NOT JUST A NECESSARY EVIL

Inspection specialists Intertek, explain the importance of the service.

In today’s competitive environment the petroleum, chemical and other industries are faced with a complex situation, where on the one hand a buyer is forced to shop around for the cheapest and at the same time best quality product, and on the other hand a supplier not wishing to jeopardize his market share has to offer lower prices thus achieving slimmer profits.

Price has become the main driving force in oil and cargo trading.

This perpetuates the risk of eroding product quality safety margins in order to survive. Compounded with the possibility of contamination during distribution it is not surprising that sometimes even strictly regulated rules are challenged.

Under these circumstances a competent, independent inspector has become an integral part of custody transfer operations and plays a central role in quality and loss control of petroleum shipments. In the case of Petroleum testing it would be Intertek’s Caleb Brett division.

Under today’s commercial pressures some form of protection is necessary in respect of the quantity and quality of products in the distribution system particularly if this includes marine transportation.

Any trader who feels that the inspection and testing is yet another unnecessary expense will certainly change his mind when the first problem appears. Unless the testing and inspection is carried out no claim can be pursued due to lack of technical evidence provided by an independent inspection.

The subject of petroleum and chemical products cargo disputes is normally associated with shortage claims and quality problems. These two types of claim arise for different reasons and can be prevented or at least remedied cost effectively by quantitative and qualitative monitoring of the loading and discharge operations by the independent inspector.

The large volumes of crude oil and petroleum products involved in marine transportation compounded with many potential errors which can arise during custody transfer mean that close and continuous inspection of this process is vital in order to avoid costly, timeconsuming disputes.

Each party involved in the cargo transfer has defined contractual obligations. The carrier or the master or agent of the carrier must issue to the shipper a bill of lading showing, among other things:

identification, quantity and condition, i. e. quality of the cargo. Since the bill of lading is one of the most important documents referred to in cases of dispute, it is crucial to establish the quantity and quality of cargo.

Apart from his knowledge, the inspector has access to both ship and the shore facilities which would be denied to the individual parties involved in the transaction. Today more often the independent inspector is contracted by more than one party and often the contract will state: “Inspection: For quality and quantity determined at load port and confirmed by independent inspector with findings to be binding on both sides. Costs shared 50/50”.

Normally during the inspection involving a sea voyage the following measurements are taken:

shore facilities before loading the ship (bill of lading) ship before loading – on board quantity (OBQ) ship after loading ship before discharge ship after discharge – remaining on board (ROB) shore facilities before and after discharge of the ship (shore outturn) When cargo shortage occurs, the benchmark against which the receiver assesses the ‘missing ‘ amount is the bill of lading as issued at the port of loading. The overall loss is calculated as the difference between the bill of lading and the receiver’s shore outturn. If the loss occurs the cargo receiver, or more probably his insurer, will claim damages which will depend on the contracts prevailing at the time of the loss. It is a feature of the trade that the main recipient of the loss claim is normally the carrier of the cargo i. e. the shipowner, normally supported by his P&I Club.

Apart from the shore-to-shore loss a claim for short delivery may arise if a large amount of unpumpable cargo is left remaining on board (ROB) after the discharge. The determination of ROB is a complex shipboard measurement even for an experienced inspector. The problems with ROB are specific to heavier products such as waxy vacuum gas oils and high-pour point residual fuel oils. It is important for the vessel to carefully consider whether or not the ship is capable of maintaining the specified carriage and discharge temperature of the cargo. The ROB may also be due to instability of some products rather than their waxy nature. Early identification of any potential loss is most important in order to take remedial action.

Shipboard losses arise due to:

evaporation via the installed venting system leakage to non-cargo spaces or sea high ROB due to lack of heating capacity, pumping deficiencies or ineffective crude oil washing deliberate retention of cargo for illicit purposes, particularly the practice of using crude oil cargoes as bunkers Generally, the role of an independent inspector is to record all the facts he has been contracted to monitor and provide documentation of the inspection before and after cargo transfer. In the majority of cases the inspector is responsible for drawing representative samples for testing at the time of inspection and for retention for future testing if necessary.

Quality claims arise as a consequence of a product undergoing changes in quality during storage, handling or transportation, to the extent that it no longer conforms to specification stipulated in the purchase contract. In such cases technical investigation should be conducted by independent chemist inspectors to provide the reasons for the change in quality. The central importance in such investigations is the technical intentions of the purchase specifications and the relationship between the product quality criteria and its intended use.

It is still common practice to order products by stipulating only a very few basic physical tests. Regrettably no one can comment about the quality of any product on the basis of viscosity, density, water, ash and sulphur content alone. In as much as this will enable a user to calculate the calorific value, which solely from the commercial standpoint seems to make perfect sense, such data does not give a complete picture of the fuel characteristics and therefore will not indicate any possible difficulties or troubles which may arise in storage and use of the product.

The primary objective of any specification is to define the limits of the characteristics of a product acceptable for a particular application. A product specification has three distinct functions:

to control the quality of the product manufactured to ensure the supply to the customer of a grade reasonably consistent in its characteristics to enable a customer to select the most suitable grade for his use.

It is therefore an essential purchasing tool. A supplier regards specification limits as permitted values to which he will endeavour to get as close as possible in order to maximize profits. The end-user on the other hand, views specification as a safeguard to protect him from the more extreme characteristics which may cause him problems.

Only independent inspection and testing can provide safeguard and control to give prior warning of potential problems with cargoes which have been accidentally or deliberately adulterated. In cases which do escape this control, the engine or ultimate appliance is the final assessor giving in-service feedback of the product’s quality. Litigation or arbitration is the ultimate guardian and these require the absolute proof of a relevant link between the damage and the quality of the product.

Bulk liquid cargoes account for approximately 40% of seaborne trade and are worth many billions of dollars so it is important that the quality and quantity of cargo carried on board vessels is carefully monitored and accurately accounted for. With today’s commercial pressures and the speed of trading, the penalties of trading and using off-specification products by far outstrip the cost of maintaining a quality control system.

The inspector’s role is an important and necessary part of the business process. There is a perception that cargo inspection is only there to detect bad quality and is therefore a “necessary evil”. In reality the converse is true. The inspector is there to help, and ensure that quality is maintained throughout the custody transfer operation.

Whilst the inspector’s presence does not add to the profitability of the product, actions and intervention of the surveyor reduce risk of loss or contamination. The resulting quality and quantity certificate constitutes an added value to both product and operation.

Intertek Caleb Brett is a leading testing and inspection services provider to the petroleum, refining and petrochemical industries with an international network of over 200 laboratories in 118 countries.

Services include laboratory analysis, cargo inspection, allocation certification, process and catalysis testing, certification, calibration and related activities supporting the global petroleum and chemical industries. Further information on these and the company’s other services can be found at www. intertek. com