Medium Range Tanker, image courtesy Transpetrol

RIO DE JANEIRO (Dow Jones)–Brazilian oil field services company OSX Brasil S/A (OSXB3.BR), part of Brazilian businessman Eike Batista’s industrial empire, said Monday that it had received a $732 million order to build 11 medium-range tanker ships for Kingfish do Brasil Navegacao.

OSX will build the ship at its Acu port complex, which is under construction in northern Rio de Janeiro state, the company said. OSX’s Acu port complex is part of a rebirth for Brazil’s shipbuilding sector, with demand for ships and oil field equipment soaring due to development of recently discovered reserves off the country’s coast. Brazil was once one of the world’s largest shipbuilding countries before an economic downturn in the 1980s caused the sector to nearly shut down.

The oil field services company is branching out from its initial role to build vessels for sister company OGX Petroleo e Gas Participacoes S/A (OGXP3.BR, OGXPY). OSX will build two production platforms, OSX-4 and OSX-5, known as FPSOs, or floating production, storage and offloading vessels.

OSX recently secured a contract to build a pipe-laying vessel for Sapura Seadrill.

Also, Sete Brasil, a drill-rig holding company, said last month that it was in talks with OSX to build two drilling rigs at the Acu shipworks. The rigs are part of the massive 21-vessel order from state energy company Petroleo Brasileiro S/A (PBR, PETR4.BR), or Petrobras, that Sete Brasil won in February.

“Fourteen naval construction projects now compose the work plan for OSX’s team at our Acu naval construction unit,” said Luiz Eduardo Guimaraes Carneiro, OSX’s chief executive, in a statement.

Kingfish will lease the vessels to Petrobras, OSX said.

-By Jeff Fick, Dow Jones Newswires

TORM has entered into an agreement to sell the MR product tanker TORM Lana. The parties have agreed not to disclose the sales price. TORM Lana will be delivered to the new owner in either the second half of March or the first half of April 2012. The transaction leads to a P&L loss of approximately USD 15 million which will be recognized in the financial statements in the first quarter of 2012. The agreement has a positive cash impact of approximately USD 4 million.

Following the sale, TORM’s owned fleet consists of 66.5 product tankers and two dry bulk vessels. In addition, TORM has one product tanker on order.

A new generation of 37,000-tonne tankers have been ordered for the Royal Navy fleet, the Ministry of Defense announced today. The new Military Afloat Reach and Sustainability (MARS) tankers will maintain the Royal Navy’s ability to refuel at sea and will provide fuel to warships and task groups.

They will support deployed amphibious, land and air forces close to the shore, will be able to operate helicopters and are planned to enter service from 2016, replacing existing Royal Fleet Auxiliary (RFA) single hulled tankers.

At over 200 metres long, the four tankers will be approximately the same length as 14 double decker buses and can pump enough fuel to fill two Olympic sized swimming pools in an hour.

Minister for Defence Equipment Support and Technology, Peter Luff, announced that Daewoo Shipbuilding and Marine Engineering (DSME) is the government’s choice for the deal. This represents the best value for taxpayers’ money, with £452 Million to be spent on the four new vessels to support the Royal Navy on operations around the world.

A number of British companies took part in the competition, but none submitted a final bid for the build contract. In light of this, the best option for Defence and value for money for taxpayers is for the tankers to be constructed in South Korea by DSME.

UK companies will however benefit from £150m of associated contracts comprising:

• £90m on UK contracts for the provision of key equipment, systems, design and support services. The winning design is being provided by UK company BMT Defence Services;
• £60m investment in the UK from customisation, trials and specialist engineering support.

The tankers are part of a multi-billion pound investment programme for the Royal Navy, which includes Type 45 destroyers, Queen Elizabeth Class aircraft carriers and Astute Class attack submarines, employing thousands of people in the UK.

Minister for Defence Equipment, Support and Technology, Peter Luff, said:

“Over the next decade, the Government will be investing billions of pounds in our Maritime capabilities to ensure that our Royal Navy remains a formidable fighting force.

“This project will inject up to £150 million into UK industry and support and maintenance will also be carried out in the UK. The Government remains committed to building complex warships in UK shipyards.”

