MARINE TRANSPORTATION OF CRUDE OIL AND PRODUCTS
Abstract
This paper reviews the technical and economic
changes in the marine transportation of crude oil and
its products for the past four years, highlighting :
1 . The world tanker fleet analysed by ships’ sizes,
specifications and routes.
2. Relevant elements which call for or support the
progress and changes of oil transportation, such
as
(a) increasing volume and changing patterns of
oil trade;
(b) further considerations of safety and environ-
mental conservation;
(c) technical achievements in shipbuilding and
marine engineering.
3. Economics of tanker management consisting of
ship prices, operating costs, investment effect and
operational constraints.
Finally, some conclusions and forecasts are given.
1. INTRODUCTION
During the 1960s, economic efficiency in the
transport of oil and oil products was marked by a
dramatic development, favoured by a rapid rise in
demand for energy as well as by a stable oil situation,
and further assisted by the revolutionary large sizes
by SAMPEI YAMAJI,
Chairman,
The Japan Tanker Owners’ Association,
2-6-4 Hirakawa-Cho, Chiyoda-ku,
Tokyo, Japan
353
Résumé
Cette communication donne un aperçu général des
changements techniques et économiques qui sont
intervenus en matière de transports maritimes de
pétrole brut et de produits dérivés pendant les quatre
dernières années, mettant particulièrement l’accent
sur :
1. La flotte de pétroliers dans le monde classée
selon la taille des navires, leurs destinations
spécifiques et leurs lignes de navigation.
2. Les facteurs qui nécessitent des changements ou
des améliorations, ou bien les facteurs qui
constituent des changements ou des améliora-
tions, tels que :
(a) l’accroissement du volume et les modifica-
tions des structures dans le commerce des
produits pétroliers,
(b) les conditions de sécurité nouvellement
intervenues et les problèmes de préservation
de l’environnement,
(c) les améliorations des techniques dans la
construction navale et le génie maritime.
3. Les conditions économiques de la gestion des
pétroliers : prix des navires, frais de fonctionne-
ment, effet des investissements et des contraintes
opérationnelles.
Enfin, quelques conclusions et prévisions sont
esquissées.
and automation realised for tanker fleets of the world.
In the early 1970s, tanker management was playing a
major part in energy shipments, but it was seriously
affected by the recent upheaval in the economic
environment.
In this report I should like to concentrate mainly on
marine transport of crude oil and oil products in and
after 1971, with particular reference to the trends in
shipping demand, changes in major sealanes, require-
ments for environmental conservation, safer naviga-
tion, and progress in shipbuilding techniques and
marine equipment, and instruments that contributed
to changes as well as development of tankers. After
354 Marine Transportation of Crude Oil and Products RP 10

TABLE 1
GROWTH OF WORLD TANKER FLEET, 1970-1973 (as at 31 December)
1970 1971 1972 1973
Ownership No. dwt No. dwt No. dwt No. dwt
Oil company 1220 53685784 1247 59716089 1234 63858843 1259 72088489
Private 1882 95539534 1960 109098373 2006 123388170 2090 141211679
Total commercial fleet 3102 149225318 3207 168814462 3240 187247013 3349 213300168
Government 123 2329796 115 2195988 114 2196473 103 1984229
Miscellaneous 10 156521 9 355310 5 289891 6 308541
Total 3235 151711635 3331 171365760 3359 189733377 3458 215592938
Growth rate 12.9% 10.7 % 13.6%
Source: J. I. Jacobs & Co., Ltd., World Tanker Fleet Review, 1970-1973.

describing these factors and other various problems
that have important bearings on the economy of
tankers, I shall attempt a few forecasts.
2. GROWTH OF WORLD TANKER
FLEET AND CURRENT STATUS
Important changes were witnessed in many aspects
of the oil industry in the early 1970s, but the demand
for oil, a major energy source, continued to grow as
world economy expanded and the general standard of
living rose. Marine shipments of oil increased at an
average annual rate of 13%.
In response to the demand for tanker tonnage, the
world tanker fleet was reinforced. This period was
characterised by the wide use of VLCCs and ULCCs
(very and ultra large crude oil carriers) which have the
merit of economy of scale, and by the growth of large
combined carriers that could offer flexible selection of
cargoes, including oil, and reduce running in ballast.
