHARTER

FIXED AMOUNT OF CHARTER HIRE.

DOES NOT GET THE ADVANTAGE OF SLUMP FREIGHT TANKER MARKET AND NEEDS TO PAY ON FIXED CHARTER HIRE RATE FOR A GIVEN PERIOD.

SECURED AGAINST INCREASE FRT RATES - VARIATIONS IN MARKET CONDITIONS

SUSTAINED AVAILABILITY OF A TANKER FOR A GIVEN PERIOD – FREEDOM OF CHANGING EMPLOYMENT –VOYAGE PATTERN ETC

VOYAGE CHARTER

GETS BENEFITS OF LOWER FRT MARKET AS EVERY VOYAGE HE NEEDS TO PAY BASIS CURRENT FREIGHT RATES.

CONTINUOUS BOTHERATION OF FIXING THE VESSEL ON VOYAGE TO VOYAGE BASIS - DELICATE NEGOTIATIONS

FREEDOM OF CHARTERING AS WHEN NEEDED WHEN THE TKR AVAILABILITY IS SUFFICIENT.

AVAILABILITY OF SUITABLE TKR IS NOT GUARANTEED AS AND WHEN NEEDED ESPECIALLY IN TIGHT MARKET CONDITIONS.

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CHARTERING DECISIONS : TIME VS VOYAGE

In a UPGOING & STRONG tanker market a ship owner would like to give a tanker on a voyage charter basis to earn higher freight rates from voyage to voyage basis.

In case the market indicates falling trend of freight rates the ship owners

would like to give the ship on long time charter basis to protect himself from the losses.

If the Charterer is sure about the long term employment and exercises

utmost diligence in the usage of the vessel he should opt for a time charter especially in up going frt. market.

Time charter rates comparision with voyage charter rates as on for following

size of vessels :

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VOYAGE CHARTER :

CRUDE :

• VOYAGE – RASTANURA TO VIZAG

• SMAX (140000 MT) $ 28.23 / MT

• LS FREIGHT $ 3.95 MILLION RS. 15.80 CRORES AT WS 335

LPG :

• VOYAGE – RASTANURA TO VIZAG

• VLGC (39000 MT) $ 50.00 / MT

• LS FREIGHT $ 1.95 MILLION RS. 7.80 CRORES

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Tanker Voyage Charter PartiesBare Boat chartering – Lease the hull and machinery of the ship for a long period of time Charterers act as if he was the Owners of the ship.

Time chartering – enables the operator to cover their shipping requirements at a stable price other than bunker cost. Charter hire fixed for a particular period of chartering.

Voyage chartering – Freight rate as per prevailing market rate. used for spot requirements. Ship management totally in the hands of owners.

Consecutive Voyages and COA cover for a period of time but leaves the ship operations to the owners, as under voyage charter.

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OWNER(Revenue)

CHARTERER(Transport)

THE CHARTER PARTY(A contract)

BAREBOATTIME

VOYAGE

Trip Time CharterConsecutive

voyage

Contract ofAffreightment

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Tanker Voyage Charter Parties

Voyage Charter PartiesASBATANKVOY – Association of Ship Brokers & Agents (USA) Inc.BP Voy 4Exxon Mobil Voy 2005Shellvoy 6

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ASBATANKVOY

Well known and often used which may have a number of additional or rider side clauses which were added by Charterers.

Rider clauses re-states the main clause in the charter party.

Unless rider clauses are carefully drafted and related to each other and to the clauses in the printed form there is scope for error, duplication, inconsistency and subsequent litigation.

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ASBATANKVOY – Charter Party

Part – I Description and position of vessel Laydays/Cancelling Voyage Cargo Description of cargo Rate/Billing Laytime Demurrage Commission General Average/Arbitration

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ASBATANKVOY – Charter Party

Part – IIWarrantyFreight and DeadfreightBerthing, Pumping and MooringDues and other chargesIceCleaning/GradesAdvancesBills of Lading

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ASBATANKVOY – Charter Party

PROTECTIVE CLAUSESClause ParamountJason Clause and General Average ClauseBoth o BlameWar ClausesLienAgentsAssignment/sub-letClean SeasArbitration

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Rider Clause – Conoco Weather Clause

“Delays in berthing for loading or discharging and any delays after berthing which are due to weather conditions shall count as half laytime or, if on demurrage, half demurrage”

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Rider Clause – Cargo Retention Clause

“In the event that any cargo remains onboard upon completion of discharge, Charterer shall have the right to deduct from freight an amount equal to FOB port of loading value of such cargo plus freight due with respect thereto provided that the volume of cargo remaining onboard is pumpable and determined by an independent surveyor. Any action or lack of action in accordance with their provision shall be without prejudice to any rights or obligations of the parties”.

