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TA KEROperator JANUARY/FEBRUARY 2013

www.tankeroperator.com

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Contents 04

Markets BIMCO’s reflections Bunker prices continue to rise

06

News Feature Economies the driving force Complying with regulations

36

10

Finance TORM’s restructuring efforts Seeking private investors Banks to assert more control

16

Middle East Report Refining investment the key Tankers head for ASRY Saudi tanker operator emerges

23

Anti-Piracy GoG problem highlighted Identifying HRAs Manuals produced 100 series rules effectiveness

30

Flag States IMO sets targets Liberia to benefit from investment ICS updates performance table

55

Technology 36 Coatings Tanker high performance coatings Energy consumption measurements Performance monitoring Jotun plugs into Kyma 42 Operations Making the most of IT 46 Shuttle Tankers New generation AET/OSM tankers 47 Waste Heat Recovery Auxiliaries addressed 48 Fuel Treatment Expertise to increase 49 Hose Handling Cranes Personnel carriers 50 Tank Services Valve test gases argument Mechanical float levels Tanker Report Lively panel discussion

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January/February 2013

TANKEROperator

01

COMMENT

Will 2013 be unlucky for some?

As we welcome 2013 in from a rather chilly northern hemisphere, in this issue Tanker Operator has included a few articles outlining hopes and fears for the future of shipping.

Despite the media generally sticking to the rule that only bad news makes good news, there is light at the end of the tunnel, particularly for the product tanker owners and operators. However, we are not sure about the crude segment going forward.

The world has been in this mess now long enough for companies and organisations to try to find innovative ways to survive. You only have to read the TORM article on page 10 to see that with a bit of give and take on both sides, something can be worked out. But for how long?

Will TORM become a major casualty this year, following OSG’s Chapter 11 in 2012? We hope not, as the current board must be applauded for its efforts to keep the company afloat.

Forecasting is and always has been a nightmare, as there are so many world events each year that can scupper even the best of the crystal ball gazers. In this issue, we have a controversial article from a consultancy, which takes a swipe at the more traditional method of forecasting. We would be very interested to hear your views on this subject.

Also in this issue, BIMCO quite rightly calls for a period of stability and a level playing field with no nationalistic type interference in the running of shipping. We have recently seen the EU rattle the IMO’s cage even threatening to derail conventions by putting its own spin on the rules and regulations, especially on environmental issues. The US Coast Guard has always been a law unto itself, but seems to be a bit more practical these days.

Could we see the Ballast Water Management Convention finally ratified this year, meaning that equipment manufacturers and shipping companies have 12 months to get their houses in order before it enters into force? Whatever happens, it will still cost the cash-strapped owners money, like most IMO conventions.

“

The world has been in this mess now long enough for companies and organisations to try to find innovative ways to survive.

”

We even have a plea from a leading class society to invest in more software in an effort to save money in the long run. This argument probably makes the most sense in an industry that is notoriously slow to react to change.

Authorities, flag states, class societies and others are all urging shipowners and managers to plan now for the future, but that is easier said than done, as the future is so unclear and we are not talking only of ballast water here, as there are the environmental issues looming, such as low sulphur fuel regulations.

Where will the money come from? Probably, not from earnings on the charter market for a little while yet. The trouble is that in this issue, Moore Stephens has forecast that banks and finance houses will become even stricter this year on their lending policies and by calling in debts sooner rather than later, so no joy there then. We have already seen several companies lumbered with impairment costs on their books, as asset values fall way below book values – TORM being a case in point.

There are investors out there still willing to take a punt on the shipping industry, as after all it accounts for over 90% of the world’s goods movements and as the world’s population is forecast to keep growing at a significant rate, more and more people will need food and energy of some kind, or another. One thing for certain is that shipping will be around for a very long time, as there is no viable alternative.

The question is – how will it change in the next few years? Will some of the innovative designs on the drawing board become the ships of the future? Will other forms of renewable energy really take off? Even wind farms located at sea need ships to maintain and supply them.

The answer largely comes down to cost leading the supply/demand balance, which is well illustrated by the disparity between the price of oil and gas. This has led to a resurgence in the so called ‘dash for gas’, a phrase that we believe was coined by a gas journalist a few years ago.

Other forms of energy will doubtless play a part, but it will still be king coal, gas and oil, which will form the staple diet of both developed and developing countries.

One thing is for certain is that the shipowner/operator will not spend any more money than he or she has to, unless a huge return on investment can be seen in the near term. As has been said many times before, we work in a conservative industry and this is true today as it ever was.

Here’s wishing everybody in the industry luck in 2013. We think we TO are going to need it!

TANKEROperator

02

Vol 12 No 3 Tanker Operator Magazine Ltd 2nd Floor, 8 Baltic Street East London EC1Y 0UP, UK www.tankeroperator.com

EDITOR Ian Cochran Tel: +44 (0)20 8150 5295 Mobile: +44 (0)7748 144265 cochran@tankeroperator.com

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TANKEROperator January/February 2013

INDUSTRY - MARKETS

What will 2013 hold?

W

hile there is some optimism that the worst of the global downturn is now behind us, a perceptive economic analysis published by the organisation outlined the challenges facing the main shipping sectors on account of the excessive supply of ships.

In - Reflections 2013 – which is claimed to be a concise, condensed and thoughtprovoking analysis of the challenges facing the shipping industry today and during the coming year, BIMCO emphasised the need for a worldwide industry to be regulated globally.

In addition in the report, the organisation called for pragmatic and practical environmental policies, underlined the need to value, treat fairly and educate the human resources, upon which the industry depends and also called for the maintenance of strong defences against piracy and lawlessness.

Against the background of a world economy struggling out of the financial crisis, positive global growth of both GDP and world trade at 3.6% and 4.5% respectively encouraged BIMCO to suggest that 2013 will be the turning point in macroeconomic terms.

But while such a scenario might normally offer comfort to ship operators, all the main shipping sectors continued to labour under a substantial overhang of tonnage ordered in more optimistic times.

Despite slow steaming, layups and the recycling of redundant vessels, the report suggested that any balance between supply and demand will not be quickly achieved. And while highly efficient ‘ECO-ships’ might appear attractive, they too add to the totality of a remarkably young world fleet. As a result, BIMCO forecasts that challenging times will continue to face the industry.

Global regulations Free market access, along with a regulatory ‘level playing field’ for all participants has been a rallying call for BIMCO for more than a century, with plenty of evidence that such an approach works best. With effective

In a wide ranging report, BIMCO has forecast growth in the shadow of the tonnage overhang.

international regulatory bodies available, there is every reason to reject any moves toward regionalism, or local protectionism and under the banner ‘Keep Regulation Global’, BIMCO provided compelling evidence in the report why such policies need international support and why international regulations that are ratified and work in practice remained essential.

Worrying tendencies toward regional and local regulations, along with a revival of local voices calling for trade protectionism, as a result of hard times, need to be energetically countered, BIMCO warned.

Towards greener shipping With a closer focus of shipping’s environmental footprint, the shipping industry is working hard to improve and demonstrate its sustainability in environmental terms.

Technical advances and fuel saving measures, along with operational efficiencies showed many encouraging trends, although emission controls, such as limits to SO2 emissions, proved that regulatory changes are neither easy nor cheap to implement and may produce many unanticipated consequences.

Nevertheless, the focus on energy efficiency showed that an environmental agenda need not be viewed in isolation. Reflections 2013 does, however, illustrate that the complexities of implementing the IMO Ballast Water Convention to its designed timescale at the same time as developing adequate treatment systems may have been overlooked, or not adequately addressed.

Human element With 1.3 mill seafarers servicing the material needs of the entire world population of seven

“

With a closer focus of shipping’s environmental footprint, the shipping industry is working hard to improve and demonstrate its sustainability in environmental terms.

04

”

billion people, BIMCO emphasised once again the industry’s dependence upon a highly professional workforce, which deserves rather more recognition than 21st century society often provides.

BIMCO, which has catalogued the unfair treatment of seafarers by certain legal regimes, has again highlighted the ways in which seafarers are unjustly criminalised after accidents and more regularly treated with disrespect by shoreside bureaucracy.

The entry into force of the ILO Maritime Labour Convention in August 2013, will, it is hoped, be a further contributor to better and fairer treatment of this essential workforce, BIMCO said. Reflections 2013 also emphasised the value of continuous education for marine industry personnel, with BIMCO enlarging its role with an expanded education programme.

Thinking beyond piracy The fight against piracy needs much more than Best Management Practice (BMP), or armed protection. A combination of political, economic, legal and diplomatic efforts, possibly supported by military action will, suggested the report, be needed if the problem is to be eradicated.

As a catalyst of information and advice on piracy, BIMCO said that it continues to challenge governments to fulfil their obligations to protect shipping and to interdict and prosecute these lawless people who are making seafarers’ lives a misery. It should also be remembered that around 150 seafarers were still held in terrible conditions by Somali pirates, while pursuing the ultimate objective of keeping the seas safe and secure, the organisation stressed.

Practice and pragmatism In his accompanying message to Reflections 2013, BIMCO president Yudhishthir Khatau spoke of his confidence that the “worst is behind us” and that there is room for optimism. The industry outlook remains positive for the coming year, despite the challenge of oversupply of tonnage.

He also emphasised that BIMCO’s practical and pragmatic approach in influencing regulators, legislators and politicians really worked and that free trade and fairness remained the most important ingredients to enable shipping to fulfil its irreplaceable role as the consistent and predictable servant of world trade and globalisation.

TO

TANKEROperator January/February 2013

INDUSTRY - MARKETS

Bunker prices to rise slowly in the near term Individuals active in the shipping, or oil industry, will be aware that residual fuel and bunker prices have been rising in recent years. n 2012, the basket of bunker prices that were tracked at major ports reached an all-time high of almost $750 per tonne in early March. This was influenced by an upward spike in crude oil prices combined with robust demand for power generation from various countries, McQuilling Services said.

Although prices have since fallen, bunker prices are anticipated to rise in the coming years. This increase will be in line with higher crude oil prices, but also tighter supplies due to secondary capacity additions and changes to the international crude slate. Tanker earnings will continue to be pressured, which will encourage owners to explore methods to boost fuel efficiency.

In its annual Tanker Market Outlook due to be published this month, McQuilling Services provides a bunker price forecast using the correlation between Dated Brent and the average bunker price. Dated Brent provides a more accurate gauge of international crude oil prices, as it is not subject to the local logistical issues that affect the US benchmark WTI and it is considered the global oil price benchmark.

In previous editions of the Tanker Market Outlook, McQuilling noted that the correlation between Dated Brent and international bunker prices had shifted upwards, as tighter

I

specifications and refinery upgrades were reducing supplies. Between 1994 and 2007, the slope remained constant but started to steepen in 2008. This trend has continued into this yearâ&#x20AC;&#x2122;s forecasting cycle (Figure 1).

In the 2012 outlook, the consultancy forecast that Dated Brent would average $105 per barrel and bunker prices $650 per tonne.

Year-to-date (end December) Dated Brent has been roughly $111 per barrel, or 3% above the forecast while bunkers averaged $675 per tonne, about 4% higher than projected.

Under pressure Going forward, limited upward support for international crude oil prices is forecast, as the global economy is expected to remain under pressure, while supplies should remain relatively ample. In Table 1, the bunker price correlation to Dated Brent is illustrated in column three and is based on the prior yearâ&#x20AC;&#x2122;s data.

However, given the previous discussion regarding the shift in the cost of bunkers compared to Dated Brent (Figure 1), this price is adjusted using a gauge of market sentiment.

This projected bunker price, located in column four, is then incorporated into the TCE forecast for the 12 trades published in the Tanker Market Outlook.

Figure 1: Bunker and dated Brent Price Correlation

January/February 2013

TANKEROperator

Global crude production should remain supported by the expectation that output in North America will increase throughout the forecast period. Saudi Arabia will continue to be the most influential swing supplier of OPEC nations, while Russian production should also continue to hover around 10 mill barrels per day.

Political risks that could result in reduced production, especially in the Middle East and North Africa will remain present. Demand growth from non-OECD economies will stay healthy throughout the forecast period, which will help absorb displaced barrels, in particular from the Caribbean, as a result of rising North American crude oil production.

This will support tonne/mile demand in particular for the larger tanker classes.

The medium term forecast anticipates that bunker prices will rise slowly over the next three years. This range bound activity will be influenced by a rising share of natural gas consumption in both industrialised and developing nations that will provide some balance to market fundamentals.

The rise in the latter part of the forecast period is the result of tighter bunker fuel specifications, combined with the growth in sophistication of the global downstream TO industry, McQuilling concluded.

Table 1: Brent and Bunker Price Forecast

05

INDUSTRY - NEWS FEATURE - FORECASTING

Change in economiesâ&#x20AC;&#x2122; structure affects tanker demand It should be common sense that trade flows between countries, or regions, will develop over time in relation to the activity in various sectors of the economies, weighted more heavily to some sectors than to others and with the weights varying by cargo type.* common, indeed endemic mistake made by maritime forecasters is to simply expect cargo volumes to reflect GDP. For export led economies like China this is over-simplistic, as its export trade and some of its imports are more reflective of the economic activity in its main trading partners than of its own domestic economy.

That of course will change in scale as domestic demand expands, but the importance of worldwide economic drivers will remain.

A more subtle but significant omission is the effect of the changes in importance of different sectors of the economy on cargo volumes. For oil imports, it is particularly important, as the oil and oil derivatives intensity of different sector of the economy differ so much and hence the effect of changes in their contribution to GDP growth is critical.

Another prevalent error or, more honestly described as analytical carelessness, is that most forecasters implicitly assume that the relationship between GDP and/or its sectors and cargo remains immutable. Indeed, this is a problem even with the large private, government and international (eg IMF) economic forecasting models of economies and partly explains why they have been so poor in recent years.

Some changes are gradual, such as when new technology is taken up over time and this can be picked up accidently but often effectively by the trend variable that forecasters use.

For example - Oil imports = f(GDP, trend) But there are dramatic changes in the relationship between GDP and oil imports caused by the impacts of economic shocks.

Such shocks change temporarily to permanently the importance of different sectors in an economy and hence alter the

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relationship between oil demand and activity measured at the GDP level.

Unless the parameters / coefficients / multipliers that enumerate the relationship are allowed to change from time to time in the model used to test relationships over history, any model of trade flows estimated in terms of GDP before the shock will no longer be valid and any forecast produced on its back can be worse than useless.

Marine Traffic Forecasts (MTF) have shown in its Maricasts model used for port investment projects and due diligence that major shocks have this effect while lesser impacts, such as most one-off moderate or lesser recessions, do not.

If the shock is long drawn out, the impact on freight relationships can be dramatic, volatile and destabilising for that period, though not necessarily permanent.

China today is a classic example of this, partly because the epicentre of the financial earthquake was elsewhere. The crisis started in late 2006, as the housing market in the fastest growing US states took the first part of a long dive. Chinese exporters of, for example, bamboo floor tiles suddenly found their markets shrank and indeed the wood products sector as a whole began falling at that time.

Many elements of the international crisis had long lags (like a long fuse) with the Southern European bomb primed in 2007 finally going off in 2011. In total, there have been five years of continual shocks, with some abrupt positive ones in between time that were rapidly more than reversed.

The impact of all this on oil demand is illustrated by a simplified example relating to the contribution of sectors. One can contrast the effect on wood products in 2006 with plastic production weakening following the

drop in exports in 2011, both of which have the same negative impact on GDP. But since one uses electricity (and hence coal) and the other uses oil to make plastic, the impact of these two mini shocks on oil consumption would have been completely different. Only detailed attention to the changes in the structure of the economy at such times, rather than reliance GDP, can explain oil demand and ultimately the volume of oil imports. This is separate from the usual supply side and technology effects that have to be considered for such commodities.

Once the economy emerges from the shock period, the changes to the relationships between freight and its drivers persist and in many cases do not change again until the next shock, as the structure of the economy stabilises, with a different mix to the preshock era. The ways the sectors swing around often persist; but their underlying relationship to GDP has changed and hence the relationship between GDP and cargo volumes will have altered.

Forecasts based simply on historic relationship will mislead decision makers, whether ports or ship operators.

China is of great interest today and we can show how relationships change even using simple (but not simplistic) analysis. Since China only became a net oil importer in 1993, the charts shows only the later period, although the estimation model was run over a longer historic period (1968-2011). The analysis is of oil consumption which, once production is subtracted, is a proxy for oil import demand, given that China has hardly exported any oil over that period.

In depth preliminary analysis of the relationships between various sectors and GDP indicate that there were transformations from economic shocks centred on 1998 and

TANKEROperator January/February 2013

INDUSTRY - FORECASTING Start of period

End of period

GDP multiplier / coefficient estimated

1988

1998

0.1179

1998

2001

-0.0065

2001

2011

topping-off

0.3466 Source: Marine Traffic Forecasts (Maricasts).

2001, or one extend shock effect over those three years, which changed relationships temporarily in one way and then permanently in another.

The three periods defined by those two dates produce stable relationships when an econometric model was estimated between GDP and oil consumption producing different coefficients in each period, as shown in the table above.

The estimation was then re-run to find the best fit using the simple GDP method, used by forecasters, which forces the same multiplier for the whole period.

The chart above shows the results. The blue dotted line show actual annual oil consumption, while the red line shows how the oil consumption that the simple model generates from GDP data. The blue line shows the oil consumption that the Maricasts model generates from GDP by splitting the period into stable inter-shock periods.

It is immediately apparent that the conventional GDP model severely under-estimated consumption early on and later over-estimated it. The traditional method may have influenced some shipowners to over-order; especially if similar distortion were introduced for other routes from traditional GDP models.

The long drawn out impact of the current financial crisis in the West cannot yet be judged in retrospect by definition. Forecasts for the next few years must be based on careful consideration of the causes of these variations, even if the longer term relationship is re-established for the medium term.

