Structure Behind The Tanker Charter Market Finance Essay

India, today is one of the largest turning economic systems of the universe and its energy demands are turning each twelvemonth. The major ball of this demand is fulfilled by crude oil merchandises which are imported and marketed by the oil selling companies like IOCL, BPCL and HPCL. The monetary value of crude oil merchandises is governed in the international market and assorted market forces of demand and supply that act upon it.

This demand and supply forces, in similar manner, works on the oiler market worldwide. In this mode, the oiler market itself becomes really volatile and cargo for passenger car of rough oil and refined crude oil merchandises maintain on fluctuating. Under such fortunes to do the concern profitable it is of import for all oil companies to hold a chartering section that can read the market good in progress and can strategically move and acquire a profitable trade for the company.

The demand for oil company flexibleness creates the oiler charter market. However, the assortment of oiler market demands, peculiarly with regard to the length of charter, has created a figure of specialist charter markets with oil companies or independent oiler proprietors at assorted times being actively involved in either long term vas hire or medium or short term chartering.

The assorted determinations taken by the oil companies in India with regard to renting vass at different times and their reverberations need to be critically studied in deepness in order to understand the market. In this manner, it will be easy to measure if the determinations were taken in conformity to the market kineticss and if they proved to be profitable for the oil companies and for state as a whole.

Most of the oil companies tend to cover a basal burden oiler demand in owned vass and to take extra vass under a long, medium and short term charters, eventually run intoing fringy demands by engaging oilers on a individual ocean trip or topographic point footing. The usage of individual ocean trip market is besides necessary for logistical grounds. Besides offering this flexibleness to get by with short or average term alterations in the degree of oiler demands, entree to the charter market offers other benefits to the oil company, such as minimisation of capital outgo, a restriction of its engagement in ship operations and disposal, and the flexibleness to accommodate its oiler fleet to the altering features of the trade.

Structure of oiler charter market:

The three chief operators in the oiler charter market are oil companies, independent oiler proprietors and oiler agents. In many instances, oiler proprietors are represented by direction companies, which efficaciously take their topographic point in any charter understanding. International oil companies have to run big oiler fleets to run into their conveyance demands. Most international oil companies are, in fact, both oiler proprietors telling and runing vass to travel their ain oil and charterers engaging tunnage from independent proprietors under a assortment of charter agreements.

Mugwump proprietors buy new or 2nd manus vass for the express intent of engaging out their services to oil companies and of import differences can be seen between single oiler proprietors with respect to their chartering policies. The premier map of oiler agents is the arrangement of contracts between oil companies and independent oiler proprietors or directors.

Agents besides provide an bureau service in relation to the operation of vass and the motion of cargo, ie the agent does non contract for his ain benefit, but is appointed by another party and works on a committee footing on any rate understanding. Agents can be appointed to move either for a vas ship proprietor or as a chartering agent for a lading proprietor, ie an oil company in regard of the oiler market.

The widespread employment of agents in penchant to direct dealing by ship proprietors and lading proprietors comes approximately because the agent has the advantage of a changeless engagement in sounding out the market and finding tendencies within it. This experience forms the footing of the broking service.

The chief for an oil company wishing to rent tunnage is that the company ‘s demands are invariably altering and the alterations themselves are frequently hard to foretell. For illustration, a drawn-out enchantment of cold conditions can ensue in a sudden demand to increase oil imports into a major devouring country or instead, extra oiler demands can all of a sudden ensue from the menace of an oil monetary value addition with the consequent possible advantage of stockpiling.

Conversely, oiler demands may be reduced in the short term, for case by a comparative lowering of the landed monetary value of short draw petroleums as compared to hanker haul petroleums. For these grounds, oil companies need to keep a important grade of operating flexibleness.

Most oil companies tend to cover a basal burden oiler demand in owned vass and to take extra vass under a mixture of long, medium and short term charters, eventually run intoing fringy demands by engaging oilers on a ocean trip or topographic point footing. The usage of the individual ocean trip market is besides necessary for logistical grounds.

Besides offering this flexibleness to get by with short or average term alterations in the degree of oiler demands, entree to the charter market offers other benefits to the oil company such as a minimisation of capital outgo, a restriction on its engagement in ship operations and disposal and the flexibleness to accommodate its oiler fleet owned and chartered to the altering features of its trade.

The demand for oil company flexibleness therefore creates the oiler charter market. However the assortment of oiler charter market demands, peculiarly with regard to the length of charter, has created a figure of specialist charter markets with certain oil companies or independent oiler proprietors at assorted times being actively involved in either long term vas hire or medium or short term renting or once more individual ocean trip chartering.

The difference in oiler charter demands is besides reflected in the chief types of charter understanding reached between oil companies and independent oiler proprietors.

Types of Charter:

There are five chief types of charter understanding that are reached between oil companies and independent oiler proprietors. The papers used in holding a vas charter is known as a charter portion and standard charter parties for different types of charter outlined below are normally used. A charter party is basically a legal contract and is distinguishable from a measure of ladling which is used in general passenger car of goods and which in add-on to integrating an understanding to travel cargo besides act as a reception of goods and a papers of rubric.