Commodore Bill Walworth, Head of the RFA, said:

“We are delighted the RFA will be able to operate these world class vessels.

“These fleet replenishment tankers will be flexible ships, able to operate with the Royal Navy and Armed Forces in conflict, and are designed to allow for upgrades and emerging technologies meaning that they have been designed with the future in mind.”

Chief of Defence Materiel, Bernard Gray, said:

“The competition for the contract sought to engage shipbuilders from across the globe. I believe the winning bidder’s solution will offer the UK the best value for money.

“The MARS tanker is an exceptionally versatile platform; able to simultaneously refuel an aircraft carrier and destroyer whilst undertaking helicopter resupply of other vessels.

“I am looking forward to the award of the contract and the work that will follow in the lead up to the delivery of the ships.”

VLCC Ardeshir H Bhiwandiwalla

The Great Eastern Shipping Company Ltd. took delivery of its 318,000 DWT Very Large Crude Carrier (VLCC) Ardeshir H Bhiwandiwalla from Hyundai Heavy Industries Ltd, (HHI) South Korea today and subsequently delivered the vessel to its new buyers.

This is the second vessel out of the 3 VLCCs which the Company had ordered at HHI in April 2010 and subsequently contracted to sell the same in Q1 FY12. The third VLCC will be delivered to the buyers in April 2012.

The Company’s current fleet stands at 34 vessels, comprising 24 tankers (9 crude carriers, 14 product carriers, 1 LPG carrier) and 10 dry bulk carriers (1 Capesize, 3 Kamsarmax, 1 Panamax, 4 Supramax, 1 Handymax) with an average age of 8.9 years aggregating 2.62 million DWT.

Image courtesy Knightsbridge Tankers

Bermuda-based Knightsbridge Tankers Ltd (NASDAQ:VLCCF) reported yesterday a net income of USD 9.5 million (EUR 7.1m) for the fourth quarter of 2011, up from USD 6 million a year earlier.  Net income increased primarily due to an improvement in the results of the VLCC Kensington, which is operating in the spot market.  Last year at this time, VLCC Kensington was in drydock which resulted in a subsequent revenue loss of $3.6M.

The average daily time charter equivalents (“TCEs”) earned by the Company’s VLCCs and Capesize vessels were $26,900 and $36,500, respectively, compared with $25,300 and $36,800 in the preceding quarter.

Operating revenue grew to USD 25.9 million from USD 21.6 million. Earnings per share (EPS) improved to USD 0.39 from USD 0.25. The board of directors proposed a dividend of USD 0.50 per share for the fourth quarter of 2011.

Net income for the full 2011 declined to USD $34.4 million from USD $38.6 million in 2010. EPS fell to USD $1.14 from USD $2.02. Revenue rose to USD $96.2 million from USD $95.9 million.

BREAK-EVEN FIGURES

As of February 2012, Knightsbridge reports an average cash breakeven rate for the remainder of 2012 for its VLCCs and Capesize vessels, (excluding bareboat charters), of $14,100 and $7,600, respectively, per vessel per day.

The VLCCs which are on bareboat charters have a cash break even rate of $5,300 per vessel per day.

THE TANKER MARKET

The market rate for a VLCC trading on a standard ‘TD3’ voyage between the Arabian Gulf and Japan in the fourth quarter of 2011 was WS 54, representing an increase of approximately WS 7.5 points from the third quarter of 2011 and a decrease of approximately WS 4 points from the fourth quarter of 2010. Present market indications are approximately $20,000/day in the first quarter of 2012.

Bunkers at Fujairah averaged $672/mt in the fourth quarter of 2011 compared to $664/mt in the third quarter of 2011; an increase of approximately $9/mt. Bunker prices varied between a low of $629/mt at the beginning of October and a high of $711/mt on November 14, 2011.

The International Energy Agency’s (“IEA”) January 2012 report stated an average OPEC oil production, including Iraq, of 30.53 million barrels per day (mb/d) during the fourth quarter of the year. This was an increase of 0.6 million barrels per day compared to the third quarter of 2011 and an increase of 1.1 million barrels per day compared to the fourth quarter of 2010.