There are, however, indications that new relationships are forming and that the next 10 years will show oil growing on a new path relative to GDP as the shocks, for example, induce a premature realignment from major growth in exports to consumption goods.

To analyse the impact this will have, it is necessary to model the movement in all sector of the Chinese economy, as well as the effects of technology, to enhance the estimates of the relationship between GDP and oil consumption over the short, medium and long term. A simple correlation with projected GDP growth estimates is simply TO inadequate.

*This article was written by Graham Cox, economist & William Eadie, econometrician - Maritime Traffic Forecasts.

January/February 2013

TANKEROperator

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INDUSTRY – NEWS FEATURE - REGULATORY COMPLIANCE

Meeting the demands of an increasingly regulated industry In this article, Søren Christian Meyer, global sales director, OW Bunker, explains the best route to regulatory compliance. or the past 18 months, there has been much debate about sulphur emissions regulations. For example, what the effects of these requirements will be, how likely they are to be enforced and how we can realistically meet these environmental and operational demands in tough and economic conditions.

The implementation of the North American Emissions Control Area (ECA) in August 2012, plus the subsequent supply and demand challenges has highlighted the importance of readiness and of having a robust fuel procurement plan in place. It also showed the benefits of shipowners and operators working together with their fuel suppliers to ensure compliancy to gain value in the most cost effective and efficient way.

Debate and speculation over the timelines and stringency of impending regulations has led many owners and operators to delay their commitment to an appropriate compliancy solution and a fuel procurement programme. In the US, without the knowledge of market demand, delays in procuring compliant low sulphur products led to an inflated price differential between high and low sulphur fuel products.

While this market is beginning to show signs of improvement, it is clear there can be no procrastination when it comes to 2015. Put simply, when fuel oil accounts for nearly 70% of a vessel’s operating costs, implementing the right compliancy and fuel procurement strategy should be a key point on the boardroom agenda of every shipowner and operator.

From a European perspective, 2020 is now a fixed deadline as the European Parliament has removed the provisions for an extension to 2025. The IMO has also rejected calls from the International Chamber of Shipping to conduct an early report into the demand for distillates and it is clear the regulator will face pressure from many legislative and environmental factions to make 2020 a firm date for change.

We also know that there is a strong lobby to

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expand the current ECA regions, including the Mediterranean, as well as the Pearl River Delta, although there is a strong rationale why this would not go through. However, the primary concern for most owners and operators as to where they should place their focus is the move to 0.1% SOx in 2015.

To ensure that owners and operators can adapt, it is vital that they are armed with a full understanding of the compliance options available to them. This provides them with the foundation to adopt a solution that meets the particular demands of their business and operations.

Three options As is commonly known, there are three options - distillates, LNG and scrubbers.

Currently there is speculation across the market as to the reliability and operational efficiency of scrubbers, although some tests have shown positive results. However, currently there has not been widespread take-up of the technology. This leaves distillates and LNG. LNG is a cost effective option and delivers in terms of emissions reductions. Data from Rolls Royce verifies that burning LNG instead of heavy fuel for medium-sized vessels will reduce particulate matter (PM) and SOx emissions by 100%, NOx by 92% and CO2 by 23%. While this may seem like a credible solution, particularly for the longer term, there are some downsides.

For example, it has a better weight to energy ratio, but a much worse volume to energy ratio, than distillate fuels. This requires LNG-fuelled vessels to have a much greater fuel storage capacity. For existing vessels, this means that cargo must be sacrificed to make space for fuel.

The supporting infrastructure for LNG bunkering is also in its infancy and the market for supply remains immature. There is limited distribution, a lack of port and shore-based infrastructure, including production and regasification facilities, plus bunkering stations.

While we have seen a number of key ports committing to developing an LNG bunkering

infrastructure, the reality is that the investment required remains an issue.

To give this some perspective, a 700 cu m installation in port for stationary bunkering will cost in the region of €2.2 mill, plus the additional spend required to procure the LNG feeders required to meet expected demand.

There is also a need for development in handling, delivery and health and safety standards. This requires time, money and resources that cannot be afforded by most suppliers at a time when owners and operators are demanding more for less.

For owners and operators, LNG-fuelled engines cost in the region of €1.5 mill for small coastal carriers and $1.65 mill for larger ships. According to a study by DNV for the Danish Government’s Environmental Protection Committee, unless LNG is at least 45% cheaper than 0.1% gas oil, most operators will not commit to switching fuels and investing in LNG engines.

Ultimately, price is the single biggest driver for LNG’s widespread adoption as bunker fuel. Based on the embryonic nature of LNG, it is unlikely that the market will have matured enough, or that the infrastructure will have been developed to make it a viable and widespread solution by 2015.

Distillates This leaves distillates, which for most companies – certainly in the short to medium term – will be the most likely compliance solution.

As it stands, there is likely to be an imbalance between supply and demand for low sulphur fuels. Again, this is being caused by an uncertainty over projected demand. As a result, few refineries have committed to producing large quantities of LSFO as a standard product, due to the fact that there are greater challenges during the production of middle distillates, which are labour and capital intensive. The desulphurisation process

TANKEROperator January/February 2013

INDUSTRY â&#x20AC;&#x201C; NEWS FEATURE

KROHNE Skarpenord offers complete solutions for monitoring of liquids onboard all kinds of ships

A structured approach should be taken when tackling a credit issue.

requires upfront investment in installations and in procuring the catalysts, as well as in developing additional storage capacity.

However, this is not to say that supply would not be able to meet global demand. The future refining capacity is increasing in the Middle East and Asia/ Pacific. Of the 150 refiners that will invest in building capacity for middle distillates in the next decade, more than half are in these regions. So enough product will be available, but not in crucial areas such as northern Europe, which will require products to be shipped in to meet demand.

Compliance When it comes to compliance, ultimately, there is no cut-and-dry solution and with each option comes its own particular challenges. However, recognising this early and working to ensure that measures are established to deal with impending regulations is of paramount importance.

Key to this is ensuring robust and appropriate financial frameworks are in place to enable shipping companies to adapt to change. Access to appropriate finance will determine the ultimate outcome and will dictate whether owners and operators will be able to commit to a compliancy solution that is right for their business needs. But in an environment where banks and financial institutions are restricting credit and withdrawing liquidity from the market, bunker suppliers have been stepping into the breach and increasingly, playing the role of financial facilitators.

In this environment, it is up to the suppliers that have a robust business model and the financial strength to extend good credit terms â&#x20AC;&#x201C; based on commercial prudence - to customers that are prepared to engage in an open and transparent way. While it is a risk for fuel suppliers to do this, if it is based on sound knowledge, analysis and good business principles, it is a risk worth taking for the benefit of the wider industry.

But this is not about extending payment terms, but granting the required amount of credit to meet the increased price of fuel and the risk that this entails. The reality is that the bunkering industry is financing shipping to an eye-watering extent. To put this into context, an average of 300 mill tonnes of fuel oil is consumed every year. Priced at an average of $700 per tonne, if we divide this by 12 to represent the usual 30-day payment terms, the figure you get is $17.5 bill. This is the amount that would be required if all shipowners and operators had to pay cash for their bunkers.

However, credit needs to be given in a controlled and balanced manner and bunker suppliers must lend cautiously. Likewise, owners and operators should not commit to credit terms from bunker suppliers that they cannot afford, or on conditions that are not right for their business.

We believe that, where appropriate and where there is transparency and trust within a relationship with a shipowner and operator, we must take a structured approach to managing and helping with the credit issue.

With this foundation in place, owners and operators are in a strong position to plan for future regulations and to choose a route to compliance that will help them to weather the storm.

TO January/February 2013

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INDUSTRY – FINANCE

TORM gains time in its battle to stay afloat The shipping recession has taken its toll of those companies that were heavily in debt to their banks and finance houses as they soon found that they could not service the debt. his has resulted in several simply giving up and declaring themselves bankrupt or insolvent.

Others have tried to find innovative ways to continue trading in the hope that tanker rates will recover in the not too distant future.

One company in the latter category is TORM, which some observers thought was ‘dead and buried’, as it was deemed that the company could not possibly recover from the catastrophic losses posted year in and year out.

No doubt that an ongoing boardroom battle between major shareholders helped to exacerbate the problem, leading to mass resignations of both board members and senior management down the years.

Since then, the remaining board members have attempted to steady the sinking ship by talking with TORM’s major stakeholders, including its banks and charter partners, to find a solution, other than simply declaring bankruptcy and walking away.

At an extraordinary general meeting held on 9th January this year, the current chairman NE Nielsen gave an update on the company’s restructuring programme and also gave details of the agreement reached.

He said that the recently signed agreement had helped to ensure that TORM secured a substantial deferral of its bank credit facilities, gain new liquidity and benefit from significant cost savings from the restructuring of the fleet of chartered-in vessels. The company had thereby been given time to secure its future, long-term capital structure.

Nielsen continued by outlining the significant events that took place last year in TORM’s battle to stay afloat and why these moves were necessary.

He said that since 2010, TORM has worked on improving the company's capital structure and liquidity situation by seeking to tap into different corporate bond markets and through

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10

Will these vessels still be flying TORM's colours in a couple of years?

other measures. Mainly due to its strategic position as a spot-oriented company, low freight rates and the generally challenging conditions in the capital markets, the company was unable to obtain this type of financing.

In October 2011, TORM presented a proposal to its banks that combined an equity injection of $100 mill with subscription rights for existing shareholders and a bank moratorium. The proposal was not accepted, but the company achieved a standstill agreement, which was extended several times last year to ensure that a long-term, comprehensive financing solution could be found and implemented.

Nielsen claimed that throughout the whole

process, TORM's board and executive management had worked to avoid bankruptcy, or other in-court solutions in Denmark, or abroad. However, the process had also involved detailed negotiations and preparations for a suspension of payments, including under the US Chapter 11 rules.

In the spring of 2012, TORM received conditional offers from reputable, international shipping investors, as well as institutional investors, who were prepared to make new investments in the company provided that substantially amended bank terms were agreed. However, the banks did not find the investor proposals sufficiently attractive to act upon.

TANKEROperator January/February 2013

INDUSTRY â&#x20AC;&#x201C; FINANCE A solution was eventually found by which TORM could gain time for a potential general market improvement and as a result, the company signed a conditional agreement in principle with the banks and the major timecharter partners regarding a long-term financing solution.

This formed the basis of the restructuring agreement, which proved very comprehensive and contained a number of supplementary agreements with individual parties, including amendments to TORM's existing financing agreements, Nielsen said. From April to November 2012, the final contractual framework was detailed, documented and completed by the banks, the timecharter partners and the company.

Agreement contents TORM secured new working capital of $100 mill until 30th September 2014 with first lien in the majority of the company's vessels.

The company's group of banks has aligned key terms and conditions and financial covenants across all existing debt facilities while all maturities on existing credit facilities

were adjusted to 31st December 2016. The bank debt remained unchanged at $1,794 mill as of 30th September 2012. The book value of the fleet, excluding vessels under finance leases was $2,167 mill.

Based on broker valuations, TORM's fleet, excluding vessels under finance leases, had a market value of $1,316 mill at the end of September 2012, which was $851 mill lower than the carrying amount. The recognised equity was $358 mill.

Going forward, interest on the existing debt will only be paid if the company had sufficient liquidity and otherwise, the remainder will be accumulated until at least 30th June 2014 with potential extension until 30th September 2014. On average, the interest margin will increase to about 240 basis points on the bank debt and the company will pay interest on the new working capital facility until 30th September 2014.

The new financing agreements provided for a deferral of installments on the bank debt until 30th September 2014, in which period rescheduled principal amortisations will only be payable if TORM has sufficient liquidity.

Provided that sufficient positive cash flows are generated, certain cash sweep mechanisms will apply. Annualised minimum amortisations of $100 mill will start from 30th September 2014 until 31st December 2016. If any vessels are sold, the related secured debt will fall due.

TORM has also implemented substantial changes to its internal legal group structure, including transfers of vessels to separate legal entities in Denmark and Singapore based on the individual loan facilities. All legal entities are ultimately owned by TORM A/S. New financial covenants will apply uniformly across the bank debt facilities and include: *Minimum liquidity: Cash, plus the available part of the new $100 mill working capital facility, must exceed $50 mill to be tested from 31st December 2012. This will later be adjusted to a cash requirement of $30 mill by 30th September 2014 and $40 mill by 31st March 2015.

Loan-to-value ratio: A senior loan tranche of $1,020 mill was introduced out of the total bank debt of $1,793 mill on 30th June 2012.

Details of the share listing prospectus A share listing prospectus was published in early December 2012. This described in detail the company's situation after the restructuring agreement and provided an in-depth description of risk factors.

Among other things, the prospectus stated that with the restructuring, TORM had gained time for a potential market improvement and to secure the company's future, long-term capital structure.

However, TORM had considerable bank financing and in the absence of substantial market and rate improvements, it will most likely continue to generate losses, thus eroding the equity. Moreover, the existing capital structure did not provide the necessary basis for the financing of TORM's operations and growth in the medium to long term and additional financing, remission of debt, or alternative actions would be required.

Based on broker valuations, the market value of TORM's fleet, excluding finance leases, of $1,316 mill as at 30th September 2012 was significantly lower than the bank debt of $1,906 mill at the completion of the restructuring.

If the underlying market conditions did not improve, there was a risk that the gap January/February 2013

between the debt and the fleet market value would widen, simply because of the vesselsâ&#x20AC;&#x2122; age.

In case the freight rates remained low over a longer period, there would be a considerable risk of an impairment of the companyâ&#x20AC;&#x2122;s fleet values. The same would apply in case the assumptions for the quarterly impairment test were changed.

If the difficult market conditions continued, TORM expected that the credit agreements might be breached at the time of testing of the financial covenants on 30th June 2013 and, under certain scenarios, before, or after this date. In case this occurs, TORM planned to start renegotiations with the secured lenders to obtain the necessary waivers and amendments.

The prospectus also provided details of the individual option rights for the lenders under three of the company's bank facilities to request the sale of vessels being financed by the facilities in question. The options related to bank facilities financing 13, five and four vessels, respectively.

Under the options, the company would be required to propose a sales strategy to be agreed with the relevant lenders for the vessels mentioned. The lenders under the bank facility financing five vessels

TANKEROperator

exercised their option and thus initiated the process set out in relation to these vessels.

The total outstanding debt relating to the bank facility financing five vessels was $121 mill as at the restructuring date. The carrying amount of the five vessels was $210 mill, while the market value based on broker valuations was $141 mill. Their average age was two years at the restructuring date. Based on the broker valuations, a sale of the five vessels would result in P&L loss of about $69 mill.

TORM forecasted a loss before tax for 2012 of $500-530 mill, including the accounting effects of the restructuring, but excluding further vessel sales and potential impairment charges and any consequences if the sales options are exercised.

Nielsen said that if the recent freight rate levels seen in the product tanker market in the fourth quarter of 2012 are maintained over a number of years, the company will be able to meet its new financial covenants and in the future be able to service its debt as it falls due.

If freight rates reach the 10-year historical average, TORM will be in a position of generating profits and it will be able to make considerable repayments on its bank debt, the company said.

11

INDUSTRY – FINANCE The senior tranche must have an initial agreed ratio of loan to TORM's fleet value based on broker valuations (excluding vessels under finance leases) at 85% to be confirmed from 30th June 2013. This will gradually be stepped down to 65% by 30th June 2016. The remaining bank debt of $773 mill was divided into two additional debt tranches, both with collateral in the company's fleet.

Consolidated total debt to EBITDA: Initial agreed ratio of a maximum of 30:1 to be tested from 30th June 2013, gradually stepped down to a 6:1 ratio by 30th June 2016.

Interest cover ratio: Agreed EBITDA to interest ratio of initially a minimum of 1.4 x by 30th June 2014, gradually stepped up to 2.5 x by 31st December 2015.

Additional material covenants The terms of the credit facilities include a catalogue of additional covenants, including among others: A change-of-control provision with a threshold of 25% of shares or voting rights.

No issuance of new shares or dividend distribution without consent from the banks.

Certain specific option rights were also agreed that may result in vessel sales to be agreed prior to 31st January 2013 for up to 22 vessels and repayment of the related secured debt.

The options given to three bank consortiums, which were subject to certain agreed terms and conditions, are in place until 31st July 2014. One bank consortium had given notice on five vessels. However, TORM said that it would try to maintain the vessels' association with the company.

Chartered-in tonnage As for the timecharter partners, they accepted that the existing contracts would either be permanently changed and rates aligned to the market level with upside/downside split, or be allowed to terminate. These amendments would result in a significant reduction of the company's future timecharter commitments, TORM said.

TORM estimated that the changes in timecharter contracts corresponded to a total positive nominal mark-to-market impact of about $270 mill. However, a few of the owners of chartered-in tonnage did not take part in the restructuring. As a result, TORM will return 22 vessels to the partners ahead of the original contracted schedule.

Effective from 5th November 2012, the date of the restructuring, TORM's future timecharter commitments were reduced by around $590 mill, to $228 mill, due to the 12

“

... the timecharter partners ... accepted that the existing contracts would either be permanently changed and rates aligned to the market level with upside/downside split, or be allowed to terminate.

freight rates being aligned to the market level, or by the vessels’ redelivery.

As a result of this agreement, the tanker division had reduced the expected average timecharter costs for the first quarter 2013 by 36% from $18,848 to $12,141 per day.

In the same period, the drybulk division reduced the average timecharter costs from $16,286 to $13,755 per day, equal to a 16% reduction.

New ownership structure The remuneration given to the timecharter partners as a consequence of the amended contractual conditions, as well as a fee to the banks, estimated at a total net present value of $200 mill, was converted into company shares, corresponding to 90% ownership.

By achieving this, the existing shareholders retained an ownership interest of 10% against the 7.5% announced at the April AGM. The equity allocation between the banks and the timecharter partners was agreed between them and formed part of the restructuring agreement.

