Ocean Tankers: Analysis of Refining and Shipping in Oil and Gas

This report provides a comprehensive analysis of Ocean Tankers, a Singapore-based company specializing in energy-focused transportation within the oil and gas sector. The report explores various aspects of the company, including its current fleet size of over 100 tankers, financial performance, and risk management practices. It delves into the impact of oil prices on tanker construction, global oil demand versus crude, and employment contracts. The report also highlights Singapore's strategic importance as a hub for the oil and gas industry. Furthermore, it examines the products transported by sea, voyage trip, and time chartering policies, along with the company's biggest competitors. The report emphasizes the importance of risk management strategies, including economic, operational, political, and financial risks, and how Ocean Tankers mitigates these challenges. The report concludes with a summary of key findings and insights into Ocean Tankers' operations and its role in the global oil and gas market.

Refining and Shipping in Oil and
Gas Industry
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Table of Contents
INTRODUCTION................................................................................................................................3
Reflecting oil prices on build tankers..............................................................................................3
Ocean Tankers current fleet size......................................................................................................3
Risk management practices.............................................................................................................5
Global Oil Demand versus Crude....................................................................................................6
Employment contracts.....................................................................................................................7
Why Singapore................................................................................................................................8
Products which are transported by Sea route...................................................................................8
Voyage trip and time chartering policy............................................................................................9
Ocean Tanker’s financial performance analysis..............................................................................9
Biggest competitors.......................................................................................................................11
CONCLUSION...................................................................................................................................11
REFERENCES...................................................................................................................................13
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INTRODUCTION
Oil and gas sector is considered as the most important aspect for growth and development of
nation. It assists different sectors to operate their business effectively with ease of transportation
facilities. Present report is based on Ocean tankers which is based in Singapore and develop
solutions tailored in term of energy focused transportation. This corporation shed light upon
customer focused services along with quality and strong commitment towards safety. Further,
reflections have been provided upon oil price on build of tankers by taking into account company
report from Thamoson reuters and Sin Clarkson as well as Bloomberg. In addition to this, financial
information has been presented along with risk management plan. Apart from this, global oil
demand vs crude has been explained. This assignment aims at examining its current fleet size,
products and its financial performance analysis. Moreover, in the age of rapid changes, refiners also
face number of issues and difficulties, henceforth, the report will also identify various ways by
which Ocean Tankers manage its risk.
Reflecting oil prices on build tankers
According to the give information, oil prices on build tankers is increasing continuously
from past time period. This happened because of enhancement in prices of crude oil as demand of
the same is rising. However, tankers are used to float storage and energy across different countries
where it becomes important to focus upon price of the same (Pressures Build in Oil-Shipping
Business, 2016). However, in case of higher price of building tankers, the management need to pay
increase price for oil as shipping cost will be raised. Therefore, tanker rates is volatile and depends
upon price of oil or demand of the same in the marketplace. In this manner, construction of tankers
and scope of tighter supplier of oil assist to boom trade of oil shipping. It can be critically evaluated
that when price of oil or fuel go down then profitability of ship increases to a great extent. It shows
that low price of oil is associated with good business of oil tankers so as to ensure supply of the
same across different areas.
Ocean Tankers current fleet size
Ocean Tankers is largest crude oil operators of Singapore founded in the year 1968 and Hin
Leong, Universal Terminal, Turas Terminal and Ocean Bunkering services are its affiliated
companies (Ocean Tankers, 2016). It is specializes in transportation of petroleum and other
products. The vision of the company is to become a first choice of consumers in the area of global
maritime transportation. Currently, Ocean Tankers has an excellent fleet having more than 100
tankers of oil in different sizes. All the fleet have been designed as per the perspective of charters.
Its engineers are focuses on building new fleets so as to maximize its carrying capacity to load more
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vessels and doubling the pumping capabilities at higher speed (Silvestre and Gimenes, 2017). It’s
new vessels also facilitative optimum pooling of various spare parts as well as vessel substitutions.