As Table I shows, the growth in tanker tonnage
from the end of 1970 to the end of 1973 was from
about 150 million dwt to about 220 million dwt, a
growth rate of more than 40%. If combined carriers
were added, the tonnage at the end of 1970 came to
170 million dwt which increased to about 250 million
dwt at the end of 1973, more than 50%.

TABLE II
INCREASE IN WORLD TANKER FLEET RELATED TO SIZE (as at 31 December of each year)
1970 1971 1972 1973
Size No. dwt Rfte No. dwt Rate No. dwt Rate No. dwt Rate
A % % %
139 1604372 0.5 141 1617085 0.8 142 1624160 0.4 144 1652253 1*7
268 4215281 All.0 249 3897170 A7.6 215 3354843 A 14.0 203 3161379 A6.8
464 8716398 A10.1 444 8318863 A4.6 412 7725529 A7.2 379 7124692 A74
384 8279775 12.5 411 8852998 6.9 418 9012858 1.8 417 9002127 A0.2
25000/29999 227 6202314 6.4 240 6564733 5.8 241 6587163 0.3 264 7224272 9.6
30000/34999 257 8482126 A4.3 268 8857293 4.4 267 8821494 A0.5 283 9339940 5.8
35000/39999 174 6429224 8.4 172 6358616 Al.1 177 6544001 2.9 178 6581976 0.5
40000/44999 139 5937566 A4.9 137 5842336 Al.7 136 5801111 A04 134 5720218 A1.4
45000/49999 119 5761538 1.1 122 5899382 2-3 120 5794258 A1.8 116 5599858 A3.4
50000/59999 227 12173236 3.6 227 12178693 0.0 227 12172039 AO.1 232 12425441 2.0
60000/69999 123 7959208 0.9 125 8074773 1.4 125 8064775 A0.2 126 8124201 0.7
70000/79999 134 9963272 3.7 135 10025447 0.6 138 10231346 2.0 142 10538829 3.0
80000/89999 90 7639770 6.9
.. 89 7527681 A1.5 90 7614905 1.1 94 7955695 4.4
90000/99999 82 7810026 8.2 85 8105840 3.7 88 8398096 3.6 87 8297631 A1.2
1OOOOO/ 124999 86 9479922 8.7 92 10102856 6.5 95 10461896 3.5 103 11379232 8.7
125000/149999 24 3293214 41.1 33 4501715 36.7 41 5590265 24.1 49 6640865 18.8
15OO00/174999 15 2397954 24.9 17 2709840 13.0 18 2884659 6.4 20 3207789 11.1
175000/199999 19 3611942 5.6 20 3782924 4.7 20 3782924 0.0 21 3952263 4.4
200000/249999 117 25256903 125.2 165 36033760 42.6 204 44979774 24.8 244 54344674 20.8
250000/299999 8 2051065 302.1 28 7229542 252.5 58 15144007 109.4 100 26459952 74.7
300000/349999 6 1960212 0.0 7 2332910 19.0 7 7284212 A2-2 10 3247716 42.2
350000/399999 - - - - - - 1 372698 - 1 366813 A1.6
400000 - - - - - - - - - 2 952352 -
3102 149225318 15.1 3207 168814462 13.1 3240 187247013 10.9 3349 213300168 13.9
Tankers over loo00 dwt, except Government owned vessels.
Source: J. I. Jacobs & Co., Ltd., World Tanker Fleet Review, Dec. 1970-Dec. 1973.
RP 10 Marine Transportation of Crude Oil and Products
The increase by types of vessels is shown in Table II.
The greatest growth in this period was recorded by the
200000-250000 dwt class, which accounted for about
one-quarter of the world's tonnage. This class shot up
particularly fast in the 1970s, with 13-fold growth in
this period. From 1973 on, increase of ULCCs of
300000 dwt and more was remarkable.
The ULCCs and VLCCs of 200000 dwt and above
registered a threefold increase in the period from the
end of 1970 to the end of 1973. As a result, the average
tonnage of tankers rose from 47000 dwt to 62500 dwt
in the same period.
A look into new shipbuilding orders shows that as
of mid-1974 about 200 million dwt had been con-
tracted, most of which is expected to be completed by
the end of 1977. In 1975-6, new vessels totalling 50-55
million dwt per year are expected to be completed and
enter service.