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Rider Clause – Over Age Insurance (Cargo Insurance)

“Any additional premium which might be placed on the cargo insurance by reason of the vessel’s age and/or condition shall be for Owner’s account, and Charterers shall be entitled to deduct the cost of any such additional premium from the freight”

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Rider Clause – In Transit Loss Clause

“In addition to any other rights which Charterer may have, Owner will be responsible for the full amount of any in transit loss if in transit loss exceeds 0.3% and Charterer shall have the right to deduct from the freight an amount equal to the FOB port of loading cost or such missing cargo plus its pro rata cost of freight and insurance. In trasit loss is defined as the difference between gross standard vessel volumes after loading at the loading port and before unloading of the discharge port”

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Rider Clause – Notice of Readiness

It the vessel tenders notice of readiness during its acceptance date range, laytime shall begin, subject to all other provisions of this agreement, upon the expiration of 6 hours after the tendering of NOR or on commencement of loading, whichever occurs first. If the vessel tenders NOR before its acceptance date range the NOR shall not be effective until 0001 hour on the first day of such range, and laytime shall begin on commencement of loading or 6 hours after the effecitve tender of NOR whichever occurs first. If the vessel misses cancelling date and in the event of charterers not exercising option to cancel the fixture time will commence to count when loading commences.

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Tanker Time Charters Introduction Shipboard Personnel and DutiesLaws and DisputesLiens and Sub Freight

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Introduction :Types of Time Charter : 1. Trip Time Charter - Short period, flexibility

to charterers, commonly practiced veg.oil, chemicals,dry bulk cargo.

2. Time Charter - Voyage expenses, pumping at loadport and disport on charterers account.

Tanker Time Charters

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Shipboard Personnel and Duties Duty to maintain- Due diligence by

owners to maintain and restore the vsl to required condition, charterers right to putoff the vsl.

Limits of trading period- Charterer’s option.

Final voyage-Redelivery, where & when. Trading limits-WIWL

Tanker Time Charters

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Shipboard Personnel and Duties Laydays/Canceling-Charterer’s option. Owners to provide-All provisions, wages, Ins.etc Charterers to provide-Generally for dry cargo. Rate & Payment of Hire-Delay in payment,

tanker withdrawal clauses and etc. Instructions and Logs-Performance monitoring. Directions and conduct of vessel’s personnel

Tanker Time Charters

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Shipboard Personnel and Duties Bunkers-Supply of quality bunkers. Supernumeraries-Representative on Board. Sub-letting-Liabilities from mal-performance. Loss of vessel-Total loss or Constructive loss. Off-Hire – Shelf time form specifies the time. Periodical dry docking-Area of dry docking.

Tanker Time Charters

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Shipboard Personnel and Duties Performance clause-Speed, bunker

consumption and port stay. Salvage-Apportionment of expense Lien – Each party’s rights of lien. Exception – Unplanned repairs &

breakdown. Injurious cargoes – Explosives.

Tanker Time Charters

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Shipboard Personnel and Duties Laying up – Charterers and Owners to

consult. Requisition by Govt. Protective clauses – Both to blame

collision clause, New Jason clause, Clause Paramount.

TOVALOP & ITOPF – P&I Club Insurance. Law and Litigation – English law.

Tanker Time Charters

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The Law & Dispute : Withdrawal –

(a)Frustration.(b)Repudiatory Breach.(c) Exercising a right.

Set-off – Holding deduction against hire. Speed and Consumption-Tolerance clause. Off-hire-Loss of money, deduction of

money.

Tanker Time Charters

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Lien for sub freight : Prepayment of freight due to risk of

shortages,delays etc that may affect delivery.

Lien on the cargo, freight and subfreight in the bill of lading

Lien is regarded as the floating charge against the assests of the head charterer.

Tanker Time Charters

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CHARTERING

Post fixture.Port

Operation

COMMERCIAL MANAGEMENT

Chartering. Fixture Negotiation

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CHARTER PARTY

C / PARTY

CLAUSES

NEGOTIATION

FINALISATION

OF C / PARTY

SIGNING OF

C / PARTY.

