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CHARTERING OF

TANKERS
1

Tanker Trade - History


Crude-produced commercially in USA in 1859
1861 Elisabeth Watts carried 900 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 tankers of 10000 12000 tons size
were built.
2

Tanker Trade History


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
3

Tanker Trade History


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?
4

Tanker Trade - History


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.
5

TYPE OF CHARTER
VOYAGE CHARTER
FOR ONE VOYAGE

TIME CHARTER
FOR TIME/PERIOD.

1 OR 2 LOAD PORT/
DISPORTS

VESSEL AT CHARTERERS
DISPOSAL.

FREIGHT, DEMURRAGE
DEAD FREIGHT

MONTHLY CHARTER
HIRE IN ADVANCE.

BUNKER PORT CHARGES


ON SHIP OWNERS A/C.

BUNKER & PORT


CHARGES ON
CHARTERERS ACCOUNT

CARGO RELATED
CHARGES ON
CHARTERERS A/C.

CARGO RELATED
CHARGES ON
CHARTERERS A/C.

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

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,

TANKER IS TAKEN FOR A


PARTICULAR VOYAGE OR
CONSECUTIVE VOYAGES
EFFECTIVE TENDERING NOR
AT DESIGNATED PORT OF
LOADING WITHIN THE AGREED
LAYDAYS.
FREIGHT PER METRIC TON
NORMALLY PAYABLE ON
COMPLETION OF 3 DAYS
AFTER DISCHARGE.
EXTRA TIME TAKEN BY
CHARTERERS THAN THE
AGREED LAYTIME ALLOWED
FOR LOADING/DISCHARGE
LEADS TO PAYMNET OF
DEMURRAGE TO SHIPOWNERS

BY CHARTERERS

BY SHIPOWNERS

BY CHARTERERS

BY SHIPOWNERS

ON CARGO - BY CHARTERERS

ON CARGO - BY CHARTERER.

DELIVERY

PAYMENTS
DEMURRAGE

CHARTER HIRE PAYABLE IN


ADVANCE - 1ST OF THE MONTH

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

DETAILS
CHOICE
EMPLOYEMENT
CHARTERERS

TIME CHARTER

VOYAGE CHARTER

OF WHEN
THE WHEN A REQUIREMENT IS FOR SHORT
BY REQUIREMENT IS FOR A PERIOD - SPECIFIC VOYAGE OR
LONGER
TIME
- CONSECUTIVE VOYAGES
CONTINUOUS BASIS

MONITORING / VOYAGE BY CHARTERERS


INSTRUCTIONS ETC.
OFFHIRE/UNDER
TO BE DEDUCTED FROM
PERFORMANCE ETC
C/HIRE BY CHARTERERS
IN LINE WITH C/P

BY SHIPOWNERS

DEADFRT/DEVIATION
CHARGES

PAYABLE BY CHARTERERS IF DUE


LIMITATIONS OF CHARTERERS.

NOT
SEPARATELY
PAYABLE AS S/OWNER
GETS FULL C/HIRE
INSURANCE CARGO
ON CHARTERERS
A/C
-- SHIP
ON SHIPOWNERS A/C
EXTRA INSURANCE DUE NEGOTIABLE - AS PER
OLD AGE/WAR ETC
C/P

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

ON CHARTERERS A/C
SHIPOWNERS A/C
NEGOTIABLE - AS PER C/P

ON

SHIP OWNERS POINT OF VIEW

TYPE OF
CHARTER

ADVANTAGE

DISADVANTAGE

TIME CHARTER

PAYMENT OF C/HIRE IN ADVANCEFIXED 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

FROM CHARTERES POINT OF VIEW:

TYPE OF
CHARTER
TIME
CHARTER

VOYAGE
CHARTER

ADVANTAGE

DISADVANTAGE

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
GETS BENEFITS OF
LOWER FRT MARKET AS
EVERY VOYAGE HE
NEEDS TO PAY BASIS
CURRENT FREIGHT
RATES.
FREEDOM OF
CHARTERING AS WHEN
NEEDED WHEN THE TKR
AVAILABILITY IS
SUFFICIENT.

CONTINUOUS BOTHERATION OF FIXING


THE VESSEL ON VOYAGE TO VOYAGE
BASIS - DELICATE NEGOTIATIONS

AVAILABILITY OF SUITABLE TKR IS NOT


GUARANTEED AS AND WHEN NEEDED
ESPECIALLY IN TIGHT MARKET
CONDITIONS.

10

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 :

11

VOYAGE CHARTER :
CRUDE :

LPG :

VOYAGE RASTANURA VOYAGE RASTANURA


TO VIZAG
TO VIZAG
SMAX (140000 MT) $
28.23 / MT
LS FREIGHT $ 3.95
MILLION RS. 15.80
CRORES AT WS 335

VLGC (39000 MT) $


50.00 / MT
LS FREIGHT $ 1.95
MILLION RS. 7.80
CRORES
12

Tanker Voyage Charter


Parties
Bare 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.