Incorporated within the charter party are a figure of indispensable commissariats such as:

Name of vas proprietor and charterer

Date of charter party and topographic point of contract

Description of vas including name, flag, type of propulsion, tunnage, category, bill of exchange, velocity and ingestion

Current place of vas and expected clip of reaching at initial lading port

Cargo transporting capacity of vas

Specification of burden and discharge ports as applicable

Laydays and call offing day of the month

Time allowance for lading and discharge

Force majeure clause

Demurrage clause

Provision for effects of work stoppages, war or ice

Arbitrage clause

Exception clause

Brokerage and committee clause

Rate of hire with an escalation clause on long term charters

It is normal for any charter understanding to be based on one of the standard charter parties provided by the oil big leagues, Intertanko, or one of the chief agents. The charter party is likely to be amended in conformity with the peculiar penchants of proprietor and charterer and extra clauses may be entered. An understanding will besides incorporate extra clauses on war hazards and pollution – once more there are standard signifiers for such understandings. There may besides be specifications on minimal sand trap qualities and the charter party is concluded with signifier B, which gives vas ‘s specifics.

Topographic point or individual ocean trip charter:

A topographic point or individual ocean trip charter is one in which an proprietor agrees to utilize a specified vas to transport a fixed measure of oil from a specified burden port or country to a named port of discharge for an in agreement fee. There may be some grade of flexibleness incorporated into the charter, particularly in regard of the pick of port of discharge.

The topographic point charter is basically a cargo understanding whereby the oil company arranges the motion of a specified lading between two finishs at a fixed fee, all costs associated with the transportation of that lading being borne by the ship proprietor, non the charterer – Internet Explorer the ship proprietor provides a complete service in providing a seaworthy vas, a maestro and crew, all appropriate shops and makes all payments associating to the running of oiler such as sand trap fuel for the ship ‘s engines, port fees etc.

The lone signifier of reimbursement of costs for the proprietor is indirectly, through the fee agreed with the charterer and this fee may or may non cover all costs depending on the cargo market. Throughout the charter the ship proprietor retains direct control of the vas.

Back-to-back Voyage charter:

In a back-to-back ocean trip charter an proprietor agrees with the charterer to supply a specified vas to travel a fixed measure of oil on a repetition voyage footing, either stipulating the figure of ocean trips between designated port of burden and discharge, or a clip period during which the repetition ocean trips are to be undertaken.

As with topographic point ocean trips, each back-to-back ocean trip is undertaken on the footing that a vas proprietor delivers a specified lading of oil for a fixed fee, with all fixed and variable costs associating to the transit of the oil staying the vas proprietor ‘s duty.

Besides, as with individual ocean trip charters, a figure of options are common: the vas may be substituted for a similar oiler, within predetermined bounds: some agreement for extra journeys may be included and so on.

Contract of Affreightment:

In a contract of affreightment a ship proprietor agrees to do available a specified tunnage capacity which is used to transport a fixed measure of oil over a period of clip between specified burden and discharge countries.

As with the topographic point and back-to-back ocean trip charters, payment is made on a fixed fee footing per metric ton of oil delivered. The major difference that arises with a COA is that the continued employment of a specified vas is non needfully portion of the understanding, it being up to the proprietor to schedule suited vass to run into loading committednesss built-in in the contract. Similarly, the proprietor remains straight responsible for each oiler being employed and has to run into all fixed and variable costs associating to the running of the vas.

COA ‘s have proved peculiarly attractive for proprietors of combined bearers, supplying guaranteed employment in a mode that allows an proprietor to retain a big step of flexibleness in his operations, and in peculiar leting the continued motion between oil and the dry majority trades.

Time Charter:

A clip charter relates to hiring of a specific vas for a limited period of clip which can change between a few yearss and many old ages, efficaciously covering the operational life of the vas. Whereas the topographic point and back-to-back charters, together with COA ‘s are concerned with the motion of specified cargo between specified ports, a clip charter relates to hiring of a vas for an in agreement period to be employed on the charterer ‘s concern more or less he sees fit.

The ship proprietor is responsible for providing effectual lading transporting capacity, which entails supplying a seaworthy vas, doing all insurance and care payments and providing a maestro, crew and suited shops – Internet Explorer the ship proprietor continues to run into all fixed costs. For supplying this service the ship proprietor is paid a fee normally in the signifier of a specified sum of money paid per vas deadweight metric ton per month or a specific sum per twenty-four hours.

The vas charterer is so free to teach the proprietor to lade the vas with legal lading up to its loadlines and to run between ports which the charterer designates although the contract may incorporate some exclusion clauses. However, all extra costs associating to the running of the vas it ocean trip costs become the charterer ‘s duty which chiefly means the payment of sand traps, port dues, light dues, canal theodolite dues, towage and quay dues in the port and any lading handling charges.

In normal fortunes, the vas hire will be uninterrupted irrespective of whether the charterer is able to supply full or portion ladings. If the vas becomes idle because of deficiency of suited lading or because of a work stoppage in a peculiar port, the charterer is still responsible for hire payment. However, vessel hire is suspended in the event of the vas ‘s being immobilised due to accident or breakdown, or when the ship is drydocked for regular study and care.

Death and Bareboat Charter:

In the old chartering understandings, the ship proprietor has continued to be lawfully responsible for the vas. The proprietor retains control of the vas and the maestro and crew continue in his employment on which the vas is to be used. However, with a death charter, the charterer efficaciously becomes the impermanent proprietor of the vas under rental for the period of the charter. A ship proprietor in holding a death charter is responsible for supplying a vessel hull. If a crew is besides provided so all purposes and intents they act for the charterer the bare boat is used to mean that no crewing agreements are included.

All operating costs, insurance, fixs and care, crew rewards, shops etc and all ocean trip costs, sand traps, port dues, canal theodolite dues etc. stay the duty of the charterer. Death or bareboat charters are about constantly long term charters, payment being calculated usually on a deadweight per month footing, normally paid either monthly or yearly. Although non in widespread usage, a death or bareboat charter can turn out utile as a manner of financing new tunnage. As this type of charter offers really small hazard t the ship proprietor, he can normally anticipate to work on merely a little net income border, since his service is limited to set uping the initial capital for the building or purchase of the vas and paying off any involvement due on the initial funding of the vas.

