A Review of the Nigerian Energy Industry

BP holds millions of barrels of oil off China as demand falters

*BP office

30 June 2018, News Wires — Four supertankers chartered by energy major BP have been held up or delayed off China’s east coast over the last two months, unable to fully discharge oil as slowing demand from the country’s private refiners starts to impact global markets.

Two of the four BP-chartered very large crude carriers (VLCCs) are still off Shandong province holding half their cargoes of Angolan crude oil, and another is headed back there from South Korea, according to trade flow data in Thomson Reuters Eikon and two shipping sources who track these vessels.

It’s not clear why the tankers have had so much trouble offloading all their oil, or if BP had first secured buyers for the 8 million barrels – worth more than $600 million at current market prices – that was loaded onto the vessels out of Africa. BP has declined to comment on the matter.

What is apparent is that the fortunes of China’s independent refiners, often called “teapots”, have turned for the worse amid escalating global trade tensions, rising crude oil prices, an oversupplied domestic fuel market and tighter government tax scrutiny.

“Either it’s because of lower run rates curbing teapots’ buying, or the buyers are having problems paying,” said an executive with a western trading house.

While an executive at an independent Shandong refiner said: “The market is bad – weak demand as plants come under policy headwinds … (with) the tax rules biting into margins.”

Both executives declined to be named as they were not authorised to speak publicly about commercial operations.

Turned Away

It is not unusual for producers like BP to ship cargoes before finding a buyer. But having cargoes orphaned for two months is less common, several oil traders and shippers said.

Paying for supertankers, each half a kilometre (0.3 miles) long, to wait in open seas to unload is costly as well.

Although it is not known at what rate BP chartered the four vessels, shippers estimate the daily charter rate for a VLCC is now about $30,000 a day. So, four chartered VLCCs sitting idle for a month would cost BP around $3.6 million.

BP declined to comment on the cost of having the tankers waiting off China to unload oil.

Several traders and shippers said BP was unlikely the only seller caught off guard by the slowdown in demand and the teapots’ troubles, although all said stranded cargoes of this size and duration is rare.

Among the four BP-chartered ships, the Texas has been held up the longest. It discharged part of its Angolan crude load in mid-April at Qingdao and was slated to offload the rest of its cargo at Rizhao, another port in Shandong, shortly after.

Instead, the Texas has been anchored off the coast until this week, when it discharged 130,000 tonnes on Thursday, according to a port source with knowledge of the matter.


  • Reuters
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