13

OWNER
(Revenue)

CHARTERER
(Transport)
THE CHARTER PARTY
(A contract)

BAREBOAT

TIME

Trip Time Charter

VOYAGE

Consecutive
voyage

Contract of
Affreightment
14

Tanker Voyage Charter


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

15

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.
16

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
17

ASBATANKVOY Charter
Party

Part II
Warranty
Freight and Deadfreight
Berthing, Pumping and Mooring
Dues and other charges
Ice
Cleaning/Grades
Advances
Bills of Lading
18

ASBATANKVOY Charter
Party

PROTECTIVE CLAUSES
Clause Paramount
Jason Clause and General Average Clause
Both o Blame
War Clauses
Lien
Agents
Assignment/sub-let
Clean Seas
Arbitration
19

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

20

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.
21

Rider Clause Over Age


Insurance (Cargo Insurance)
Any additional premium which might
be placed on the cargo insurance by
reason of the vessels age and/or
condition shall be for Owners account,
and Charterers shall be entitled to
deduct the cost of any such additional
premium from the freight
22

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
23

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.
24

Tanker Time Charters


Introduction
Shipboard Personnel and Duties
Laws and Disputes
Liens and Sub Freight

25

Tanker Time Charters


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.
26

Tanker Time Charters


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- Charterers
option.
Final voyage-Redelivery, where & when.
Trading limits-WIWL
27

Tanker Time Charters


Shipboard Personnel and Duties
Laydays/Canceling-Charterers 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 vessels personnel

28

Tanker Time Charters


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.

29

Tanker Time Charters


Shipboard Personnel and Duties
Performance clause-Speed, bunker
consumption and port stay.
Salvage-Apportionment of expense
Lien Each partys rights of lien.
Exception Unplanned repairs &
breakdown.
Injurious cargoes Explosives.
30

Tanker Time Charters


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.
31

Tanker Time Charters


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.
32

Tanker Time Charters


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.
33

CHARTERING
COMMERCIAL MANAGEMENT

Chartering.

Fixture
Negotiation

Post fixture.

Port
Operation
34

CHARTER PARTY

C / PARTY
CLAUSES
NEGOTIATI
ON

FINALISATION

SIGNING OF

OF C / PARTY

C / PARTY.

35

CHARTERING
VOYAGE
CHARTER

ONE/TWO
LOADPORT/
DISPORT

FREIGHT
DEMURRAGE

TIME
PERIOD
CHARTER

COA
TOTAL
QTY/TKR
(OWN/
CHARTER)

TOOLS

MKT.
TREND

C/HIRE

FREIGHT
DEMURRAGE

LAST
FIXTURE
36

FIXTURE
NEGOTIATION
ENQUIRY

OFFERS

COUNTER

CONCLUSION

VOYAGE

TIME CHARTERING

VOYAGE

TIME CHARTER

CARGO

TYPE OF SHIP

DESCRIPTION-SHIP

DESCRIPTION

PARCEL SIZE

DURATION

PARCEL SIZE

LOADPORT

TRADING AREA

FREIGHT

T/C
PARTICULARS

DISPORT

CARGO

DEMURRAGE

LAYDAYS

SPL.REQUIREMENTS

C / PARTY.

LAYCAN

SPEED/CONSUM.
PERIOD RATE
EXCEPTIONS
37 -CP

POST FIXTURE
OPERATIONS

COORDINATION

COORDINATION

WITH

WITH

CHARTERER

SHIP

AGENCY

ARRANGING

FREIGHT

ARRANGEMENT

FUNDS

COLLECTION

38

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.
39

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.
40

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

41

CHARTERING INVOLVES
(CONTD.)

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,

42

ATTRIBUTES OF
SHIPPING MARKET- HIGH VOLATILITY.
CHARTERING ACTIVITY

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.

43

FUNCTIONS
CHARTERING & SHIPPING

FOLLOWING SENSITIVE ACTIVITIES ARE INVOLVED:


FLOATING OF ENQUIRY
EVALUATION OF OFFERS
FREIGHT
NEGOTIATIONS FOR
CRUDE/PRODUCT
VESSELS
POST FIXTURE WORK
COORDINATION WITH
SUPPLIERS/LOADPORT/
DISPORT/SHIPOWNER/S
HIP & 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.
44

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

45

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.
46

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
47
CLAUSES.

Pre requisites
BOARD APPROVAL OBTAINED FOR ADOPTING OMCS
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
48

Pre requisites.
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.
49

CHARTERING PROCEDURE

50

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.
51

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
52

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.
53

Brief out line of


CHARTERING PROCEDURE

54

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 owners Association (INSA) through email /
fax.
Obligatory for Owners / Brokers to keep offers
valid till a specified time/date indicated in the
enquiry.
55

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).
56

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

57

Evaluation of Offers:

The offers will be ranked on the basis


of freight quoted.
Demurrage rate and other terms &
conditions to be negotiated.

58

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.
59


Negotiations/Counterscontd.

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


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

60


Negotiations/Counters-

contd.
(A)
Indian ship-owner is L1
Firm 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.
61

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.
62


Negotiations/Counterscontd.

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 Subjectswith time schedule to
carry out following activities:
Charterers 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
64

Charter party:
Adoption of customised Charter party:
Voyage C/P BPVOY 4 ASBATANKVOY
Time C/P SHELL TIME 4
Coastal Time C/Party
Contract of Affreightment (COA)
Coastal voyage C/party- ASBATANKVOY

65

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)

66

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.

67

THE MARKETING
STRUCTURE

68

We shall have a look at


Tanker Market structure
Worldscale
AFRA
Factors which have influenced freight
market levels
69

Tanker Market Structure


3 Players
Owners
Charterers
Brokers

70

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 ???
71

The Tanker Market

Works very quickly


Address commission
Brokerage
Negotiations on phone or Messenger
Recap via e-mail or Fax
Asbatankvoy is widely used standard
Charter party with additional clauses

72

Worldscale
Easy and common reference point for
negotiations and to know the market trends
Takes 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

73

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
74
for Suez Canal

Worldscale

Some 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 ???
75

Worldscale
Variable 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
76

AFRA
Developed by Shell and BP
Accepted as a basis for assessing
transportation costs for intercompany 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 & ULCC
Available only to the subscribers
77

Factors influencing the


freight markets
Political events
Oil demand
New building activity
Tanker scrapping
External pressures
78