VLCCs and ULCCs constitute a large part of these
new construction orders, with orders for 250000 dwt
and above reaching 120 million dwt or 60% of the
total orders, indicating the continued widespread use
of huge tankers. Compared with the average tonnage
of 62500 dwt of the existing tankers as at the end of
1973, the average tonnage of tankers ordered at the
same time was 170000 dwt.
In terms of the number of new orders in each class,
there is a noteworthy number of orders for the 120-
150000 dwt, 80-90000 dwt and 30-35000 dwt classes,
in addition to the increase in VLCCs and ULCCs.
While huge tankers proliferate, ship owners are
apparently paying attention to the market for special
tankers of medium and small sizes, in view of the
limited depths at terminals, the navigable draft of the
Suez Canal when reopened, feeder service from CTS
and the anticipated increase in transport of oil
products resulting from more refining at the produc-
tion sites and intermediate places.
Another factor that determines the efficiency of
tankers is speed. The average speed in the past few
years has been 15-5-16 knots. While tonnage has
increased, speed has remained virtually unchanged.
One result of the growth in huge tankers is that
while the number of tankers of the world increased by
only 4%, shipping capacity expanded by 43% (T-2
tankers equivalent).
3. MARINE SHIPMENTS OF OIL AND
SEALANES
Marine shipments of crude oil and oil products in
1970-3 increased by 33%, from 1200 million tons to
1600 million tons.
355
Table III indicates oil movements between various
areas in the 1970-3 period, according to which the
main world oil trading routes are: Middle East-
Western Europe, Middle East-Japan, Africa-Western
Europe, Caribbean-USA, Southeast Asia-Japan, and
Middle East-USA. Especially noteworthy in this
four-year period are a large-scale rise in exports from
the Middle East, and increased shipments from West
Africa and Southeast Asia, while shipments from the
Caribbean slowed down and those from North Africa
actually decreased.
Imports, on the other hand, have increased in major
consuming nations : Western Europe, Japan and the
USA, in particular. The pattern of marine trans-
portation of oil is apparently shifting from short-
distance shipments to long-distance shipments. As a
result, the average distance of oil shipment was
prolonged from 5600 miles to 6480 miles in the same
four-year period, with a ton/mileage increase of 49%.
This led to increased demand for tanker tonnage and
constituted a large factor in bringing about the tanker
freight boom of 1973.
The higher ton/mileage figures were almost entirely
attributable to increased exports from the Middle
East, notably from the Persian (Arabian) Gulf.
During the Middle East War in 1973, some coun-
tries in the region temporarily reduced oil supplies,
and oil sources other than the Middle East were
sought for. However, since the Middle East has
overwhelmingly great reserves, and can satisfy rising
demands, the pattern of dependence on the Middle
East will continue.
Needless to say, the reopening of the Suez Canal
would naturally have a considerable effect on trans-
portation distances and ton/mileages. If the Canal is
reopened and widened as planned, it would depress
tanker demand and the Canal would serve as the main
oil transportation route again.
4. ENVIRONMENTAL CONSERVATION
AND NAVIGATIONAL SAFETY
Ocean pollution by tankers and prevention of oil
pollution
A high rate of economic growth has led to the grave
problem of environmental destruction. World concern
over ocean pollution has mounted and serious efforts
to protect environment are now being exerted through
international regulation and co-operation.
Ocean pollution may be attributed to many causes,
but the one that relates to tankers is oil pollution,
generally due to leakages of the following kinds:
356 Marine Transportation of Crude Oil and Products RP 10

TABLE ìII
INTER-AREA TOTAL OIL MOVEMENTS, 1970-1973 (million tons)

USA 2:; Japan Others Total

1970 106 26.5 1.3 38.5 172.3

Caribbean 71 113.5 27.3 0.8 23.2 1644
72 118.8 27,O 0.5 41.5 187-8
73 131.1 17.5 0.5 38.4 187.5
1970 8.8 309 173 140.7 631.5
Middle East 71 20 378.8 191.8 164.9 755.5
72 24.3 426.4 185.8 206.1 842.6
73 40.8 513.3 215.9 219 989.0
1970 3.8 220.5 2 5.5 231.8
North Africa 71 4.5 158.3
_..- 1 __
22 1 X I . X-
_--
72 11.8 129.9 0.2 24.6 166.5
73 17.8 120.8 1.o 23.7 163.3
1970 2.5 44.3 0.5 9.5 56-8
West Africa 71 5.5 55.5 2 16.3 79.3
72 13.6 57.4 3.4 19.7 94.1
73 25.2 50.3 5.4 24.9 105.8
1970 3.5 0.5 30 5.5 39.5
South East Asia 71 6.8 0.3 31-3 3.6 42
72 9.2 0.3 40.7 3.7 53.9
73 11.8 0.5 54.8 2.0 69.1
1970 45.4 42.7 4.5 38.5 131.1
Others 71 48.5 47.8 4.1 27.0 127.4
72 64.8 54.9 5.1 29.2 154
73 86.5 53.4 6.1 34.3 180.3
1970 170 643.5 211.3 238.2 1263
Total 71 198.8 668 231 257 1354.8
72 242.5 695.9 235.7 324.8 1498.9
73 313.2 755.8 283.7 342.3 1695.0
Source: BP Statistical Review of the World Oil Industry, 1970-1973.