As per the table, it can be seen that company’s Tanker fleet consists of total 82 tankers comprising
14 VLCC, 1 Suezmax, 14, Aframax/LR2, 6 Panamax/LR1, 22, Medium Range, 21 IMO2/Chemcial
Tanker Type 2 and 21 used for General
Purpose Ocean Tankers, 2016). All of the
fleets have total capacity of 7,808,058
DWT tonnages, out of these; VLCC has
the largest capacity of 4,454,216 DWT
tonnages. On the other hand, its Support
Vessel Fleet is used by Ocean Traders to
transport crew and other spare parts to
Singapore’s water vessels and outer ports
as well, appended below:
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Ocean Tankers have a diversified
support vessel portfolio which delivers
comprehensive logistic service to the
people. Its 51 support vessel fleet
encompasses 9 Bunker Barge, 17
Lube/Diesel Barge, 4 AHTS, 13 Harbour
Tug and 8 passengers Boat. In this,
Bunker Burge has maximum capacity of
32,000 DWT tonnages (Ocean Tankers, 2016). In addition to this, its warehouse also store sufficient
quantity of consumables, spare parts and other equipment so as to meet urgent demand of the
customers. It delivers significant competitive advantage to the company to carry out operations
successfully. Along with this, it also provide ship to ship transfer services and tanker management.
In total, Ocean Tankers have 135 vessels having a total size of 8,250,153 fleet size.
Risk management practices
Risk Management is the process of identification and analysing threats, followed by
coordinated and calculated methods to mitigate the risk. Risk management is important tool to
minimize the impact. Ocean tankers being one of the leading oil and energy Transportation
Company in Singapore needs to have a crucial department to handler and mitigate the risk. Since
they have underlying commitments to safety and quality towards customer therefore managing the
risk will add value to growth and development of company. Risk can be prioritised and modelled in
following manner.
Economic Risk: This is broad classification which includes all the economical factors
affecting the Company and its functioning. Volatility or movements in oil and energy resource
pricing moving downwards will adversely impact the Ocean tankers. As raised prices will reduce
the demand and therefore business of entity will tend to decline resulting into reduced profitability.
To minimize the impact of price fluctuations various financial instruments and hedging contracts
should be entered into to hedge the foreign exchange risk in case of currency fluctuations with
respect to freight involved on transport (Zhdannikov, Bousso and Ghaddar, 2016). Effective pricing
policy should be adopted to attract the suppliers of oil to contact us even in case of recession.
Operational Risk: This involves the case of industrial risk such as natural disasters, natural
losses of oil in transit, regulatory fines, civil liabilities towards renewal of licences etc. Such risks
need to be mitigated on priority basis to reduce the chances of threat and continual of critical
services and operations even in hardship faced (Yusuf and et.al., 2014). To survive the disaster and
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environmental factors Ocean tankers spent huge amount on designing ships with advanced
technology which are inflammable and coated with fire resistant metals. Operational risks can be
best mitigated by taking Insurance of the carriage (Ablo and Overå, 2015). Moreover, in addition to
this, Ocean Tankers has licensed Triple Point’s chartering and vessel operations software. This
software system is used by the company to manage both the pre and post fixture activities for the
ensuring effective bulk shipping operations. It also offer real-time and solid solution to the company
to effectively manage their market price, risk due to counterparty failure and operational as well as
regulatory compliance risk by a tight and strong integrated program. It also conducts an internal as
well as external audit so as to find out mistakes or errors in their financial statements and take
appropriate decisions to eliminate the same.
Political Instability: Instability in the political environment of nation will lead to disruption
in supplies in certain countries. As a tanker merchandiser, Ocean Tankers face severe difficulty due
to seasonality factor or other extrageneous variables that are beyond the control of the business such
as political turmoil. Impact of political instability will lead to civil wars, terrorism, guerilla attacks
etc. To mitigate such types of risks proactive step should be taken and beforehand analysis should
be conducted prior to committing resources or entering into contract to deliver oil to countries with
which chances of civil war are high. Also resources should be directed to lower the risk (Bergh and
et.al., 2014).