Commercial Considerations: Charters – Advantages and Disadvantages:

Equally far as a ship proprietor is concerned the comparative advantages and disadvantages of different signifiers of charter relate to hi attitudes towards hazard, guaranteed future vessel employment and possible net income or loss borders. The least hazard involved in renting out vass on a death or bareboat charter footing. However, in a moderately balanced market an proprietor could merely anticipate to run on a little net income border with such a charter, this being compensated for a guaranteed future vessel employment.

At the other extreme systematically runing vass on the topographic point market involves the greatest hazard, with the proprietor harvesting the full benefit of any short term betterment in the market but conversely holding to prolong continued losingss during a drawn-out slack in the market due to the deficiency of forward employment screen. In other words, the hazards are high, as are the possible net incomes or losingss.

Operating vass on clip charters, back-to-back ocean trip charters or contracts of affreightment falls between the two extremes of the topographic point market and the death or bareboat charter market, dependant on the period of employment governed by the peculiar charter.

Sometimes charters extend virtually for vas ‘s life while some short sea back-to-back ocean trip charters can be less than a month in continuance.

The rates that an proprietor can anticipate to have from the assorted signifiers of charter available to him go progressively dependent on the current oiler demand, supply state of affairs as the period of charter becomes shorter, and on the future outlooks as the charter becomes longer.

Topographic point rates reflect fringy oiler demand and supply, and can lift really aggressively every bit shortly as demand and provide attack equilibrium. Conversely, they can slouch dramatically at the first intimation of oiler excess.

Short term period charters, back-to-back ocean trip charters and contract of affreightment by and large closely reflect current topographic point rate degrees, but this becomes less and less so as the length of the charter is extended. Long term charter rates and death or bareboat clip charter rates bear small or no resemblance to current topographic point rate degrees and are more closely geared to the cost of replacing tunnage.

Therefore, from an proprietor ‘s point of position the type of charter to be preferred will chiefly depend on current charter market, and possibly more significantly on the current charter market and possibly more significantly on the right reading of how that market will travel in the class of following few old ages.

On a aggressively lifting market an proprietor ‘s net incomes are maximised by holding his fleet employed on topographic point or short term clip or back-to-back ocean trip charters. When a market turns down in to slouch an proprietor is best served by holding his vass on long term charters, sooner agreed at the clip when the market has peaked.

Some proprietors prefer a back-to-back policy favoring bareboat and long term clip charters whilst the others are prepared to go forth their lucks the short term and topographic point charter markets. However, the industry is punctuated by illustrations of incorrect determinations.

From the oil company ‘s point of position the assorted signifiers of charter offer different advantages and disadvantages. In general, the greater the charter length, the more stable the future costs of cargo to the company. Death or bareboat renting offers the greatest control over future transit costs. The operation of such vass in an oil company fleet is similar to runing a fixed investing in straight owned tunnage. Time charters, back-to-back ocean trip charters, contract of affreightment offer cost control benefit over which charter period is agreed.

Trusting on topographic point market offers small control over future cargo costs and can besides show considerable volatility in whatever costs are incurred. Long term charters have the disadvantage of inflexibleness for illustration if the vas demands are later found to hold been over estimated although in pattern reletting can be effected.

Concept of ‘Relet Charters:

With most oiler charters, the charterer retains the right to relet the vas to a 3rd party for all or portion of the staying charter period. Indeed, some vass will be runing under a twine of relet charter understandings. Reletting can and does happen with vass under all signifiers of charter understanding.

There are several grounds why a charterer may wish to relet a vas. An oil company happening itself with extra tunnage back on the market as available for topographic point, clip or other signifiers of charter. This may at first appear to invalidate the disadvantage of inflexibleness antecedently mentioned, but it should be remembered that if one company all of a sudden finds itself with excess tunnage, similar companies are likely to be in the same place. The net consequence for oil companies who are overtonnaged is that they are by and large depressed and therefore they will non avoid the punishments misestimating the forward tunnage demands.

Associating may besides be bad. If a ship proprietor or other company, anticipates a lifting market, the tunnage may be chartered for a three to five twelvemonth period in the hope that later runing vass in the topographic point market will bring forth a net income. Obviously, the built-in hazards besides increase as a slack would ensue in tunnage holding to be relet at well lower degrees.

Vessels may besides be relet at a policy of geting tunnage through bareboat or long term charters from other ship proprietors instead than buying tunnage direct. Reletting peculiarly on the topographic point market, may besides be the consequence of operational expedience. For illustration an oil company may non hold tunnage available to lade a peculiar lading at a peculiar port or the vass may non be of optimal size. In this instance it may turn out more efficient to relet available tunnage that has already been chartered in and to engage a vas or vass on the topographic point market.

FACTORS INFLUENCING CHANGES IN OWNERSHIP & A ; CHARTERING POLICIES:

Different proprietor groups within the transportation community have really different involvements and aspirations. In order to understand how oiler proprietor attitudes to having and renting have changed, ownership is broken down into four major groups:

Oil big leagues

Independent oil companies

State administrations

Transporting mugwumps

The most of import factors that are impacting determination chartering and oiler ownership determination can be listed as follows:

Security of petroleum oil bringing

Handiness of sufficient quality tunnage

Profitableness of ship owning

Safety and oil spill liability

Long term charter understanding offer the charterer certain advantages reserved for ownership. For illustration, under a clip charter understanding, the vas is at the disposal of the charterer for the period of charter and therefore provides security of supply in the same manner as an owned vas. In add-on, long term relationships between proprietors and charterers enable safe working patterns to be developed that conform to the charterer ‘s ain criterions.