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CHARTERING

VOYAGE CHARTER –

ONE/TWO LOADPORT/DISPORT

TIME – PERIOD CHARTER

COA – TOTAL QTY/TKR (OWN/ CHARTER)

TOOLS

MKT.

TREND

FREIGHTDEMURRAGE

C/HIRE FREIGHTDEMURRAGE

LAST FIXTURE

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FIXTURE NEGOTIATION

ENQUIRY OFFERS COUNTER CONCLUSION

VOYAGE

CARGO

PARCEL SIZE

LOADPORT

DISPORT

LAYDAYS

LAYCAN

TIME CHARTERING

TYPE OF SHIP

DURATION

TRADING AREA

CARGO

SPL.REQUIREMENTS

VOYAGE

DESCRIPTION-SHIP

PARCEL SIZE

FREIGHT

DEMURRAGE

C / PARTY.

TIME CHARTER

DESCRIPTION

T / C PARTICULARS

SPEED/CONSUM.

PERIOD – RATE

EXCEPTIONS -CP

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CO-ORDINATION

WITH

CHARTERER

CO-ORDINATION

WITH

SHIP

AGENCY

ARRANGE- MENT

ARRANGING

FUNDS

FREIGHT

COLLECTION

POST FIXTUREOPERATIONS

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WHAT IS TANKER CHARTERING?

A PROCESS INVOLVES NEGOTIATIONS BETWEEN SHIP OWNERS & A CHARTERER (OIL CO.) FOR HIRING A SHIP (TIME/VOYAGE OR COA BASIS) FOR CARRIAGE OF CRUDE OIL/POL AT MOST COMPETITIVE RATES, TERMS & CONDITIONS.

FREIGHT RATES ARE INFLUENCED BY VARIOUS INTERNATIONAL SUPPLY DEMAND FORCES & OPPORTUNITY COSTS.

INTERNATIONAL FREIGHT MKT. HAS NEITHER FLOOR LEVEL NOR ANY CEILING.

DIRECT NEGOTIATIONS OR THRU BROKERS MOSTLY ON EMAIL/PHONE/FAX WITH PROPER DOCUMENTATION/AUDIT TRAIL/RECORDING.

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WHAT IS TANKER CHARTERING?

A BRIEF NOTE GIVING FIXTURE RECAP ON MAIN TERMS THROUGH EMAIL/FAX IS EXCHANGED BETWEEN PARTIES AS EVIDENCE OF CONTRACT

AS PER INTERNATIONAL INDUSTRY PRACTICE, CHARTERING IS NOT A TWO BID PROCESS (I.E.TECH.& PRICE) BUT IS A COMPOSITE BID SYSTEM INVOLVING TECHNO-COMMERCIAL EVALUATION OF MULTIPLE PARAMETERS LIKE SPEED/DEAD FRT./YEAR BUILT ETC. HAVING ITS VARYING IMPACT ON COST

CREDENTIALS OF SHIP OWNERS IS CHECKED THROUGH IMB/ BIMCO/BROKERS BEFORE NEGOTIATION

CONSIDERABLE FINANCIAL EXPOSURE FOR BOTH – CHARTERER & SHIP OWNERS.

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CHARTERING INVOLVES

ENQUIRY FOR VOYAGE CHARTER VESSEL – CARGO, PARCEL SIZE, LAY DAYS, LOAD/DISPORT, ETC.

ENQUIRY FOR TIME CHARTER VESSEL – TYPE OF SHIP, DURATION, TRADING AREA, CARGO, SPEED, BUNKER CONSUMPTION, PUMPING RATE ETC.

NEGOTIATION BETWEEN SHIP OWNERS/CHARTERERS THROUGH BROKERS BY ANALYSING MARKET TREND THROUGH VARIOUS INTERNATIONAL REPORTS LIKE CLARKSONS, DREWERY, BITR

FIXTURE RECAP ON SUBJECT TO MANAGEMENT / LOADPORT DISPORT APPROVAL

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• LIFTING SUBJECTS AND CONFIRMATION.

• POST FIXTURE ACTIVITIES LIKE VOYAGE INSTRUCTION, SURVEYORS/AGENTS APPOINTMENTS ETC.

• SIGNING OF CHARTER PARTY – VOYAGE OR TIME CHARTER.