Financial risk: It refers to the failure of organization to generate adequate return due to
ineffective monetary management. Ocean Tankers can face difficulties in relation to interest risk
volatility, liquidity risk and risk due to volatile foreign exchange rate. All such are managed by its
risk management policies (Bjerga and Aven, 2016). Financial instrument like derivatives and
hedging instruments are used by the company to reduce the possibility of threat which can influence
organization adversely. Moreover, it’s compliance officer monitor continuous operation and assure
compliance with legislations and regulatory framework.
Global Oil Demand versus Crude
Oil is any neutral or non polar substance which is liquid vicious at ambient temperatures and
has properties of hydrophobic and lipophilic. Oil is of different types animal, petrochemical and
vegetable oil. However focus of world economy is only on petrochemical oil. Crude is naturally
occurred petroleum product resulting from geological pressures and hydrocarbon deposits and other
organic materials deep beneath the crust of the earth.
Oil is considered as world's primary fuel and also an enabler of globalisation and stimulator
of growth in world economy towards development. Around 90 million cars are sold every year and
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mostly running on oil it is an indicator that demand for oil is constantly rising. Demand for oil is
inelastic to its prices (Global outlook of the oil and gas Industry, 2016). This explains that whether
the prices rise or fall demand will reach sky rocketing heights. As per the recent statistics it is
analysed that 95 Million Barrels per day was consumed in 2016 as compared to 86 million barrels
per day in 2008. Demand of oil will rise as many developing nations are still waiting for their turn
to consumer oil for growth and development.
As per the International Energy agency the world's demand for crude oil is constantly raising
in contrary to its production (Said, 2016). Since last two years two new major sources of crude oil
has emerged on global scenario namely US and Canada flooding the oil market by rampaging the
supply from traditional suppliers and producers like Iraq and Saudi Arabia. However it can be said
that demand for crude oil and oil goes hand in hand and is ever increasing demand for oil will never
decline in long run.
Employment contracts
Well-trained, experienced and highly-committed people, engineers, crew members and staff
are the key pillar of Ocean Tanker’s growth and success. Currently, company has 350 shore staff
and above 3000 multinational crew members who are focusing to put their best efforts to transport
oil and delivering other logistical services to the people. Every staff member is considered as a
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valuable asset of the entity who focuses to render top-quality services to the people. Further, as its
mission is to develop teamwork practices, in which, company welcome and invites workers
suggestions to render superior quality services to the people.
Why Singapore
Oil and Gas industry plays an important and inevitable role in Singapore’s economy. This
sector became a catalyst for the nation, in which, refiners are actively focusing on exploring market
opportunities to promote sustainable industrial growth. It became a premier hub of Asian economy
as it contributes around 5% to gross domestic product (GDP) (ALNabhani, Khan and Yang, 2016).
All the companies which are operating in the sector are continuously focusing to strengthen their
competitiveness to create an excellent growth. Moreover, government and statutory authorities also
took number of initiatives to create logistic innovative solution in order to maximize synergies of
refiners and logistic activities and thereby meet global market demand. Singapore is considered as a
strategic hub of Asian economy because in its petroleum industry export around 67,000,0000 long-
ton and 75,100,100 short-tonnages of oil every year. It is dubbed as undisputed nation oil hub of
Asia. Every year, 130,000 vessels are entered in port while cargo handle above 1066 tonnes every
minute. It connects 600 ports in more than 120 countries of the world (Halkyard, 2015). In the year
2013, after Shanghai having 33.6 million container ports, Singapore stands at second position
having 32.6 million container ports. In additions to this, its best quality transportation, financial
infrastructure, friendly business policies and government initiatives, safety and security helps
refiners to carry out operations successfully. Its Ministry of Trade and Industry also came up with
bailout package to stabilize the marine industry from shipyard to offshore service providers which
are suffering difficulties from declined oil prices. In addition to this, government also provide
incentives and tax deferrals to the oil refiners (Wirjo and Pasadilla, 2016). Companies which are
awarded by the bailout packages also put best efforts to retrain their existing people and review
manufacturing process to bring necessary improvements. From all of the above decisions, it
becomes clear Singapore’s shipbuilding and marine industry became a key or strategic pillar for the
local economy. Transportation of LNG as well as LPG, eco-friendliness and new market
opportunities for transporting shale oil and refined products also exists for the refiners.
