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Gold/Mining/Energy : Strictly: Drilling and oil-field services -- Ignore unavailable to you. Want to Upgrade?

To: SliderOnTheBlack who wrote (43229)	4/26/1999 7:57:00 AM
From: diana g	Respond to of 95453

OPEC Oil Cuts Hurt Tanker Owners as Shipments Fall (Update2) (Bloomberg) quote.bloomberg.com Energy News Mon, 26 Apr 1999, 7:53am EDT OPEC Oil Cuts Hurt Tanker Owners as Shipments Fall (Update2) (Adds comments from BP-Amoco Plc in paragraph 22) Singapore, April 26 (Bloomberg) -- Oil tanker owners are looking at a slump in earnings this year as shipping rates for crude oil vessels on the Gulf-Asia route fall to a 12-month low because of output cuts by oil producers. About 110 crude oil tankers are now parked in the Persian Gulf waiting for cargoes, compared with 50 to 80 vessels on normal days, a chartering company said. ''Sitting still will kill them. Their overheads are so high. They are getting more desperate everyday ... there are now three to four ships for every one cargo,'' said Koh Guan Hwa, tanker manager at Neptank Bunkering Services Pte., a subsidiary of Singapore's Neptune Orient Lines Ltd. Rates have fallen about 60 percent to $900,000 to charter a 300,000 deadweight-ton Very Large Crude Carrier (VLCC) from the Gulf to major ports in Japan, which takes about forty days. At the same time last year, the rate was $2.2 million. The worst is not over for the tanker companies. Saudi Aramco, Saudi Arabia's state oil company, said last week it will sell 15 percent to 19 percent less crude oil to Asian customers, including Japan and South Korea. Oil producers agreed late March to cut output by 2.1 million barrels a day. Besides the cut in oil output that has too many ships chasing too little oil, loading delays has kept more tankers available than usual in the Gulf, said Erik Augustsson, chartering manager (Asia Pacific region) of Stentex LLC., a joint venture between Texaco Inc. and Stena AB. Losers? Privately held tanker owners -- Ocean Tankers Pte., Tanker Pacific Pte. and Worldwide Shipping Singapore Pte. -- could suffer from the fall in rates. All the companies have a large fleet of crude oil tankers on the spot market, or not under fixed contract. The companies either wouldn't comment or weren't available. Singapore listed-company Osprey Maritime Ltd. could also see its earnings fall, though the company said it's insulated to some degree. ''The fall in VLCC rates will affect our revenue to some extent. But we have a well-balanced portfolio between time- charter and spot vessels so we will be able to perform well this year,'' said Tim Cottew, chairman and chief executive, Osprey Maritime Ltd. Osprey Maritime does not intend to sell its four VLCCs this year, he said. Osprey lost $19 million, or 8.83 Singapore cents (5.1 US cents) a share in 1998, from a profit of $11 million, or 10.65 Singapore cents in the previous year. It booked a $24.5 million exceptional cost from the sale of two VLCCs. The company at the time of the earnings announcement said it did not rule out selling more vessels this year to lower debt levels, which stood at $763 million at the end of 1998. Japan Oil Most Japanese tanker companies are shielded from weak VLCC freight rates through long-term hire for their vessels. But they are likely to get poorer terms for their ships when they renew their contracts. ''In negotiations for our next term contract, we would have to reduce the price because the market price is lower,'' said Hiroko Waki, an official of Research Corporation Office at Mitsui O.S.K. Lines Ltd. Mitsui has 30 VLCCs, 27 of which are on one- to three-year contracts with refiners. Only three ships are for spot use. The company would not say when the contracts are up for renewal. Other companies are more exposed to plunging rates. But they cited Japan's economic slump as the main reason for the slide in oil shipments. ''With or without OPEC's production cuts, the frequency of VLCC usage has decreased from around the beginning of this year because the consumption of oil in Japan has slumped because of the recession,'' said Hiroyuki Maekawa in the corporate planning department of Kawasaki Kisen Kaisha Ltd. The company owns four VLCCs, two of which are on spot hire. The coming summer season in North Asia will also push oil demand lower. Japan and South Korea buy large amounts of heating fuel like kerosene in winter and early spring. But refineries there are expected to shut their facilities for maintenance in the coming weeks as demand recedes. Refiner Benefits While the rate plunge brings little cheer to ship-owners, some analysts say refiners, which have been smarting from poor refining returns in months, could take advantage of lower freight rates to buy more oil. ''This is a great opportunity for refiners and charterers in the short-term. Lower tanker rates can offset higher crude oil prices. This will improve refining margins,'' said Augustsson. Lower VLCC rates have helped, said an executive with refiner BP-Amoco Singapore Pte. Refining margins in Singapore have increased by as much as 20 U.S. cents for a barrel of Dubai crude oil compared with six weeks ago, he said. Singapore refiners are still losing money, though. Higher crude oil prices and low demand pushed Singapore refining margins for Dubai to minus $1.51 a barrel April 21. The margin hit a six- month low of minus $2 a barrel on 17 March. Tanker rates are not likely to rise soon as there will be more capacity in the market. According to industry estimates, 30 new VLCCs will arrive on the market this year compared with just 13 in 1998. But if rates fall further, tanker owners might decide to scrap older ships rather than pay high operating costs to keep them running. Taking more tonnage off the market could give the oil tanker industry the lift it badly needs. ------------------------------------