• SHIPPING OPERATIONS INVOLVING PAYMENT OF FREIGHT, DEMURRAGE, DEAD FRT., DEVIATIONS, OCEAN LOSS AND PERFORMANCE ANALYSIS.

CHARTERING INVOLVES (CONTD.)

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ATTRIBUTES OF CHARTERING ACTIVITY

SHIPPING MARKET- HIGH VOLATILITY.

SUSCEPTIBLE TO SUDDEN GEO-POLITICAL CHANGES LIKE WEATHER, WAR, OPEC PRODUCTION, SCRAPPING / NEW BUILDINGS ETC.

“TIME” IS OF ESSENCE. HIRING OF RIGHT SHIP AT RIGHT PRICE AT RIGHT TIME.

SOUND TECHNO-COMMERCIAL KNOWLEDGE - A MUST FOR CHARTERING TEAM.

COMPLETE CONFIDENTIALITY & INTEGRITY

SENSITIVE TO SAFETY & HUGE LIABILITY FOR OIL POLLUTION.

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• FLOATING OF ENQUIRY• EVALUATION OF

OFFERS• FREIGHT

NEGOTIATIONS FOR CRUDE/PRODUCT VESSELS

• POST FIXTURE WORK• COORDINATION WITH

SUPPLIERS/LOADPORT/DISPORT/SHIPOWNER/SHIP & STATUTORY AUTHORITIES

• FREIGHT MARKET ANALYSIS

• PAYMENT OF CHARTER HIRE/FREIGHT /DEMURRAGE, PORT DUES,CANAL DUES ETC.

• DEMURRAGE & OCEAN LOSS ANALYSIS.

• TANKER PERFORMANCE• APPOINTMENT OF

SURVEYORS /AGENTS AT FOREIGN/INDIAN PORTS.

• ARRANGEMENT OF BUNKER SUPPLIES ETC.

FUNCTIONS – CHARTERING & SHIPPING

FOLLOWING SENSITIVE ACTIVITIES ARE INVOLVED:

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BASIS FOR FREIGHT NEGOTIATIONS

SHIPPING FREIGHTS ARE NEGOTIATED IN TERMS OF WORLD SCALE RATES WHICH INDICATES MARKET TREND AT THE TIME OF NEGOTIATION.

BALTIC EXCHANGE LONDON PUBLISHES WS RATES FOR ALL PORTS ALL OVER THE WORLD ONCE IN A YEAR WHICH IS A BASE RATE.

BOTH SHIP OWNERS AND THE CHARTERERS NEGOTIATES FREIGHT RATE AFTER ANALYSING MARKET LEVEL (FOR SPECIFIC ROUTES) BASIS FOLLOWING INTERNATIONAL PUBLISHED REPORTS :

LTBP AFRA - LONDON TANKER BROKERS PANEL AVG. FRT. RATE ASSESSMENT

BITR – BALTIC EXCH. INTERNATIONAL TRADE ROUTES

CLARKSON INTELLIGENCE WEEKLY/ DREWARY & BROKERS

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BENEFITS OF IN-HOUSE CHARTERING

DIRECT CONTACT WITH VESSEL OWNERS WORLD OVER

BETTER CONTROL/FLEXIBILITY.

SAVINGS ON ADDRESS COMMISSION : - 2.5% ON FREIGHT PAYMENTS TO SCI OR - 1% TO TRANSCHART.

FREIGHT OPTIMIZATION - FLEXIBILITY OF COMBINING CARGOES THROUGH SYNERGY WITH THE OMCS.

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BENEFITS OF IN-HOUSE CHARTERING CONTD.

SELECTION OF RIGHT SHIP MEETING THE SPECIFIC REQUIREMENT OF PORT/CARGO.

GRADUAL GROWTH OF PROFESSIONALISM IN CHARTERING & SHIPPING IN OMC - ENHANCED INTERNATIONAL CORPORATE IMAGE AS CRUDE BUYER & CHARTERER LIKE BP, SHELL, CHEVRON & ESSO.

TIMELY FEEDBACK TO INT.TRADE DEPT. ON FRT./ DEMURRAGE RATES WHILE BUYING SPOT CARGOES.

STANDARDISATION OF COMPANY SPECIFIC C/PARTY CLAUSES.

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BOARD APPROVAL OBTAINED FOR ADOPTING OMC’S ‘SHIPPING POLICY’ HAVING A BLEND OF IOC/SCI PROCEDURES OF NEGOTIATIONS/ APPROVALS.

