This guide elucidates how adhering to best practices in shipboard surveys can significantly minimize the risk of shortage or contamination claims associated with loading and discharging crude oil and petroleum products. Given the substantial volumes involved and the numerous potential errors during custody transfer, meticulous supervision is crucial to prevent costly and time-consuming disputes. While primarily intended for ship officers, this guide is also beneficial for cargo surveyors and others engaged in overseeing oil cargo operations. It recommends a variety of quantitative and qualitative monitoring and recording techniques that can help detect potential loss or contamination issues early, allowing for cost-effective remediation. Should problems go unnoticed and claims arise later, the monitoring practices outlined will facilitate the identification and assessment of relevant shipboard factors, thereby exonerating the ship when warranted. This guide complements existing industry standards and procedures rather than replacing them, with recommended references provided in Appendix I and a glossary of industry terms in Appendix V.
Tanker owners, like all ocean carriers, are bound by legal obligations regarding the cargoes they transport, typically aligned with the Hague or Hague-Visby Rules as enacted in the relevant jurisdiction. A crucial aspect of these obligations is detailed in Article III, Rules 3 and 4, which emphasizes the need for the tanker master to ascertain the quantity of cargo, along with its apparent order and condition, to ensure accurate completion of the bill of lading.
Bulk liquid cargoes constitute 42% of seaborne trade, primarily transported in tankers and oil/bulk/ore (OBO) vessels, which account for around 25% of the global ocean fleet, totaling approximately 11,500 tankers. The annual trade in bulk liquids is worth millions of dollars, underscoring the necessity for meticulous monitoring and accurate accounting of the cargoes carried by this fleet.
The measurement of bulk liquids is inherently prone to uncertainty, prompting the oil industry to strive for enhanced reliability in cargo surveys. Industry-approved guidelines have been established to set standards for cargo surveyors, enabling parties engaged in crude oil and its derivatives to make informed commercial and operational decisions based on consistent and reliable data.
Typically, the responsibility for custody transfer surveys lies with independent inspection companies contracted by the cargo owner, who may also be the charterer and receiver. These inspectors are tasked with certifying the quality and quantity of the cargo delivered or received. Generally, they have reasonable access to both ship and shore facilities and may be involved with cargo shippers to ensure final quality control, especially in the case of blended cargoes.
However, it is essential to note that these inspection companies are often local offices reliant on local refineries or terminals for a significant portion of their work. Despite the professionalism of the surveyors involved, this can create a potential conflict of interest, particularly if issues arise, leading to unfair criticisms of a ship's performance or misdirected claims against it. Consequently, ship officers must remain vigilant regarding the inspector's quantity determinations and quality control procedures, including monitoring shore-side operations at the manifold.
One challenge faced by ships in monitoring shore-side operations is the limited access granted to their crews. Information is typically accessible only through independent inspectors, loading masters, and jetty watchmen.
A key meeting is typically held to discuss the loading/discharging plan among all parties, designed to mitigate handling losses and contamination risks while minimizing delays. Unfortunately, these meetings often devolve into mere checklist completions, signed by both ship and shore representatives, without addressing critical cargo safety concerns. When checklists are filled out uncritically, without consideration for the specific circumstances, the vital safeguards intended by the key meeting may be compromised or rendered ineffective.
The terms of reference for cargo surveys can vary significantly depending on whose behalf the survey is conducted. For independent inspectors, the primary purpose of a cargo survey is to provide a certified statement regarding the quantity and quality of oil loaded or discharged. In performing this duty, inspectors may need to advise on procedural aspects that could affect the quality of the loaded cargo.
Despite increased scrutiny from independent inspectors, issues can and do arise, leading to a heightened risk of serious claims against tankers for contamination and shortages of petroleum cargoes.
Shortage claims occur when a purchaser or receiver perceives a loss of oil consignment. The benchmark for assessing missing oil is typically the bill of lading issued at the loading port. Depending on the contractual agreements in place at the time of the perceived loss, the cargo receiver or its insurer may file a claim for damages, with the shipowner often being the primary target for such claims, supported by a Protection and Indemnity (P&I) club.
In addition to standard shore/shore losses (the difference between the bill of lading and the outturn), claims for short delivery may arise if a significant amount of pumpable cargo remains onboard after discharge completion. Such claims are generally governed by specific cargo retention clauses in the voyage charterparty and do not consider the magnitude of any shore/shore loss. Consequently, a situation can occur where a ship may show a gain on outturn but still face claims for retained cargo, although such instances are rare.
Identifying potential onboard losses early is critical for implementing remedial actions. Shipboard losses may arise from evaporation through the installed venting system, leakage into non-cargo spaces, and excessive remaining onboard (ROB) due to factors like high pour-point cargoes or ineffective crude oil washing. Unfortunately, these losses can also include intentional cargo retention for illicit purposes.
Maintaining adequate records covering all aspects of shipboard operations, particularly the loading and handling of bunker fuel, is crucial for defending against unwarranted allegations of cargo diversion. Historically, it was deemed acceptable if a receiver's shore tanks contained 99.5% of the bill of lading quantity. This benchmark largely persists, with claims for short delivery typically not succeeding if the outturn difference is less than 0.5%.
Contamination refers to the observed alteration in the quality of a product due to the ingress of an alien substance. However, contamination claims may also arise from quality alterations resulting from inadequate sampling or analysis at loading or discharge points. Such claims can stem from inherent instability in the product due to poor processing or deficiencies in blending or preparation by the supply terminal.
It is common for contamination incidents to occur on tankers due to co-mingling with previous cargo residues, ballast, or incompatible grades stowed onboard. Additionally, inadequate segregation of incompatible grades at shore facilities can lead to contamination. If a breach in segregation exists between a ship’s manifold and the shore reception tanks during discharge, no onboard control procedures can detect contamination at that moment.
Defending against claims stemming from shore-side errors requires systematic monitoring procedures that provide contemporaneous evidence demonstrating that the issue did not arise from shipboard factors. Similarly, if shore-side co-mingling issues occur at the loading port, monitoring can be conducted to counter potential claims for shipboard contamination.
Monitoring processes can also assist in identifying 'apparent' contaminations, where the cargo quality appears to change without external influence. Many cargoes are shipped at a quality that barely meets the purchaser’s specifications, allowing little room for error or misjudgment regarding tank cleanliness. Conversely, other cargoes may accommodate minor contamination without issue, highlighting that the degree of contamination acceptance varies between cargo sellers.
In summary, effective shipboard survey practices are essential for mitigating the risks associated with loading and discharging crude oil and petroleum products. By implementing rigorous monitoring techniques, understanding legal obligations, and maintaining vigilant awareness of potential issues, ship officers and cargo surveyors can work together to minimize claims for shortages and contamination. As the industry continues to evolve, adherence to best practices and industry guidelines will play a critical role in ensuring the integrity of oil cargo operations.
