With fuel costs constantly on the rise and freight rates on the decline, tanker owners are looking for ways to cut back on fuel consumption, while maintaining optimum sailing speeds, in order to avoid engine damages and make their trips on time. In its latest report, Mcquilling Services tries to determine which should be the right balance between fuel consumption and speed, as the main issues for tankers are fuel costs, the daily value of vessels, cargo carrying costs and emissions.
According to Mcquilling "the concept of optimum speed is relatively straightforward: The faster you go, the quicker the trip which allows for the voyage revenue to be distributed over fewer days thus increasing the daily or TCE earnings. However, since the fuel consumption relationship to speed is a cubic formula, going too fast drives the fuel consumption up drastically, ultimately reducing daily earnings by increasing fuel costs. The optimum speed curve thus has a point where the TCE earnings are greatest, that point being defined as the optimum speed for a given market level and bunker cost. In order to determine this point, good quality speed versus fuel consumption data is required over the entire operating range of the tanker" said Mcquilling Services.
It continued by mentioning that "our investigations have disclosed that there seems to be a lack of comprehensive speed versus fuel consumption data that can be readily compared to prevailing bunker prices and market freight rates. Without this information at hand, and available to the companies’ commercial groups responsible for vessel deployments, selecting the optimum speed for ballast legs, and negotiating the optimum speed for laden passages, is impossible.Cargo carrying costs are an important issue. For crude oil priced at US $100 per barrel, the inventory carrying costs for the cargo far outweigh any savings in fuel for many of the voyages in question. Assuming a ten percent annual interest rate on two million barrels of crude, the resulting daily inventory cost is roughly US $55,000. Any additional time on the laden voyage due to slow steaming will rack up this interest charge on the cargo.
Looking a little more closely however, common practice is for the shipper to pay the supplier for the cargo by the 5th of the month following the lifting month. This leads to the opportunity for charterers to avoid inventory cost if the vessel arrives at the discharge port before this date. For this reason, owners of vessels fixed for voyages that fit this time window could slow steam on the laden leg without the shipper incurring any inventory carrying cost" mentioned Mcquilling Services.
It added that "as a reference, the Arabian Gulf/Japan trade would take a VLCC approximately 25 days one-way operating at a reduced speed of 11 knots in today’s market. A charterer who fixes a vessel for this voyage in the first week of the month would narrowly avoid inventory cost assuming they utilize the pay period described previously. The laden leg of this voyage is 6,650 nautical miles which lies roughly in the middle of the range of common tanker trade routes, indicating a broad range of voyages that have the potential to avoid inventory costs while sailing at the optimum speed for market conditions.
The subject inventory carrying costs relates primarily to the tanker markets, where freight has traditionally represented about 5% of the cargo value. In the dry bulk trades, where the cargo value is much less, the impact of inventory costs is also much less, creating many opportunities to reduce bunker consumption and emissions. In addition to the monetary benefits of slow steaming for the owner, significant emissions benefits must be taken into account. Slowing a typical VLCC from 15 to 11 knots reduces fuel consumption by approximately fifty percent. Reducing fuel consumption is directly correlated to emissions and therefore exhaust-gas emissions, such as CO2 and others would be cut in half. This may be of use in coastal emission control areas, as well as attaining the MARPOL Annex VI emission requirements set forth by the International Maritime Organization" stated the US-based consulting firm.
It concluded by saying that "in light of the current market, the optimum speed calculation couldn’t be more relevant. In order to realize the potential benefits for the owner, charterer and the environment, we believe three things are necessary. First is commercial access to good data related to the speed versus fuel consumption of vessels in the fleet. Second, tools to use this information to understand what speeds are optimal for given market conditions. McQuilling Services has developed an optimum speed calculator, BestSpeed™, which provides the user a tool for calculating the optimum speed for prevailing market conditions. Finally, a spirit of collaboration between owners and charterers to reduce speeds and therefore consumptions on laden voyages where possible, will increase TCE earnings and reduce emissions, at no cost to the charterer. Perhaps this season’s best seller in the shipping industry will be the “Three Steps to Optimizing the Speed of Ships.” That may be a shade better than present circumstances" the report concluded.
Nikos Roussanoglou, Bunker Ports News Worldwide