Floating storage of oil cargoes

Mark Dunbar, Surveys Manager at West of England Club, has advised members that due to a combination of circumstances there was now a worldwide shortage of storage space ashore for both unrefined and refined oil products of all types. As such there was a now growing demand for oil tankers to be used as floating storage.

Dunbar said that owners who received requests to use their vessel for floating storage should give consideration to several issues which might arise:

1)       Degradation of the cargo in long term storage

Dunbar said that this could be due to a number of factors such as gum formation, bacterial growth, instability of the cargo, settlement of sediments, stratification of component ingredients and so on. It was advisable at the pre-fixture stage, or, if already on charter, as soon as voyage instructions were received, to carry out a thorough risk assessment to ensure that the vessel was designed and capable of storing the cargo for the periods required without any change in specifications that might result in the cargo being rejected by receivers.

From a Club cover perspective, Dunbar said that it was worth noting that Club cover could potentially be prejudiced where it was evident that the vessel was not fit to carry and store the cargo on board. It was therefore advisable that Members adequately protect themselves, either with an indemnity from Charterers or additional cover where possible.

Requests from charterers to mix additives, conditioners into the cargo(es) should be properly investigated to ensure that no deterioration occurs as a result of the same, said Dunbar, adding that any such requests should always be recorded in writing and an indemnity sought from the charterers for any liabilities arising from their request.

Any such operation should also comply with all relevant SOLAS regulations; West recommended using the INTERTANKO Cargo Additive Clause.

2)       Cargo leeching into cargo tank coatings with adverse effects

Dunbar said that paint manufacturers should be consulted, and guarantees sought where possible, before agreeing to carry cargoes for prolonged periods, thus avoiding off-spec claims, and preserving a right of recourse against paint manufacturers, if possible.

3)       Cargo loss due to evaporation, leaks, etc

Some product cargoes were known to have inherent qualities such that the cargo evaporates over a period of time, resulting in cargo shortages. West recommended that Members consider this and allow for any shortages, by incorporating a customary allowance in the CP and an indemnity from Charterers for any claims by a third party for losses within the agreed allowance.

Extra costs incurred due to heating/circulation of cargo, port dues, supply / generation of fresh water, supply of provisions at remote locations etc.

4)       Maintenance of safe anchorage position.

West recommended that the Charter party incorporate appropriate protective clauses The Club said that Members might wish to use as a starting point the BIMCO Storage Clause in Clause 21 in BPTIME 3. West said that the clause was simple and provided charterers the option to use the ship for floating storage within agreed geographical limits.

Additionally, West recommended, as a minimum, that owners incorporate:

  • BIMCO Hull Fouling Clause for Time Charter Parties to avoid potential disputes about the ship’s subsequent performance and allocate responsibility for costs for hull cleaning.
  • Any agreement to use the ship for floating storage purposes should be limited in duration (number of days) depending on the characteristics of the cargo being stored.
  • Members might also wish to consider obtaining an indemnity from Charterers for loss, damage or delay due to storage exceeding the agreed number of days.
  • Bill Of Lading Clause making it sufficiently clear that any Bill of Lading (negotiable / non-negotiable) will be endorsed with the words: “Cargo(es) loaded on ( insert date ) stored on board. Carrier makes no representation regarding the quality or quantity of the cargo on board”.
  • Ensure that any contract for carriage and/or storage of the cargo stipulates that such carriage or storage is subject to the Hague-Visby Rules.