Friday, February 25, 2011

Refiners Said Seeking Alternatives to Libyan Oil


LONDON—Oil refiners and trading companies are making enquiries for alternatives to Libyan crude with the favored sources being from ports in West Africa and Ceyhan in Turkey, said the chief executive of New York-listed Teekay Tankers Ltd.

"Most enquiries are from companies wanting to source oil from West Africa and Ceyhan now, because the crude oil from these regions is lighter and sweeter than that of Saudi oil. The Italian refiners prefer the lighter blends," Bruce Chan said in an interview late Thursday.

Although Turkey is not a major oil producer, its role as an increasingly important oil transit country makes it vital to world oil markets, particularly Europe. Nigeria meanwhile produces the same high-quality, light, sweet crude as Libya.

Freight rates will start to reflect this change in shipping routes in a matter of days or weeks, Mr. Chan said, with low stocks in Italy exacerbating the situation.

"Also, voyage times are longer from West Africa away," he added.

Commercial ports in Libya have been closed on the order of the country's head of state since Tuesday, but many of the oil terminals remain open, he said, and vessels at certain ports have loaded crude oil and have left Libya already.

"Certain vessels from oil terminals have already received oil and could leave Libya, with some terminals functioning depending on location in the country. There are mixed-messages as to which terminals are operating normally and which are closed," Mr. Chan added.

According to Lloyds List, at least one ship, the Sea Bravery, departed Es Sider with a crude cargo Feb, 23, heading for Cork in Ireland. There are other tankers currently heading to Libya to pick up cargoes, Lloyds List said, although a number of ships that were heading there in previous days have then been diverted. Favored locations for distressed vessels are Malta and Gibraltar, shipping and tanker sources said.

A suezmax owned by Teekay Tankers that is scheduled to load crude oil in Libya's Zueitina port over the next 24 hours hasn't yet received orders from the vessel's charterer.

"At present, the vessel has not been ordered to head to Zueitina port yet so it's resting 100-150 miles offshore Libya in a close, safe location. The vessel is on standby if the situation changes," Mr. Chan said. "I believe the reason for which our vessel will not dock is because the scheduled port in the eastern part of the country. The terminals which are away from the disruptions appear to be functioning better," Mr. Chan said.

There has already been looting in several Libyan ports. "According to people I've spoken to on the ground in Libya, people have broken into ports with stuff being stolen out of containers, so people are scared about shipments arriving at the ports," said Ugur Dalbeler, vice-chairman of the Turkish Steel Producers Association.

Zueitina port is located 130 kilometers south of Benghazi city, in the east of Libya. The port has offshore loading berths for oil tankers and liquefied petroleum gas carriers and handles about 270 vessels a year.

The current instructions for loading and payment of the ship are standard charter-party contractual terms, where the charterer advises Teekay's ship operations group. Payment for the voyage also comes from the international oil company that charters the oil tanker, Mr. Chan added.

Should the Libyan crisis persist, Mr. Chan said the likelihood of piracy could rise as different, more risky routes are used.

—James Herron contributed to this article.

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