Nielsen then provided an account of the changes to the share capital that took place on 5th November 2012.

At TORM's AGM held on 23rd April 2012 it was decided to reduce the share capital by a nominal value of DKK363,272,000 to DKK728,000 nominal value by transfer of the reduction amount to a special reserve fund and by changing the nominal amount per share (denomination) from DKK5 to DKK0.01 in accordance with the Danish Companies Act. On 5th November 2012, the board decided to complete the capital reduction.

Also at TORM's April AGM, the board authorised an increase in the share capital by up to a total nominal value of DKK2,400,000,000 by payment in cash, conversion of debt, or contribution of assets other than cash without pre-emptive subscription rights for the existing shareholders, at a rate discounted to the market price.

Following this, the board increased TORM’s share capital by a nominal value of DKK6,552,000 by issuing 655,200,000 shares

”

with a nominal value of DKK0.01 each.

This capital increase comprised a new share issue by conversion of debt of DKK1,174,100,581 in total (about $200 mill) under the terms of the restructuring agreement and supplementary agreements to TORM's banks and timecharter partners, or their assignees.

The increase was fully subscribed at a subscription price of DKK1.79 per share of DKK nominal value 0.01 each (around $0.31 per share). The new shares issued corresponded to 90% of TORM's registered share capital and votes following the registration of the capital increase with the Danish Business Authority. TORM's issued share capital now amounted to DKK7,280,000 nominal value, equal to 728,000,000 shares of a nominal value of DKK0.01 each.

The company’s existing share option programmes were subsequently adjusted in accordance with the capital increase, but exercise prices remained significantly higher than the prevailing share price and the share option programmes were therefore ‘under water’.

On 27th September 2012, TORM signed a separate agreement to acquire its own shares from certain timecharter partners. This agreement concerned the acquisition of 3,739,840 shares with an aggregate nominal value of DKK37,398.40, corresponding to 0.5% of the company’s total share capital.

The shares were transferred immediately after the completion of TORM’s restructuring on 5th November 2012, against the release of a claim of an estimated value of $0.6 mill according to an independent valuation.

Following prolonged negotiations and supported by statements from various advisers, the board assessed that the agreement to acquire own shares was the company's only real opportunity of securing participation by the involved parties in the overall restructuring and thus avoiding the imminent detrimental effects of a potential bankruptcy, or other insolvency proceedings, according to the Danish Companies Act. TO

TANKEROperator January/February 2013

INDUSTRY – FINANCE

Looking for private investors Reduced lending activity from traditional ship finance providers has industry participants looking towards private equity investors to bridge the gap in capital. uch of the ship finance lending activity in 2012 and likely continuing into 2013, will focus on restructurings and existing loan portfolios at the large shipping banks, reported McQuilling Services.

Private equity groups make investments in shipping through a number of different structures, including: direct investment, bridge financing, mezzanine financing, debtor-inpossession financing, sale-leaseback transaction and joint ventures.

These groups have been attracted to the shipping sector because of the global recession, banking crisis and a large vessel orderbook. These factors are driving depressed freight rates, vessel values and a spate of restructurings, defaults, renegotiations and bankruptcies, which create ripe targets for distressed investors.

Asset owners and project managers might be looking to partner with private equity groups to boost liquidity and meet the difference between the decreasing availability of debt financing and their total project costs.

Establishing a successful strategic partnership with a private equity fund will depend on the objectives of both parties and the contributions that each are able to provide.

The biggest question that comes up between

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Investor

the two parties is control. As the private equity investor is likely putting up the largest portion of the investment, typically they will require a corresponding portion of control over management. Creative structures will address management control on a sliding scale through the use of goals and performance/ return mandates, McQuilling said.

Private equity investors are generally interested in shipping because of their desire to invest in physical assets and realise an upside return upside on exit through asset sales. As such, additional issues likely to arise in the investment evaluation will relate to timing of an investor exit.

If asset values rise to a high point where an attractive positive return could be attained, the private equity investor will need to know their ability to request that a vessel within the joint venture be sold.

The bottom of a market is never easy to call unless you’re on the way back up. Patience is required from investors to ride out the remaining periods of depressed freight and asset value markets across a number of different sectors. It is important to establish a workable management and capital structure that will allow you to operate in persistent depressed market.

Wilbur Ross/Diamond S Shipping generated

Est value ($)

a strong management team with a capital structure that will support the company’s operations for a specific long term period of depressed markets. Established long-term contracts on the Diamond S product tanker fleet acquisition (2011) are said to be enough to carry the debt structure on their entire company even if their newbuilding Suezmaxes made no profit whatsoever. For this group (and most private equity investors), these investments are much like portfolio investments where the significant returns are only realised through the sale of assets in the upturn of an asset value market.

As we enter another period of low shipping markets, McQuilling said that the consultancy believed private equity investors will want to see some light at the end of the tunnel giving hope to potential returns. Timing is one of the biggest topics of discussion for investors.

In the selected list of private equity investments and partnerships in the tanker sector, the investor has partnered with a strategic shipping expert to achieve his or her goal.

As we enter into 2013, the number of transactions on this list will certainly increase, as strong capital structures will be required for the longevity and growth of shipping firms, TO McQuilling predicted.

Asset type

Company

Shipping expert

Date

-

Product tankers

Prime Marine

Michael Chalkias

2012

First Reserve/Wilbur Ross

900

Product tankers

Diamond S Shipping

Craig Stevensen

2011

Alterna Capital Partners

100

Prod/Suezmaxes

Solo/Western Bulk

Harry Troll

2010-12

Apollo Management

200

Suezmaxes

Principal Marine

Arthur Regan

2010

Opportunistic

Peter Livanos

Andrian Dacy

2010

Perella Weinberg

JP Morgan Asset Mngt

-

Greenbriar Equity

100

Product tankers

Seacove Shipping

Anthony Gurnee

2009

Sterling Partners

170

Jones Act tankers

US Shipping

Paul Gridley

2009

Blackstone/Cerebrus

500

Jones Act tankers

American Petroleum

Robert Kurz

2008

Source: Marine Money/Watson, Farley & Williams.

January/February 2013

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13

INDUSTRY – FINANCE

Bankers to assert greater control over shipping companies Banks will take a firmer grip on shipping this year while vessel values will fall, a leading consultancy said.

International accountant and shipping consultant Moore Stephens said the banks will exert more control over the shipping industry in 2013. It also expected vessel values to fall further and the cost of regulatory compliance to increase.

Moore Stephens partner Julian Wilkinson said, “For shipping in 2012, it was not so much a case of ‘Crisis, What Crisis?’ as ‘Crisis, Which Crisis?’ This year will be equally challenging.

“Operating costs are going to go up. Like a commuter facing another increase in rail fares and no extra money coming in, shipping will most likely have to absorb the costs of more expensive fuel, more costly labour and dearer raw materials on the back of declining freight income. Even Mr Micawber, the Dickens character who always believed that something would turn up, would have taken one look at the shipping industry’s prospects for 2013 and cried, ‘I’m off!’

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“In 2013, the banks will exert more control over the shipping industry as debt-to-equity ratios deteriorate. Restructuring, deferred payment, impairment and provision have become common coinage in shipping. Openness and the avoidance of unnecessary delay will be key elements to successful financial restructuring. Even if there really are cashrich banks in China prepared to underwrite shipping deals, nobody is waiting for them to start lending before planning their next move.

“This year will see continued efforts to accelerate scrapping, which is only made more attractive by the approach of expensive classification special survey deadlines.

Despite record scrapping levels in the past 12 months, there still exists a considerable gap between the volume of newbuilding deliveries coming onto the market and both the amount of tonnage scrapped and the availability of suitable demolition facilities. Newbuilding deliveries have been running at record levels for three years. One major operator said recently, ‘Global tonnage oversupply is irrelevant.’ It isn’t, but the fact remains that now is a good time to build eco-friendly ships

at reasonable prices for which there will be strong demand in the future.

“Expect vessel values to fall further in 2013, last year having closed with a VLCC selling for the lowest price since the mid-90s.

The danger is that each successive fall creates a new benchmark. Expect also further increases in the cost of regulatory compliance.

That will have to include planning for the BWM convention. Ballast water is not sexy, but it is expensive. Once the percentage of worldwide tonnage is met in the near future, the convention will enter force 12 months thereafter. Owners need to be thinking now about where the money for retrofitting – and it is a lot of money – is coming from.

“Remarkably, the Moore Stephens Shipping Confidence Survey showed that the industry closed 2012 more confident than it ended 2011. Now remains a good time to buy for those with cash and a following wind. New investors, or existing stakeholders embarking on new projects, will be putting money into a leaner and greener industry than the one which was making good money before the economic TO gloom kicked in,” he concluded.

TANKEROperator January/February 2013

INDUSTRY â&#x20AC;&#x201C; MIDDLE EAST GULF REPORT

Offshore activities and refining investment to boost tanker market In what could be a significant boost to the chemical/products tanker markets, the Middle East region, especially the oil producing countries bordering the Persian Gulf, is rapidly changing its energy exporting emphasis. his is due to the construction and upgrades of several refineries in the region, which will enable the countries to produce, both for domestic consumption and for export, products, as well as crude oil almost at the same location.

Local governments have said that they wish to diversify their economies away from the reliance on upstream projects, thus adding value to their heavy crude oil production.

India and China are seen as major markets for both Arabian crude and products, plus natural gas, which is mainly shipped from Qatar in the Gulf.

According to World Energy Outlook 2013, published by the International Energy Agency in November last year, by 2035,

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16

almost 90% of Middle Eastern oil exports will be shipped to Asia, while the USâ&#x20AC;&#x2122; emergence as a net exporter will accelerate the eastward shift in trade.

As their economies continue to grow, the Gulf States, primarily Saudi Arabia and the United Arab Emirates, now import gasoline with the result that the countries have said that they need to refine more oil domestically, as well as tapping into the large oil products export market.

In its report, the IEA said that global energy demand will rise by over one-third in the period to 2035, underpinned by rising living standards in China, India and the Middle East.

As for oil production, The IEA said that Iraq will account for 45% of the growth in global production to 2035 and by the 2030s,

the country will become the second largest global oil exporter, overtaking Russia. Indeed, more recently reports suggested that Russia had temporarily overtaken Saudi Arabia in oil production.

In nearby India, Reliance operates two of the largest refineries in the world capable of processing about 1.2 mill barrels of crude oil per day in total. India still relies on crude oil imports for its refining needs, but could become a major exporter of products. It used to rely on Iran for much of its oil, but has also recently sourced oil from different suppliers, since that country has experienced problems with exporting oil and products. The vast country also imports natural gas from Qatar.

Most of the European-based oil majors, such as Total, Shell and BP, have closed, or

TANKEROperator January/February 2013

INDUSTRY – MIDDLE EAST GULF REPORT reduced their refining capacities of many their European refineries and are looking elsewhere to invest.

According to various research papers into the subject, the move to reduce European refining capacity was driven by higher oil prices, which has scaled back fuel sales, especially heating oil, which is now more expensive than gas.

This trend, coupled with the more efficient use of energy, has also occurred in the US, which has witnessed a large reduction in refining capacity, especially during 2012.

Indeed, the US looks likely to become a net exporter of crude oil and LNG in the not too distant future.

The IEA said that economically viable efficiency measures can halve energy demand growth to 2035. In addition to cutting energy expenditures by an average of 20%, improved efficiency will bring wider economic gains, particularly for India, China, US and Europe.

GCC refinery expansion An example of current Gulf expansion projects includes Saudi Aramco and Total’s refinery at Jubail, which will be one of the world’s largest refineries when it comes on stream by the end of this year. It is located in the desert about 30 kilometres from the Persian Gulf and once opened, will be able to process 400,000 barrels of crude oil per day.

Other known ongoing projects in the Kingdom include the Rabigh refinery expansion and upgrade project undertaken by Saudi Aramco in a joint venture with Sumito Chemical, a new Saudi Aramco refinery at Jizan, the Ras Tanura refinery expansion project again involving the Saudi oil major and a new refinery at Yanbu by Saudi Aramco in a joint venture with Sinopec.

In December, AMEC, the international engineering and project management company, announced that it had been awarded a $528 mill project management consultancy (PMC) contract by the Kuwait National Petroleum Company (KNPC) for a new oil refinery to be built at Al Zour, Kuwait.

When completed in 2018, the multi-billion dollar refinery is expected to be the largest in the Middle East and will increase Kuwait’s refining capacity by 615,000 barrels per day.

It will be a key part of Kuwait’s long term strategy to produce cleaner fuels to meet its electrical power generation growth and demand while adhering to the latest environmental standards, AMEC said. It is also thought that the Kuwaitis will be looking to export products.

January/February 2013

Dr Hisham Mahmoud, AMEC’s group president, growth regions, said in a statement: “This contract award supports our Vision 2015 strategy, which includes growing our presence in the Middle East’s oil and gas upstream, midstream and downstream sectors.”

Alan McLean, AMEC’s vice president of the group’s Middle East, Africa and CIS business, added: “This project is significant for AMEC in the Middle East and recognises the experience and knowledge we have gained by successfully delivering PMC contracts in the region. The project is also important for KNPC in enabling it to meet the demands of its customers.”

Other projects ongoing in Kuwait include the expansion of its large Mina al-Ahmadi refinery.

In Iran, there are thought to be up to 10 new refineries under construction, or planned across the huge country, of which seven are known to be ongoing, including one in the Caspian Sea, which will no doubt be served by the shallow draft Panamax shuttle tankers being built at Sadra, an Iranian shipyard on the inland sea.

There are also thought to be at least five expansion/upgrade projects also underway, or planned in Iran. Most of the projects are under control of the National Iranian Oil Co (NIOC) and one refinery is being built with help from Petroleos de Venezuela (PdV).

As for neighbouring Iraq, there are believed to be eight new refineries planned with at least one capable of producing 140,000 barrels of oil per day, plus the upgrade of the Basrah oil refinery, as the country seeks to claim second place in the crude oil production league within the next 25 years.

Further south in Qatar, which is a major LNG exporter through the new port of Ras Laffan, Qatar Petroleum recently completed a refinery at the port and has plans in place to expand it. In addition, another new refinery is planned at Al Shaheen.

Choke point Fujairah is a massively expanding port in the UAE. Its advantage is that it is located just outside the choke point of the Straits of Hormuz. It is already the world’s third largest bunkering station.

At Fujairah, Abu Dhabi-based International Petroleum Investment Co (IPIC) is building a new refinery while a new VLCC loading terminal was opened last year, connected via a pipeline to the Abu Dhabi crude oil production plants and served by single point mooring buoys located to the North of the port, but coming under the port’s jurisdiction.

TANKEROperator

Several products storage companies have set up facilities at Fujairah together with load/discharge jetties. Off the port, some 100 vessels can be seen at any one time at anchor, many of which are supplied by local companies located within the port.

Another UAE refinery located at Ruwais is being upgraded and expanded.

Also just outside the Gulf, Oman is building a bitumen refinery at Sohar and is also expanding and upgrading a refinery, also located at Sohar. In addition, Oman Refining is planning a new refinery at Duqm, a new port, which houses the huge drydock complex opened about 18 months ago.

Other refinery work known to be underway, or planned, involve Aden, Egypt (at both ends of the Suez Canal), Jordan, Syria and Yemen.

However, with many of these projects, local and international politics could delay, or totally undermine, their construction.

The Gulf region’s increasing focus on offshore oil and gas projects is also attracting renewed interest from major global contractors, as well as new entrants to the market.

“Outputs from oil and gas projects in the Gulf contribute significantly to the GDPs of countries in the GCC. This new focus on offshore production should be a boost to the continuing economic development of the region,” said Julio Armando De Quesada, head of corporate and investment banking group, Mashreq, who have signed up as the official financier of the MEED Quality Awards for Projects 2013, in association with Ernst & Young; as well as category sponsor for the Mashreq Oil & Gas Project of the Year award.

In a recent report, MEED Projects revealed that oil producers are now turning offshore in search of oil and gas to boost production, now that advancing technology has significantly brought the costs down. As a result, the region now accounts for a significant proportion of global platform and pipeline contracts.

According to the report’s count, citing data from the US’ Baker Hughes, there are currently 45 offshore rig projects, eight more than the same period in 2011 and over previous peak of 43 recorded in 2008.

Last year, Qatar Petroleum and Qatar Shell’s Pearl GTL joint venture project won the MEED Quality Project of the Year Award, in association with Ernst & Young, as well as the Oil & Gas Project of the Year honours.

With the UAE economy seeming to have stabilised to some extent, could we see Dubai once again rise to become the financial centre of the GCC region?

TO 17

INDUSTRY – MIDDLE EAST GULF REPORT

ASRY – a top choice for tanker operators Last year turned out to be an acceptable year for Bahrain’s Arab Shipbuilding & Repair Yard (ASRY) on the tanker repair front, following previous false dawns in recent years of an expected market upturn.

SRY started life in 1977 as the Middle East’s first shiprepair yard dedicated to the repair and maintenance of VLCCs. While the company’s business has expanded into the repair and maintenance of all types of vessels, both commercial and naval, as well as offshore rigs, large tanker continue to be

A

handled at the Bahrain shipyard.

An encouraging trend during 2012 was the large number of tanker repairs undertaken, especially on VLCCs and large LPG carriers.

These vessels came from the fleets of the Kuwait Oil Tanker Co (KOTC); Bahri (MidEast Shipmanagement); Vela International Marine, Red Sea Marine Services, V Ships

The VLCC Samco Europe in Dock No 1 at ASRY last year, seen having her Mewis Duct fitted. Photo credit – Mike Hood.

18

France and BW Fleet Management.

A total of 55 tankers were repaired at ASRY last year, slightly up on the figure of 52 for 2011. These included 10 VLCCs, eight LPG carriers and a large number of chemical tankers. They came from owners/managers based in the following countries - Kuwait, Saudi Arabia, the United Arab Emirates, France, Greece, India, Norway, Singapore, Italy and Belgium.

