Managing wreck removal costs

Removal of a ship that has been declared a loss can be a complex process with many unknown factors that may emerge during the wreck removal process.

Weather, topography, location, situation, availability and reliability of local personnel, equipment and, of course, risks associated with an individual country can all impact cost.

As the parties responsible for the physical loss or damage of ships and their cargo, it is understandable that marine underwriters would look to have clarity on costs and limit their exposure.

Salvage companies do their best to prepare a competitive proposal once a tender for a wreck removal has been issued.

Most underwriters request an all-inclusive proposal that includes considerations of delays. This is the most secure approach for the underwriter as it transfers all liability to the salvor.

Estimating Fixed Costs

A popular option is the BIMCO Wreckfixed contract, which requires the salvor to finance the whole removal operation. It is worth noting that, while this will provide a fixed cost to the underwriter, it will automatically increase costs to prevent an financial undue burden on the salvor.

When estimating the cost, a salvor must consider the size of a vessel. Large vessels will likely require more time for cargo and wreck removal than smaller ones.

Salvage companies must also factor in the removal of bunker oil and cargo - keeping in mind environmental considerations.

The location of a wreck will also play a large role in estimated costs, with remote locations being priced as more expensive given difficulties in accessing the site.

Salvors must also consider the possible damage to the economy or environment that will likely necessitate liaising with local and national authorities.

Of course, local circumstances such as weather and soil conditions must be considered, as must disposal costs in the region.

The skills available in the region via local contractors will impact pricing as certain cases will require experts to be flown in and accommodated for the length of the project.

As you can see, although this type of contract offers fixed costs, it may not provide the best value for money for underwriters.

Agility Is Key

We have found that the best approach when tendering for a vessel is to match the type of contract to the case. We work with the Lloyds Open Form (LOF), Wreckfixed, Wreckhire and Wreckstage contracts - or even bespoke contracts. Furthermore, we have found ways to identify potential reductions in pricing.

Whenever possible, we try to work with local subcontractors and suppliers to secure salvage equipment and personnel.

This approach not only reduces the mobilisation and demobilisation costs, but is also likely to result in a reduced day rate for the equipment and personnel. We also try to hire equipment and personnel through the shipowner where possible as this increases the transparency and reassures the owner.

We believe that an agile approach is key and in cases where mobilising heavy lifting vessels will be costly and time consuming, we use alternative methods such as barges and winches to lift, deploying shore-side cranes, engaging mobile cranes on barges, pressurising tanks and void spaces, or a combination of the above.

The big advantage of developing such methods is that this equipment is readily available in most regions and is extremely cost effective.

In some cases underwriters and/or their appointed consultants have not invited salvors without heavy lifting capabilities to bid for the removal of a wreck. We feel that this is a shame as it not only drives up costs for the underwriter, but, ignores evidence from multiple cases where wrecks have successfully been removed without using heavy lift equipment, using non-traditional methods that are extremely safe.

Admittedly, this requires a more hands on approach and an in-depth understanding of the proposed salvage method so that risks can be mitigated. But salvors such as ourselves are more than able to demonstrate our technical and operational capabilities.

Communication Builds Trust

Wreck removal can be stressful, particularly in the case of delays caused by inclement weather or problems with permits, licenses and transporting equipment.

We believe that open, proactive communication that puts our stakeholders in charge of the decision-making process (albeit with access to our expert opinion) is the best way to manage any project.

Perhaps the biggest saving we bring as contractors is peace of mind. Our experts are willing to explain the reasons at the heart of our approach and ensure that the trust placed in us to correctly handle a technically complex and expensive project is well deserved.

To quote the slogan of a famous credit card company, control combined with peace of mind during a salvage process is simply priceless!

SPONSORS: this live, in-person event is set for 27th April 2023! Now in its 4th year, taking place at the Raffles City Convention Centre, Fairmont Singapore, Marine Insurance Asia is the leading global marine insurance conference and all brokers, insurers, ship owners and third parties should attend this event to help shape the future of the industry in the region.

Taking place at The InterContinental Houston – Medical Center on 16th May 2023, Energy Insurance Americas is specifically designed to bring together all the key players in the energy insurance market in the Americas, the agenda featured a range of senior speakers discussing, debating and offering actionable insights into the issues affecting the region.