There are of class of import differences between having and clip chartering. Notably a clip hired vas does non look as a capital point on the charterer ‘s balance sheet. However, the similarities between owned and clip hired tunnage mean that it is possible to see clip hired tunnage as an extension of the owned fleet and the clip renting as an extension of swift enlargement programs.

Below is the tabular array that looks at the advantages and disadvantages of oiler ownership compared with puttering chartering:

ADVANTAGES OF TANKER OWNERSHIP COMPARED TO CHARTERING:

Ownership

CHARTERING

Advantages

Disadvantages

Advantages

Disadvantages

1. Potential to bring forth net incomes

1. Potential to bring forth losingss

1. No important capital spending for newbuilding

1. Undependability of supply

2. Reliability & A ; supply

2. High hazard oil spill liability

2. No oil spill liability

2. No benefit when rates/asset values lift

3. Control over safety of operation

3. Lack of flexibleness

3. No job of idle tunnage in low demand market

3. No control of operation, hence require vetting to guarantee safety

A

4. Significant capital spending for newbuilding

4. Topographic point repairing provides flexibleness and pick

A

A

5. necessity of plus trading in order to do operation profitable, due to low cargo rates

5. Long term chartering allows charterers to carry through specific employment demands

A

Major burden and discharge countries in the universe:

Middle East Gulf/ Red Sea:

It is doubtless the most of import country with regard to crude oil trade. Oil ladings are besides loaded in the Gulf of Oman and in the Red Sea.

Major ports in the country: a. Mina a. Ahmadi

b. Mina Saud

c. Ras Tanura

d. Halul Island

e. Das Island

f. Abu Dhabi

g. Dubai

h. Khor fakkan

i. Bandar Abbas

j. Sidi Kerir

k. Jeddah

l. Aqaba

m. Ain Sukhna

Mediterranean / Black Sea:

In this part major petroleum oil exporters are former Soviet Union states, Russia, Ukraine, Georgia from Black sea, Iraq through Ceyhan. Clean merchandise ladings are sourced from Italy, Spain, France and Libiya.

Major ports in the country: a. Ceyhan

b. Piraeus

c. Istanbul

d. Novorosisk

e. Odessa

f. Augusta

g. Genoa

h. Trieste

3. U.K, Continent and Baltic Sea:

This part consists of U.K, Scandinevian states

Major ports in the country: a. Sullom Voe

b. Oslo

c. Leningrad

d. Gdynia

e. Fawley

4. West Africa:

The chief lading countries in the country are Nigeria and Angola

Major ports in the country: a. Bonny

b. Walvis Bay Lagos

c. Cape Verde Islands

d. Cape Town

e. Canary Islands

5. Gulf of Mexico / Caribbean Sea:

Mexico and Venezuela are largest oil manufacturers in the country with Trinidad and Columbia besides lending a little per centum.

Major ports in the country: a. Dos Bocas

b. Cayo Areas

c. Havana

6. South America:

Major exporters in the country are Chile, Argentina, Brazil, Uruguay and Peru

Major ports in the country are: a. Quintero

b. Punta Arenas

c. Recife

d. Ilo

e. Magellan

7. Far East:

Major exporters in the country are Indonesia, Malaysia, Vietnam and China

Major ports in the country are: a. Arjuna

b. Cinta

c. Blang Lancang

d. Port Dickson

e. Santam

States exporting oil to India:

Persia

Irak

Kuwait

Oman

Katar

Saudi Arabia

UAE

Yemen

Algeries

Angola

Brazil

United arab republic

Brunei

Azarbaijan

Cameroon

Kenya

Guiena

Mexico

Nigeria

Soviet union

Soudan

Siam

Turkey

Venezuela

Introduction TO IOCL, BPCL & A ; HPCL:

INDIAN OIL CORPORATION LIMITED:

Indian Oil is India ‘s flagship national oil company with concern involvements straddling the full hydrocarbon value concatenation – from refinement, grapevine transit and selling of crude oil merchandises to geographic expedition & A ; production of petroleum oil & A ; gas, selling of natural gas, and petrochemicals. It is the taking Indian corporate in the Fortune ‘Global 500 ‘ listing, ranked at the 125th place in the twelvemonth 2010.

With over 34,000-strong work force, Indian Oil has been assisting to run into India ‘s energy demands for over half a century. With a corporate vision to be the Energy of India, Indian Oil closed the twelvemonth 2009-10 with a gross revenues turnover of Rs. 271,074 crore and net incomes of Rs. 10,221 crore.

BHARAT PETROLEUM CORPORATION LIMITED:

The nucleus strength of Bharat Petroleum Corporation Limited has ever been the fervent chase of qualitative excellence for maximization of client satisfaction. Thus Bharat Petroleum, the erstwhile Burmah Shell, has today go one of the most formidable names in the crude oil industry.

Bharat Petroleum produces a diverse scope of merchandises, from petrochemicals and dissolvers to aircraft fuel and forte lubricators and markets them through its broad web of Petrol Stations, Kerosene Dealers, LPG Distributors, Lube Shoppes, besides providing fuel straight to 100s of industries, and several international and domestic air hoses.

HINDUSTAN PETROLEUM CORPORATION LIMITED:

HPCL is a Fortune 500 company, with an one-year turnover ofA Rs. 1,08,599 Crores and sales/income from operations of Rs 1,14,889 Crores ( US $ 25,306 Millions ) during FY 2009-10, holding about 20 % Marketing portion in India and a strong market substructure.

