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Subject: Shipping Investment Patterns and Strategy - 25 April 2020
The Case of Company that
Decided to Invest in VLCC Tankers 
in April 2016
Presenter:
1. Natalia Vasileiou
2. Phuong Thuan Tran
3. Ibrahim Md Rana
4. Thu Thao Tran
5. Natalie Zusko
Introduction
Subject: Shipping Investment Patterns and Strategy - Natalia Vasileou
Introduction
Bahri Company
Bahri, formerly known as the National Shipping Company of Saudi Arabia, is
a transportation and logistics company, positioned as the national shipping
carrier of Saudi Arabia.
5 business units: Oil, Chemicals, Logistics, Dry Bulk, and Ship Management.
Services: transportation of crude oil, oil products, chemical, bulk cargo, Roll-
on/roll-off, ship management
• Largest owner and operator of VLCCs in the world
• 88 vessels: 42 VLCCs, 35 chemical/product
tankers, 6 multipurpose vessels, 5 dry bulk
carriers.
• VLCC orders in 2016
Subject: Shipping Investment Patterns and Strategy - Natalia Vasileou
Overview of Tanker Market 2016
(Source: McQuilling)
Subject: Shipping Investment Patterns and Strategy - Natalia Vasileou
Reason for low demand …
Subject: Shipping Investment Patterns and Strategy - Natalia Vasileou
Reason for low demand …
Subject: Shipping Investment Patterns and Strategy - Natalia Vasileou
Problems in Shipyards
(Source: Gibsons)
This turmoil brings
opportunities &
disasters….
Oil Market 2016
Subject: Shipping Investment Patterns and Strategy - Phuong Thuan Tran
2016 - New Period of Lower Oil Prices
(Source: McQuilling)
Subject: Shipping Investment Patterns and Strategy - Phuong Thuan Tran
1. CRUDE TRADE
• ~37 mb/d in 2017
• Middle East = main crude exporting region: ~54% of inter-regional
crude exports by 2021
•No significant volumes of US crudes to markets outside the OECD
Americas (medium- term)
•Continue shifting eastwards to non-OECD Asia.
Subject: Shipping Investment Patterns and Strategy - Phuong Thuan Tran
2. DEMAND
Major contributed factors:
•One-off supports, particularly in OECD Europe
•Much lower oil prices —> Economic recovery
•Rising road transport fuel demand
•Petrochemical (LPG (including ethane) and naphtha)
•Air transport sectors
Subject: Shipping Investment Patterns and Strategy - Phuong Thuan Tran
2. DEMAND
Constraints to demand growth:
•Improved vehicle fuel efficiency
•Structural changes in the Chinese economy: reliance on heavy industry/
export > more services & domestic consumption
> lower demand for many commodities > price falls
•Recession in Brazil
•Prospect of rising interest rates in the United States
Subject: Shipping Investment Patterns and Strategy - Phuong Thuan Tran
3. SUPPLY
•Global oil capacity growth: 3.3 mb/d over 2015-2021
•Non-OPEC production:
2.0 mb/d ~ 60% of the increase
Supply: Decline of 0.6 mb/d in 2016, steady in 2017, recover from 2018
2021: 59.7 mb/d (2.0 mb/d higher than in 2015)
Russia: steepest output declines (medium term): ~ 275 kb/d lower by 2021
Subject: Shipping Investment Patterns and Strategy - Phuong Thuan Tran
3. SUPPLY
• OPEC production: 800 kb/d by 2021
Modest growth in the low-cost Middle East
Iran, Iraq, United Arab Emirates dominating the expansion
•Exploration & production spending: decline of 17% from 24%
reduction in 2015 (United States)
Bahri - Strategies
Subject: Shipping Investment Patterns and Strategy - Ibrahim Md Rana
✓Global leadership
✓Diversified services
✓Efficiency
✓information technology infrastructure
✓Optimization of the voyage
✓Technology management
✓Increase shareholder value
✓Financial strength
✓Signed a Joint Development Agreement
Subject: Shipping Investment Patterns and Strategy - Ibrahim Md Rana
✓‘Performance’ and ‘Transformation'
✓Long-term partner arrangements
✓Safety and quality standards
✓Fleet expansion strategy
✓Signing a memorandum of agreement
✓Long-term strategic partnership
✓Market performance
✓Diversified routes
✓Fleet utilization
✓Agreement with S–oil
How they play?
Subject: Shipping Investment Patterns and Strategy - Thu Thao Tran
2015 2016
$1.5b
(+10)
• Signed contracts for building
10 new VLCCs from Hyundai
Samho Heavy Industry (HSHI).
Received in 2017, 2018
• Jan: Received remaining
used VLCC from DK Maritime
in Jan 2016
$157m
(+2)
• Purchased 2 used 5-year-old
VLCCs from DK Maritime.