IEA further estimates that world oil demand averaged 89.53 mb/d in the fourth quarter of 2011, which is the same level as the previous quarter, and a decrease of approximately 0.25 mb/d from the fourth quarter of 2010. Additionally, the IEA estimates that world oil demand will average approximately 90 mb/d in 2012, representing an increase of 1.2 percent or approximately 1.07 mb/d from 2011.

The global VLCC fleet totalled 594 vessels at the end of the fourth quarter of 2011, up from 584 vessels at the end of the previous quarter. 11 VLCCs were delivered during the quarter whilst one was deleted. The orderbook counted 123 vessels at the end of the fourth quarter, down from 131 orders from the previous quarter. Three new orders were placed during the quarter, and the current orderbook represents about 21 percent of the VLCC fleet. According to Fearnleys the single hull fleet stands at 30 vessels.

Teekay Corporation (NYSE:TK) and König & Cie are pleased to announce that Diamond S Shipping Group has joined the Gemini Tankers Suezmax Pool as a full member. The Gemini fleet currently has 17 modern Suezmax vessels. This is expected to grow to 26 vessels by the end of 2012 as vessels redeliver from time-charters and Diamond S’ eight additional newbuildings are added to the Pool.

“We are delighted that Diamond S Shipping has joined the Gemini Tankers Suezmax Pool. The addition of their eight, high quality newbuild Suezmax tankers delivering over the course of 2012 further modernizes our fleet and solidifies our position as the premier Suezmax tanker pool,” commented Håkan Svedin, Gemini’s Managing Director.

“We have a great team in place providing a transparent, reliable and flexible management service to our customers, with whom we have long-term relationships. To them we can offer a fantastic modern Suezmax fleet operating across the globe, with a focus on the Atlantic spot markets,” Mr. Svedin added.

Craig Stevenson, CEO, Diamond S Shipping Group commented, “We are pleased to pool our Suezmax tankers with Teekay and König in the Gemini Tankers Suezmax Pool. We are excited by the opportunities this relationship will create for Diamond S. We were attracted by the modern fleet of Suezmax tankers operated by the Gemini Tankers Pool and their established track record of successfully managing that fleet in the key Suezmax tanker markets around the world.”

Bruce Chan, President, Teekay Tanker Services, commented, “Teekay is very pleased to continue with its long-standing cooperation with König, and excited about working with a first-class owner in the Craig Stevenson-led Diamond S Shipping. The addition of eight, high quality newbuild Suezmax tankers over the course of 2012 ensures that Gemini will be able to continue to provide excellent service to our customers.”

Tobias König, Managing Partner, König, agreed. “We have worked with Teekay for many years, and believe that the new relationship we have with Diamond S will support the long-term success of Gemini Tankers,” said Mr. König. “We have real competence in the pool: each partner brings a proven commercial record, strong financial backing, and long-term commitment to the Suezmax segment,” continued Mr. König.

“We have strong, reliable pool owners who are with us for the long-term,” added Mr. Svedin. “However, we will also consider taking further owners and tonnage into the Pool over time. The future for Gemini Tankers is exciting and the team will continue providing the best service in the market to our pool partners and customers.”

About Gemini

Gemini commercially manages a pool of Suezmax tankers. The Gemini team, including key chartering, commercial operations and post-fixture staff, operate from the pool’s headquarters in Stamford Connecticut, headed by Managing Director, Håkan Svedin, who has successfully led the Gemini Pool since 2009.

About Teekay

Teekay Corporation provides a comprehensive set of marine services to the world’s leading oil and gas companies, helping them seamlessly link their upstream energy production to their downstream processing operations. Teekay is growing its operations in the offshore oil production, storage and transportation sector through its publicly-listed subsidiary, Teekay Offshore Partners L.P. (NYSE:TOO), and its investment in Sevan Marine ASA (OSE:SEVAN). Teekay also continues to expand its significant presence in the liquefied natural gas shipping sector through its publicly-listed subsidiary, Teekay LNG Partners L.P. (NYSE:TGP), and seeks to grow its conventional tanker business through its publicly-listed subsidiary, Teekay Tankers Ltd. (NYSE:TNK). With a fleet of approximately 150 vessels, offices in 16 countries and approximately 6,300 seagoing and shore-based employees, Teekay transports approximately 10 percent of the world’s seaborne oil and its reputation for safety, quality and innovation has earned it a position with its customers as The Marine Midstream Company.