A welcome trend seen during the year was the return of the large tanker, especially from Arab owners. During 2012, ASRY repaired a total of 10 tankers of 300,000 dwt and over, of which nine came from the Arab market and two from the international market. The lack of large tankers from the international sector showed the continued pressures that these operators are facing in the continuing depressed shipping markets.

Saudi Arabia’s Bahri, who fleet is managed

by Dubai’s Mid-East Shipmanagement, repaired a total of five VLCCs during 2012: the 317,788 dwt Wafrah, the 302,977 dwt Marjan, the 303,138 dwt Safwa, the 317,821dwt Layla and the 302,986 dwt Abqaiq. Dubai-based Vela International Marine docked two VLCCs: the 316,501 dwt Leo Star and the 316,808 dwt Pices Star, while Kuwait’s KOTC repaired one VLCC: the 317,507 dwt Al Jabriyah II. The two VLCCs from the international market came from Europe: V Ships France repaired the 317,713 dwt Samco Europe, on which work included the fitting of a performance enhancing Mewis Duct and the 300,000 dwt Astro Challenge from Greece’s Maran Tankers Management.

Besides its one VLCC docking during 2012, KOTC also repaired a further 10 tankers, including crude oil carriers, product carriers and one large LPG. These included the 121,109 dwt sisterships Arabiyah and Hadiyah, the 149,258 dwt Almubarakiah and the 113,849 dwt Wafrah.

Meanwhile, Saudi Arabia’s Red Sea Marine Services repaired a total of seven tankers

TANKEROperator January/February 2013

INDUSTRY – MIDDLE EAST GULF REPORT during the year, a mixture of crude oil carriers, chemical tankers and LPG carriers including the following: the 149,258 dwt Al Mubarakah and the 105,083 dwt Al Marzoqah, both crude oil carriers; plus the two LPG tankers Al Barrah and Al Jabirah.

From the international market Norway’s Odfjell Management repaired eight chemical tankers at ASRY during the year. Again work included the fitting of new performance enhancing propeller ducts. Other Norwegian owners to dock tankers at ASRY during 2012 included BW Fleet Management with its two large LPG carrier BW Boss and BW Broker and Solvang with another pair of LPG carriers: Clipper Hebe and Clipper Helen.

Remaining with large LPG carriers, the end of the year saw the drydocking and repair of the 64,220 dwt Flanders Harmony operated

by Belgium’s Exmar Shipmanagement.

First time visitors Last year also saw the visit of a number of tankers from first time customers of the yard including: Gulf Stolt Shipmanagement’s 45,951 dwt chemical/product tanker Gulf Deffi; the 45,680 dwt chemical/product tanker Seychelles Prelude from Cyprus-based Victoria Navigation; Hong Kong’s Fleet Management’s 45,934 dwt product tanker UACC Strait and the 47,106 dwt product tanker Strovolos from Singapore’s World Tankers Management.

However, the most challenging tanker job carried out by ASRY during 2012 was not a repair but a ship re-cycling project on the firedamaged chemical tanker Stolt Valor.

When the badly damaged 24,000 dwt Stolt Valor was towed into ASRY in June 2012

A challenging task for the yard was the recycling of the fire-damaged chemical tanker Stolt Valor. Photo credit - Mike Hood.

following an explosion and fire in one of her cargo tanks, it was first thought that ASRY would be asked by the vessels owners to make the tanker seaworthy for onward tow to a shipbreaking yard.

However, following detailed inspection of the vessel by a number of parties, including ASRY, the owners decided to break-up the chemical tanker on site.

This is a technical first for the Bahrain yard and one of the most challenging jobs yet undertaken by ASRY. Work started alongside ASRY’s new 1.38 km repair quay wall, with much of the damaged deck piping being cut away and taken ashore, as well as the accommodation block.

Stolt Valor was then towed into ASRY’s 500,000 dwt capacity No 1 Dock where the

vessel was cut into three sections and the damaged cargo section scrapped. All the reuseable mild steel and stainless steel found buyers in Europe and Bahrain.

Commenting on the Stolt Valor, ASRY’s CEO Chris Potter said: “We are proud to have been chosen to undertake this undeniably impressive task. Re-cycling of a ship the size and complexity of Stolt Valor is another benchmark in ASRY’s portfolio of firsts. It is a testament to our reputation and skill set that we continue to be chosen for these landmark jobs. In this case, we are committed to a responsible and environmentally-conscious strategy that, as always, keeps the Kingdom of Bahrain’s best interests a priority.”

The re-cycling of Stolt Valor was successfully completed in early January 2013.

TO

Fujairah - a major WSS service station Wilhelmsen Ships Service’s (WSS) Fujairah service station has been operational for 35 years and looks after the UAE. The service station also provides operational, technical and training development support to other Middle East stations - mainly Bahrain and Qatar - as well as the AMB area.

Its core function is to provide fire, safety and rescue services and products. Some 1,800 safety service tasks were carried out last year.

As a multi-purpose port, Fujairah is ready to meet the requirements of the as yet unfulfilled, industrial development potential of the Emirate, WSS said. Strategically located, the Emirate has provided the location for a number of important Federal January/February 2013

developments, including; Desalination plants, using the Indian Ocean rather than the inner Gulf.

Abu Dhabi Crude Oil Pipeline (ADCOP). (a) Transport of 1-1.5 mill bpd via a 360 km long, 48 inch dia pipeline. (b)12 mill barrel storage capacity. (c) Three sub-sea pipelines. (d)A main and intermediate pumping station. (e) Three deepwater single-point mooring buoys for tanker loading. (g)A major refinery under consideration.

Strategic grain reserve - Grain silos and load discharge arms on a dedicated berth on the Southern Breakwater was scheduled for operation during 2011

TANKEROperator

with an initial storage capacity of 250,000 tonnes.

WSS handled 2,568 vessel calls in 2010, which included some 60% of all the vessels calling at the Vopak storage terminal. The company also operates five modern crew boats to serve the vast anchorage off Fujairah.

In addition, WSS has its own 4,178 sq m warehouse, which is used to house ships spares and equipment. A dormitory is available fitted with 16 beds for crew changes.

WSS’ Fujairah staff numbers 38 and the facility also serves Kalba and Khor Fakkan under the watchful eye of Gerard De Lima, WSS Middle East area safety service manager.

19

INDUSTRY – MIDDLE EAST GULF REPORT

Mega Saudi VLCC concern formed by merger One of the most significant initiatives to occur last year was the National Shipping Company of Saudi Arabia (Bahri) tie up with Vela International Marine, a wholly owned subsidiary of Saudi Aramco.

During November, both companies executed definitive and legally binding agreements to merge their fleets and operations.

Execution of the transaction agreements took place in Riyadh on 4th November 2012. The transaction was still subject to a number of conditions, including its approval and the related capital increase by Bahri's shareholders at an extraordinary general assembly (EGM) and receipt of required approvals from relevant regulatory authorities, including the approval of the Capital Market Authority and Supreme Council for Petroleum and Mineral Affairs.

Subject to the required regulatory approvals being attained, Bahri said that it expected to convene an EGM towards the end of the first quarter of this year. If all the relevant resolutions are approved, the initial transfer of vessels would follow during the second quarter with the final transfer taking place during the early part of the third quarter of 2013.

Vela will transfer its entire fleet of 14 VLCCs, a floating storage VLCC, one Aframax and four product tankers to Bahri. In addition, Vela's seafarers and a number of shore-based personnel will transfer to Bahri. Following this, Vela’s shipping businesses will be integrated within Bahri's corporate structure.

Under the terms of an initial 10-year shipping contract, Bahri will become the exclusive provider of VLCC crude oil shipping services to Saudi Aramco for crude oil sold by the Saudi oil major on ‘a delivered basis’.

Bahri said that it intended to satisfy Saudi Aramco's annual VLCC transportation requirements, which was estimated to be around 50 VLCCs. This will require employing, 31 Bahri VLCCs and 19 Vela VLCCs chartered-in.

UAE class society formed

Saudi Aramco will continue to manage all crude oil marketing and sales directly with its customers while Bahri will provide the transportation services on competitive terms.

Furthermore, the two companies planned to explore ways to expand their co-operation in the maritime sector.

This long-term shipping contract is based on negotiated terms that include a floor to protect Bahri against declining shipping rates and provision for Saudi Aramco to be reimbursed for floor protection payments if shipping rates exceed a certain threshold.

Cash and shares Bahri will pay the equivalent of SAR4.875 bill ($1.3 bill). This will be made up of a cash payment of SAR3,122,812,500 ($832.75 mill) and by issuing 78.75 mill new shares at an agreed price of SAR22.25 per share.

Based on a post-transaction equity capitalisation of 393,750,000 shares, the new shares, to be held by a wholly owned Saudi Aramco subsidiary, will represent a 20% shareholding interest in Bahri and will be appropriately represented on the company’s board. Bahri will raise the cash through Sharia compliant debt financing from a number of sources, the company said.

Meanwhile, Bahri announced that its 80% owned subsidiary, The National Chemical Carriers (NCC) took delivery of the eighth new chemical carrier out of a series of nine newbuildings on 4th December, 2012.

Named CC Sama, the 45,000 dwt vessel was built by SHINAsb (previously SLS) of South Korea, as part of a nine-vessel contract previously ordered by NCC from the yard during 2006 - 2007 for a total value consideration of around SAR1.722 mill.

NCC has one additional sister vessel under construction valued at SAR195 mill with delivery expected early this year, plus one 75,000 dwt chemical tanker, ordered from Daewoo for about SAR247 mill. She will be TO delivered during 2013.

“

Bahri will become the exclusive provider of VLCC crude oil shipping services to Saudi Aramco for crude oil sold by the Saudi oil major on ‘a delivered basis’.

”

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Tasneef, the recently formed UAE class society, has chosen RINA as the International Association of Classification Societies (IACS) partner to support its development.

Emirates Classification – Tasneef has been established in Abu Dhabi and plans to expand with future worldwide offices.

Working in partnership with RINA, the goal is to develop Tasneef as an international class society capable of meeting the technical and classification needs of the region's maritime industry, the UAE flag and international commercial shipping.

Andrea di Bella, area manager Middle East, RINA, said, “We are very excited to have been chosen to assist the development of Tasneef after a tender process that included all the major classification societies.

“We will work closely with Tasneef on a number of newbuilding projects and ships in service to develop their procedures and technical competence. We expect this to be the beginning of a long partnership as the UAE further expands its maritime interests,” she said.

Rashed Alhebsi, head of Tasneef’s establishment committee, said, “We selected RINA to help us develop Tasneef because of its proven competence and the good collaboration we experienced with them during our UAE Naval shipbuilding (corvette class) programme.

“We at Tasneef have carefully and systematically reviewed potential partners and we took our time to decide.

“Tasneef and RINA Group will also support this region, which is becoming a world hub for the maritime industry where more than 60% of the world’s shipping either operate or pass, especially after establishing Khalifa Port, which increases the shipping capacity of this region.

“Tasneef and RINA are currently finalising together a portfolio of up to 44 classification projects in 2013, varying from new construction and ships in service, to supporting the UAE Flag administration with thousands of statutory certifications.”

TANKEROperator January/February 2013

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INDUSTRY – ANTI-PIRACY

Combating piracy in the Gulf of Guinea B

oth the International Maritime Bureau (IMB) and the European Union (EU) have highlighted this new menace, the latter by launching a project aimed at boosting security and maintaining the safety of maritime routes across seven African countries in the Gulf of Guinea.

Called the Critical Maritime Routes in the Gulf of Guinea Programme (CRIMGO), it will help governments across West and Central Africa to improve safety of the main shipping routes by providing training for coastguards and establishing a network to share information between countries and agencies across the region, the EU said.

Development commissioner, Andris Piebalgs, explained at the initiative’s launch: "Without security, development can never properly reach the people it needs to. That's why our new project, which will help to boost transport security in Western Africa, is so crucial. By making the waters safe, we are helping to boost trade and growth and provide more opportunities to make a living, which these countries so desperately need."

The project will be rolled out from January 2013 in seven African coastal states - Benin, Cameroon, Equatorial Guinea, Gabon, Nigeria, Sâo Tomé and Principe and Togo.

The Gulf of Guinea currently accounts for 13% of oil and 6% of gas imports to the EU. However, piracy and armed robbery, as well as drug, arms and human trafficking, pose a real threat to the security of the region. In Nigeria alone, some 98 cases of piracy, armed robbery at sea and marine pollution were recorded between 2008 and 2012.

A major cause for concern for the tanker sector is the rise of piracy in the Gulf of Guinea region off West Africa.

At present, the region suffers from a lack of co-ordination between coastguards, as well as between regions. There is also currently no common standard for maritime training and weak conditions for information sharing between the countries involved.

The EU will provide €4.5 mill for the CRIMGO project under its Instrument for Stability (IfS).

Other partners in the project include the France Expertise International (FR), the Direction de la Coopération de Sécurité et de Défense (France), the Direção-Geral do Polítca do Mar (Portugal), the Fundación Internacional y paralberoamérica de Administración y Políticas Públicas (Spain), the Foreign and Commonwealth Office (UK), the Satakunta University of Applied Sciences (Finland), the International Maritime Safety Security Environment Academy (Italy) and the Szczecin Maritime University (Poland).

Programme focus CRIMGO’s focus is on the security and safety of essential maritime routes. Its objective is to increase maritime security and safety; thereby helping to secure shipping and trading lines of communication. In the long term, the programme aims to improve maritime governance.

A Listed Area As the result of a critical increase in attacks on international shipping off Benin, the country’s territorial waters and EEZ were included in the Hull, War, Strikes, Terrorism and Related Perils Listed Areas by Lloyd’s Joint War Committee on 1st August, 2011.

This means that insurance companies can put additional premiums on ships calling, or transiting, in, or through, this area.

The Listed Area is defined as: ‘Gulf of Guinea, but only the waters of the Beninese and Nigerian Exclusive Economic Zones north of Latitude 3° N’.

January/February 2013

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The programme started in 2009 and is transregional, with activities concentrated in Southeast Asia, the Western Indian Ocean and the Gulf of Guinea. Since the start €16 mill has been allocated to these activities.

IfS is a strategic tool that links security and development. The main objective is to support measures aimed at safeguarding, or reestablishing the conditions under which the partner countries of the EU can pursue their long term development goals.

It complements existing EU geographic and thematic instruments and policies, common foreign and security policy actions, regional and international organisations and bilateral programmes carried out by EU Member States.

The instrument brings added value as it fills gaps where geographical, or other development instruments cannot be used and can be used to address transregional threats to security, which cannot be done through traditional development instruments, the EU explained.

Dangerous proportions Meanwhile, the IMB has said that pirate attacks on tankers in the Gulf of Guinea are reaching dangerous proportions.

The increase in attacks in this area was highlighted in a news item published by Armed Maritime Security (AMS)* recently quoting the IMB also said in December that 44 pirate incidents were reported in 2012, compared with 25 in 2011. Many other attacks have gone unreported.

The bureau also said many other attacks have gone unreported off West Africa. It also said that most of the pirate attacks appear to be the work of Nigerian crime syndicates that have been operating in their own oil-rich country for years.

"Pirates in West Africa is a serious problem," said IMB Director Pottengal Mukundan.

"Pirates are getting quite audacious, with increasing violence being used."

While the high-profile piracy by Somali gangs in the Gulf of Aden and the Indian Ocean appeared to be declining, largely due to the intervention of international naval task forces, attacks off West Africa were increasing as the region's oil production steadily mounts and tanker activity intensifies.

23

INDUSTRY – ANTI-PIRACY The countries around the Gulf of Guinea are reportedly losing $2 bill a year to maritime crime, AMS said.

Some examples of pirate activity against tanker were given. These included an attack on 18th August on the British tanker Anuket Emerald, which was seized by 16 heavily armed pirates in the Gulf of Guinea, the pirates' main operational zone, off Lome. Most of its cargo of 3,450 tonnes of oil was transferred to another tanker, Nigerian authorities reported.

The pirates held the tanker for five days before releasing it. Some of the stolen oil was traced to a tank farm near Lagos, Nigeria's main port and commercial centre.

Ten days later, the 74,990 dwt tanker Energy Centurion was seized by pirates as the vessel lay in the Lome Anchorage off the Togo coast. After a brief gun battle with a Togolese navy vessel, the intruders took the Greek-owned tanker and its crew of 23 Russians and a Greek Master.

The pirates stole 3,000 tonnes of its 50,000tonne cargo of oil products and disappeared. A French warship found the tanker the following day off the coast of Togo, its crew unharmed.

"It's not piracy; it's robbery," an official of the owner-operators, Golden Energy Management in Athens, declared at the time.

"The tanker was carrying gasoil and the robbers just wanted the cargo."

In another incident on 5th September, 20 gunmen in four speedboats attacked the Singapore-flagged tanker Abu Dhabi Star 1 4 nautical miles off Lagos.

"Our radar picked up four unlit boats," the tanker's Indian Master, Capt Aron Chandran, told the BBC. "They were much bigger than the standard boats here. They had twin engines and approached very fast ... on both sides of the ship. Each boat had five well-armed people on board," he said.

The 23-man Indian crew took refuge in the citadel. The ship's operator, Pioneer Ship Management Services of Dubai, said the pirates stole several thousand tonnes of its US-bound cargo of Nigerian crude and fled 10 hours after the hijacking.

On another attack on 28th August, pirates seized a Greek-owned tanker off Togo as an anti-piracy conference was being held in the Togolese capital, Lome. The raiders offloaded 3,000 tonnes of fuel onto barges and disappeared along the coastline.

None of the seafarers on board any of the tankers were harmed in these attacks but the pirates frequently use violence and several

seafarers have lost their lives recently.