Oil in bilge. consistently endeavoured to prevent oil leakage and

Oil in ballast and tank-cleaning water.
Oil leakage due to improper mechanical opera-
tion, i.e. improper use of valves.
Cargo or fuel oil spillage due to collision,
stranding and other accidents.
Control by international treaties and agreements
aimed at preventing these kinds of oil pollution of the
oceans has been made more stringent over the years,
but recently, based on an IMCO proclamation, the
1973 Treaty on the Prevention of Ocean Pollution was
adopted. The concentration and the total amount of
oil in the oil discharge were strictly regulated, and the
way was opened for international legislation of
measures to prevent oil pollution completely through
the use of special ballast tanks, supervision of oil
discharge, application of control equipment and
enforcement of greater control measures.
Before enactment of legal steps, ship operators had
devised such measures as the load-on-top system and
slop tanks. As concern over environmental conserva-
tion mounted and regulations were made tougher, the
industry carried out researches on improved tanker
designs, installation of equipment to prevent pollution
as well as on techniques to treat polluted water,
control harmful materials, and develop higher per-
formance of oil-water separators. Studies on the
relations between the ocean environment and pollu-
tion and on the natural purification mechanism of the
ocean were also made. It is hoped that international
co-operation will be strengthened and that more
information will be exchanged in these areas.
Prevention of explosions and fires
The next problem I would like to take up is how to
prevent fires, explosions, collisions and stranding of
tankers that are most likely to cause serious pollution.
RP 10 Marine Transportationof Crude Oil and Products
Because of the nature of the tanker’s cargo, there is
always the danger that the oil or the flammable gas in
the holds may cause explosions or serious fires. The
major causes are:
Leakage of fuel or lubricating oils in the engine
room and gas leakage from pipe fittings and
valves in the pump room.
Insufficient control and treatment of the mixture
of air and gas remaining in the tanks after
unloading.
Failure of the crew to observe fire prevention
measures.
Effective measures to prevent (I) include separation
of steam and oil pipes in the engine room, and installa-
tion of ventilation and thermostats in the pump room.
For (2), one may either increase the gas concentration
in the tanks, or reduce it, or replace it with an inert
gas. In new ships the inert gas system is employed, by
using engine exhaust gas.
With regard to the crew’s handling of fire, a thorough
and strict supervision system is imperative. Tanker
owners have established detailed fire prevention rules
to be applied in all the procedures of operating and
attending to tankers, based on experience and research,
and they are also giving thorough education and train-
ing to crew members. The IMCO recommends the
living quarters of the crew should be designed from
the point of view of fire prevention and crew’s safety,
and it is under way. The design would also help to
prevent fire from spreading even when a crew member
had been careless.
Prevention of collisions and stranding
To cope with increased dangers of collision and
stranding arising from congestion in maritime traffic,
governmental and international as well as private co-
operation is under way to prevent accidents, limit
damage and revise international laws and regulations.
Establishment of separated sealanes
The IMCO is establishing in the world’s major sea-
lanes a one-way traffic system by separating sealanes
and enforcing tighter traffic regulations. A joint
proposal to set up a traffic separation belt by the three
coastal states facing the Malacca-Singapore Strait is
being planned.
If the 1972 Convention on International Regulation
for Preventing Collisions at Sea comes into effect in
1976, the seaway separation system will be applied
more widely and is expected to prove very effective.