Teekay’s common stock is listed on the New York Stock Exchange where it trades under the symbol “TK”.

About König:

König & Cie. is a leading privately owned developer of investment projects as well as a fund & asset manager in Germany, and has currently €4.2 billion assets under management. Investment projects have focused on the following industries: Shipping, Infrastructure, Real Estate, Private Equity & Renewable Energy. König currently controls a fleet of 83 vessels ranging from Container Vessels, Tankers, Bulk Carriers and a Car Carrier. König sponsors and manages the stock listed “Marenave Schiffahrts AG” that controls a fleet of currently 13 vessels. König issued over 80 KG-Funds approved by the German SEC, thereby investing into shipping investments valued at approx. €2.9 billion. The company is representing approx. 31,000 investors with about 42,000 KG-shares.

About Diamond S

Headquartered in Greenwich, Connecticut, USA, Diamond S Shipping Group is a global owner/operator of modern, efficient crude and refined product tankers. Diamond S Shipping’s current fleet consists of 30 medium-range refined product tankers on long-term charter, a newly built Suezmax tanker operated in the spot market and seven newbuild Suezmax and two LR2 tankers scheduled for delivery in 2012 and 2013. Diamond S Shipping has invested or committed US$2.0 billion in building its fleet.

SIFA, a sistership to DABA, was delivered to OSC in early 2011

Oman Shipping Company S.A.O.C. (OSC) took delivery of one of their latest Very Large Crude Carrier (VLCC) the DABA, at Hyundai Heavy Industries co. Ltd’s (HHI) Yard in Ulsan, South Korea on 6th Jan 2012.

DABA has a 317,000 deadweight ton (DWT) capacity, is 333 meters length overall, 60 meter in beam and a design draft of 21 meters.  This is OSC’s third VLCC delivery, out of an order of five, from HHI, and is the Company’s 11th out of a future fleet of 17 VLCCs.  DABA is going to be operated in the VL8 Pool, managed by NAVIG8, of which OSC is Shareholder. With this, OSC will have 6 vessels in VL8 Pool.  International Tanker Management (ITM), in Dubai, will technically manage the vessel.

Since commercial operations began in 2003, OSC now has afleet of 30 vessels, and an order book of 11 vessels to be delivered between now and 2013.  The DWT capacity of the current fleet is around 4.6 million DWT, increasing to around 8 million DWT once the order book is delivered.

Oman Shipping Company S.A.O.C. is a closed joint stock company, incorporated in 2003 and owned by the Government of the Sultanate of Oman through the Ministry of Finance (80%) and Oman Oil Company S.A.O.C.(20%).  Headquartered in Muscat, Oman, it was established to transport the Sultanate’s oil and gas products to world markets, provide Omani shipping services to the country’s trade partners in other commodities, and to re-vitalize Oman’s seafaring tradition.  The Company is involved in ship owning, chartering and management activities through its subsidiary companies: Oman Charter Company S.A.O.C., Oman Ship Management Company S.A.O.C., and Oman Container Line S.A..  In 2010, the Company’s profit was USD 19.5 Million, with a turnover of USD 238 Million, and total assets of USD 2.3 Billion.  OSC’s Omanisation ratio is 86%, and the Company has an active cadet program for Omani Deck and Engineering staff.

Oman Shipping Company’s fully owned subsidiary, Oman Ship Management Company (OSMC) is presently undertaking the technical management of 14 of Oman Shipping Company’s Vessels including 3 VLCCs. Going forward, OSC has plans to bring more of its vessels under Oman Ship Management’s technical management. Recently, in September 2011, OSMC was awarded ISO 9001 and ISO 14001 accreditation, recognising its adoption of international standards and best practices in Ship Management.

Image courtesy Mitsui OSK Lines

Following in the recent footsteps of the containership industry and their newly formed, G6 Alliance, the crude tanker industry is consolidating their assets by creating a “VLCC pool” named Nova Tankers that according to their press release will “offer relevant vessels of the highest standard to cater for our customers’ need for safe and environmentally friendly marine transportation.”