Off West Africa, the pirates mainly focus on stealing the tankers' oil, which they load on board other tankers operated by criminal syndicates, many of them based in Nigeria, to sell in African, Asian and European markets using forged documents.

Some maritime security specialists suspect many of the attacks are masterminded by a single syndicate with insider access to oil industry and tanker company data on sailings and cargoes.

Nigerian syndicates have been conducting such operations for years in the Niger Delta, the country's main oil-producing zone, where they steal thousands of barrels of oil every day.

Industrial-scale theft of oil in Nigeria, Africa's leading oil producer, has become a national security threat, with the state losing TO $1 bill a month, AMS reported. *AMS is the maritime division of Twenty Committee Risk Management (XXCRM), which was founded in 2009 by former members of the Foreign and Commonwealth Office in partnership with British and Finnish Military Officers, operating off the east and west coast of Africa, the Mediterranean and the Indian Ocean.

Identifying HRAs for route planning Jeppesen has introduced piracy update software in co-operation with Bergen Risk Solutions.

The new feature can be added to the company’s C-MAP OceanView route planning system. The information, covering the location of recent and historical pirate attacks, is stored and disseminated, thus allowing the operator to quickly identify high risk areas while route planning.

According to Arild Nødland, CEO of Bergen Risk Management, the chart overlay contains all of the so called ‘official’ piracy incidents, ie data collected, collated, verified and disseminated by the military forces operating in the High Risk Area

24

(HRA) in the GoA/Indian Ocean, plus information from the US Office of Naval Intelligence and IMB piracy Reporting Centre worldwide.

Due to the heightened activity off West Africa, especially the GoG, in addition the information contains Bergen Risk Solution’s own data on Nigeria. Nødland claimed to have an extensive network of security contacts in the oil and gas industry that is not shared with the IMB. He explained that an added advantage of storing and disseminating the information on pirate-related incidents was being able to take on the role of ‘expert witness’ in a dispute.

“We have already used the chart overlay in support of at least two clients in legal disputes over the risk of piracy. The charterer(s) did not want to pay for armed teams that the owner(s) had hired. We used the piracy update as one of several supporting arguments in support of the owner,” he explained.

Ståle Høylandskær –Jeppesen’s Marine Services’ key account manager also explained that the solution can be used as a

part of Jeppesens OceanView system together with Jeppesen’s Professional+ digital charts. In applicable ECS/ECDIS systems, the information can be displayed on ENCs. When displayed on applicable ECDIS systems, the information comes in the form of another overlay in the same way as other data can be displayed, such as weather data – all of which are approved as a part of the ECDIS type approval process.

The data download is triggered by the user and can be accessed whenever and wherever the users preferred, Høylandskær said.

As well as being used for route planning on board vessels, it is also used by owners, operators and the insurance industry. Its coverage is worldwide and it will report any criminal-related activity against vessels, regardless of the ship’s location.

Høylandskær said that the advantage of using this particular solution is that first and foremost, it can be displayed directly on top of detailed digital charts. Update files are small and can be downloaded on most vessels – even those with the most basic communication set up, eg e-mail.

TANKEROperator January/February 2013

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Manuals proliferating the market With maritime security fast becoming a separate sector of the shipping industry, various guides are now being produced, three of which are highlighted below. irst, Oxberry Risk Strategies has launched a Maritime Tactical Security manual. This manual has been produced in order to ensure that every person with security related responsibility for their crew’s safety is equipped with the latest information in relation to the tactical aspects of utilising the services of armed guards on board their vessels.

While there are numerous resources and releases of interim guidance on the use of armed guards from various governmental and non-governmental maritime organisations, none of these guidance notes address the essential issues of interfacing with maritime security providers, or go into any detail on the operational procedures or standards that should be expected, Oxberry claimed.

This publication will be of assistance for

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26

anyone with direct responsibility for either booking, or supervising, an armed security team to serve on board their vessel(s). It contains security industry’s ‘insider tips’ - thus allowing the separation of the unscrupulous security providers from the credible ones.

Even with the advent of GUARDCON, there is still ample scope for some of the poorer security providers to take advantage of a CSO (or their designate) that is largely uneducated within the area of armed security providers, Oxberry warned.

The manual is specifically available to the following personnel who will find it of great use and reference, such as Masters, CSOs, fleet superintendents, HSQ managers, fleet managers and DPAs, the company claimed.

Oxberry stressed that the main aim of the manual is to ensure that:

The safety and security of vessels are optimised and never unnecessarily compromised.

All vessels within a fleet receive the exact same levels of service and excellence – regardless of the TL (Team Leader), or security team composition.

The embarked armed security team operates within the parameters of any relevant established legal framework and that all relevant laws, regulations and conventions are met and adhered to.

An ‘aide memoire’ is to hand in order to serve as a point of reference when interfacing with the security team, or your nominated maritime security provider.

Second guide The second guide under the spotlight was

TANKEROperator January/February 2013

INDUSTRY – ANTI-PIRACY published by the Nautical Institute (NI) last November.

Called Maritime Security – a practical guide, it is aimed at providing a comprehensive and practical guide to making vessels truly secure and also creating a real security culture that works both on board and ashore.

Since the ISPS Code came into force in 2004, there have been significant developments in the training, information and products and services available to Masters and to company and ship security officers. At the same time, the number and sophistication of the threats to security have also increased.

Author Steven Jones explained that those responsible for vessel crews, cargoes and the vessels must continue to develop a security management system that works on board.

“People are the key to security and this new guide looks to develop the ways and means of creating a security management system which has the human element at its core. It explores not simply the rules and lists of requirements but also the implications of failure and the steps to developing successful maritime security techniques.”

As maritime director of the Security

Association for the Maritime Industry (SAMI), the primary focus for Jones is to bring security techniques and effective management to the attention of crews of merchant vessels, office personnel and ship operators.

“Whether fighting pirates, stowaways or countering terrorism, true security begins when the Master and crew work within a system they respect, understand and appreciate,” he said.

In addition to a decade of on board experience as a navigation officer, including a pirate attack, he has advised numerous shipping companies on security planning and has worked for insurers, publishers and professional bodies.

Threats examined The book examines the threats to maritime trade and to specific ship types, before discussing in detail how the ISPS Code came into being and its underpinning principles and requirements. Subsequent chapters focus on the practicalities of security planning, shipboard procedures and equipment and how to make security work – including the use of armed guards.

We are a London based, independent and international security and business risk consultancy focused on supporting the maritime and offshore oil and gas sectors. We deliver high end maritime security services and risk mitigation planning, intelligence and support to shipping organisations and offshore oil and gas exploration projects in the Middle East, Africa and South East Asia

Another recent offering comes from Control Risks, which has launched a new web-based maritime information portal - Control Risks Maritime Security Online.

This portal has been designed to help companies identify, assess and mitigate key risks in the maritime environment by providing a range of options to monitor, evaluate, predict and analyse all incidents, trends and developments in the global maritime sector, the company claimed.

Companies can access a consolidated set of data to assist them in evaluating the risks to their maritime assets, whether they are vessels, or static assets. The service can also be tailored enabling subscribers only to receive alerts and analysis, which are relevant to their activities.

Some of the key features of the new service include: Interactive mapping.

Forecasts, advisories and analysis.

Alerts for journeys, assets and monitored areas.

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Vessel tracking.

Port risk ratings.

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TANKEROperator

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27

INDUSTRY – ANTI-PIRACY

What are the rules for using force?

Security firm Ambrey Risk has examined the effectiveness of the 100 series rules for the use of force by analysing articles and various flag states’ legislation. ith the 100 Series Rules for the Use of Force attracting considerable attention from the key stakeholders in the industry, Adam Swierczewski, Ambrey Risk’s corporate and legal affairs manager has made observations from an industry perspective.

The 100 Series is said to be designed to ‘alleviate uncertainty’ and provide ‘clear legal basis for acts of self-defense’.

At the moment individual private maritime security companies (PMSCs) submit their Rules for the Use of Force (RUF) to flag states, as a part of the flag state approval process. BIMCO has already produced one set of guidelines on the RUF, outlining the main concepts and measures that should be implemented by PMSCs. The question is whether a universal set of RUF can be produced in view of international and national laws; and to what extent would it bring practical benefit.

The modern international concept of an individual’s right of self-defense is a result of cross-jurisdictional effort that has evolved over the centuries and is now internationally recognised and present in the legal systems of most civilised nations.

One of the major concerns of many parties involved in the industry and affected by the 100 Series Rules (which the authors of the document rightly recognise themselves) is the fact that the right of self-defense may be interpreted differently by individual jurisdictions. Moreover, in the event of an incident countries could be also involved in arguments over jurisdiction, what has been exemplified by the Enrica Lexie case.

At a core level, ramifications of the right of self-defense are universally agreed and implemented into national laws in a similar way, often reflecting the wording of the European Convention on Human Rights. By way of example, constitutions of Bahamas and Antigua & Barbuda provide near identical references to what degree of force should be used in self-defense and in what

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28

circumstances. A degree of correlation can be found in the legal systems of Cyprus and UK. Even where similarities in the wording used are not as obvious, as is the case with Panama, the underlying foundations remain the same.

Bahamas Article 16 of the Bahamas Constitution provides that lethal force will not be regarded as contravening the law if such force was ‘reasonably justifiable for the defense of any person from violence, or for the defense of property’.

Antigua & Barbuda Near identical wording is included in Antigua & Barbuda’s law stating that ‘such force is reasonably justifiable for the defense of any person from violence, or for the defense of property’.

In addition, force can also be used in selfdefense in order to lawfully prevent the commission by a person of a criminal offence.

Cyprus Under the Constitution of Cyprus, lethal force can only be used ‘in defense of person, or property against the infliction of a proportionate and otherwise unavoidable and irreparable evil’ and must be ‘no more than absolutely necessary’.

United Kingdom The UK does not have a codified constitution and, as such, the right of self-defense stems from the common law, some codified primary sources of legislation and the ECHR .The basic position is that a person may use such force as is reasonably necessary in the circumstances.

What is ‘reasonably necessary’ is to be decided in view of particular circumstances but in any event the concept incorporates necessity and proportionality of defensive response.

Panama Article 32 of the Penal Code states that a person does not commit an offence if such person acts in self-defense of ‘oneself, his

rights, or a third person, or property, if circumstances so require’. The circumstances include ‘existence of an unjust aggression, actual or imminent’. The force must however be used rationally and not in excess of what is necessary to repel the attack.

The above analysis demonstrate that selfdefense is generally implemented in accordance with the same core principle – the evil caused shall be lesser than the evil sought to be avoided.

This approach is closely related to necessity and proportionality of one’s actions and reflected in the Series 100. Nevertheless, despite clear agreement on the existence of international principles governing the concept of self-defense, seamless and universal application cannot be guaranteed by the states in the military context, let alone in relation to utilisation of citizen’s constitutional right of self-defense in commercial security The problem can be exemplified by a debate at an international level in 2003, when the US invaded Iraq. Some countries believed that US intervention was entirely pre-emptive in nature and therefore could not be justified as selfdefense, due to the lack of ‘imminent threat’.

The other group of countries argued that although, reliance on pre-emptive actions has historically been avoided (ie the Cold War), the use and interpretation of ‘anticipatory defense’, or broader pre-emptive action should be changed in the post 9/11 era of global terrorism.

Openly endorsed It has been argued that in order to achieve a success the 100 Series needs to be openly endorsed by the states. Whether this would bring a significant change is debatable; in view of the fact that at least some of the states have already taken steps to monitor PMSCs by implementing accreditation processes and thereby reviewing not only the RUF but also other relevant documentation, including the standard operating procedures. In any event flag state approval will not be issued without prior submission of the RUF. Most of the well-

TANKEROperator January/February 2013

INDUSTRY – ANTI-PIRACY established companies operate under RUF drafted by reputable lawyers, often established in many of the most common flag states.

Therefore, it comes as a no surprise that many RUF are already remarkably similar, being based on the same sources. Currently utilised RUF would have by now been in use on many transits and seen by most of the ‘popular’ maritime authorities. Thus, in the view of many, the nuanced status quo may be more attractive than chasing an unattainable nirvana.

Finally, no state will guarantee that following a set of universal industry agreed RUF will provide amnesty against prosecution. Cases of this nature are fact dependent and will always be assessed in view of the applicable law. It is for this reason that the 100 Series cannot provide ‘clear legal basis for acts of self-defense’ as such basis is already present in the applicable law and subject to exclusive judicial interpretation.

Any set of RUF, unless legislated on, will be only a set of guidelines that help to mitigate the risk of excessive use of force and any associated damage. No certainty can be safely assumed. This is the inherent risk of operating with commercially generated armed

security operating under self-regulated framework.

Ambrey Risk has also announced that the company is expanding further this year with the appointment of Mick Clifford OBE as their new full-time training director.

Clifford served for 24 years in the British Army with 19 years in 22 Special Air Service.

He was awarded the OBE in 2001 and commissioned to Captain.

He has considerable first-hand knowledge and experience of working in hostile environments. On leaving the military, he cofounded Phoenix Close Protection and as managing director grew the company to be one of the UK’s largest and most successful training companies, which was then acquired

by Armor Group in 2005.

Training director Since then Clifford has been working in the private security sector with the US Government and Department of Defence, designing and delivering asymmetrical warfare programmes to the US Forces deployed worldwide. He joined Ambrey Risk as a full-time training director towards the end of 2012, after a short

period as sub-contracted training manager.

James Gasson-Hargreaves, Ambrey Risk’s business management director, said: “The international security sector is a growing market and although much of our business is conducted overseas, we rely heavily on our Herefordshire head office staff to manage these operations - training is seen as a key tenet of our growth and diversification strategy.

“Mick Clifford is working with the City & Guilds to provide the national standard for training MSOs (marine security operatives), his unrivalled expertise in this area will be invaluable to Ambrey’s intention to set the benchmark for regulatory compliance and professionalism in TO maritime security,” he concluded.

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Ship Visit Reports Internal Audits Navi Audits

Overdue Items Report Ship Reports Oil Major Reports

Marine Injury Reports Vessel/Cargo damages Machinery damages Environmental incidents Near Misses Non Conformities

January/February 2013

Mark Clifford, OBE.

TANKEROperator

Vetting Status Report Internal vs. External Deficiencies Key Performance Indicators info#chemserve-marine.com www.chemserve-marine.com

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INDUSTRY – FLAG STATES

IMO targets - new amendments enter force S

peaking at the opening of the IMO’s first meeting of 2013, the Sub-Committee on Fire Protection, in early January, IMO secretary general Koji Sekimizu told delegates that it was his vision to halve lives lost at sea and eradicate pirate attacks.

Ensuring the release of all hostages can, and should, be legitimate targets, for the organisation and for shipping in the years to come, he said.

He also said that the number of lives lost annually at sea had been over 1,000 for each of the past five years. An ambitious, but achievable target would be to aim for a 50% reduction, to no more than 500 lives lost annually, by 2015.

He said that the matter could be addressed at the IMO Symposium on Future Ship Safety in June.

One of the mechanisms that could help reach this target was his own initiative for an ‘Accident Zero’ campaign, in conjunction with the International Association of Marine Aids to Navigation and Lighthouse Authorities (IALA).

He added that first, the IMO should consider establishing a mechanism for the collection and collation of statistics on lives lost to enable formal, official figures to be produced.

With regard to piracy attacks and hostage taking, Sekimizu said that 2012 had been an encouraging year, having seen a sharp reduction in successful piracy incidents off the coast of Somalia and in the Indian Ocean. However, 12 ships and 159 people were still in the hands of Somali pirates at the beginning of this year.

He identified continuous protection by navies in the Gulf of Aden, consistent application of Best Management Practices (BMP) and proper handling of armed security guards under national policies, taking into account discussions at IMO and the ISO, as key factors.

He also said he would accelerate capacity building under the Djibouti Code of Conduct and urged IMO members to maintain naval protection forces until the risk of piracy had been sufficiently eliminated from the Indian Ocean and the Gulf of Aden and to urge shipping industry leaders to ensure continuous implementation of the BMP. 30

Lives lost at sea halved and piracy eradicated should be the IMO’s targets in the years to come.

On a wider front, he confirmed his support for the initiatives of the UN and the international community to help Somalis re-establish law and order and revive their own livelihood and economy and for countries in western Africa to enhance their maritime security and also aim for piracy-free waters in that region.

New amendments Several convention amendments entered into force at the beginning of this year.

These included the entry into force of the amendments to SOLAS aimed at preventing accidents during lifeboat launching.

The amendments, adopted in May 2011, added a new paragraph 5 to SOLAS regulation III/1, to require lifeboat on load release mechanisms not complying with new International Life-Saving Appliances (LSA) Code requirements to be replaced, no later than the first scheduled drydocking of the vessel after 1st July 2014 but, not later than 1st July 2019.

In addition, a new chapter 4 on energy efficiency for ships was added to MARPOL Annex VI, to make mandatory the Energy Efficiency Design Index (EEDI), for new ships, and the Ship Energy Efficiency Management Plan (SEEMP) for all ships.

Other amendments to Annex VI added new definitions and the requirements for survey and certification, including the format for the International Energy Efficiency Certificate (IEEC).

The regulations apply to all ships of 400 gt and above. However, under regulation 19, flag state administrations may waive the requirements for new ships up to a maximum of four years.

EEDI is a non-prescriptive, performancebased mechanism that leaves the choice of technologies to be used in a specific ship

design to the industry. As long as the required energy-efficiency level is attained, ship designers and builders would be free to use the most cost-efficient solutions to comply with the regulations.

SEEMP establishes a mechanism for operators to improve the energy efficiency of ships, as they are required to keep a ship specific plan on board.

Other MARPOL amendments to enter into force on 1st January, include amendments to MARPOL Annex VI designating certain waters adjacent to the coasts of Puerto Rico (US) and the US Virgin Islands (US) as the US Caribbean Sea Emission Control Area for the control of emissions of NOX, SOX and particulate matter under regulations 13 and 14 of MARPOL Annex VI. The new US Caribbean Sea ECA takes effect on 1st January 2014.