351
Improvements of sealanes
To prevent bottom-touch and stranding by deep-
draft VLCCs and ULCCs, large-scale depth-soundings
are being taken in designated areas. For example, the
results of detailed soundings carried on for six months
in the Malacca-Singapore Strait were published
recently, while similar soundings are under way in the
Lombok-Macassar Strait at present. Resurveys of the
Dover Strait and the southern part of the North Sea
are being planned, too. The competent authorities in
major harbours are actively working to open up deep-
draft sealanes and tighten traffic regulations.
Development of navigational instruments
To maintain safety in navigation, various instru-
ments and systems have been developed one after
another through advanced electronic engineering and
put to practical use: such as Doppler sonar, which
accurately measures the absolute speed when a huge
tanker is berthing, and detects underwater obstacles ;
collision prevention equipment which uses radar as a
sensor and processes its signal by computer; NNSS
which uses navigational satellites ; the position-
determining system by OMEGA, etc.
I have so far briefly referred to the progress in
various navigational safety systems, but I would like
to additionally stress that the most important thing in
preventing accidents, collisions or fires is to give
thorough-going education and training to the crew
about these matters.
5. TECHNICAL PROGRESS IN
SHIPBUILDING AND SHIP’S EQUIPMENT
Building systems
As orders for VLCCs became predominant, large
shipbuilding docks were constructed one after another.
To overcome the labour shortage and rising wages in
these large shipyards, a shift was made from previous
labour intensive to technology intensive, with major
concern directed to labour-saving, safety and improved
working conditions.
Production systems with the layout and facilities of
the docks designed to enable continuous construction
of huge tankers effectively were introduced, and in
place of a three-stage building system, side-building
and dual ends building dock construction methods
were employed, which led to revolutionary improve-
ments in precision and rationalisation of block
construction, assembly and conveyance.
358 Marine Transportation of Crude Oil and Products RP 10

Computers are used in every phase of designing and required output exceeds 60-65000 PS and, therefore,
building, and designing by an on-line automatic blue- the main engine of a ULCC of over 700000 dwt will
printing system and a “dialogue” with the computer require twin-shaft propulsion for the time being.
is now possible. The introduction of N C in hull con- With respect to the reheating plant which is highly
struction has enabled automation, greater speed and economical in fuel consumption, stress has been laid
accuracy in steel-cutting. in recent years on safety, reliability and simplicity in
In tanker fittings, the unit construction method is operation rather than on performance and, conse-
being increasingly employed, which will help eliminate quently, its output and efficiency have not increased
dock-side fitting work in the future. remarkably. However, the rapid rise in fuel costs has
sparked a renewed interest in the reheating plant, as
was the case with the diesel engine, and rapid technical
Design and fittings for tankers development of the plant, aimed at higher performance,
will be pursued.
Regarding designs, studies were made of propulsion With the advent of the year 1970, manufacturers
and manoeuvrability of an extra-broad tanker, developed a number of low-speed, high-output diesel
including tests on a large model ship, when orders engines. In 1973, a diesel engine was about to be
were placed for 500000 dwt tankers, and several ship- produced with 3400PS per cylinder, 10 cylinders
yards announced the development of a new model of (105 cm 4) and an output of 48000 PS. Some feel that
LIB = 5. In view of the regulations on tank-size from the point of view of technical reliability the
imposed by IMCO, it is planned to employ for huge current limit on diesel engines would be 50000 PS of
tankers a horizontal main system and three longi- output at a mean pressure (pmc) of 11-13 kg/cm2.
tudinal bulkhead systems, as a greater number of In view of the trend toward larger tankers at a time
tanks will be made of which length is shorter than of high fuel oil prices, shipowners will probably be
depth. more interested in a high horsepower diesel engine, as
In the hull construction design, computers arc used in the reheating turbine, and this will stimulate
for theoretical calculations (finite element method, further technical development.
etc.) which enables analysis of stress. As a result, Meanwhile, development of a high-output medium-
centre girderless construction, side stringer construc- speed geared diesel is proceeding, and per cylinder
tion, increased longitudinal space, large perforated- output is steadily rising every year. Studies are also
type swash bulkheads and other labour-saving designs under way on the decelerators and the flexible coupling
came to be used in hull construction. that are required if medium-speed geared diesel
Aside from the improvements of the engine depart- engines are installed in large ships. Although there are
ment and advanced automation described below, the disadvantages from the standpoint of automation
most outstanding improvements made in fittings and compared with other engines, it is expected that this
facilities are the establishment of inert gas systems, kind of engine will be installed in huge tankers in the
widespread use of the Doppler sonar, extension of the near future.
tank coating area, maintenance-free cast steel pipes,
fixed tank cleaning equipment. These contribute to
the safety and economy of tankers and lightening the Advanced automation
work of the crew.
