Shipping

The transportation of crude oil and refined products necessary for the activities of the Group is coordinated by Shipping. These requirements are fulfilled through balanced use of the spot and time-charter markets. Shipping maintains a rigorous safety policy, mainly through a strict selection of chartered vessels. Like a certain number of other oil companies and ship owners, in its Shipping activity the Group uses freight rate derivative contracts to adjust its exposure to freight rate fluctuations.

In 2014, Shipping chartered nearly 3,000 voyages to transport approximately 122 Mt of crude oil and refined products, compared to 115 Mt in 2013. As of December 31, 2014, Shipping employed a fleet of forty-eight vessels (including seven LPG carriers), none of which were single-hulled, that were chartered under long-term or medium-term agreements. The fleet has an average age of less than six years.

Freight rate averages of three representative routes for crude transportation

Table : Freight rate averages of three representative routes for crude transportation

In 2014, the shipping market witnessed a positive turnaround in oil transport activities, especially for larger crude and product tankers. Conditions were less favorable, meanwhile, for medium-sized petroleum product carriers, although year-end brought a slight improvement to the economic environment. During the second half of 2014, marine bunker prices, driven by decreasing crude prices, substantially dropped, which considerably improved ship owners’ results. However, transport costs benefited little from this situation.

After contracting in 2013, global demand for the transport of crude oil maintained the same level in 2014. The decrease in North American imports, driven by the sharp increase in domestic production, was once again offset by the growing transport needs in Asia. This continent continued to diversify its supplies from more distant regions (South America, West Africa). At the same time, the growth in the fleet slowed to a level that had not been seen for many years. This context rebalanced supply and demand and resulted in a return to high volatility and freight rates that were, on average, higher than in 2013.

The situation in the petroleum product maritime shipping market continued to be good overall for larger vessels, which benefited from the lengthening of trips. On the one hand, arbitrages in favor of routes to Asia, particulary the flows of naphtha from Europe which continued at the same pace as in 2013, and on the other hand, exports from new Middle-East and Far-East refineries, contributed to a strong growth in demand. The freight rates were somewhat weaker for medium-size product carriers due to the delivery of many new tankers.