In addition, amendments to MARPOL Annex IV for the prevention of pollution by sewage, include the possibility of establishing special areas, such as the agreed designation of the Baltic Sea as a Special Area.

The revised MARPOL Annex V regulations aimed at the prevention of pollution by vessel garbage also entered into force, following a comprehensive review to bring it up to date.

The main feature of the revision is the prohibition of the discharge of all garbage into the sea, except as expressly provided otherwise in the Annex. Cargo residues and cleaning agents and additives listed in the amendments must only be considered for discharge if they are not harmful to the marine environment.

The changes also include the updating of definitions; the introduction of an ‘en route’ requirement for the discharge of garbage at sea; and the regrouping of the categories for the purpose of the garbage record book.

TO * These figures are from statistics generated by the secretariat based on reported casualties collected from various sources, including non-official reporting. They are neither accurate, nor comprehensive, the IMO said.

TANKEROperator January/February 2013

INDUSTRY – FLAG STATES

Liberia’s stability offers new investment possibilities Down the years, the Liberian flag state has perhaps been rather unfairly linked with the country’s domestic politic upheaval in the past, as Liberia wrestled with various dictatorships, following years of civil unrest. owever, for a couple of decades, the registry itself has been highly regarded since putting its house in order and is now a leading member of the IMO, being recently welcomed back into the organisation’s Council.

Tanker Operator talked with David Pascoe, head of maritime operations & standards, Liberian International Ship & Corporate Registry (LISCR), the US-based manager of the Liberian Registry about the state of affairs in the country itself, the registry’s current growth pattern and other maritime questions facing the world’s second largest flag state.

“We continue to surpass all-time tonnage records and closed 2012 with 3,900 ships, aggregating more than 131 mill gt,” he said regarding the registry’s sustained growth.

Talking of Liberia’s current situation, Pascoe explained that since 2005, Liberia has re-established political and economic stability under the leadership of Africa’s first female elected President, Ellen Johnson Sirleaf.

President Sirleaf’s reform initiatives have significantly contributed to increasing transparency, strengthening the rule of law, growth in GDP and ultimately making Liberia an attractive option for foreign investment, Pascoe claimed.

Under her administration, Liberia has restored its relations with its West African neighbours and the rest of the world, reemerging as a leader in the region and the Economic Community of West African States (ECOWAS).

Liberia has maintained a stable position as a constitutional republic and representative democracy that is free from political and financial risk, accessible to reputable businesses, entrepreneurs and investors alike.

Indeed, Liberia’s progress has been so spectacular that the World Bank listed Liberia

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January/February 2013

as one of the 10 most improved business reformers in its Doing Business 2010 report, which is a remarkable achievement in a short span of time. The economic prospects in Liberia within the next 10 years are very promising, not least since the country entered in a three-year offshore drilling and exploratory programme with the US energy major Chevron Corp in 2010.

“This is all good news for Liberia, and for the Liberian Registry,” Pascoe said. “This significant growth underlines the stability, as well as the effectiveness and achievements, of the ship registry. It is our belief that the unparalleled success of the Registry over the last decade, in terms of safety records and growth, serve as further testament to the quality reputation of Liberia’s Ship Registry in the eyes of the global community.”

Turning to the IMO, Pascoe said that decisions taken at the IMO affected a substantial part of the world's fleet, as Liberia is the world's second largest registry. Liberia is also the second largest contributor to the IMO budget. From the very beginnings of IMO, Liberia has been an active and ardent supporter of the goals and objectives of the organisation, to provide safe, secure and efficient shipping on clean oceans by promoting safety, security and protection of the marine environment, he said.

He continued by saying that over several years, decisions at the IMO have been increasingly influenced by political expediency with less regard to the technical considerations.

“It is important to remind ourselves of IMO’s purpose as summarised by Article 1(a) of the IMO Convention: ‘to provide machinery for co-operation among governments in the field of governmental regulation and practices relating to technical matters of all kinds affecting shipping

TANKEROperator

LISCR's David Pascoe.

engaged in international trade; to encourage and facilitate the general adoption of the highest practicable standards in matters concerning maritime safety, efficiency of navigation and prevention and control of marine pollution from ships.’

“As a member of the IMO Council, Liberia is more effectively involved in the overseeing of the work programmes of IMO Committees and Sub-Committees, the budget and the appointment of the Secretary-General,” he said.

Explaining the recent appointment of the registry as a recognised organisation (RO) by the Indian Register of Shipping, Pascoe said that Liberia would act on behalf of vessels operating under its flag.

“We look forward to continuing to work together so that IRS can discharge its delegated authority, in accordance with the registry’s established high standards. The Liberian Registry adopts a proactive approach to the service, which it provides to the record numbers of ships which fly the Liberian flag.

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INDUSTRY – FLAG STATES “This involves using our own highly trained staff to carry out audits, inspections and certification and, where appropriate, delegating authority for those activities to ROs, which we know and trust.

“Subsequent to IRS’s admission to IACS as a full member, we conducted our own audit of IRS’ systems and procedures and are satisfied with their competence and capability to provide statutory services in accordance with Liberia’s robust standards. India is a global economic power which generates increasing demand for shipping. It is a very important market for the Liberian Registry.

“As we increase our market share in India, we have great confidence in IRS’s ability to work alongside us to help maintain the quality of our fleet to the highest standards and beyond,” he said.

Talking about the thorny question of the Ballast Water Management Convention, he said that Liberia had been working with International Chamber of Shipping, BIMCO, INTERTANKO, INTERCARGO and others at the IMO to address some remaining issues of concern within the Convention to assist with the smooth implementation when the convention enters into force.

These include: 1) The efficacy of BWMS after obtaining Type Approval under the current GB guidelines; 2) Availability of BWMS and sufficient facilities to install systems; 3) Survey and certification requirements for ships constructed prior to entry into force; and 4) Port State Control sampling and analysis

Liberian Registry’s fleet composition In percentage terms, the fleet is comprised of the following: Bulk carrier and drycargo: 18 % Containerships: 27 % Tankers: 28 % Offshore vessels: 8% By tonnage, or carrying capacity: Bulk carrier and drycargo: Containerships: Tankers: Offshore vessels:

26 % 29 % 38 % 4%

The balance of the fleet consists of speciality vessels, such as passenger liners, refrigerated cargo vessels and ro-ros.

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procedures to ensure that enforcement measures do not go beyond the systems’ original testing parameters.

“Liberia requires manufacturers of BWMS to apply for Type Approval (TA) from the administration, regardless whether they have TA from another administration. Our TA certificate will include any limitations imposed on a BWMS to operate under varying working and operational conditions. We believe this is information that should be beneficial to shipowners,” Pascoe explained.

Turning to the subject of piracy, specifically off West Africa, Pascoe said that although cargo theft and piracy in the Gulf of Guinea (GoG) is mainly targeting product/special commodity tankers, the situation affects all types of vessels and our advice regarding activities in the GoG is provided to all vessel owners.

Liberia requires implementation of ship security measures on board equivalent to ship security level 2 operating in the affected areas and for all vessels to remain well clear and light (light as opposed to anchored) off the GoG coastal areas to the extent possible. “We advocate the use of self-protection measures as developed in Best Management Practice (BMP) against piracy,” he said.

Interim guidelines for protection against piracy in the GoG region as developed by industry have also been incorporated into a Liberian Marine Security Advisory, which encompasses security requirements for Liberia-flagged vessels navigating in the GoG high-risk areas.

“In addition, we provide relevant frequent situation updates when available,” he explained.

The Liberian Registry is the first and so far the only major open registry to have trained a worldwide network of more than 280 nautical inspectors and more than 150 qualified security and safety auditors in both the International Safety Management (ISM) and International Ship and Port Facility Security (ISPS) Codes, Pascoe claimed.

He explained that by harmonising the overlapping requirements of these international codes, the Liberian Registry seeks to provide shipowners with convenient, efficient and cost-effective certification services. Shipowners can ensure compliance while reducing the burden on ship and shore staff, as well as reducing survey expenses by enrolling in Liberia’s optional Harmonised Audit Programme.

In addition, the registry has also trained its global network of auditors to conduct Maritime Labour Convention 2006 (MLC) inspections. The administration offers

shipowners and shipmangers a block fee arrangement (BFA) for verification and certification for compliance with MLC 2006.

The BFA includes the fee for review and acceptance of the shipowners’ Declaration of Maritime Labour Compliance (DMLC) Part II, initial and intermediate verification inspections and issuance of the MLC certificates and amendments during its fiveyear duration term.

The following IACS member classification societies are also recognised for conducting surveys and issuing statutory certificates of behalf of Liberia: American Bureau of Shipping (ABS).

Bureau Veritas (BV).

China Classification Society (CCS).

Croatian Register of Shipping (CRS).

Det Norske Veritas (DNV).

Germanischer Lloyd (GL).

Indian Register of Shipping (IRS).

Korean Register of Shipping (KR).

Lloyd's Register (LR).

Nippon Kaiji Kyokai (NK/ClassNK).

Polish Register of Shipping (PRS).

Registro Italiano Navale (RINA).

Russian Maritime Register of Shipping (RS).

A close association between the societies and the Liberian Administration’s technical department has developed from the many years of positive exchanges between each class society and the registry’s technical staff.

“As a consequence of the close co-operation between the registry's technical staff and the class societies, Liberia has implemented consistent interpretations of international rules and regulations to facilitate clear and unambiguous technical information for use in new vessel construction by major shipyards around the world and to ensure continued compliance and safe operation of existing vessels under the Liberian flag,” Pascoe said.

As for the tanker sector, the registry employs several ex-tanker Masters and exclass surveyors who were involved with the Common Structural Rules (CSR) and IMO Goal Based Standards and who are monitoring the so-called eco-ships that are offering potentially large fuel savings compared with existing tankers.

“We are a supporter and encourage use of TMSA, which, if implemented properly, enhances safety management. However, we have concerns regarding complaints we have received that some vetting schemes seem to be establishing their own requirements for ships and crews that go beyond international regulations with little or no justification for their benefit to safety, security or protection of TO the environment,” Pascoe said.

TANKEROperator January/February 2013

INDUSTRY – FLAG STATES

ICS updates flag state performance table The International Chamber of Shipping (ICS) has published its latest ‘Shipping Industry Flag State Performance Table’. his can be downloaded from the homepage of the ICS website (www.ics-shipping.org) ICS director external relations, Simon Bennett explained: “Our table is intended to encourage shipowners to maintain a dialogue with their flag administrations to effect any improvements that might be necessary in the interests of safety, the environment and

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January/February 2013

decent working conditions.”

This year’s ICS table included some new flag states, which seemed to be increasingly popular with some shipowners, such as Moldova and Sierra Leone. They joined the ranks of flags such as Bolivia, Cambodia and Mongolia in being revealed by the table to have a somewhat patchy performance.

ICS stressed that the table included what

TANKEROperator

should be regarded only as potential positive indicators. There may be good reason why a flag is lacking one, or two of these, especially if it has had too few port calls to gain a place on certain port state control ‘white lists’, or has not yet ratified one or two recently adopted international conventions, the organisation explained.

Bennett said: “The absence of a couple of

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INDUSTRY – FLAG STATES positive indicators is probably not very important. But if a flag is lacking a large number of positive indicators then shipowners may want to ask serious questions.”

ICS emphasised that, in today’s modern global industry, distinctions between so called traditional flags and open registers were increasingly meaningless and actually unhelpful.

For example, the ICS table showed that many open registers, like Liberia and the Bahamas, were among the very top performers alongside several European registers, or flags such as Japan, Hong Kong and Singapore, that might be expected to perform well.

In the same way that, through mechanisms such as the ISM Code, the shipping industry is

committed to the concept of continuous improvement and transparency with respect to its performance, ICS believed that the same principles applied to the performance of flag administrations.

ICS has therefore reiterated its support for the decision by IMO to make its Member State Audit Scheme mandatory, the TO organisation said.

Marshall Islands registry focuses on offshore sector The Republic of the Marshall Islands (RMI) Registry is the third largest in the world surpassing 87 mill gt and 2,780 vessels by the end of October 2012.

Vessel types include, among others, oil tankers, LNG/gas carriers. However, an increasing group of vessels in the fleet includes mobile offshore drilling, production and service units.

Over the past five years, RMI’s mobile offshore fleet has grown by nearly 71% in terms of gross tonnage. For example, several

of the world’s largest drilling companies have signed up to the registry.

Charles McHardy, who joined IRI’s Houston office in November 2011 as vice president, technical, has been employed for over 30 years with Det Norske Veritas (DNV), last serving as manager, Maritime Gulf District. He is currently responsible for the RMI’s worldwide offshore fleet.

“The Registry’s dedication to its growing offshore customer base is apparent through its expanding presence in key offshore sectors,” said McHardy. “This provides owners and operators local access to

regulatory and technical assistance for offshore operations.”

“Singapore is a hub for the offshore industry in the region and home to a growing number of owners as well as technical and financial companies focused on oil and gas operations. For the RMI Registry, it is important to continue supporting the specialised needs of offshore clients in Singapore, a country whose owner and operator base maintains a significant segment of the Registry’s fleet,” concluded Shawn Tan, country manager of IRI's Singapore office.

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TECHNOLOGY - COATINGS

High performance coatings for tanker operators Recent years have seen tanker owners continue the trend of specifying silyl acrylate antifouling coatings that are designed to deliver high performance and long service life together with measurable improvements in fuel efficiency. ey concerns for owners extend beyond in-service performance.

They also want to specify a coating with a high solids content and low volatile organic compound (VOC) profile. Coatings must provide long term protection – typically 60 months between drydockings – but should have reduced application time and paint usage.

For tanker owners in particular, the coating must be able to perform consistently across a range of trading routes and conditions and at varying service speeds. For this to be possible, the coating must have a predictable polishing rate, which allows for a tailor-made solution matched to the vessel’s profile and sailing pattern.

The key building block of an effective antifouling coating is the binder. The specific nature of the silyl acrylate binder results in a controlled hydrolysis reaction, providing linear and consistent self-polishing behaviour, which ensures the consistent release of active ingredients and also minimises the leached layer.

In addition, the chemical hydrolysis reaction with water results in a continuous, self-smoothing effect of the top layer. During service this will result in smoothing of the hull, reducing the frictional drag of the vessel and thereby reducing fuel consumption.

K

PPG Protective & Marine Coatings (PPG) has been working on the development of advanced antifouling paints based on silyl acrylate binders in co-operation with clients and suppliers for more than 20 years. As a result of this research and development, PPG has optimised the composition of its silyl acrylate antifouling to the point where it is considered to be one of the leading premium antifouling solutions available.

One of PPG’s clients is Unicom Management Services (Cyprus), which is a member of the Sovcomflot Group but operates as an independent shipmanagement company.

Unicom manages a fleet of 91 vessels totalling about 7.2 mill dwt, of which 98% are tankers.

Some 31 of these tankers are trading under longterm charters in the harsh, icy conditions of the Arctic during the winter months.

Paramount importance A combination of the highly aggressive marine conditions that these vessels are exposed to and the need to manage operational costs makes optimal efficiency, low maintenance and high performance of paramount importance in selecting hull coatings.

Unicom first chose PPG’s SIGMA SYLADVANCE 800 premium silyl acrylate

antifouling system in March 2010, for application on the tankers SCF Byrranga, SCF Aldan and SCF Baltica. In addition to keeping the ship’s hull free from fouling, the application of silyl-acrylate polymer technology also contributes positively to the hydrodynamics of the ship’s hull by reducing hull frictional drag and fuel consumed. The predictable product performance also allows for a tailor-made solution to each vessel’s profile and sailing pattern.

After application to the first three tankers, Unicom monitored the performance of the hull coatings and was able to immediately confirm an improvement in operational efficiency for each vessel. Following two years of in-service evaluation, Unicom decided in 2012 to convert eight more tankers and two bulk carriers to the antifouling system, bringing the total number of vessels that benefit from the energy efficient performance of the antifouling to 13.

SCF Unicom’s fleet manager noted that SIGMA SYLADVANCE had been “tested in aggressive fouling conditions where it delivered excellent performance results in addition to impressive fuel savings. As a result, we have decided to adopt this product for our future drydockings.”

TO

Following the application of SIGMA SYLADVANCE to three tankers managed by Unicom in 2010, two years later the coating was specified for a further eight tankers and two bulk carriers. Pictured after re-coating are the Suezmaxes Aleksey Kosygin and SCF Caucasus.

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TANKEROperator January/February 2013

CRUISE CONTROL

Setting the benchmark for reduced maintenance costs and guaranteed fuel savings.

At PPG, our knowledge in marine coatings technology is helping to increase vessel productivity and profitability with the SIGMAGLIDE® silicone fouling release system.

SIGMAGLIDE Coatings are specially formulated to provide optimal hull smoothness from the outset—for immediate fuel savings of up to 8 percent*. And, because it doesn’t contain biocides, it’s friendly to marine life. The tolerance of our coatings and the support provided by PPG’s experienced staff help our customers fit critical shipyard and ship owner schedules. Outstanding color and gloss retention as well as in-service durability reduce maintenance. Find PPG’s global marine products under the leading brand name SIGMA COATINGS®. Visit ppgpmc.com to learn how PPG innovation is helping the marine industry control costs and steer toward better performance.

The PPG logo and “Bringing innovation to the surface.” are trademarks of PPG Industries Ohio, Inc. SIGMAGLIDE and SIGMA COATINGS are registered trademarks of PPG COATINGS NEDERLAND B.V. The Pullmantur Zenith, and the above image, are properties of Pullmantur Cruises. *Statistic confirmed by customers.