As tankers have grown in size, cargo pumps with a Ships with automated and unmanned engine rooms
capacity of 8000 t/hr have been developed. are increasing in number. In 1971, highly automated
ships were commissioned which, by using the com-
puter, could control not only the engine room equip-
Propulsion engines ment but also cargo work and navigation, and thus
could save labour and ensure more safety. In 1972, a
A steam turbine plant with an output of 45000 PS VLCC made its debut equipped with a total computer
for use as the main engine of a 477000dwt ULCC system in which every system of navigation, cargo
was completed in May 1972. Standard series of turbine handling and turbine plant is integrated.
plants with an output of up to 60000PS for use as These tankers, using the computerised total control
main engines in larger tankers, container ships and system, are provided with the previously described
LNG ships are being developed in major shipyards. NNSS and OMEGA positioning systems, a collision
However, when a ship exceeds 700000 dwt, the prevention system that processes the signal supplied
RP 10 Marine Transportation of Crude Oil and Products
by the radar which works as sensor, a regulardata-
receiving system and related automatic recording and
computing systems. In the automatic cargo work
system, it is now possible to perform automatically
loading, unloading, taking in and discharging of
ballast water, valve operation, pump control, draft,
trimming, measuring of cargo volume and weight, and
other various recordings.
In the control system of the engine room, computa-
tion of the performance, accident prevention, un-
manned operation, emergency monitoring, daily log-
ging and recording are all automated.
Use of the computer by automated ships began by
installing a single unit with a large capacity which
could be used simultaneously for multi-purposes such
as navigation, cargo work, engine operation, radio
communication, etc. Later, when good minicomputers
came to be produced at a relatively low cost, a number
of small computers were used for specific purposes.
6. ECONOMIC EFFICIENCY
OF TANKERS
Economic factors in increased size
As stated already, tankers have grown larger in size,
with VLCCs and ULCCs most favoured, as require-
ments for marine transportation of oil have expanded
phenomenally and shipbuilding technology has re-
markably progressed. The major result of large size
has been, of course, the economic effect of reduced
transportation costs, because of the merit of large size.
The main factors leading to cost reduction through
increased size are:
Ship’s cost per unit ton can be comparatively
cheap.
There is not much difference in the number of
crew between huge and ordinary tankers.
Operating costs such as repairs and stores do not
rise in proportion to the tanker’s size.
Overhead expense does not vary much with ton-
nage.
Necessary engine output is relatively small in
proportion to tonnage, permitting decreased fuel
and lubricating oils costs and larger cargoes.
Building costs
Building costs for tankers of the same tonnage vary
with the design, grade, shipyard facilities and payment
359
conditions. Especially in recent years, when inflation
has continued and freight rates have fluctuated
violently, construction costs often vary depending on
the time when the order was placed. Assuming all
these conditions to be equal, a very rough estimate of
shipbuilding costs has been plotted in Fig. 1. Vessels
of up to 500000dwt, for which it is more or less
possible to make an estimate, are considered here. In
the view of experts from major Japanese shipyards,
the cost per dwt drops sharply up to vessels of about
400000 dwt. However, partly due to the regulations on
¡i-
TANKER 210,000 DWT EQUIPPED
W I T H TURBINE
S I Z E IN DWT
i 1,000 TONS 1
Fig. I-Building cost related to size.
the size of the tank imposed by IMCO, the drop
diminishes with vessels above 400000 dwt and reaches
a minimum with 600000-700000 dwt vessels. With
vessels above 700000-800000 dwt, twin-shaft propul-
sion is necessary, and it is generally considered that
the cost per ton is relatively high, close to that of a
250000 dwt tanker. Because of the recent currency
instability, soaring inflation and other economic un-
certainties, some shipbuilding contracts incorporate
currency parity clauses and the sliding system. This
causes the shipowner who places an order to make
different judgements from heretofore in finance and
planning his balance sheet.