HPCL operates 2 major refineries bring forthing a broad assortment of crude oil fuels & A ; fortes, one in Mumbai ( West Coast ) of 6.5 Million Metric Tonnes Per Annum ( MMTPA ) capacity and the other in Vishakapatnam, ( East Coast ) with a capacity of 8.3 MMTPA. HPCL holds an equity interest of 16.95 % in Mangalore Refinery & A ; Petrochemicals Limited, a state-of-the-art refinery at Mangalore with a capacity of 9 MMTPA.

HPCL besides owns and operates the largest Lube Refinery in the state bring forthing Lube Base Oils of international criterions, with a capacity of 335 TMT. This Lube Refinery histories for over 40 % of the India ‘s entire Lube Base Oil production. A

HPCL’sA huge selling web consists of 13 Zonal offices in major metropoliss andA 101 Regional Offices facilitated by a Supply & A ; Distribution substructure consisting Terminals, Aviation Service Stations, LPG Bottling Plants, and Inland Relay Depots & A ; Retail Outlets, Lube and LPG Distributorships. HPCL, A over the old ages, has moved from strength to strength on all foreparts. The refinement capacity steadily increased from 5.5 MMTPA in 1984/85 to 14.8 MMTPAA soon. On the fiscal forepart, the turnover grew from Rs. 2687 Crores in 1984-85 to an impressive Rs 1,16,428 Crores in FY 2008-09.

EXISTING CHARTERING PRACTICES OF IOCL:

1. Enquiry shall be sent at the same time to all the empanelled agents and Indian Ship-owners through e-mail/fax. Transcripts of the question shall besides be sent to DG ( Transporting ) and Indian National Ship proprietor ‘s Association ( INSA ) through email/fax.

2. Owners / Agents will be advised to maintain offers valid boulder clay a specified time/date indicated in the question.

Receipt of Offers

1. Reception of offers shall be through either of the undermentioned manners:

hypertext transfer protocol: //www.iocl.com/NewImages/Misc/bullet.gifDedicated electronic mail box with watchword protection. Separate letter boxs shall be provided for reception of offers against each question.

hypertext transfer protocol: //www.iocl.com/NewImages/Misc/bullet.gifA dedicated facsimile in a locked room would besides be available as an surrogate manner.

2. The offers will be printed / collated after the electronic mail box is opened at the designated clip for reception of offers specified in the question or at the termination of the drawn-out clip as provided in sub-clause ( vitamin E ) of this clause, as the instance may be.

3. Unsolicited / Mid manner offers will non be considered.

4. As a standard process, bidders will be required to subject difficult transcript of the offer and other related communications for records.

5. The clip for entry of offers may be appropriately extended, if required.

Evaluation of Offers

The offers will be ranked on the footing of cargo. Demurrage rate and other footings & A ; conditions will besides be negotiated.

Negotiations/Counters: The procedure of dialogue will be as given below:

1. No Indian Ship-Owner has quoted: Negotiation will be held with all the technically acceptable bidders bespeaking their several ranking. Whereas a ‘firm ‘ counter will be given to L1 bidder, the counter to other bidders will be opened. During dialogues, the original rankings of the bidders can alter depending upon their response to the counter ( s ) .

In instance, understanding is non reached, Indian Oil would research other options.

2. Indian ship-owner ( s ) has besides quoted: In instance offers ( s ) are received from Indian ship-owner ( s ) besides, the Indian ship- proprietor ( s ) will hold the ‘first right of refusal ‘ .

3. Indian ship-owner is L1: In instance, counter is to be given, the same shall be offered ‘firm ‘ to the technically acceptable L1 Indian ship-owner ( and ‘open ‘ to other technically acceptable Indian ship-owners, in instance there are other Indian ship proprietors in add-on to the L1 Indian Ship proprietor, irrespective of their ranking ) along with ‘open ‘ to all technically acceptable foreign ship-owners. The several rankings of all the bidders shall be disclosed. In instance, dialogues are successful with the foreign ship-owner, Indian ship-owner ( s ) will be asked to fit the rate neglecting which the ship will be fixed with the foreign ship-owner.

4.Indian ship-owner is non L1:

hypertext transfer protocol: //www.iocl.com/NewImages/Misc/bullet.gifIn instance, the rate quoted by the foreign ship-owners is acceptable, technically acceptable Indian ship proprietors will be asked to fit the rate. If, more than one Indian ship-owners match the rate, the ship belonging to Indian ship-owner with the original lowest superior amongst themselves will be fixed on topics.

hypertext transfer protocol: //www.iocl.com/NewImages/Misc/bullet.gifIn instance, counter has to be given, the same will be given ‘firm ‘ to the technically acceptable L1 Indian ship-owner and ‘open ‘ to other technically acceptable Indian ship proprietors irrespective of their ranking and to all technically acceptable foreign ship-owners. The comparative ranking of all ship-owners shall be disclosed.

hypertext transfer protocol: //www.iocl.com/NewImages/Misc/bullet.gifIn the event, the Indian ship proprietor ( s ) , are non L1 in the dialogues, they will be asked to fit the lowest rate of the foreign ship-owner. In instance, none of the Indian ship-owners match the rate of the lowest foreign bidder, fixture on topics will be concluded with the foreign ship-owner.

All counters shall be sent or received within a specified clip.

Fixtures on Subjects

Once dialogues are concluded, the ship fixture will be confirmed on ‘subjects ‘ with a clip agenda.