PANEL OF BROKERS FINALISED

INSA & DG-SHIPPING HAVE BEEN APPROACHED FOR REGISTRATION AS CHARTERERS

REVISION OF LAM – DELEGATION OF AUTHORITIES THROUGH FC FOR APPROVING PROMPT / HIGH VALUE INTERNATIONAL NEGOTIATIONS WITHIN THE DEPT. HAS BEEN PROPOSED

TRAINING OF PERSONNEL ON CHARTERING & SHIPPING IS IN PROGRESS

Pre requisites…

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EXPERIENCED CHARTERING OFFICER FROM SCI ON DEPUTATION TO OMC.

SEPARATE ROOM FOR CHARTERING DESK, SPACE FOR C & S DEPT.

MOBILE & ISD FACILITY WITH APPROPRIATE HIGHER LIMIT OF REIMBURSEMENT.

IT SUPPORT FOR DEVELOPMENT OF SOFTWARE PROGRAMMES ON VOYAGE ESTIMATION, DISTANCE TABLE ETC.

SUBSCRIPTIONS TO INTNL. MAGAZINES, PERIODICLES AND MARKET REPORTS.

Pre requisites….

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CHARTERING PROCEDURE

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Policy aims at …

“First right of refusal” cargo preference to be given to Indian Flag Ships, without any frt.preference, for oil imports - FOB lifting.

Standard Shipping policy for PSU Oil cos.developed in accordance with DGS & MOS guidelines.

Strictly follow common & transparent tendering/negotiations procedure while chartering tankers.

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Policy aims at…..(contd.)

Firm FOB requirements to be circulated to empanelled Brokers / all Indian/foreign ship Owners /INSA /DGS simultaneously.

Different process of Negotiations for: 1) No Indian S/owner has quoted

2) Indian ship owner(s) has also quoted

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Policy aims at…..(contd.)

Fixtures on subjects: - Management/DGS approval. - Loadport / suppliers / disport

approvals. - DGS clearance on case to case

basis

Lifting subjects & conclusion of fixtures.

Signing of Charter party – Std. Clauses for time & Voyage charters.

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Brief out line of CHARTERING PROCEDURE

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Floating of Enquiry in the Market• Enquiry for tanker requirement will be sent

simultaneously to the empanelled brokers and Indian Ship-owners through e-mail/fax.

• Copies to DG (Shipping) and Indian National Ship owner’s Association (INSA) through email / fax.

• Obligatory for Owners / Brokers to keep offers valid till a specified time/date indicated in the enquiry.

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Receipt of offers from Owners/Brokers

• Receipt of offers shall be through :

Dedicated email box with password protection. Separate mailboxes for receipt of offers against each enquiry.

A dedicated fax in a locked room - as an alternate mode.

At the designated time for receipt of offers specified in the enquiry Offers are printed/collated from the email box (or at the expiry of the extended time).

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Receipt of offers …..contd.

Unsolicited / Mid way offers will not be considered.

As a standard procedure, bidders will be required to submit hard copy of the offer and other related communications for records.

The time for submission of offers may be suitably extended, if required

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The offers will be ranked on the basis

of freight quoted.

Demurrage rate and other terms &

conditions to be negotiated.

Evaluation of Offers:

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Negotiations/counters

The process of negotiation:

(A) Incase, No Indian Ship-Owner has quoted

Negotiation will be held with all the technically acceptable bidders indicating their respective ranking. A ‘firm’ counter will be given to L1 bidder, the counter to other bidders will be ‘open’ (i.e. Open1, Open2 etc.).The original rankings of the bidders may change, basis response to the counter (s). In case of no agreement, to explore other alternatives.

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Negotiations/Counters-contd.

(B) Indian ship-owner (s) has also quoted

In case offer (s) are received from Indian ship-owner (s) also, the Indian ship- owner(s) will have the ‘first right of refusal’.

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Negotiations/Counters-contd.

(A) Indian ship-owner is L1Firm offer to L1 Indian Ship owner And Open to other Indian S/O,irrespective of

their ranking along with all tech.acceptable Foreign S/Owners.

Ranking of bidders will be disclosed. If neg. with Foreign S/O is successful,Indian

S/O will be asked to match the rate.Failing which Foreign S/Os ship will be fixed.

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Negotiations/Counters-contd.

(B) Indian ship owner is not L1

Indian S/Owners will be asked to match rate of foreign S/O L1 rate.