TECHNOLOGY - COATINGS

You can’t manage what you don’t measure Utilising clean technologies and operational measures to increase energy efficiency across the maritime sector delivers a number of undeniable advantages*. his comes at a time when owners and operators are struggling to cover record-high fuel costs and seeking a competitive advantage, plus meeting increasing environmental regulations. In addition, charterers would also benefit as in most cases, they pay for the fuel.

Being able to accurately measure energy consumption is key to ensuring that efficiencies can be identified and any measures to reduce energy consumption are addressed. You wouldn’t embark on a New Year diet without a set of accurate scales.

Not only does increased energy efficiency of individual vessels help to reduce day-to-day operational costs, but also industry-wide improvements in energy usage will ultimately lower the macro costs of international trade.

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IP's Paul Robbins.

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By directly addressing and rectifying energy inefficiencies, shipping can contribute a ‘shot in the arm’ that the global economy needs and act as an engine of recovery and development. Moreover, technological and operational improvements also have the potential to significantly reduce greenhouse gas emissions and create incentives to invest and generate jobs in companies that are developing, or have already developed, proven fuel saving technologies through accelerated technology take-up.

However, in spite of the benefits supposedly available to all, there continues to be a disconnect between ’clean’ technology providers, who believe they have affordable solutions that will provide a measureable return on investment within a short period of time, and shipowners and operators who are wary of over inflated fuel savings claims.

Tom Boardley, marine director at Lloyd’s Register and chairman of the International Association of Classification Societies (IACS), recently expressed doubts over what he believed were unsubstantiated fuel savings claims based on theoretical modeling with no physical results. As time goes on, this disconnect will only lead to further delays in the adoption of the measures that the industry needs to provide certainty for investments.

The first step in helping shipowners and operators to realise the fuel and emissions reductions benefits of clean technologies fitted to new and existing vessels, is to increase the transparency of the fundamental data and analysis behind performance claims.

By standardising and monitoring data, owners and operators will have a universal benchmark to work from, which can also be used to contextualise and compare competing clean technologies.

Only recently, EU Climate Action Commissioner Connie Hedegaard and

Commission vice president Siim Kallas announced they intended to pursue such a monitoring, reporting and verification process in early 2013 - "A simple, robust and globallyfeasible approach towards setting a system for monitoring, reporting and verification of emissions based on fuel consumption is the necessary starting point [to any market-based mechanism].”

Limited Information Information is something that the independent performance monitoring providers can help with and in some cases are doing so already.

To measure is to know and real-time, automated performance monitoring enables the crew on board a vessel to take necessary actions early in response to changing conditions that can adversely affect fuel consumption.

From an onshore management perspective, real-time, on board performance monitoring enables long-term trends to be measured and analysed to enable faster and more precise decision making within the long-term goal of developing more efficient fleet operations.

However, as things stand, most shipowners and operators have limited information about the fuel consumption and the energy efficiency of their fleet. For most, performance analysis is carried out manually with operators comparing energy performance reports and audits in isolation against budget estimates.

Standardised independent approach As well as the gap in data, another piece of the jigsaw that is also missing is the standardisation of an independent approach used to measure the fuel savings of clean technologies and performance increase against a baseline - the ultimate requirement for the

TANKEROperator January/February 2013

TECHNOLOGY - COATINGS monetisation of the fuel saving. Access to an optimum level of fundamental data on fuel consumption, vessel performance and emissions will provide the foundation for calculating fuel consumption and therefore, demonstrate the real fuel savings available from clean technologies.

Hull coatings are the most widely used ecoefficient technology on the market and as a leading global marine coatings supplier, International Paint has the opportunity and responsibility to lead the way. However, it should not and cannot be up to hull coatings’ companies to set the parameters and methodologies by which their products are measured; a principle that is relevant to all clean technology and their manufacturers.

The best and most appropriate thing we can do is let independent, third party expert fuel and emissions monitoring organisations develop a standard model that can be applied to measure fuel consumption and the savings available through technologies. Tapping into accurate, high-quality and high-frequency fuel consumption and vessel performance data, collected from ships’ sensors monitoring engine torque, navigational systems and the speed log, throughout the service life of a vessel could become a fundamental way of improving operational efficiency of the global shipping fleet.

Ensuring independence is critical and the most responsible and effective way to generate credibility and accurate ecoefficiency benefits for clean technology manufacturers, which will serve to build trust with customers and the wider shipping industry.

Measuring the effect of clean technologies will present different challenges in newly built vessels and those vessels that have been retrofitted. For a newbuild there is no historical data, therefore it is only possible to measure change in efficiency during the inservice period, compared to sea-trial data.

Therefore it is more difficult to evaluate varying technologies, as each vessel will be slightly different. Another challenge is determining the cause of any change in performance and subsequent change in fuel consumption (eg, mechanical damage, hull fouling, propeller, engine efficiency, etc).

For retrofitting technology to existing vessels, it is possible to compare predrydocking data with post-drydocking data.

Using noon reports it is possible to measure performance changes, but the accuracy of the results will depend on the precision and integrity of the data. The challenge of determining the cause of any change (eg January/February 2013

mechanical damage, hull fouling, propeller, engine efficiency, etc) is still the same. In addition for retrofitting, the vessel must be trading in equivalent state (speed, draft, trim, etc) for the results to be meaningful.

Compensating for the effects of weather, as with all vessel efficiency measurements, is also critical in determining effect on efficiency. Again, automated systems will give the most accurate results.

To measure is to know Many shipowners and operators today have to rely on inadequate information and data to justify investments. If they don’t have confidence in the fuel and emissions reduction figures that are claimed, the take up of these technologies and further innovation will be stifled and customers will spend more on fuel than they need to at a time when budgets are

TANKEROperator

being significantly stretched and charterers increasingly scrutinising their fuel spend. With current technology and innovation there is the scope for a meaningful framework and roadmap for calculating fuel consumption and a level playing field provided for all.

Accurate measurements can only serve to challenge coatings’ manufacturers to continue to develop technology to better serve future demands for greater efficiency within the industry. Of course, the challenge for International Paint will be to embrace the opportunity and drive constant, measurable TO improvement to a recognised global standard. * This article was written by Paul Robbins, marine marketing director, International Paint.

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TECHNOLOGY - COATINGS

Hull performance monitoring Improved hull performance measuring will provide both environmental benefits and also reduce operational cost. ith the launch of HEMPASIL X3 in 2008, HEMPEL claimed to be the first paint supplier to offer a total package composed of 1) An efficient fouling release system.

2) A hull performance monitoring system.

3) A fuel consumption guarantee.

“It is our experience over the last five years that operators find it more and more relevant to be able to measure hull performance applying a transparent standardised methodology. We also believe this is the only

W

objective way to determine fuel saving claims of the eco-efficient coating technologies on the market today,” said Torben Rasmussen, Hempel’s group product manager.

Hempel said that the company believed that the right approach was to let an independent third party company do the measuring. “We should not as a paint company be the party that defines methodology and parameters to be measured,” Rasmussen stressed.

The company therefore supports Clean Shipping Coalition’s initiative to bring these issues forward at the IMO in order to get a

reliable and transparent standard for measuring hull and propeller performance.

“Today there is a number of companies offering hull performance programmes. But if the tanker operators fully should utilise the fuel efficiency potential of today’s advanced hull coatings, we really need a credible standardised way of measuring hull performance,” continued Rasmussen.

Hempel’s performance monitoring system SeaTrend is undertaken in collaboration with Force Technology in Denmark, the company TO explained.

A Hempel coated tanker seen about to leave drydock.

40

TANKEROperator January/February 2013

TECHNOLOGY - COATINGS

Jotun gives Kyma the nod Kyma’s ship performance has been verified compatible with Jotun’s hull performance measurement method.

The reliable and accurate measurement of hull and propeller performance allows owners to make both fuel-cost and greenhouse-gas (GHG) emissions savings, based on informed investment decisions, Jotun said.

Kyma claimed to be a pioneer of long-trend ship performance analysis and its Kyma Ship Performance (KSP) system has been used by shipowners to monitor ship performance since 1980.

There are more than 650 vessels with the system in operation today, the company said.

Jotun’s hull performance solutions combine the antifouling SeaQuantum X200 with a reliable and transparent method for measuring the impact of the coating on ship performance (Jotun hull performance measurement method) with a no-cure-no-pay business model.

According to Kyma’s managing director, Erik Hagestuen, “Having worked with shipowners to monitor ship performance for more than 30 years, we have seen first hand that there is a considerable fuel-cost and GHG-emissions saving potential related to improvements in hull and propeller performance.

“The no-cure-no-pay business model offered as a part of Jotun’s hull performance solutions, in combination with the reliable measurability offered by our KSP system, should make it possible for shipowners to quickly realise much of this potential.”

Jotun said that it commended Kyma on enabling fully transparent measurements of hull and propeller performance to be carried out. Geir Axel Oftedahl, Jotun’s director of business development, said: “Performance-based contracting is a corner stone in our hull performance solution. A prerequisite for performance based contracting is that the measurement methodology and data used to determine the outcome of the contract are available to both parties.”

Data from the Kyma ship performance diagnostic tool box for vessels in service gives information about the change in ship efficiency, both in graphic format and with calculated numbers for speed loss and the calculated fuel oil impact.

It is possible for the owner to enter events such as a drydocking, recoating of the hull, etc. The change in efficiency can easily be seen for the vessel after a docking and it can be quantified in terms of saved fuel oil, or less speed loss, Kyma said.

TO

With nearly a century’s marine paint and coating experience, Hempel can always provide the protection you need to keep business moving. We believe in working closely with you to understand your speci c challenges.

This enables us to supply a solution that not only keeps your vessel in prime condition, but that also makes sound nancial sense.

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Kyma's graphics can clearly show a vessels efficency change, as well as showing speed loss and fuel oil impact by numbers.

January/February 2013

TANKEROperator Typ 02 - Wave - 297x105.indd 1

2012-09-24 13:49:21

TECHNOLOGY - OPERATIONS - IT

Making the most of IT to save opex “There has been significant under-investment in IT systems in what is a conservative industry. However, management systems are a fraction of a company’s non-fixed costs,” said Dr Torsten Bussow, Germanischer Lloyd’s (GL) vice present, maritime software. ussow said that compared with annual investment in new vessels of around €100 bill, the annual software spend was only about €700 mill, or 0.7%. By comparison, the oil and gas industry invests some €12 bill in software per annum alone, which is around 3.5% of its capital investment of circa €340 bill.

In snapshots taken with 200 shipping companies in 2009 and 2012, GL was told that the companies’ IT budget investment would not strongly increase. However, around 50% of the respondents said that the budget would increase somewhat and 40% said that it would remain constant - surprisingly, as many as 10% said that their IT budget would decrease.

He thought that in general, tankers were ahead of the game in commercial shipping with the exception of the cruise vessel sector.

For tankers, vetting is the driving force, as those passing the inspections are more likely to gain employment with the major charterers. Such is its importance, many QHD and vetting departments now report directly to a tanker company’s managing director, Bussow said.

GL offers software solution to aid vessel operations across the board, not only to companies using GL class, but also to vessels

B

classed with other societies. The idea started with GL ShipManager about 10 years ago.

Today, the class society claimed to offer the most comprehensive and innovative portfolio in the industry.

Bussow cited several cases where good fleet management software available at an annual cost of €5,000 per vessel could have saved an operator many thousands of US dollars/euros.

These not uncommon incidents included: Unplanned offhire per day = $20,000.

Predictable equipment breakdownreplacement = $70,000.

Purchasing at 3% above best market prices = $25,000.

Small pollution incident = $60,000.

Avoidable structural damage in critical areas = $50,000.

Extra crew travel due to short term changes = $10,000.

One more office assistant for compliance work = $6,000.

Unmanaged development of foreign exchange rates = $50,000.

The original solution was recently supplemented by a fleet management portfolio, which was built up less than two years ago and continues to be enhanced.

Bussow explained that GL ShipManager remained the central platform with the other

software offerings being built around it, able to be fully integrated into the central system, plus one another.

For example, GL HullManager is a hull integrity solution, which has been developed to support inspections and thickness measurement processes based on an interactive 3D ship model. He claimed that GL was the only class society supporting 3D interactive software.

The hull is a critical part of the vessel and to avoid costly repairs several years into a vessel’s life, GL recommended that the assessment be undertaken at the design stage in order to be able to detect problems at much earlier.

For example, problems with ballast tanks can be highlighted, which if left undetected could incur drydocking bills of between $300,000 - $500,000, plus damaging loss of hire. By using the hull integrity management software, correct maintenance systems can be introduced on board the vessel, such as for tanks and their internal coatings.

Other examples include the early detection of pitting damages, which could lead to the crew using a filler instead of a costly repair squad; the early detection of anode consumption will prevent high corrosion rates while the early detection of a coatings failure

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TANKEROperator January/February 2013

TECHNOLOGY - OPERATIONS - IT to the notebook for recorded messages. It is intrinsically safe, enabling it to be used in enclosed spaces on board ship.

A 3D view of a tank in HullManager.

will prevent the hiring of a riding crew for blasting and/or re-coating work.

Bussow also explained that the six monthly ballast water tank inspection is a very complex task, but with clear 3D pictures, the exact frame, or stiffener, that needed to be examined, can be identified. A complete assessment can be made using this method, which can be made available to the vetting organisations. This system can also be duplicated in the shoreside management office.

There is usually a thickness measurement inspection campaign every five years and each steel plate can be modelled and the thickness established. The class societyâ&#x20AC;&#x2122;s professional management concern - GL Pegasus â&#x20AC;&#x201C; is able to support the thickness management measurement undertaking,

enabling inspections to be completed in just two days instead of several weeks, as before.

Bussow said that the software was very intuitive and training takes less than 30 mins.

Several tanker operators are already using the system.

For the tanker sector, this software system offers transparency, Bussow explained.

Vessels of up to two to three years of age are normally of good hull integrity quality. â&#x20AC;&#x153;While vetting organisations normally do not take into account technical problems, they may be impressed with a companyâ&#x20AC;&#x2122;s maintenance schemes,â&#x20AC;? he said.

This year, a ruggedised notebook version has been introduced, which operates via a screen, which can be used in tanks. The software can record results taken from the tank inspection and a microphone is attached

Potential savings GL listed potential cost savings examples by undertaking timely hull maintenance. These included â&#x20AC;&#x201C; Four additional deck crew for two months, including travel, provisions, insurance and paint = $15,000.

Tank cleaning/gas freeing for steel repair preparation (500 cu m capacity, excluding pumping and storage) = $22,500.

Scaffolding for steel work repair preparation (5 x 5 m, including transportation to compartment) = $7,500.

Steel repair for shell and structural elements (2 x 3 m, including high temsile steel and web frame) = $37,500.

Inflated steel repair invoice â&#x20AC;&#x201C; around 30% higher than correct price due to imprecise specification = $15,000.

One day offhire, depending on the charter market = $12,000.

By being able to compute the vesselâ&#x20AC;&#x2122;s remaining strength, even if the thickness measurement indicates a need for repairs to be undertaken, all of the above costs can be alleviated, GL claimed.

Bussow said that GL was currently working on enhancements to the software, including an extended repair module to alleviate incorrect drydocking specifications thus making the repair, or upgrade, more of an exact science. A corrosion prediction module is also under development as is a hot spot marking with bending cracks warnings of forthcoming coatings corrosion.

Emissions monitoring Another software solution introduced in 2011 and launched at last yearâ&#x20AC;&#x2122;s SMM in Hamburg was GL EmissionManager. Bussow explained

(UJOVYZ HUK JOHPUJHISLZ

January/February 2013

TANKEROperator

43

TECHNOLOGY - OPERATIONS - IT

â&#x20AC;&#x153;

â&#x20AC;&#x153;While vetting organisations normally do not take into account technical problems, they may be impressed with a companyâ&#x20AC;&#x2122;s maintenance schemesâ&#x20AC;?

â&#x20AC;?

- Dr Torsten Bussow, vice present, maritime software, Germanischer Lloyd that emissions based on fuel consumption were a necessary starting point. The new software is essentially a monitoring system by which vessels can be compared to improve their operations and thus enact emissions control. â&#x20AC;&#x153;You can only manage something if you monitor it,â&#x20AC;? Bussow explained.

By using reported data and analysing it in a smart system, sensors fitted on a vessel become unnecessary, Bussow said. Several different reports can be compiled for owners, managers, charterers, agents and other interested parties. Fleet monitoring is enhanced by collecting information using a smart method, especially for new

benchmarking, such as the voluntary Energy Efficiency Operational Indicator (EEOI), etc, which is an index for vessels already in service, as opposed to the mandatory Energy Efficiency Design Index (EEDI) being introduced for new vessels, plus the mandatory Ship Energy Efficiency Management Plan (SEEMP) for existing vessels.

It is also claimed to support the clean cargo working group, environmental ship index, clean ship index and the environmental passport.

Information filtered includes weather and sea conditions and whether the vessel is at

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44

sea, on a coastal voyage, or in port. This solution has been trialled on five vessels for six months during which, the data was collected on board and analysed onshore. The data is structured for ease of analysis, Bussow explained. This system is also aimed at reducing the Masterâ&#x20AC;&#x2122;s workload as the data can be filtered out to the various stakeholders automatically, effectively replacing the more traditional ship-to-shore reporting system, such as the noon, departure and arrival reports.

He also pointed out that the EU is no longer pushing for an emissions trading scheme, but rather â&#x20AC;?â&#x20AC;Śâ&#x20AC;Ś.a simple robust and globally feasible approach towards setting a system for monitoring, reporting and verification of emissions based on fuel consumption is the necessary starting point.â&#x20AC;?

GL has installed its software on board several tankers, including those operated, or managed, by Ahrenkiel Shipmanagement, Aegean Bunkering, Arpeni, Athenian Sea Tankers, Benelux Overseas, Chios Navigation, Columbia Shipmanagement, German Tanker Shipping, Hartmann, Laskiridis, Misuga, TO Parakou and Pertamina.

