Oil Companies Are Leaving Millions On The Table

Oil Tankers spend 15-22 days per year waiting at anchor outside of ports

That’s not the only cost that adds up

Delivering to the wrong US port at the wrong time and you could end up paying millions in unnecessary costs.

Let’s look at this through an example. Supposed that we have two tankers both carrying medium-sour crude oil, due to arrive at the Port of Houston, both within 24 hours of each other. Let’s suppose they are both from different companies, so we can’t just divert one elsewhere.

What happens? Well the nearby refineries only require a limited volume of medium-sour crude at a given time. With both tankers competing for the same refinery demand, the price drops and both suppliers earn less per barrel.

On top of this, there is limited space for unloading oil at ports. Tankers arriving so close together means that there is increased congestion in the port, meaning tankers are forced to wait longer before they can offload. Of course, every day spent on the water comes with costs itself, with personnel and fuel costs being just some of the increases to consider. All this occurring while the company’s cash flow is tied up in the very same tanker.

Let’s travel say 200 miles down the coast. In this port, the local refineries are experiencing a supply shortage of the exact same oil type. If either tanker knew about this a few days in advance, they could have rerouted strategically to win both a higher price for the oil and lower operational costs due to a faster unload. Instead they are facing higher costs and lower profits.

This scenario plays out over and over again in the oil shipping industry, with each time leaving more money on the table. Without an optimised strategy, oil companies are bleeding money.

When oil tankers arrive at US ports, they don’t pay a fixed fee. The costs fluctuate depending on supply and demand at the time of delivery. When too much oil of a certain quality arrives, this creates a surplus in supply and the price drops. A tanker delivering the same oil a few days later or to a port a few miles further away might fetch a significantly higher price for the same cargo.

What makes this even more of a challenge is that it is often impossible to know what the impact of these fees will be in advance. Currently historical data or static pricing models are used to generate a best guess, but in a world as complex and dynamic as the one we live in today, this methodology doesn’t quite cut it. Sub-optimal decision making results in continually squeezed profits.

Unfortunately, this problem can’t just be solved by staggering the arrivals of your own oil deliveries. There are additional layers of complexity, in which the API Gravity and Sulfur content of the delivered oil affects the price. This is compounded by the presence of competitors; your plan might be perfect until your competitor’s tanker arrives at the same place with the same grade of oil.

It’s one thing to be aware of these problems, but it’s another thing entirely to be able to fix them. The industry is relying on a mix of historical trends, fixed contracts and gut instinct precisely because there is a lack of real-world available data to use strategically. So what if we made that data available?

The 411 Data Oil Delivery Optimisation Data Product follows all oil tankers globally, meaning we can keep track of where the ship comes from, where it’s heading to and the volume and grades of oil that it’s carrying. With the data on not only your own oil tankers but the movements of your competitors, you can build optimisation algorithms to ensure you reach the right delivery point at the right time.

What is especially interesting about this data product is the insights that can be pulled from it, for example this moment of indecision where the tanker in question hovered in the Gulf before making its decision about which port to deposit to. With this dataset, there wouldn’t need to be as much hanging around and waiting to make a decision.

This dataset solves both problems, enabling optimisations for the highest price according to grade of both your and your competitors’ oil, but also allowing you to tactically bypass the most congested ports, cutting down on time wasted just waiting to unload.

Like all 411 Data products, it can also be enriched with further data layers such as the carbon cost of the routes taken so that you can optimise to what is most important to you. The data product is ready-to-ingest into your system with data quality and formatting already accounted for, meaning you can jump straight into using it for the decisions that matter.

Finding hard-to-find data to solve hard-to-solve problems is our speciality. Keen to find out more? Book a demo and we’ll show you.