How will degassing regulations impact pricing?

Why do barges degass?

One might question the rationale behind this practice. After unloading a barge, the vapors of the previous cargo often still linger in the ship's tanks. These vapors can mix with the new cargo, causing it to become contaminated. There is also a risk of explosion if the gasses are flammable. Therefore, on the way to the load location, the cargo tanks are ventilated with fans to evaporate and remove the last residues. To ensure safety, some loading locations require barges to arrive with tanks below 10% LEL (lower explosive limit).

Let's consider a scenario where you've transported diesel from ARA to Strasbourg. On the return journey, there is an opportunity to pick up a cargo of naphtha from Ludwigshafen back to ARA. Because naphtha has been loaded, the barge is not gas free anymore and these gasses remain in the tanks. Upon arrival in ARA, you're required to load diesel or gasoil once more. To do this, the barge must arrive gas-free at the loading installation, as not all terminals are equipped with a Vapor Recovery Unit (VRU). A VRU is a system designed to capture and recover the gases released during the loading process, preventing their emission into the atmosphere. In such a situation, two options present themselves: degassing in the open air or using a degassing installation.

Degassing at an installation

Degassing at an installation carries a cost of approximately 1 Euro per m3 (prices vary between sites) plus the relevant sailing time, waiting time and degassing time. For a 3000 m3 barge this would add up to roughly 3000 euros and a degassing time of 12 hours. The majority of the considerable cost is the waiting time rather than the price. Due to the limited number of degassing installations, as well as their generally busy schedules, waiting times can often be 3 days or more. A 3000 m3 barge has a demurrage rate of 160,- p/h, that means 3840,- per day, times 3 days is 11.520,- euros.

If we add degassing costs and sailing time we easily reach roughly 15.000,- euros (in the case of a 3000 m3 barge). For a 7000 m3 barge this would easily amount to 27.000 euros in this scenario. Degassing in open air Degassing in open air involves the cost of sailing time to an allowed area, plus the ventilation time, which can vary depending on the size of the barge, typically taking around 12 hours + 6 hours sailing time is 18 x € 160,- p/h demurrage rate = € 2.880,-. When comparing the two, it becomes clear that the cost of degassing in the open air is generally more economical than using an installation.

Portable degassing

There are multiple portable degassing units in operation, which can be strategically installed at various locations, subject to local permits, such as in Amsterdam and Rotterdam. The primary distinction lies in the requirement to reserve a timeslot, a feature that presents both advantages and challenges. On the positive side, the need to book a timeslot eliminates the potential for unnecessary waiting in line, as is often the case with traditional systems. However, it can be quite challenging for a barge to accurately predict its arrival time. If a barge arrives too early, it may still find itself waiting in line, negating some of the benefits of the timeslot system. In terms of cost, these portable units align with the pricing of fixed installations. Additionally, they offer contractual agreements that allow for the purchase of a specified number of timeslots per year at a set price.

Who bears the cost?

Under Article 8 of the CDNI convention, the charterer bears the cost of degassing the barge, including the cost of rerouting to a designated degassing facility location and the time involved. Even though the CDNI has implemented this rule, it remains a matter that will be negotiated based on market conditions. The CDNI views these gasses as waste, whereas brokers and charterers focus solely on flexibility and cost. The broker has a choice to plan a barge in any specific product category.

For instance, when sailing in fame products, this pre-cargo is the least flexible of all for loading any products thereafter. It is rare for a broker to request cleaning or flushing after loading fame. In a strong market, brokers who do not wish to have a fame pre-cargo will negotiate for the barge to be flushed or cleaned afterwards. The same will happen regarding degassing. Conversely, in a weak market, no charterer is willing to pay an additional 20-30k or more on top of freight to degas a barge as there are probably dedicated barges available. In strong markets a broker doesn’t want the barge to be stuck at a degassing installation for 3-5 days, even if paid the applicable demurrage rate; the TCE (time charter equivalent) in strong markets is higher than the demurrage rate.

So, if a broker only wants to sail a single naphtha trip and be degassed afterwards, these trips will be negotiated including the idle time while waiting at a degassing installation.