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Channoil news

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October 2015 to August 2016 

 

COMMERCIAL DUE DILIGENCE 

CLIENT: SPANISH TERMINAL OPERATOR

Channoil were appointed to perform Commercial Due Diligence of a Spanish Terminal Operator's storage activities in Barcelona, Spain, in support of  loan renewals for the business.

Channoil carried out a market study of Western Mediterranean trade flows, a review of their portfolio and storage contracts, verified the probable medium term income and provided comfort to the lenders of the Spanish Terminal Operator's future competitiveness.

Following submission of the report, the loans were successfully renewed. 


EXPERT WITNESS ASSIGNMENT

A dispute arose between a trading company and a condensate producer.  The dispute related to a contract for the delivery of cargoes for a period of one year. The contract quality details were limited to specification points for only five criteria however historical typical quality data was shown as an integral part of the contract.  The trading company had been buying spot cargoes for some time prior to agreeing to the term deal and had relied on typical sulphur content of a very low nature.  This allowed the trader to be able to blend the sulphur to meet the US spec for ULSD No2 oil.

After the contract was signed a new gas field, with associated condensate, was introduced into the condensate stream, giving rise to higher sulphur content.  The buyer was not made aware of this change and was unable to utilise the condensate as he had previously.

The producer claimed that he had met the sulphur content specification and used the Shell Terms and Conditions to justify his right to change the material up to the limit of the specification.

The buyer counterclaimed that the condensate was a naturally occurring material and that any change in field quality should be compensated by and adjustment in price.

The case was to be heard in the Courts of New York under English Law.  However the case was settled out of court.

Channoil gave expert evidence on the issue of quality for naturally occurring crude oil and condensate fields.


REVIEW OF MOZAMBIQUE PETROLEUM IMPORTING ARRANGEMENTS/TENDER PROCESS & A HIGH LEVEL REVIEW OF THE REGULATORY SYSTEM

Channoil has just completed the review and assessment of the mechanism for the importation of fuel and the system for importing petroleum products to Mozambique, with recommendations for improving those to ensure that they respond more efficiently and effectively to the current market situation.

Our review included:


VALUATION OF THE TAWKE CRUDE OIL STREAM

Channoil was commissioned to provide a valuation of a medium-heavy, sour crude oil traded predominantly in the Mediterranean market.  Channoil investigated a number of options for the valuation, including an assessment based on API and sulphur values and a further methodology based on Gross Product Worth evaluation.  An appraisal of the advantages and disadvantages of each methodology was provided alongside advice on the most applicable option for the client.


CRUDE OIL VALUATION - AN INDEPENDENT ASSESSMENT OF SHAIKAN CRUDE OIL

Channoil provided a valuation of a very heavy and very sour crude oil (approximately 15 API and <5% sulphur).  A Gross Product Worth assessment was used as a basis with API/sulphur based correlations also considered as a second option.  Consideration was also given to the issues of placing such an unusual crude oil in the market place.  The possibility of sales to bitumen producers was also evaluated.


OVERVIEW OF TRENDS IN OIL PRODUCT SUPPLY AND DEMAND

Channoil was requested to provide an overview of recent trends in the supply and demand of oil and refined products.  Key demand trends were identified and due consideration given to the potential impact of competing fuels and the impact of the COP 21 Agreement on potential future hydrocarbon demand.  Various demand supply scenarios were reviewed and key influences on both supply and demand were identified and discussed.


OVERVIEW REVIEW OF PROPOSED AMMONIA/UREA PLANT

On behalf of a client considering investment in a grass roots ammonia/urea plant, Channoil conducted a pre-feasibility study.  Channoil assessed potential capital and operating costs for the plant and provided and economic justification for the potential project.  Channoil identified required gas prices in order to meet return on investment criteria.  Channoil also provided a detailed market study, identifying completing sources of both ammonia and urea and analysing the potential competiveness of the new plant versus alternative sources of supply.   