Products which are transported by Sea route
Ocean Tankers deliver wide range of products and services to their customers. Its Tanker
Management consists of chartering, operations, technical management and supply to crews.
Moreover, it also offers ship to ship (STS) services to their consumer (Minier-Matar and et.al.,
2015). It is specialise and expertise in handling operations with one ship at anchor or with more
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than one ship underway. From the sea route, Ocean Tankers transport crude oil, refined petroleum
product, liquefied petroleum gas and liquefied natural gas as well.
Voyage trip and time chartering policy
Ocean Tankers also operates Voyage charters and time chartering policy in their operations. In
the year 2016, Ocean Traders that has been built in 2008 of 108,943 dwt tonnage has been chartered
on 13th May 2016 and its redelivery had took place on 28th May, 2016. This delivery took place at
Thaigulf. It was chartered for a period of 15 to 45 days at a rate of 20,000 USD. In addition to this,
there are many ships chartered by the firm, appended below:
Ocean Tanker’s financial performance analysis
2007 2006
Gross profit 9.99 6.12
Net sales 16.41 9.78
Gross profit ratio 61% 63%
Net profit 1.47 1.74
Net sales 16.41 9.78
Net profit ratio 9% 18%
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Current assets 13.69 13.21
Current liability 37 3.51
Current ratio 0.37 3.76
Current assets 13.69 13.21
stock 1.14 4.13
Current liability 37 3.51
Quick ratio 0.34 2.59
Sales 16.41 9.78
Debtor 10.54 1.99
Debtor turnover
ratio 1.56 4.91
Debt 32.17 1.91
Equity 60.18 34.15
Debt equity ratio 0.53 0.06
Net profit 1.47 1.74
Equity 60.18 34.15
Return on equity 2% 5%
Gross profit ratio: Gross profit ratio reflects the extent to which company maintain very strong
control on its expenses (Kumbirai and Webb, 2010). It can be seen from the table given above that
gross profit ratio of the Oil tankers was 63% in 2006 and same declined to 61%. This reflects that to
some extent firm control on the production cost get declined. Due to elevation in direct cost gross
profit declined.
Net profit ratio: Net profit ratio of the firm declined from 18% to 9%. This means that control
on indirect expenses reduced from the firm. It is the elevation in the indirect expenses that are
responsible for decline in the net profit ratio of the firm. Oil tankers need to improve its
performance and in this regard it requires to curb enhancement in the indirect expenses. In this
regard firm must prepare cost control strategy in its business.
Current ratio: Current ratio reflects the firm capability in terms of payment of current liability
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by using current assets (Drivelos and Georgiou, 2012). Current ratio of the firm in 2006 was 3.76
and same in the 2007 become 0.37. This means firm payment capability by using current asset get
declined. Firm needs to make its cash management strategy more strong then before.
Quick ratio: Mentioned sort of ratio give clearer picture of the firm liquidity then current ratio.
This happened because in this ratio stock and prepaid expenses are not taken in to account. Stock
cannot be converted in to stock overnight (Ocean groups annual report, 2007). It can be seen that
quick ratio of the firm declined from 2.59 to 0.34. Hence, it can be said that firm condition is very
critical.
Debtor turnover ratio: This is the ratio which indicates firm capability to generate sales by
selling goods on credit basis to the customers. In the FY 2006 firm sale 4.91 times in the year on
credit basis. Whereas, it sold goods 1.56 times in a year on credit basis. Hence, it can be said that
firm is following a strict credit control policy in business which is good for the firm.
Debt equity ratio: Debt equity ratio of the Oil tankers is 0.06 in the FY 2006 and it increased to
0.53 in the FY 2007 (Guo and et.al., 2010). This means that proportion of debt increases in the firm
balance sheet relative to equity. However, this percentage increase does not negatively affect the
business firm. Hence, it can be said that there is no threat to firm on this front.
Return on equity: Return on equity declined in the FY 2007 relative to FY 200. It can be seen
that return on equity was 5% in the FY 2007 but it declined to 2%. This means that shareholders are
receiving less return on the invested amount. Hence, firm needs to improve its performance so that
shareholders receive good amount on the invested amount.
