Dede’s Law and Business Series: The Very Large Crude Carrier and the factors that lead to its development (1)

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Foluke Akinmoladun

The development of oil tankers in general started with the movement of oil from the place of extraction to the place of use. The first well for oil drilling was in 1859 in Pennsylvania, USA and the USA soon grew to be the world’s largest consumer, producer and importer of crude oil. With the commercial production of crude oil, came the transportation of the product around the globe by sea. In the early days, the oil was filled in wooden barrels and loaded on ships.

However, with the discovery of oil in other parts of the world, the USA and Europe were no longer in monopoly of production. Instead, because the major oil companies were from the USA and Europe, and for political and economic reasons, refineries were located away from production areas. The principle being that oil majors did not want to have their refinery assets confiscated by a foreign government.

This trend resulted in crude oil transportation on a major scale as refineries were located closer to areas of consumption and away from places of extract and production. The other advantage of having to transport crude oil as against refined oil was the economies of scale. It helped to simplify the distribution of several products and by products of crude oil in the places of consumption by distribution through multi-modal transports such as smaller tankers, overland pipelines and trucks.

The barrels were therefore replaced by tanker vessels, with only the notion of a barrel as a measure in the oil trade persists. The demand for oil increased all over the world with the use of more machinery requiring the consumption of various products from crude oil and its by-products. This combined with the discovery of large oil reserves in the Middle East, created the perfect environment for the demand and use of crude oil tanker ships to grow considerably larger. The largest, most commonly used tanker today is a Very Large Crude Carrier (VLCC), typically measuring around 300,000 dwt.
The way oil was transported historically also changed. It was thus noted that,
“………[t]he move to carry the liquid without the weight and hassle of barrels or other vessels made incredible sense. It was lighter, cheaper, faster and easier – and it became the norm. With the move to tanks filled with liquid, the need for specialised designs was born. A liquid cargo in a cask was in essence handled no different from bales of wool or cotton. Suddenly bulk liquids changed everything.”

It was this new trend in oil transportation, coupled with the increased demand for crude transportation, the increase in refinery assets and port infrastructure, that lead to the development of super tankers that could meet this demand. The two main types of super tankers are the VLCC-Very Large Crude Carrier and the ULCC-the Ultra Large Crude carrier.

The demand of the VLCC, like all other vessels in the trade of cargo, is derived demand which is, derived from the demand of crude itself. This is why, despite the popularity of the VLCC, the demand of other smaller crude oil tankers like Suezmax and Aframax has grown faster than the demand for VLCC in the last 9 months majorly due to the reduced demand from China for US Crude.

VLCC were and still are huge vessels commonly referred to as super tankers. The vessel has been described thus,
“……….[the]VLCC have a size ranging between 180,000 to 320,000 DWT. They are capable of passing through the Suez Canal in Egypt, and as a result are used extensively around the North Sea, Mediterranean and West Africa. VLCC are very large shipping vessels with dimensions of up to 470 m (1,540 ft) in length, beam of up to 60 m (200 ft) and draught of up to 20 m (66 ft). But the standard dimensions of these ships range between 300 to 330 meters in length, 58 meters breath and 31 meters in depth.

They are known for their flexibility in using terminals and can operate in ports with some depth limitations. The cost of a VLCC ranges between $100 million to $120 million depending on its age. Frontline Limited of Bermuda has the largest fleet of VLCC consisting of 44 vessels.”

The rule of thumb is that the volume that can be carried by a tanker increases as a function of the cube of its length. This has helped tremendously with respect to the capacity of a VLCC. A VLCC that is slightly less than one and a half times the size of a small range product tanker can carry more than about six times the volume – 330 meters VLCC to 205 meters for a product tanker and the volume difference is 50,000 for product tankers to 320,000 DWT for VLCCs.

Foluke Akinmoladun is a lawyer, accountant, mediator and arbitrator. She is the Managing Solicitor of Trizon Law Chambers and can be reached at: Foluke.A@trizonlawchambers.com

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