Received 1 on 29 Dec 2015
• Jan & Feb: Received 2 used
5-year-old VLCCs from Alpha
& Beta VLCC Companies
purchased in Dec 2015
$155m
(+2)
• Purchased 2 used 5-year-old
VLCCs from Alpha & Beta
VLCC Companies in Dec 2015
$75m
(+1)
• 28 Feb: Purchased another 5-
year-old VLCC from HSHI
delivered in Mar
(Source: Bahri
Annual Report 2016)
Subject: Shipping Investment Patterns and Strategy - Thu Thao Tran
Subject: Shipping Investment Patterns and Strategy - Thu Thao Tran
Subject: Shipping Investment Patterns and Strategy - Thu Thao Tran
Why and How?
Q1 - 2016: VLCC rate avg: $55k pd (Aframax: $35k, Suezmax $42k)
•Low oil price in Jan 2016 ($35/bbl)
•Increase in oil production from OPEC + US oil shale
Q2 - 2016: VLCC rate avg: $55k pd (Aframax: $25-30k, Suezmax $35k)
•Heavier global refinery maintenance schedule in 2016
•Increase in crude import in China & VLCC rates supported by high
Middle East Export
•Vessel delay between 2 regions of Middle East and China > increase
tonne-mile demand, tighten up supply & keep stable rates for VLCC
Subject: Shipping Investment Patterns and Strategy - Thu Thao Tran
Why and How?
Q3 - 2016: VLCC rate in August: $19k pd!!
•Global oil supply no longer growing
•Russia & Saudi Arabia stopped strategy
of flooding global market with oil with
attempt to put US drillers out of business
•Number of oil rigs in service in US
plunged
Q4 - 2016: VLCC rate avg: $35k pd
•Decrease in China crude production > import more
•VLCC rates supported by high Middle East exporters
Subject: Shipping Investment Patterns and Strategy - Thu Thao Tran
Why and How?
***Bahri’s shareholder: ARAMCO; Shipping partner of: BP, ExxonMobil
(big players in the industry)!!
Bahri Oil agreed with Saudi ARAMCO to potentially increase the volume
of oil deliveries to its clients in the East. In return for a 2.5% discount on the
additional deliveries to the East, if the total volume exceeds the 2015
levels. While this supports route diversification drive, it is also in line with
Bahri’s strategic goal of being Saudi ARAMCO’s shipping partner.
Subject: Shipping Investment Patterns and Strategy - Thu Thao Tran
(Source: Bahri Annual Report 2016)
Vision
Subject: Shipping Investment Patterns and Strategy - Natalie Zusko
Thank you for
listening!

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Bahri Shipping vlcc tanker investment 2016

  • 1. Subject: Shipping Investment Patterns and Strategy - 25 April 2020 The Case of Company that Decided to Invest in VLCC Tankers  in April 2016 Presenter: 1. Natalia Vasileiou 2. Phuong Thuan Tran 3. Ibrahim Md Rana 4. Thu Thao Tran 5. Natalie Zusko
  • 3. Subject: Shipping Investment Patterns and Strategy - Natalia Vasileou Introduction Bahri Company Bahri, formerly known as the National Shipping Company of Saudi Arabia, is a transportation and logistics company, positioned as the national shipping carrier of Saudi Arabia. 5 business units: Oil, Chemicals, Logistics, Dry Bulk, and Ship Management. Services: transportation of crude oil, oil products, chemical, bulk cargo, Roll- on/roll-off, ship management • Largest owner and operator of VLCCs in the world • 88 vessels: 42 VLCCs, 35 chemical/product tankers, 6 multipurpose vessels, 5 dry bulk carriers. • VLCC orders in 2016
  • 4. Subject: Shipping Investment Patterns and Strategy - Natalia Vasileou Overview of Tanker Market 2016 (Source: McQuilling)
  • 5. Subject: Shipping Investment Patterns and Strategy - Natalia Vasileou Reason for low demand …
  • 6. Subject: Shipping Investment Patterns and Strategy - Natalia Vasileou Reason for low demand …
  • 7. Subject: Shipping Investment Patterns and Strategy - Natalia Vasileou Problems in Shipyards (Source: Gibsons) This turmoil brings opportunities & disasters….
  • 9. Subject: Shipping Investment Patterns and Strategy - Phuong Thuan Tran 2016 - New Period of Lower Oil Prices (Source: McQuilling)
  • 10. Subject: Shipping Investment Patterns and Strategy - Phuong Thuan Tran 1. CRUDE TRADE • ~37 mb/d in 2017 • Middle East = main crude exporting region: ~54% of inter-regional crude exports by 2021 •No significant volumes of US crudes to markets outside the OECD Americas (medium- term) •Continue shifting eastwards to non-OECD Asia.
