June, 2020 - COVID-19 drives floating storage risks
The recent months have seen an unprecedented surge in the use of tankers as floating storage for oil and petroleum products caused by a perfect storm of collapsing demand for such products due to the COVID-19 pandemic - leading to the rapid overwhelming of onshore storage capacity - together with falling oil prices. The use of a tanker for such storage may have a range of practical and legal implications that arise from using a ship in a manner that was not contemplated or specifically provided for by the relevant charterparty.
Even as lockdowns begin to ease and demand for oil rebounds, the volume of tanker capacity used as floating storage still appears to be increasing. According to Lloyd’s List Intelligence data, at the end of May some 278.2m barrels were tracked on 239 ships at anchor for 20 days or more, accounting for an estimated 10% of the global VLCC fleet.
The above factors have given rise to problems such as severe port congestion and increased risks of hull fouling during lengthy idle periods, which are likely to result in contracual disputes.