To find out more contact Daniel Creasey on +44 (0)7702 835 831 or email daniel@cannonevents.com

GLOBAL PARTNERS: www.energyinsuranceamericas.com

The InterContinental Houston – Medical Center, 16th May 2023

07:50 - 9:00 : Delegate Registration and Refreshments

09.00-09.30: KEYNOTE ADDRESS: State of the Insurance Market – A Post-Mortem of 2022

Inflation was considered a big threat as we launched into 2022, so this session will explore what really happened with rates and claims numbers through the year. We will analyze the latest statistics to gain a realistic picture of what the numbers are.

Presenter: Michael Kolodner, Global Renewable Energy and US Power Leader, Marsh

09.30-10.15: PANEL DISCUSSION: What on Earth is the World up to Next?

Moderator: George Lugrin IV, Managing Partner, Hall Maines Lugrin

Panelists: Christopher Guith, Senior Vice President, US Chamber of Commerce Global Energy Institute, Jim Krane, Wallace S. Wilson Fellow for Energy Studies, James A. Baker III Institute for Public Policy, Rice University, Jason Feer, Head of Business Intelligence, Poten Partners/BGC Partners

10.15-10.45: ONE-TO-ONE CHAT: Re-Insuring the Market in 2023, and Beyond

This session will look at what happened during the last set of renewals. Our experts will reveal whether the insurance market faced rate hikes, freezes or declines, and what they are predicting going forward. They will also explore whether the risks are changing, and how that is changing insurer appetite.

10.45-11.15: NETWORKING BREAK

11.15-12.00: PANEL DISCUSSION: ESG – A Case of the Emperor’s New Clothes?

Moderator: Steve Laino, Global Head of Environmental Solutions, Poten & Partners/BGC Partners

Panelists: Steven Weiss, Consultant, Steven P Weiss Consulting LLC, Patty Errico, Partner, Global Commercial Lead, Corporate Governance and ESG Advisory, Aon

12.00-12.45: WORKSHOP: Managing Weather Risk for Renewables Projects

Presenters: Roderick Rennison, Vice President, Rimkus

12.45-13.45: LUNCH BREAK AND NETWORKING

13.45-14.10: PRESENTATION: The Insurance Market –Renewables 2023

Presenter: Kris Williams, Underwriter Renewable Energy, AXIS

14.10-15.00: PANEL

DISCUSSION: Main Risks to the US Offshore Wind Market

Panelists: Lionel Kpoze, Senior Underwriter Onshore Construction –Offshore Wind, Scor, Eileen Miller, Senior Project Risk Advisor Natural Resources – Renewable Energy and Power Team, Aon, Frank J. Gonynor, Senior Claims Adviser/Lawyer, Gard (North America) Inc.

15.00-15.30: NETWORKING BREAK

15.30-16.15: PANEL

DISCUSSION: The Claims Experience – Onshore Renewables

Moderator: German Torres, Underwriter, Renewable Energy, AXIS

Panelists: Pandora Wilson, Claims Advocate, Energy and Power, Marsh, Roderick Rennison, Vice President, Rimkus, Matthew Senn, Senior Project Engineer Lead – Renewable Energy, Envista Forensics, Darren Askari, North American Claims Manager, GCube

16.15-17.00: PANEL

DISCUSSION: The Claims Experience –Offshore Wind Cable Losses

Moderator: Manny Morrell, Director Renewable Energy, Origin and Cause Panelists: Matthew Yau, Director, Lloyd Warwick

13.45-14.10: FIRESIDE

CHAT: Latin America –The Next Big Thing?

Participants: Manuel Taratino, Head of Offshore and EGA, Charles Taylor

14.10- 14.35:

PRESENTATION: Presentation: Sanctions –Challenges of Maintaining Compliance

Presenter: George Chalos, Partner, Chalos Law Firmv

14.35-15.00:

PRESENTATION: Opportunities and Challenges from the Inflation Reduction Act (IRA)

Presenter: Tom Dickson, Chief Executive Officer, New Energy Risk

15.00-15.30: NETWORKING BREAK

15.30-16.15: PANEL

DISCUSSION:

Carbon Capture –Revitalizing the Oil and Gas Sector

Moderator: Bobby Galindo, Director, Technical and Engineered Risk; National Energy Loss Control Leader, IMA Corp

Panelists: Glenn Legge, Partner, HFW, Bruce Crager, President – Energy Advisory Group, Endeavor Management

16.15-17.00: PANEL

DISCUSSION: The Claims Experience – Oil and Gas

Panelists: Lynette Wachuku, Senior Vice President, Energy and Power Claims Advocate, Marsh, Gary Mawditt, Chief Executive Officer and Global Head of Upstream Claims, MatthewsDaniel, Brad Nehring, Director, Energy, RB Jones