October 2 2000 BUSINESS NEWS

EU plan to scrap old ships could lift oil price

BY CARL MORTISHED, INTERNATIONAL BUSINESS EDITOR

SHIPPING interests will clash with the European Union this week over proposals to crack down on rust-bucket ships. Public concern caused by the sinking of the Erika off Brittany last December has generated an EU plan to phase out elderly vessels faster. Recent Greek ferry disasters have added to concern over old ships. The EU scheme, which will be debated at the International Maritime Organisation in London, is vehemently opposed by shipping interests and is also arousing fears that the rapid attrition of the world's tanker fleet could raise oil prices.

The initiative to send old tankers into the scrapyard comes when charter rates for ocean-going oil tankers have hit a 25-year peak amid high demand from refiners and record Opec export volumes.

According to analysts at Deutsche Bank, the cost of moving crude oil from the Gulf to Singapore has trebled since December. Fears are growing that a proposal supported by France, Germany and Belgium to scrap single-hull tankers more than 23 years old from 2003 will tighten the screw further on oil transport capacity and costs.

Marsoft, a US maritime market research and risk management firm, reckons that, even allowing for new tankers scheduled for delivery before 2003, the global industry could suffer disruptions causing tanker rates to spiral. "The price to transport oil from the Middle East to the United States could approach $10 per barrel, almost quadruple recent cost levels," Marsoft says.

At least 30 per cent of the world's tanker fleet is now 20 years old and the fleet is working close to 100 per cent of capacity. The shortage of tankers has been exacerbated by the Erika disaster, caused when a 25-year-old Maltese-registered ship split up off the coast of Brittany. The spillage of some 14,000 tonnes of heavy fuel oil fouled 400 kilometres of French coastline and prompted a Europe-wide call for action to ban ageing tankers from European waters.

The International Chamber of Shipping reckons the French proposal would entail scrapping 2,500 ships worth some $16 billion.

http://www.sunday-times.co.uk/news/pages/tim/2000/10/02/timbizbiz01018.html

-- Martin Thompson (mthom1927@aol.com), October 02, 2000

Answers

Aging tankers? Working near 100% capacity? On top of everything else?

Too much.

-- Loner (loner@bigfoot.com), October 02, 2000.