Transportation costs
In order to compare transportation costs of tankers
by types, a study must be made, in addition to the
building cost mentioned above, of the following: the
terms of finance (repayment, interest, security) ; terms
of insurance and the premium; crew costs, that differ
according to nationalities ;widely fluctuating fuel costs
and other costs which vary depending on the owner
360 Marine Transportation of Crude Oil and Products
giving the order and the time of construction; opera-
ting expenses ; presence of the escalation clause ; trade
routes; the operation time per year; estimates of future
rise of various expenses, etc. Particularly in periods
like the present when all these factors are fluctuating
sharply, an accurate comparison is almost impossible.
However, an attempt has been made to determine the
factors involved and the results are shown in Fig. 2.
The route between the Persian (Arabian) Gulf and
TANKER WITH TURBINE VIA MALACCA
Fz
100
U
n VIA LOMBOK
a
w
75
100 200 300 400 WO
SIZE IN DWT
I 1,000 DWT I
Fig. 2-Transportation cost related to size.
Japan is taken up, with which Japanese shipowners
are very familiar, on the assumption that the vessels
in ballast, or of less than 21 ft draft when loaded, pass
the Malacca-Singapore Strait, and vessels of deeper
draft pass the Lombok-Macassar Strait. It is revealed
that the transportation costs for a 250000 dwt ship
passing the Malacca-Singapore Strait both ways and
a 300000 dwt vessel going through the Lombok-
Macassar Strait when fully loaded are about the same.
With larger ships, some cost reduction can be anti-
cipated even when they make the detour via Lombok.
A twin-shaft vessel of more than 700000-800000 dwt,
which is not included in these calculations, would show
a somewhat higher curve. Another view is that there
would be little difference between a 700000 dwt and a
300000dwt tanker, but in the case of a 800000dwt
tanker built with today’s technology, the cost would
rise.
One should not forget that as the tanker becomes
larger, there will be fewer terminals that can receive it;
more days will be required for pre-docking cleaning;
docking facilities will be more limited; and more
safety factors must be taken into account.
In the last 4-5 years, the operating costs in marine
RP 10
transport have risen sharply. The building cost
doubled, the crew costs have gone up three times in
Japan, and the fuel oil price jumped as much as five
times. Repair costs and the interest on shipbuilding
funds have also gone up sharply. As long as the
economic environment remains as unstable as it is,
the fluctuations in costs will be inevitable for some
time to come.
Moreover, as the number of tankers grows, their
economic efficiency will fall because of harbour con-
gestion, stricter safety measures and more tank-
cleaning time required to prevent marine pollution,
leading to higher transportation costs.
For long-term stability of petroleum goods, some
tankers have concluded long-term cost-base contracts.
Because of unexpectedly high inflation they have
suffered enormous losses recently. With the under-
standing of the oil industry regarding recent abnormal
economic variations and their cooperation and sup-
port, a return to normal will be possible for ship
owners.
600 7. TRANSPORTATION OF OIL PRODUCTS
Transportation of oil products may be made over
three categories of distance: short distance, in which
case the distance from the refinery to the consumer is
relatively short within a certain area; medium-
distance, in which case difference between the yield
pattern and demand are balanced, e.g. across the
Atlantic; long distance between producers and con-
sumers, e.g. from the Middle East to Europe, America
or Japan.
For short-distance distribution, small tankers,
including sophisticated product carriers for petro-
chemicals, predominate, while in medium- and long-
distance transportation, slightly larger tankers are in
service.
International trade in oil products expanded from
230 million tons in 1970 to 290 million tons in 1973,
of which approximately 80% was automobile gaso-
line, diesel oil and residual fuel. The percentages of
naphtha, kerosene and petrochemicals were still small.
In the transportation of fuel oil, ordinary dirty
carriers are used frequently and it is difficult to know
the precise tonnage of product carriers, but it is
estimated that 2000 vessels totalling 50 million dwt are
engaged in transportation of oil products.
As regards the future trade of oil products, the
United States has become an importer and fuel oil
shipments to that country are expected to increase.