  • 11. Subject: Shipping Investment Patterns and Strategy - Phuong Thuan Tran 2. DEMAND Major contributed factors: •One-off supports, particularly in OECD Europe •Much lower oil prices —> Economic recovery •Rising road transport fuel demand •Petrochemical (LPG (including ethane) and naphtha) •Air transport sectors
  • 12. Subject: Shipping Investment Patterns and Strategy - Phuong Thuan Tran 2. DEMAND Constraints to demand growth: •Improved vehicle fuel efficiency •Structural changes in the Chinese economy: reliance on heavy industry/ export > more services & domestic consumption > lower demand for many commodities > price falls •Recession in Brazil •Prospect of rising interest rates in the United States
  • 13. Subject: Shipping Investment Patterns and Strategy - Phuong Thuan Tran 3. SUPPLY •Global oil capacity growth: 3.3 mb/d over 2015-2021 •Non-OPEC production: 2.0 mb/d ~ 60% of the increase Supply: Decline of 0.6 mb/d in 2016, steady in 2017, recover from 2018 2021: 59.7 mb/d (2.0 mb/d higher than in 2015) Russia: steepest output declines (medium term): ~ 275 kb/d lower by 2021
  • 14. Subject: Shipping Investment Patterns and Strategy - Phuong Thuan Tran 3. SUPPLY • OPEC production: 800 kb/d by 2021 Modest growth in the low-cost Middle East Iran, Iraq, United Arab Emirates dominating the expansion •Exploration & production spending: decline of 17% from 24% reduction in 2015 (United States)
  • 16. Subject: Shipping Investment Patterns and Strategy - Ibrahim Md Rana ✓Global leadership ✓Diversified services ✓Efficiency ✓information technology infrastructure ✓Optimization of the voyage ✓Technology management ✓Increase shareholder value ✓Financial strength ✓Signed a Joint Development Agreement
  • 17. Subject: Shipping Investment Patterns and Strategy - Ibrahim Md Rana ✓‘Performance’ and ‘Transformation' ✓Long-term partner arrangements ✓Safety and quality standards ✓Fleet expansion strategy ✓Signing a memorandum of agreement ✓Long-term strategic partnership ✓Market performance ✓Diversified routes ✓Fleet utilization ✓Agreement with S–oil
  • 19. Subject: Shipping Investment Patterns and Strategy - Thu Thao Tran 2015 2016 $1.5b (+10) • Signed contracts for building 10 new VLCCs from Hyundai Samho Heavy Industry (HSHI). Received in 2017, 2018 • Jan: Received remaining used VLCC from DK Maritime in Jan 2016 $157m (+2) • Purchased 2 used 5-year-old VLCCs from DK Maritime. Received 1 on 29 Dec 2015 • Jan & Feb: Received 2 used 5-year-old VLCCs from Alpha & Beta VLCC Companies purchased in Dec 2015 $155m (+2) • Purchased 2 used 5-year-old VLCCs from Alpha & Beta VLCC Companies in Dec 2015 $75m (+1) • 28 Feb: Purchased another 5- year-old VLCC from HSHI delivered in Mar (Source: Bahri Annual Report 2016)
  • 20. Subject: Shipping Investment Patterns and Strategy - Thu Thao Tran
  • 21. Subject: Shipping Investment Patterns and Strategy - Thu Thao Tran
  • 22. Subject: Shipping Investment Patterns and Strategy - Thu Thao Tran Why and How? Q1 - 2016: VLCC rate avg: $55k pd (Aframax: $35k, Suezmax $42k) •Low oil price in Jan 2016 ($35/bbl) •Increase in oil production from OPEC + US oil shale Q2 - 2016: VLCC rate avg: $55k pd (Aframax: $25-30k, Suezmax $35k) •Heavier global refinery maintenance schedule in 2016 •Increase in crude import in China & VLCC rates supported by high Middle East Export •Vessel delay between 2 regions of Middle East and China > increase tonne-mile demand, tighten up supply & keep stable rates for VLCC
  • 23. Subject: Shipping Investment Patterns and Strategy - Thu Thao Tran Why and How? Q3 - 2016: VLCC rate in August: $19k pd!! •Global oil supply no longer growing •Russia & Saudi Arabia stopped strategy of flooding global market with oil with attempt to put US drillers out of business •Number of oil rigs in service in US plunged Q4 - 2016: VLCC rate avg: $35k pd •Decrease in China crude production > import more •VLCC rates supported by high Middle East exporters
  • 24. Subject: Shipping Investment Patterns and Strategy - Thu Thao Tran Why and How? ***Bahri’s shareholder: ARAMCO; Shipping partner of: BP, ExxonMobil (big players in the industry)!! Bahri Oil agreed with Saudi ARAMCO to potentially increase the volume of oil deliveries to its clients in the East. In return for a 2.5% discount on the additional deliveries to the East, if the total volume exceeds the 2015 levels. While this supports route diversification drive, it is also in line with Bahri’s strategic goal of being Saudi ARAMCO’s shipping partner.
  • 25. Subject: Shipping Investment Patterns and Strategy - Thu Thao Tran (Source: Bahri Annual Report 2016)
  • 26. Vision Subject: Shipping Investment Patterns and Strategy - Natalie Zusko