The VLCC Pool will operate a combined fleet of around 50 quality VLCCs by the end of 2012 with an average age of only 3 years and consists of ships from the following shipowners, MITSUI O.S.K. LINES, LTD. / PHOENIX TANKERS PTE. LTD., A.P. MØLLER – MÆRSK A/S (Maersk Tankers), SAMCO SHIPHOLDING PTE. LTD., and OCEAN TANKERS (PTE.) LTD., SINGAPORE.

MT SEEB, an Iranian-owned Very Large Crude Carrier (VLCC)

At about 2100hrs on 04 Jan 2012 (Singapore time), the Maritime and Port Authority of Singapore (MPA) received a report that a Singapore-registered containership, Kota Tenaga and a Malta-registered VLCC, M/T SEEB had collided at about 2.7km south of Pulau Sebarok.

The master of Kota Tenaga reported that about 5 metric tons of marine fuel oil had spilled into the sea.  An inter-agency effort, coordinated by MPA, was immediately activated to contain and clean up the oil spill. The spillage of oil from Kota Tenaga was contained and Kota Tenaga was moved to Raffles Reserved Anchorage. An oil boom was laid around the vessel as a precaution. There is no report of injury to crew members.

A total of 12 craft was activated to monitor and clean up the oil spill. Non-toxic and biodegradable oil spill dispersants were used to break up patches of oil sighted in the vicinity of Pulau Pawai, Pulau Senang, and Raffles Reserved Anchorage.

MPA continues to monitor the situation closely and will respond to any sighting of oil patches.

Traffic in the port and the Strait of Singapore remains unaffected.

MPA is investigating the cause of the collision.

SINGAPORE (Dow Jones)–European trader Vitol has provisionally chartered a supertanker to ship North Sea Forties crude to Asia loading early January, in what could be at least the third such arbitrage voyage in just over a month, according to a shipbroker and traders.

Vitol provisionally booked the Very Large Crude Carrier (VLCC), Great Lady, to ship 270,000 metric tons, or around 2 million barrels, of Forties crude loading at Hound Point Terminal, Scotland, on Jan. 3. A Singapore-based trader said the cargo may be loaded a few days later.

Exports of more North Sea crude will likely firm the European market, somewhat offsetting the bearish impact of Petroplus Holdings AG (PPHN.PB) recently shutting down three refineries.

The latest fixture would mean that a total of 6 million barrels of Forties will have left the North Sea for Asia between in just over a month.

Differentials in the North Sea market jumped on Tuesday as Shell sold two Forties cargoes to Vitol, one at a premium of 80 cents a barrel to Dated Brent, compared with quotes at discount of 15-30 cents for mid-January loading cargoes in the previous session.

The latest booking highlights rising crude flow from the West to East after resumption of Libyan crude exports, as Asian refiners try to take advantage of a surplus European market.

Cargoes of Brent-linked Russian Urals were also seen chartered to head to Asia in recent weeks.

Another cargo of North Sea crude will likely be shipped to Asia late January. Statoil ASA (STL.OS) was heard to have provisionally chartered VLCC Front Champion at $6.10 million for Jan. 21-23 loading from Mongstad port in Norway for shipping 2 million barrels to South Korea.

The Singapore trader said it could be carrying some Norwegian grades, presumably for storage in Asia, although this couldn’t be confirmed. Statoil operates storage facilities in South Korea.

South Korea is also a likely destination for the Forties cargo. Two similar December parcels shipped by Total SA (FP.FR) and BP PLC (BP.LN) were heard to be targeting Korean refiners.

A free trade agreement between South Korea and Europe that came into effect in July allows buyers to redeem 3% of the price, making arbitrage deals attractive at current levels.

A senior executive with a Korean refiner told Dow Jones Newswires in mid-December that the company was weighing the option of buying January-loading Forties crude as the arbitrage window appeared open.

The FTA with Europe and a sharp increase in crude prices by Middle East producers last month made the arbitrage attractive amid a narrow Brent/Dubai EFS, he said.

-By Gurdeep Singh, Dow Jones Newswires