Following activities would be undertaken one time the ship fixture is on ‘subjects ‘ : –

hypertext transfer protocol: //www.iocl.com/NewImages/Misc/bullet.gifCharterer ‘s direction blessing.

hypertext transfer protocol: //www.iocl.com/NewImages/Misc/bullet.gifTerminal/Supplier Acceptance.

hypertext transfer protocol: //www.iocl.com/NewImages/Misc/bullet.gifTo arrange for licence from DG ( Transporting ) .

hypertext transfer protocol: //www.iocl.com/NewImages/Misc/bullet.gifObtain record note of dialogues and Fixture Note from the agent / proprietor for record.

All parties will supply record notes of all telephonic conversations.

Charter Party

Ocean trip Charter ( Foreign Voyages )

hypertext transfer protocol: //www.iocl.com/NewImages/Misc/bullet.gifASBATANKVOY with IndianOil Special ( Rider ) Clauses.

hypertext transfer protocol: //www.iocl.com/NewImages/Misc/bullet.gifBPVOY 4, which has been customized for IndianOil ‘s usage, will be adopted at a ulterior phase.

Time Charter ( Foreign Voyages )

hypertext transfer protocol: //www.iocl.com/NewImages/Misc/bullet.gifSHELLTIME 4 / 3 ( for LPG )

Coastal Time Charter and COA CPs developed by IndianOil and in usage.

Coastal Voyage Charter

hypertext transfer protocol: //www.iocl.com/NewImages/Misc/bullet.gifASBATANKVOY, presently in usage.

EXISTING CHARTERING PRACTICES OF BPCL:

Floating of Enquiry

Enquiry will be floated to all the Indian Ship proprietors / Indian Ship agents registered with BPC.

Transcripts of all questions would be sent to DG ( Transporting ) and Indian National Ship proprietors Association ( INSA ) , for obtaining compulsory No Objection Certificate ( NOC ) / Licenses

Questions would be floated through e-mail / facsimile.

Receipt of Offers

Receipt of offers shall be through either of the undermentioned manners:

Dedicated electronic mail box with watchword protection. Separate letter boxs shall be provided for reception of offers against each question.

A dedicated facsimile in a locked room would besides be available as an surrogate manner.

Offers received by either of the above manners will be considered.

The offers will be printed / collated after the electronic mail box is opened at the designated clip for reception of offers specified in the question or on the termination of the drawn-out clip as provided in sub-clause ( g ) of this clause, as the instance may be.

Unsolicited / Mid manner offers ( offers received after shuting clip ) will non be considered.

As a standard process, bidders will be required to subject difficult transcript of the offer and other related communications for records.

Evaluation of Offers

The offers will be ranked on the footing of cargo.

Demurrage rate and Other Footings and Conditionss of the Charter Party ( CP ) will besides be evaluated.

Counter Offers / Negotiations

The procedure of Counter Offers / Negotiation is as under:

No Indian Ship Owner has quoted:

Negotiation will be held with all the ‘technically acceptable bidders ‘ bespeaking their several ranking. Whereas a ‘Firm Counter ‘ will be given to lowest ( L1 ) bidder, the counter to all other bidders will be ‘Open ‘ ( i.e. Open 1, Open 2 etc. ) .

During dialogues, original rankings of the bidders can alter depending upon their response to the counter ( s ) .

Indian Ship Owner ( s ) has besides quoted:

If offer ( s ) are received from Indian ship-owner ( s ) , ( Vessels belonging to Indian Ship Owner winging the Indian Flag ) , the Indian ship-owner ( s ) will hold the ‘first right of refusal ‘ vis a vis the lowest offer received from Foreign ship proprietor, in conformity with authorities guidelines.

Indian Ship Owner is L1

The counter shall be offered ‘firm ‘ to the technically acceptable L1 Indian ship-owner. Open counters would be offered to other technically acceptable Indian ship-owners and all technically acceptable foreign ship-owners. The several rankings of all the bidders shall be disclosed.

If dialogues are successful with the foreign ship-owner, Indian ship-owner ( s ) will be asked to fit the rate, neglecting which the ship will be fixed with the foreign ship-owner.

Indian ship-owner is non L1

The counter will be given ‘firm ‘ to the technically acceptable L1 Indian ship-owner and ‘open ‘ to other technically acceptable Indian and foreign ship-owners. The comparative ranking of all ship-owners shall be disclosed.

Fixtures on topics

Once dialogues are concluded, the ship fixture will be confirmed on ‘subjects ‘ with a clip agenda, While the ship fixture is on ‘subjects ‘ following activities will be undertaken:

Charterer ‘s direction blessing

Terminal/Supplier Credence

To set up for licence from DG ( Transporting ) in instance of foreign ships

Obtain record note of dialogues and Fixture Note from the agent / proprietor for record.

All parties will supply record notes of all telephonic conversations.

Charter Party Agreement

Following Charter Party Agreements apply:

Voyage Charter Party ( VC – for Foreign & A ; Coastal ) ASBATANKVOY with BPCL particular ( Rider ) Clauses.

Time Charter Party ( Foreign Voyages ) SHELLTIME 4 / 3 ( for LPG )

Coastal and Time Charter Party. Charter Party understandings developed by BPC and in usage.

EXISTING CHARTERING PRACTICES OF HPCL:

1. ENQUIRY ( MARKET ENTRY )

A

Enquiry shall be sent at the same time to all the empanelled agents and Indian Ship-owners through e-mail/fax. Transcripts of the question shall besides be sent to DG ( Transporting ) and Indian National Ship Owners ‘ Association ( INSA ) through e-mail / facsimile for obtaining compulsory ‘No Objection Certificate ( NOC ) / Licences ‘ .

