THE NEW YORK TIMES: Exxon Hiring Older Tankers for Asia

Posted Saturday 2 July 2005

By REUTERS

LONDON (Reuters) – Exxon Mobil Corp. is transporting oil to Asia aboard older, single-hulled supertankers shunned by other major oil companies, industry sources said on Friday.

The world’s largest listed oil company has regularly chartered aging oil tankers, built in the late 1980s, to save on freight costs.

Exxon is not breaking any laws and says that any oil tanker it hires is subject to very strict vetting procedures.

The U.S. oil giant said it regularly chartered both single and newer double-hulled tankers.

“Both configurations offer safe and effective transportation,” Exxon said in a statement to Reuters.

“Any vessel chartered by ExxonMobil affiliates must, in addition to meeting all applicable laws and regulations, pass a very thorough and stringent vetting review,” the company said.

But its recent tanker hires have raised eyebrows in the oil shipping industry because newer double-hulled tankers, offering added cargo protection, have been readily available.

“It’s more noticeable with Exxon, because they don’t have the same restrictions as some of the other majors like Total and Shell who stipulate double-hulled requirements,” a senior ship broking source said.

“Every ship that Total takes has to be a double, and Chevron are more and more double-hulled, so Exxon is more noticeable,” said the source, who did not wish to be named.

“They certainly have gone down the route of price rather than quality,” he added.

Single-hulled oil tankers, of the type that sank off Spain in November 2002 causing an environmental and economic catastrophe, are gradually being phased out worldwide.

The European Union has banned such ships carrying heavy grades of oil from calling at its ports.

SINGLE HULLS

In the last week Exxon has chartered single-hulled supertankers the VL Malibu, built in 1989, and the Titan Neptune built in 1988. Both supertankers were chartered to deliver crude from the Gulf to Asian refiners.

Ship broking sources said Exxon, in the last few months, had also chartered single-hulled supertankers the Lysaker, built 1989, the Geilo, built 1990, and the Asian Jewel built 1992 among others.

Ship brokers said Exxon had hired older single-hulled tankers 10-15 Worldscale points below modern double-hulled ships at a cost saving of some $340,000 to deliver a $120 million cargo on a typical voyage to Japan.

Supertanker freight rates for transporting crude oil are already trading close to 20-month lows.

“You’d have thought that because they have lots of alternative quality double-hulled vessels to choose from they would have gone after them,” an executive with a leading oil transportation firm said.

“They are taking the cheapest ships possible.”

Exxon’s public image was badly damaged in 1989 when the single-hulled Exxon Valdez ran aground in Prince William Sound, Alaska, shedding a third of its 260,000 barrel crude oil cargo.

The company has payed out huge damages and clean-up costs since the disaster.

Exxon posted a record 44 percent rise in profit of $7.86 billion for the first quarter on soaring oil prices.

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