 September 2015

Channoil are pleased to announce that Ms Zoe Young has joined our team of Senior Consultants and will be based at the Fleet Street office. Zoe is an experienced chemical engineer with a strong background in oil and gas consultancy with a thorough knowledge of refining process and economics.

She has been an advisor to private companies and government ministries, an expert witness (including testimony at the International Centre for Settlement of Investment Disputes) and a lecturer.

She is also a highly competent project manager with a history of bringing projects in on time and budget.  Areas of speciality include market studies, due diligence, asset evaluation, strategic advice and expert witness services covering refining, gas monetisation, LNG and petrochemicals.

She is a member of the Institute of Chemical Engineers.


June and July 2015

A major financial institution commissioned Channoil to carry out a market study and forecast of demand for a new oil port in the west Mediterranean.  The project involved:

1. Preparation of traffic forecasts (Base Case, Low Case and High Case) for hydrocarbon traffic and bunkering services for the new port.

2. Assessment of risks to the relevant Mediterranean transhipment market.

3. Assess/Benchmark likely level of concession payments received by port owners from concessionaires for the expected hydrocarbon terminal concession.

4. Assess the validity of proposed hydrocarbon terminal within the transhipment space in the Mediterranean area. 


Another project by the same financial institution involved the commercial and technical assessment of a proposed bunkering station in the Eastern Mediterranean.  This project required Channoil to carry out the following tasks:

1. An Assessment of the bunkering and the storage sector environment and the relevant competing region.

2. Assessment of the supply and demand of the handling capacities and the historical and future trends, port charges levels and trends in respect of bunker carried.

3. An analysis of the main traffic flows at the Project's location and whether the Port area and region has any natural advantages or weaknesses for certain types of cargoes.

4. An analysis of the key competitors to the proposed port and whether the Port would be able to compete effectively.

5. An assessment of the long-term commercial logic of trade flows to and from the East Mediterranean region.

6. An analysis of the different revenue and Opex scenarios for the Project including providing the client with inputs to run different sensitivity analysis.

7. Assess whether the Sponsor's/Company's anticipated management and Port's Operator can provide adequate technical and commercial management of the Port.

8. A technical review demonstrating the basis and confirming that the Project Capex is in line with the current market prices and represents good value for money; and

9. A review of the technical aspect of the construction work and contracting strategy to be undertaken by the Company.


A Global infrastructure fund commissioned us to carry out commercial due diligence as part of a valuation team bidding for a large UK product pipeline system.

This project involved assessing market demand for jet fuel at most of the major UK airports and assessing the future demand for ground fuels in the north of England.

Developing a robust commercial valuation for the throughput rates that could be achieved.

Assessing the additional Capex that could be required to optimise the use of the pipeline.   


May 2015

Channoil Consulting congratulate iCon Infrastructure and Litasco/Burando Maritime Services on the successful agreement for the purchase and sale of STR - Service Terminal Rotterdam and we are pleased to have been advisors on the deal. 


EXPERT WITNESS ASSIGNMENT

As part of its Expert Witness Services, Channoil recently provided evidence in the Commercial Court relating to the valuation of a cargo of oil product. Loading of the cargo was delayed by the seller, an oil refiner, at a time when the market was falling, leading to a loss in market value.

The contract provided for pricing on the basis of Platts daily price assessments over a set pricing period, irrespective of the Bill of Lading (B/L) date. The seller argued that the pricing terms meant the buyer was not exposed to price risk from the B/L changing and that the seller's liability, if any, should be limited to demurrage, if incurred.

The buyer argued that since he was denied the opportunity to sell on the day his tanker was due to load rather than two days later, the period of delay in loading, the set pricing period was irrelevant.  The buyer claimed loss of value based on the difference between Platts quotations for the expected B/L and the actual B/L date.

The seller argued that Price reporting agencies are not markets and therefore a single day's price quotation was not the proper way to assess value of the cargo. The seller further argued that it was normal in the oil markets to use a spread of days around the Bill of Lading when pricing cargoes in oil sale contracts.