A

B ) Ship-owners / agents will be advised to maintain offers valid boulder clay a specified time/date indicated in the question.

A 2. RECEIPT OF OFFERS

A

( a ) Reception of offers shall be through either of the undermentioned manners:

A

I. Dedicated e-mail box with watchword protection. Separate mail boxes shall be provided for reception of offers against each question.

A

two. A dedicated facsimile in a locked room would besides be available as an alternate manner.

A

( B ) At the termination of the designated clip for reception of offers specified in the question or at the termination of the drawn-out clip as provided in sub-clause ( vitamin E ) of this clause, as the instance may be, the e-mail box / facsimile room shall be opened and the offers will be printed / collated.

A

( degree Celsius ) Unsolicited / mid-way offers will non be considered.

A

( vitamin D ) Bidders will be required to subject difficult transcript of the offer and other related communicating for records.

A

( vitamin E ) The clip for entry of offers may be appropriately extended, if required.

A A

3. Evaluation OF Offers

A

( A ) Technical Evaluation

A

For all the valid offers, proficient rating shall be carried out to measure the workability of the vass.

A

( B ) Commercial Evaluation

A

After set uping the workability of the vass, commercial rating shall be made on the footing of ‘Freight ‘ quoted and offers will be ranked. Demurrage rate and other footings & A ; conditions will besides be negotiated.

A A

4. NEGOTIATIONS / Counters

A

The procedure of dialogue / counters will be as under: –

A

( I ) No Indian Ship-Owner has quoted

A

I ) Negotiations will be held with all the technically acceptable bidders bespeaking their several ranking. Whereas a ‘firm ‘ counter will be given to L1 bidder, the counter to other bidders will be ‘open ‘ ( i.e. , Open1, Open2, etc. ) . During dialogues, the original rankings of the bidders can alter depending upon their response to the counter ( s ) .

A

two ) In instance, understanding is non reached, HPC would research other alternate.

A

( II ) Indian Ship-Owner ( s ) has/have besides quoted

A

In instance, offer ( s ) is/are received from Indian ship-owner ( s ) ( vass belonging to Indian Ship Owners winging the Indian Flag ) , the Indian ship-owner ( s ) will hold the ‘first right of refusal ‘ .

A

A ) Indian ship-owner is L1

A

In instance, counter is to be given, the same shall be offered ‘firm ‘ to the technically acceptable L1 Indian ship-owner ( and ‘open ‘ to other technically acceptable Indian ship-owners, irrespective of their rankings, in instance there are other Indian ship proprietors in add-on to the L1 Indian ship proprietor ) along with ‘open ‘ to all technically acceptable foreign ship proprietors. The several rankings of all the bidders shall be disclosed. In instance, dialogues are successful with the foreign ship-owner, Indian ship proprietor ( s ) will be asked to fit the rate, neglecting which, the ship will be fixed with the foreign ship-owner.

A

B ) Indian ship-owner is non L1

A

1 ) In instance, the rate quoted by the foreign ship-owner is acceptable, technically acceptable Indian ship proprietors will be asked to fit the rate. If more than one Indian ship-owners match the rate, the ship belonging to Indian ship-owner with the original lowest ranking among them, will be fixed on topics.

A

2 ) ( a ) In instance, counter is to be given, the same shall be offered ‘firm ‘ to the technically acceptable L1 Indian ship-owner ( and ‘open ‘ to other technically acceptable Indian ship-owners, irrespective of their rankings ) along with ‘open ‘ to all technically acceptable foreign ship proprietors. The several rankings of all the bidders shall be disclosed.

A

( B ) In the event, the Indian ship proprietor ( s ) is/are non L1 in the dialogues, they will be asked to fit the lowest rate of the foreign ship-owner. In instance, none of the Indian ship-owners match the rate of the lowest foreign ship-owner, ‘fixture on topics ‘ will be concluded with the foreign ship-owner.

A

All counters shall be sent / received within specified clip.

A A

5. FIXTURES ON SUBJECTS

A

After reasoning the dialogues, the ship fixture will be confirmed on ‘subjects ‘ with a clip agenda to transport out the undermentioned activities:

A

Charterer ‘s Management blessing

Terminal / Supplier credence

Arrange for licence from DG ( Transporting ) in instance of foreign ships.

Obtain record note of dialogues and Fixture Note from the agent / proprietor for record

A

All parties will supply record notes of all telephonic conversations.

A A

6. CHARTER PARTY

A

On reception of Management blessing and terminal/supplier blessing, the ‘subjects ‘ will be lifted i.e. , the vas will be clean fixed. Fixture review will be received from the broker/ship-owner. Following charter parties shall be used.

A

a. Voyage Charter ( Foreign & A ; Coastal )

A ASBATANKVOY with HPC specific rider clauses

A

B. Time Charter ( Foreign )

A SHELLTIME 4 / 3 ( for LPG ) with HPC specific rider clauses

A

c. Time Charter ( Coastal )

A Charter Party understandings developed by HPC and in usage

Crude OIL PRODUCTION: Associate in nursing Analysis

World GDP & A ; Oil production:

Oil Intensity:

Oil ingestion growing ( Country wise ) :

Non OPEC Supply growing:

Crude Oil Imports Country-wise

The inside informations of country-wise petroleum imports during the last five old ages are as given below.