If more than one Indian S/O match rates,then original lowest ranking amongst Indian S/O will fixed on subjects.

If counters are to be given, firm counter to L1 Indian S/O & open to all Indian as well as foreign S/Owners irrespective of their rankings.

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Negotiations/Counters- contd.

Indian S/O not L1 in negotiations,they will be asked to match lowest rate of Foreign S/O.

If nobody matches the lowest rate fixture will be finalised with foreign S/Owner.

All counter shall be sent/received within a specified time.

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Fixtures on Subjects:Once Neg. are concluded fixture will be

confirmed on “Subjects”with time schedule to carry out following activities:

• Charterer’s Mgt.approval• Terminal/Suppliers approval• To arrange for license from DG(Shipping)• Obtain record note of neg. / Fixture note

from the Brokers/Owners for record• All parties to provide record note of

telephonic converation

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Charter party:

Adoption of customised Charter party:

Voyage C/P –BPVOY 4 – ASBATANKVOY Time C/P – SHELL TIME 4Coastal Time C/PartyContract of Affreightment (COA)Coastal voyage C/party- ASBATANKVOY

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Proposed Ratio of chartering Crude oil:

- COA – To cover all voyages –Appx. 6 MMT

- Time charter:- LR I (1) - Indigenous crude

Ravva/MH - SUEZ MAX (1) - to load term crude ex

RTA-Mumbai (MR) & Basrah – Vizag (VR)

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Proposed Ratio of chartering Product - Coastal movements:

Time charter: (Thru TCC- Industry tender)

- WO - Size / No. of vsls.- BO - Size / No. of vsls.

- LPG – Size (Time charter)- Product imports: on C & F basis.- Product Exports: on FOB basis.

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THE MARKETING STRUCTURE

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We shall have a look at …

Tanker Market structure

Worldscale

A F R A

Factors which have influenced freight market levels

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Tanker Market Structure

3 Players

Owners

Charterers

Brokers

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The Ship-broker

Collects and distributes information about the markets

Acts as an intermediary for a negotiation

Provides the skill and expertise to deal with the post fixture administration & operations

Ethical standards ???

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The Tanker Market Works very quicklyAddress commissionBrokerageNegotiations on phone or MessengerRecap via e-mail or FaxAsbatankvoy is widely used standard

Charter party with additional clauses

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WorldscaleEasy and common reference point for

negotiations and to know the market trendsTakes into account the different port costs as

well as different steaming time to each of the ports

Owners earn approximately the same equivalent time charter return whichever port of discharge is nominated

The basic rate is described as the “flat” rate of WS100 so that a rate of WS 120 is 20% more than the flat rate

The rates are per mt

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Worldscale Published once in a year on 1st Jan Calculations are made on a round voyage basis Standard vessel of 75000 dwt Standard speed of 14.5 knots on 55 mt (380 cst)

per day plus 100 mt per round voyage and 5 mt per port

Port time of 4 days plus 12 hours for each extra port used

Fixed hire rate of US $ 12,000 per day Average bunker prices (1st Oct to 31st Sep prior to

the year in question) Port costs based on info provided by the port

authorities 24 Hours allowed for Panama Canal and 30 Hours

for Suez Canal

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WorldscaleSome loadports have 2 rates

Via Cape of Good Hope denoted by C Via Suez Canal denoted by S Why ???

Mina al Fahal/London $20.68C 21,350 miles Loadport ? Discharge Port ? Rate per MT ? Via ? Distance between Loadport and Discharge Port ?

Rates ex Arabian Gulf are given to a waypoint which is “Quoin Island” Why ???

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WorldscaleVariable Differential usually apply where

the port charges on a given ship will be assessed differently based on the cargo, loading / unloading and discharge facilities

Fixed Differentials are applied in a different way to calculate the freight earned. These are usually based on Gross Tonnage, Cargo Qty or Distance and are not applied as percentage to WS flat rate

Produced by two non-profit making organisation ensuring independence from external bias & narrow market views

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A F R ADeveloped by Shell and BPAccepted as a basis for assessing

transportation costs for inter-company movements of oil

Compiled by the London Tankers Broker Panel and based on all known fixtures in the market and transport agreements by oil companies

For GP, MR, LR1, LR2, VL & ULCCAvailable only to the subscribers

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Factors influencing the freight marketsPolitical events

Oil demand

New building activity

Tanker scrapping

External pressures