The use of a spread of dates for cargo valuation, as opposed to a single date, was accepted as an important principle by the Judge, but he ruled that a fairer way to determine quantum would be to take the average of Platts prices for the B/L date and the two days following the B/L date, thereby, on the basis of the circumstances of this case, setting a precedent for quantum determination.


MARKET / FEASIBILILY STUDIES

1.   Channoil carried out a study covering projected crude oil and product movements from and within the Mid-East Gulf region. This task entailed researching historic and current oil movements  and focussed on the potential changes that are likely to occur as a result of commissioning the new planned complex refineries in the area.

2.   We assessed the business case for building a VLCC jetty at an existing oil terminal. The work covered a detailed study of projected crude oil movements for the area and the potential for blending and bulk building was necessary to arrive at the final database, which included substantial alternative shipping scenarios.

3.   Channoil has completed a market study to determine the feasibility of building a crude oil bulk building and blending terminal on the west coast of Africa. This study required an understanding of crude movements in the Atlantic basin and the effects on these movements created by the impact of potential supplies from the US Gulf, the potential markets for the Brazilian offshore crude oil and the effect of the widening of the Panama Canal on oil movements from the Caribbean and West African oil fields to Asia.


 NEW BUSINESS DEVELOPMENT

We have assisted a client with scanning the market and identifying a partner for forming a new joint venture business to be established in the international fuels market. The work included: preparation of a 'Teaser'; drafting and finalising Confidentiality/NDAs; preparation of an Information Memorandum; supporting the processes of shortlisting and identifying the preferred player.


 SUPPLY OPTIMISATION STUDY - AFRICAN GOVERNMENT

An advisory team including and led by Channoil, incorporating also the local office of a global advisory group and a local law firm has been mandated to analyse and advise on the future arrangements for supplying petroleum products to a land-locked African country.

This major assignment involves assessing a range of supply options including refining and importation, related logistics, product distribution, economics and advising on regulatory matters and products pricing.


 TRAINING AND DEVELOPMENT

1.  As part of a major training initiative over 2013, we established a training academy for traders and operators for a large refining, trading and marketing company. Training and development programmes were designed on the basis of skills gaps analysis conducted through interviews, simulations and tests.  Further tasks involved advising on processes and structures to allow the company to sustain the approach using internal capabilities and resources.

2.  The 11th year of the Cass Business School M.Sc. in Energy Trade and Finance is underway with 60 students from 31 nationalities. Channoil have been involved since the inception of this course and provide the material and the lecturers for the Oil and Gas Trading Economics module of the course. We are very proud to be associated with such a prestigious Business School and past graduates have found employment with most of the major oil companies and NOCs as well as the oil and gas trading fraternity.


 CONFERENCES

1.  Channoil representatives attended the Argus AMIGO Conference in Dubai in late November 2013. Based on our knowledge of the Middle East and African markets and recent research, we presented our views on oil products supply and logistics issues, in the particular context of new oil discoveries in and oil refinery plans for African 'eastern seaboard' countries and their neighbours.

2.  Channoil was also represented at an LNG Bunkering Summit held recently in Amsterdam. This is becoming a very interesting new field in ships fuel and will be one of the ways of mitigating the higher cost of bunker fuels in ECAs once the mandatory 0.1 sulphur content on bunker fuels is introduced in 2015.  If ship owners and suppliers wish to carry out feasibility studies to determine which new technology will be justified to meet the new emission restrictions, please contact us for an early explanatory discussion. 

 

 

On behalf of a client considering investment in a grass roots ammonia/urea plant, Channoil conducted a pre-feasibility study.  Channoil assessed potential capital and operating costs for the plant and provided and economic justification for the potential project.  Channoil identified required gas prices in order to meet return on investment criteria.  Channoil also provided a detailed market study, identifying completing sources of both ammonia and urea and analysing the potential competiveness of the new plant versus alternative sources of supply. 


 

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Email: consult@channoil.com