Biggest competitors
Seeing at the modern corporate world, every organization is facing competition with number
of rivalries or other companies, henceforth, in order to achieve success, companies are required to
make best strategies and necessary decisions for the growth and success of the business. With
reference to Ocean Tankers, it is facing competition mainly from AET Incorporation, BW Group,
Raffles Shpgmgmt Svces, Hong Lam Marine Pte Ltd, Chevron and Clarkson Plc. All are the largest
competitors of Ocean Tankers who are giving tough competition and taking necessary steps to
defeat the firm and reach the greatest position in the oil and gas industry of Singapore ( Stackhouse
and Stewart, 2016). Company compete and defeat rivalries by manufacturing variety of vessels in
different sizes which are capable to transport high volume and extreme range of petroleum and
other oil products. Furthermore, its high-speed, larger capacity to carry oil and other products and
SIS services are the core competitive strength of the firm. Besides this, it also ensure its product
quality by getting certification from ISO 9001:2000. This certification clearly highlights that Ocean
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Tankers shipping and ship management services are of best and superior quality.
CONCLUSION
Report concluded that Ocean Tankers exceeding fleet size, growth in carrying capacity, best
quality services, SIS services are the factors which strength its competitiveness to meet targets
easily. Moreover, financial analysis performance reported that although Ocean Tankers profitability
and liquidity position is good, but still, managers have to make decisions so as to properly utilize
their cash resources which are not currently utilized effectively. Along with this, its committed and
highly motivated team focuses to giving top-quality services to the consumers so as to ensure long-
run sustainability.
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REFERENCES
Books and Journals
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African Studies. 53(03). pp.391-413.
ALNabhani, K., Khan, F. and Yang, M., 2016. The importance of public participation in legislation
of TENORM risk management in the oil and gas industry. Process Safety and
Environmental Protection. 102(18). pp.606-614.
Bergh, L.I.V. and et.al., 2014. Developing a performance indicator for psychosocial risk in the oil
and gas industry. Safety science, 62(10). pp.98-106.
Bjerga, T. and Aven, T., 2016. Some perspectives on risk management: A security case study from
the oil and gas industry. Proceedings of the Institution of Mechanical Engineers, Part O:
Journal of Risk and Reliability. 230(5). pp.512-520.
Drivelos, S.A. and Georgiou, C.A., 2012. Multi-element and multi-isotope-ratio analysis to
determine the geographical origin of foods in the European Union. TrAC Trends in
Analytical Chemistry. 40. pp.38-51.
Guo, B.L. and et.al., 2010. Stable C and N isotope ratio analysis for regional geographical
traceability of cattle in China. Food Chemistry. 118(4). pp.915-920.
Halkyard, J., 2015. Large spar drilling and production platforms for deep water oil and gas. In
Large Floating Structures. Springer Singapore. 12(3). pp.221-260.
Kumbirai, M. and Webb, R., 2010. A financial ratio analysis of commercial bank performance in
South Africa. African Review of Economics and Finance. 2(1). pp. 30-53.
Minier-Matar, J. and et.al., 2015. Application of forward osmosis for reducing volume of
produced/Process water from oil and gas operations. Desalination. 376(12).pp.1-8.
Silvestre, B.S. and Gimenes, F.A.P., 2017. A sustainability paradox? Sustainable operations in the
offshore oil and gas industry: The case of Petrobras. Journal of Cleaner Production.
142(12). pp.360-370.
Stackhouse, M.R. and Stewart, R., 2016. Failing to Fix What is Found: Risk Accommodation in the
Oil and Gas Industry. Risk Analysis. 12(3). pp. 62-92.
Wirjo, A. and Pasadilla, G., 2016. Manufacturing of oil and gas industry equipment in Singapore.
Services in Global Value Chains: Manufacturing-Related Services. 5(2). pp. 239-289.
Yusuf, Y.Y. and et.al., 2014. A relational study of supply chain agility, competitiveness and business
performance in the oil and gas industry. International Journal of Production Economics.
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