( Qty. in MMT )

A

A

A

2003-04

2004-05

2005-06

2006-07

2007-08

Middle East Region

1

Persia

8.619

9.614

11.423

14.701

19.486

2

Irak

3.883

8.330

11.225

13.449

14.293

3

Kuwait

10.880

11.355

10.495

11.382

10.305

4

Neutral Zone

3.231

0.148

2.263

1.632

2.598

5

Oman

0.241

0.136

0.342

A

0.488

6

Katar

0.708

1.187

0.461

1.727

2.514

7

Saudi Arabia

23.551

23.929

25.289

24.626

26.989

8

UAE

8.431

6.428

8.020

8.755

10.862

9

Yemen

1.967

3.508

3.560

4.543

2.194

A

Sub Total

61.511

64.635

73.079

80.815

89.730

Other Reason

10

Algeries

A

A

0.255

0.646

0.296

11

Angola

2.378

2.441

1.653

2.609

4.336

12

Australia

A

A

A

A

0.165

13

Azarbaijan

A

A

0.216

0.709

2.109

14

Brazil

0.848

0.292

0.290

0.422

A

15

Brunei

0.539

0.807

0.481

0.634

0.350

16

Cameroon

A

0.346

0.186

A

0.110

17

Zaire

A

0.135

A

A

A

18

United arab republic

3.616

2.117

1.931

1.930

1.887

19

Equador

A

0.151

0.287

A

0.257

20

Equitorial Guiena

0.415

1.659

0.566

0.409

1.769

21

Equitorial Kenya

A

A

A

0.292

A

22

Gabun

0.639

0.275

0.406

0.141

A

23

Ivory Coast

A

A

A

0.145

0.146

24

Libya

1.721

1.465

0.907

0.130

2.072

25

Malaya

3.412

3.429

3.464

4.731

4.278

26

Mexico

2.498

2.279

1.438

1.949

1.374

27

Nigeria

11.074

15.081

13.545

13.067

9.917

28

Soviet union

0.144

0.155

A

0.400

0.358

29

Soudan

0.809

0.328

0.253

0.156

0.943

30

Siam

A

0.266

0.161

A

A

31

Turkey

A

A

A

A

0.409

32

Venezuela

0.830

A

0.291

2.317

1.169

A

Sub Total

28.923

31.226

26.330

30.687

31.942

Entire

90.434

95.861

99.409

111.502

121.672

Detailss of petroleum processed in PSU refineries during the last three old ages

Refinery

2007-08

2008-09

2009-10

HS Crude

Entire Crude

% HS

HS Crude

Entire Crude

% HS

HS Crude

Entire Crude

% HS

IOCL G

0

1000

0.0

0

864.3

0.0

0

839.1

0.0

IOCL B

515.1

5100

10.1

549.8

5553.7

9.9

575.8

5469.1

10.5

IOCL J

3229.2

11700

27.6

2781.2

11540.3

24.1

2926.1

12953.1

22.6

IOCL H

3760.1

5418

69.4

3911.9

5502

71.1

4102.6

5836.3

70.3

IOCL M

2848

6400

44.5

4484.7

7937.6

0.0

5001.8

8882.9

56.3

JOCL D

0

650

0.0

0

614.9

48.7

0

586.3

0.0

10CL Phosphorus

3104

6400

48.5

3168.7

6506.6

48.7

6627.3

9435.2

70.2

CPCL M

6188

8181

75.6

8285

9680

85.6

7776.9

9784

79.5

CPCL CBR

0

740

0.0

0

682

0.0

0

617.99

0.0

BRPL

0

2300

0.0

0

2356.2

0.0

0

2067.32

0.0

HPCL M

3609.6

6118

59.0

4311.8

6249

69.0

4830.7

7418.9

65.1

HPCL V

4302.1

7822

55.0

3559.8

7574

47.0

5178.4

9244.5

56.0

MRPL

7829.4

11809

66.3

8650.1

12014

72.0

8716.4

12531.7

69.6

BPCL M

3289.7

9138

36.0

4532

10300

44.0

6384.1

12041.09

53.0

BPCL K

5229.8

7924

66.0

4002

6900

58.0

4534.67

7743.34

58.6

Naval research laboratory

0

2042

0.0

0

2132.6

0.0

0

2503.85

0.0

Industry

43905

92742

47.3

48237

96407.2

50.0

56654.77

107954.69

52.5

Crude processing in India:

The inside informations of petroleum processing in Indian refineries during the last five old ages are as given below.

( Figs in MMT )

A

Autochthonal

Imported

Entire

2003-04

29.0

89.7

118.7

2004-05

29.4

94.9

124.3

2005-06

28.3

98.7

127.0

2006-07

30.2

111.3

141.5

2007-08 ( Prov. )

30.0

120.8

150.8

CONCLUSION & A ; FINDINGS:

All the three companies IOCL, HPCL and BPCL do renting by themselves and make non depend on the authorities renting bureau ‘Tranchart ‘ for the same.

All the three companies have their ain set of empanelled list of ship agents and charterers, who help them with the vas handiness.

The three companies follow the tendency of back uping Indian ship proprietors foremost alternatively of traveling to the foreign ship proprietors straight.

None of these companies have vass of their ain and depend on outside supplies.

The three companies judiciously hires vass largely on the ‘Time Charter ‘ when the market is on the slack and seek an get most of them during this period.

The three companies tend to calculate on the sum of oil to be imported on footing of guidelines issued by the crude oil ministry and so consequently look into the market continuously to happen the suited clip to rent the vas.

These three oil big leagues hire vass on ocean trip charter to get by with sudden demands merely.

BPCL and HPCL specifically concentrate on ‘contract of affreightment ‘ besides and at times prefer it on the clip charter.

For the coastal transportation, the three companies normally takes aid of Transporting Corporation of India and affair with them to acquire lump amount rate for annual transit of oil.