The majority of the worlds oil is supplied to customers via ships. This has traditionally meant the Middle Easts major producers have had to service their own fleet of vessels to ship crude, refined products and liquefied natural gas (LNG).
Every Gulf Opec member state operates an extensive tanker fleet except Iraq, which still relies on charter vessels.
However, in 2012, the worlds largest producer, state-owned Saudi Aramco, decided to sell its marine arm Dubai-based Vela International to Saudi National Shipping Company (Bahri) for $1.3bn in cash and shares.
The terms of the deal highlight the massive operational issues facing the regions oil and gas producers and also underline the financial cost of servicing a fleet of ships that are some of the worlds largest ocean-going vessels.
The divestment allows Aramco to concentrate on its core business. It was also able to transfer all ships, personnel and other inventory to Bahri, thus consolidating the kingdoms state-owned shipping assets.
Bahri is now responsible for shipping all of the kingdoms crude and controls a total of 32 very large crude carriers (VLCCs), 20 chemicals tankers and five product tankers. The company also has 16 ships on order, which are under construction.
Despite the sale of its shipping operations, Aramco still takes an active role in the way its former tanker fleet is maintained. In August, MEED reported that the oil major had signed a memorandum of understanding with Bahri and Singapores Sembcorp Marine to conduct a feasibility study for a maritime yard scheme in Saudi Arabia.
The shipyard is likely to be constructed at Ras al-Khair in the Eastern Province, which is close to the shipping terminal at Ras Tanura, the export point for the majority of the kingdoms crude.
The initial plan was to build a facility that catered to Aramcos extensive offshore oil production, but this has now been expanded. The new study is geared towards also carrying out refits and maintenance on large crude carriers.
A decision will be made on the shipyard in the next 12 months and a budget of about $4bn has been mooted.
The shipyard is a good indication of how Aramcos priorities are changing, says an oil analyst based in Saudi Arabia. It makes sense for Bahri to look after the shipping, but Aramco is now keen to reinvest the money it got from selling Vela International to create thousands of jobs in the Eastern Province.
On the other hand, Saudi Arabias oil and gas producing neighbours still maintain a majority stake in their own fleets.
State-owned Abu Dhabi National Oil Company (Adnoc) owns a joint subsidiary that transports its oil and gas. Abu Dhabi National Tanker Company (Adnatco) is responsible for shipping crude, as well as petroleum products and sulphur. To achieve this, it operates five VLCCs along with a molten sulphur carrier and now has a total inventory of 20 ships.
There will be a surplus of available tonnage in the very large crude carrier charter market [in the future]
In 2009, Adnatcos support services were merged with National Gas Shipping Company (NGSCO) in order to save costs and both companies are now operated under one management team. NGSCO operates a fleet of eight LNG carriers on behalf of Abu Dhabi Gas Liquefaction Company (Adgas).
Another conventional operator is Kuwait Oil Tanker Company (KOTC). The firm is a subsidiary of Kuwait Petroleum Company and operates a fleet of VLCCs and liquid petroleum gas (LPG) carriers.
KOTC was formed in 1957, but came under full government ownership in 1979. The fleet consists of eight VLCCs, seven product carriers and four LPG tankers, as well as two bunker vessels. The company is also the sole agent for tankers calling at Kuwaits sea ports.
Qatars fleet of LNG carriers is operated by Qatar Gas Transport Company (Nakilat) and dwarfs all of its rivals in terms of size. Nakilat owns 54 LNG vessels that are used to transport gas to the countrys global customer base.
Nakilat is the worlds largest LNG shipping company and its ownership differs from other regional peers. About 51 per cent is owned by various stakeholders tied to the Qatari government, with the remaining 49 per cent publicly traded on the Qatar Exchange.
The company also runs its own shipyard at Ras Laffan Industrial City, in partnership with Singapores Keppel. The facility began operations in 2010 and carries out repair and maintenance work on Nakilats fleet of LNG carriers.
Iran has always operated a large tanker fleet, but the past 18 months have proved tough for the Islamic Republic. International economic sanctions imposed due to Tehrans nuclear programme have resulted in crude exports experiencing a massive decline. Irans oil output has fallen by about 2 million barrels a day since 2012 and this has meant a lot of its fleet has been used to store crude. Nevertheless, the company running the fleet has added more capacity in recent months.
National Iranian Tanker Company (NITC) is a subsidiary of National Iranian Oil Company (NIOC), and is responsible for Irans crude carrying vessels. In an agreement with China signed in 2009, NITC is commissioning several crude carriers. Since May, four more VLCCs have been added to the fleet. This means NITCs total inventory stands at 37 VLCCs and 14 smaller crude tankers. The deal with China involves the purchase of 12 VLCCs for a total of $1.2bn. Whether Iran is paying with cash or oil for the vessels is unclear.
Iraq and Oman do not operate their own fleets and instead rely on charter vessels. Accordingly, recent years have offered some savings for the two oil producers, as the VLCC charter market has gone through one of the most stagnant periods in its history.
According to French shipbrokers Barry Rogliano Salles, in 2012, the VLCC charter market average daily rate was $14,800. This was an increase on 2011s figure of $10,700, but still fell short of providing a return on investment for any charter company operating a new vessel, some of which cost $150m.
Daily operating costs of VLCCs are about $11,000-12,000 and the low daily charter rates are causing shipping firms to drastically reduce costs. This means some operators are mothballing ships, or are sailing at slower speeds to cut down on fuel costs.
Despite most nations in the region operating their own fleets, the Gulf was still the most active charter market. In 2012, there was a monthly average of 129 spot cargoes in the Gulf.
As of the end of 2012, the total charter fleet globally consisted of 614 ships. This means there will be a surplus of available tonnage going forward, especially as another 49 vessels will have been delivered during 2013.
Owning a fleet of tankers does offer security and insulation from the volatile VLCC charter market, but is also expensive, especially when companies invest in new ships. However, the charter market is currently offering highly agreeable rates to countries such as Iraq and Oman and while this continues, it is unlikely that either will look to form their own fleet in the medium term.
In 2012, there was a monthly average of 129 spot cargoes in the Gulf