RP 10 Marine Transportation of Crude Oil and Products
It is presumed that in the late 1970s, shipments to the
US from Venezuela will decrease, and instead those
from the Mediterranean, Western Europe and the
Middle East to the US will increase. As refining in the
producing countries thrives, the Middle East-Europe
and the Middle East-Japan shipments would increase,
and more refining in intermediate places would lead
to a gradual growth in shipments from Southeast Asia
to Japan.
On the other hand, refinery facilities will not
possibly be reinforced in the advanced industrial
countries because of the environmental conservation
and pollution issues. As a result, increased use of
intermediate refining facilities, as in Singapore, is
conceivable. But construction of new refineries in oil-
producing countries and intermediate places is lagging
behind the original planning. Only in Egypt and Iran
will they be completed in the 1970s. Under these
circumstances, abundant shipment of refined oil
products from these countries to the consumer
countries will not be possible before 1980.
In the background stated above, the pattern of trade
of oil products in the late 1970s and early 1980s would
be substantially different from that followed so far and
the demand for product carriers would increase with
the growth of shipments.
In the past, 30000 dwt was considered the optimum
size for a product carrier, but, to meet the rising
demand, the commission of large ones of 80000 dwt
or even over 100000dwt would not be ruled out.
There are also reports of a plan to use VLPCs (very
large product carriers) of the 200000 dwt class in the
shipment of oil products.
8. OUTLOOK
In this report I have attempted to give a general
review of marine transportation of crude oil and oil
products since 1970 in terms of developments and
changes in the world tanker fleet, oil situation,
environmental issues, progress in shipbuilding tech-
nology, trends toward larger tankers and their
economic efficiency as well as the interrelationships
between these factors.
Basically, the developments achieved during the
1960s continue in the 1970s. It may be said that since
the last congress, no striking changes have taken place
in the economics and technology of tankers, but the
supply and price of oil, safety requirements of ships
from the environmental standpoint, the continuation
of world-wide inff ation, currency instability and other
economic and social conditions have had a great
361
effect on tanker management, and the stable growth
of the 1960s is being replaced by precariousness.
This is a very difficult time to make a forecast of the
future, but the schedule for the period until the next
congress or about 1980 includes completion of tankers
amounting to 200 million tons in the first half of 1978,
although a certain delay may be anticipated. Subse-
quent construction orders will depend on the demand
for tonnage and the freight rates, but with respect to
shipbuilding capacity there is no cause for concern at
all. On the contrary, in view of the recent world
economic trends and the oil supply situation, there is a
fear of over tonnage, and even resales or cancellations
of ships ordered on speculation may occur.
As for the prospects of huge tankers, let me point
out that tankers of 400000 dwt and over are already in
service, and that 500000 dwt class ships have been
ordered. Some major shipyards in Japan and Europe
are equipped with facilities capable of building
1000000 dwt tankers, and have announced their readi-
ness to build them.
As mentioned in Section 6 on the economics of huge
tankers, at the present level of technology tankers
more than 700000-800000 dwt must have twin shafts,
and when construction and operating factors affecting
costs are taken into account, I do not think that
tankers over 500000 dwt will generally be accepted by
1980.
The outlook for product carriers, which will be in
large demand in future, was discussed in the previous
section.
In order to rationalise transportation costs, develop-
ment and use of low fuel consumption engines and
greater automation to save labour will be urged in new
orders, but, in spite of such efforts, the transportation
costs will continue to rise for the time being because
of the high operating and management costs, and
depending upon the demand and supply situation,
international agreement on lay-up schemes may have
to be discussed in the near future.
On the other hand, regulations for environmental
conservation and safe navigation will more vigorously
be enforced, while the efforts of shipowners and the
cooperation of those in related industries will be
accelerated in coping with these problems as demanded
by society.
Finally, greater emphasis will be put on saving oil
and development of substitute energy sources to make
an efficient use of our limited resources than before,
but during the 1970s oil will continue to be the
primary energy source, and the importance of tankers
will not in the least decrease.
Amid the changing social environment and oil
362 Marine Transportation of Crude Oil and Products RP 10

economics, tanker owners will continue, as in the past, References

to pursue rationalisation of their business activities to
conform to public interest, and will always play an 1. J. I. Jacobs ¿k CO., Ltd., World Tanker Fleet Review, Dec.
2. ne
1970-Dec.
British1973.
important role in collaboration with the oil industry Ltd., Statistical Review of the
in the distribution of energy. World Oil Industry, 1970-1973.