GLâ&#x20AC;&#x2122;s software solutions for shipmanagement and operations.

The class societyâ&#x20AC;&#x2122;s shipmanagement portfolio includes â&#x20AC;&#x201C; GL ShipManager â&#x20AC;&#x201C; The workbench to support all key processes â&#x20AC;&#x201C; maintenance, procurement, on board quality/safety, administration, etc.

GL HullManager â&#x20AC;&#x201C; Advanced hull integrity solution to support inspections and thickness measurement processes based on 3D ship model.

GL MachineryManager- This is currently at the pilot stage and is an integration platform for all condition monitoring machinery information, eg visual inspections, vibration, oil analysis and performance monitoring.

GL CrewManager â&#x20AC;&#x201C; Complete crew management package supporting planning, dispositioning, data/certificates management, rest hours, etc.

GL FleetManager â&#x20AC;&#x201C; Finance Module â&#x20AC;&#x201C; Complete finance system, including accounting, controlling, cash and inter-company info for CFOs. GL FleetAnalyzer â&#x20AC;&#x201C; Business intelligence solution, aids gaining info out of different ops data for flexible and powerful reporting and analysis.

For ship operations, GL offers â&#x20AC;&#x201C; GL EmissionManager â&#x20AC;&#x201C; Solution for on board voyage reporting and onshore emissions control - a fleet performance analysis tool.

GL SeaScout â&#x20AC;&#x201C; A decision support system to aid navigation through bad weather without damages on the shortest route.

EcoAssistant â&#x20AC;&#x201C; A system to save fuel without modifying the vessel by optimal trim.

TANKEROperator January/February 2013

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TECHNOLOGY - SHUTTLE TANKERS

OSM to manage new generation shuttle tankers Last year, AET Sea Shuttle entered into a long-term contract with the orwegian energy major Statoil to operate two specialists DP2- type shuttle tankers*.

ET Sea Shuttle is a subsidiary of AET – an owner and operator of 82 tankers. Norwegian shipmanagement concern OSM will manage the vessels.

When the two new AET shuttle tankers are launched in 2015, they will be completely different from anything in shipping history, OSM claimed. “New times mean new requirements and OSM is very happy about this development,” said OSM general manager Kjell Andreassen.

Once delivered, the two AET vessels will serve oilfields in the Norwegian sector of the North Sea/Barents Sea. The charter contracts, with options for extensions, will last for up to 20 years. “The climatic conditions in the Barents Sea, 180 miles north of Hammerfest, are so rough that the usual requirement specification is not good enough,” Andreassen said.

Fortunately, the environmental requirements are also much more stringent than in the past.

“There is no doubt that the vessels will be the very best we have seen in the industry,” said Andreassen.

The two twin-skeg 120,000 dwt AET tankers will be built at Samsung Heavy Industries. Due to the unique, adverse operating environment, they will be built to a

A

superior specification that exceeds any other DP shuttle tanker currently in operation around the world, OSM claimed They will be fully capable of operating in a harsh environment and will have high power thrusters and engines. There are also options for the vessels to be built with LNG dual-fuel powered engines.

“We have extensive experience in operating DP tankers in northern waters and I believe that OSM will provide an unbeatable service to AET and Statoil,” said Bjorn Tore Larsen, OSM Group chairman.

Statoil has more than 40 years’ experience of oil and gas production on the Norwegian continental shelf and is a regular charterer of shuttle tankers.

Shuttle tankers initially started operating in the North Sea. They are now also in use in Brazil and trials have been carried out in the Gulf of Mexico. There are also plans to start shuttle tanker operations in the Arctic Sea. OSM said that it had followed the shuttle tanker market closely since its beginnings in the 1970s. They are designed to transport crude oil from an offshore location and are fitted with off- loading equipment that is compatible with the oilfield served.

This normally consists of a dynamic positioning (DP) system to maintain the

The new shuttle tankers will be the most sophisticated ever built.

46

tanker’s position relative to the installed offloading arrangement of pipes and redundant safety systems to ensure that the highly volatile crude oil is handled safely in a harsh environment .

The pioneer in the North Sea shuttle tanker business was the Norwegian shipping company Rasmussen Maritime Services (RMS). In 2003, RMS was acquired by the OSM Group and is now called OSM Ship Management.

Through its predecessor RMS, OSM has followed this development from the very beginning, as OSM has managed the sisterships Polytraveller and Polytrader. The two tankers were built in Sweden and were delivered to Rasmussen in 1979.

Much has happened since then and time has left these vessels behind. In 2008, the 265 m long Polytraveller was sold for scrap.

Today OSM manages various types of vessels, including tankers, gas carriers, chemical tankers and others. The company is also experienced in newbuilding supervision TO and project management.

*This article first appeared in OSM’s Onboard magazine.

The signing ceremony in Stavanger (from left to right): Douglas German (chief negotiator, Statoil), Tor Martin Anfinnsen (SVP head of MPR crude liquids & products, Statoil), Hor Weng Yew (president/CEO, AET) and Bjørn Tore Larsen (chairman, OSM Group).

TANKEROperator January/February 2013

TECHNOLOGY - WASTE HEAT RECOVERY

Waste heat recovery from auxiliary engines D

esigned for use after a ship’s auxiliary engines, this WHR system promises fuel and emissions savings for the world’s maritime fleet, the company claimed.

Firing the auxiliary boilers to sustain a ship’s steam requirements now costs much less – both in terms of fuel oil and impact on the environment thanks to the new WHR system, Alfa Laval said.

Capable of completely supplying, or supporting, a vessel’s steam requirements during manoeuvring and port stays, this WHR economiser turns waste heat from a ship’s auxiliary engines into usable energy and cuts carbon emissions.

With its small footprint and low weight to output ratio, the Alfa Laval Aalborg XS-TC7A is claimed to be able to reduce fuel costs for oil-fired auxiliary boilers. After two years of testing at sea, a major Danish shipping company was among the first to see the full potential of using waste heat recovery economisers both after the main engines and auxiliary engines fitted on board fleet.

The company signed a contract in January 2012 to install the WHR economiser on 20 newbuildings, plus a larger number of retrofits over the coming years.

“Waste heat recovery systems after the main engines have proven lucrative for decades for many shipowners,” said Hans-Henrik Jensen, Alfa Laval vice president, marine & diesel division. “Taking advantage of the waste heat from a ship’s auxiliary engines is the natural next step, which is now possible thanks to the

Alfa Laval has revealed details of the new Aalborg XS-TC7A waste heat recovery (WHR) economiser.

Aalborg XS-TC7A. “The product has been very well received by the shipping industry, where many of the leading companies are investigating the possibility of installing the Aalborg XS-TC7A on board,” he claimed.

Jensen also said that Alfa Laval is the first maritime supplier to help shipowners improve fuel efficiency by capturing the waste heat potential of the auxiliary engines and turning it into usable energy on board. This delivers measurable cost savings and enhances a ship’s environmental profile.

Fast ROI Return on investment (ROI) for the entire installation can typically be realised within about 12 to 18 months. However, in some cases, payback only takes six to eight months.

Drastically reduced fuel costs and reduced maintenance requirements for oil-fired auxiliary engines contributes to fast ROI as the Aalborg XS-TC7A is able to supply, or support, a ship’s in-port steam requirements.

Actual payback time varies, depending on various factors, such as the number of days the produced steam can be utilised and redundancy TO requirements, Alfa Laval explained.

Aalborg XS-TC7A WHR system.

TANKEROperator The latest weekly news is available at www.tankeroperator.com For access to the ews just register by entering your e-mail address in the box provided. You can also request to receive free e-mail copies of TA KEROperator by filling in the form displayed on the website.

Free trial copies of the printed version are also available from the website. These are limited to tanker company executives and are distributed at the publisher's discretion.

January/February 2013

TANKEROperator

47

TECHNOLOGY - FUEL TREATMENT

Fuel technology expertise to increase The subject of fuel treatment technology will probably come more under the spotlight with the introduction of low sulphur fuel oils and changing luboil patterns. anker Operator talked with Jonas Östlund, Wilhelmsen Ships Service product marketing manager- fuel technology about fuel treatment in the light of stricter environmental legislation, such as can be seen with the ECAs. He explained that his fuel technology department concentrates on the heavy fuel oils and distillate fuels. Östlund said that in general there was no difference in monitoring the quality and quantity of low sulphur fuel.

Indeed, he said that there were several facets to this question as it is still performed against the ISO 8217 standard.

What has changed is that ISO 8217 has been updated twice since 2005 so that the actual constituents that the fuel is tested against has changed with more parameters added.

The introduction of low sulphur fuels has changed the type of problems encountered, or accentuated these problems. Fuel stability is more common with low sulphur fuels, as they are blended many times with other low sulphur fuels to reach the 1% sulphur standard.

However, he thought that quantity monitoring had not changed.

Catalytic fines are also a bigger issue today with the low sulphur fuels coming from the refineries.

T

Lubes consideration Several luboil suppliers have developed a one stop BN lube for all types of fuels used.

Tanker Operator asked Östlund to comment on whether better fuel quality would help preserve cylinder wear, etc.

He said that better fuel quality was always going to be a benefit for the equipment and the environment. “In general, fuel quality is deteriorating due to the increased conversion of the crude oil at the refineries, I don’t think the quality of the fuels on the market will improve,” he explained.

When the low sulphur fuels entered the 48

Baltic area through the SECA regulation there were a few hiccups with engines having trouble when the lube oil did not match the fuel.

In these cases it was mostly a case of a too high TBN that was used on the low sulphur fuels. He explained that the role of the TBN value of the fuel is to neutralise the acidic components produced during combustion.

“

in this sense I do think extra vigilance will be needed.

“What we have seen is that when new fuel, or equipment enter the market, there is usually a learning period and I am sure this will be the case with a dual, or tri-fuel engine, so vigilance needs to be extra high in the beginning,” he said.

“In general, fuel quality is deteriorating due to the increased conversion of the crude oil at the refineries...”

”

- Jonas Östlund, product marketing manager- fuel technology, Wilhelmsen Ships Service Vessels will continue to changeover fuel when entering different ECA areas and with the number of areas increasing, it becomes a more frequent process.

Until 2020, or 2025, depending on the decision, the global sulphur cap will be at 3.5% and the changeover of fuels will continue and possibly become even harder, as the sulphur cap in ECA's will change to 0.1% on 1st January 2015. “So from my point of view, an improvement in fuel quality will always lead to better operational conditions but I am not convinced a one shot BN lube is a viable solution,” he said.

Multiple fuels Talking about different fuels and vessels operating with dual and tri-fuel engines, Östlund said that what will change through regulation and availability is the type of fuel vessels will be using and this is why engines that can use more than one type of fuel will be the future.

“As with everything, I have a feeling, without really knowing, that making an engine for several very different types of fuel will always be a question of compromise, so

WSS set up its fuel treatment division to help owners and operators overcome problems caused by inconsistent fuel quality and help focus on burning fuel efficiently, while at the same time reducing the environmental impact.

Numerous challenges Today, strict maritime regulations on fuels and emissions present numerous challenges, with more and more vessels using different types of fuels.

The instability, or incompatibility of fuels in engines, high temperature corrosion and deposit formation can all affect a vessel’s performance and increase operating costs.

WSS claimed that it understood that these problems could be reduced by applying the right treatment to the fuel after understanding the underlying causes. In particular, providing equipment that enables a crew to test a vessel’s fuel during bunkering to identify possible issues with both the bunker quality and distillate fuels.

Once the issues are clear, WSS offers what it claims to be the most effective treatment programmes to keep vessels moving TO efficiently.

TANKEROperator January/February 2013

TECHNOLOGY - HOSE HANDLING

Modifying hose handling cranes to lift personnel R

ussian tanker operator Novorossiysk Shipping (Novoship), a member of the Sovcomflot Group, approached Cargotec, as the company wanted the MacGregor hose handling cranes fitted on board two of its vessels certified for lifting personnel.

Understanding how its customers’ ships work is crucial to Cargotec, as this allows its experts to respond quickly to queries about cargo handling technology, however unusual, the company claimed.

“Cargo ships are equipped with the type of crane that has specifically been designed for their trades, but there may be occasions when cranes are needed for other tasks,” explained Åke Söderlind, senior technical engineer, crane modernisations.

At present, classification society rules for cranes used for lifting personnel require that their winches be equipped with dual independent braking systems. In addition, a crane must be equipped with approved personnel lifting equipment, such as a basket, and drivers must be trained to operate the crane safely.

Some 24 of Novoship’s tankers are equipped with MacGregor hose handling/general service cranes. In particular, the four MacGregor cranes that Novoship was asking about are classed by DNV and had IACS fitness of purpose certificates for hose handling duties only.

“It was a major challenge to deliver a DNV approved solution for lifting personnel within the time constraints set by the customer,” said Valeriy Mozhevekin, sales manager for Cargotec’s Russian branch. “With this in mind, our Crane Competence Centre started by checking the class society requirements and discussed the issues with our engineering and design departments – but they had no immediate solution. They also asked our winch suppliers’ engineers for their opinions.

“We found that the rules differ between class societies. Furthermore, many national and maritime authorities have their own January/February 2013

A tanker operator needed to know whether some of its vessels’ hose handling cranes were approved for lifting personnel and, if not, how to modify the cranes, enabling them to be used for this task.*

particular requirements. As a result of this request, we are collating all the relevant information and we are well placed to respond to other shipowners needing to use cranes to lift personnel – even so, it would be helpful to have a single, global standard.

“DNV’s standard for lifting appliance certification [No 2.22] says that personnel may be lifted by all crane types, but sets out [in section 9] additional requirements for cranes used in this way. The major consideration is that hoisting and luffing winches must be equipped with two mechanically and functionally independent brakes.

“After much discussion, we identified two solutions. The material costs were the same, but they had different delivery times,” he explained.

Dual brakes The first option was to install a new winch with dual brakes, re-using the existing hydraulic motor. The second option was to rebuild the existing winch, adding an extra brake and a new winch bracket. Installation times were calculated to be between 65 and 70 man/hours per crane for option one, and 90 to 100 man/hours for option two. In both cases work could be carried out on site, as long as suitable lifting facilities were available, MacGregor said.

Novoship chose the first option and work on the 105,800 dwt Aframaxes S Columbus and S Creation was carried out in Tuzla, Turkey, in May and July, last year. Both of the 2007- built tankers have two 15-tonne SWL

TANKEROperator

Two solutions were identified.

hose handling cranes with an outboard reach of 3.8 m.

“Thanks to careful design, planning and logistical arrangements, the rebuild process was smooth and efficient,” said Alexander Gelis, director, marine spare parts & technical services. “The project came in on time and budget, and our clients were very pleased with the speed and quality of the work and the overall results.”

Novoship and Cargotec are believed to be discussing similar work for another four vessels in the fleet equipped with MacGregor hose handling cranes to be possibly carried out this year.

“The winch upgrade programme is scheduled to coincide with the tankers’ planned dock visits for repair, maintenance and surveys,” Gelis said. “If other shipowners decide that they need to use their cranes in this way, Cargotec can help by developing solutions to fit in with their trading TO schedules.” *This is an extract from an article published in MacGregor ews, Autumn 2012.

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TECHNOLOGY - TANK SERVICES

Another fine mess for tanker owners What is claimed to be slipshod drafting in an IMO document has set in motion a battle for the hearts, minds and money of chemical tanker operators and owners that is being fought not on the high seas, but in the drydocks of the world, writes Brian Warshaw. he problem is within the Maritime Safety Committee’s MSC.1/Circ.

1324 that defines the test gas for pressure/vacuum (P/V) valves used for certifying apparatus group IIB used on vessels that carry products defined as such in column “i” in chapter 17 of the IBC code. It clarifies MSC/Circ. 677, for the Design, Testing and Locating of Devices to Prevent the Passage of Flame into Cargo Tanks in Tankers.

Clause 2 of MSC.1/Circ. 1324 is very clear, ‘Member Governments are invited to apply the amendments to the revised standards, as amended, to ships constructed on, or after 1st January 2013 and to ships constructed before 1st January 2013, no later than the first scheduled drydocking carried out on or after 1st January 2013.’

The problem this creates for existing chemical tanker owners arises from the retrospection of the wording, which clearly is unlimited, and goes backwards beyond MSC/Circ. 677 that entered into force at the end of 1994.

A Danish manufacturer of P/V valves, PresVac Engineering, argued that the amended MSC/Circ. 667 rendered valves manufactured in the era of previous MSC/Circ. 373.1 obsolete, and in need of replacement. The significant difference between the two circulars is in the test gas used to determine if a flash-back occurs during testing. Circ. 677 specified, after the amendment with Circ.

1324, an ethylene and air vapour, while Circ.

373.1 used a technical hexane and air mix.

Tests, witnessed by Lloyds Register, Copenhagen, were undertaken by Scanvent, another Danish manufacturer, which confirmed that the Circ. 373.1 valves passed the Circ. 677 procedure without any flashback using ethylene as the test media.

Scanvent’s Eric Sorensen said he fully expected this to be the result. “The selfignition temperature of hexane is half that of ethylene and generates significantly more heat radiation,” he said. “There is nothing to

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50

prevent an owner taking a test specimen from a ship in dock, after which we need one to two days to test and have class sign off.”

MSC Circulars owe their legitimacy to the code to which they relate and not on their own right. Circular 677 is reliant on the IBC code, whereas Circulars 373 and 373.1 are linked to the BLG code. Chapter 8 of the IBC Code specifically states that it only applies to ships constructed on or after 1st January 1994, adding ‘unless expressly provided otherwise’.

For other vessels, section 8.1.2 states ‘Ships constructed before 1st January 1994 shall comply with the requirements of chapter 8 of this Code which were in force prior to the set date.’ Clearly retrospection was not intended by the authors of the IBC code.

If the Committee had intended the amended MSC/Circ. 677 to be retrospective to vessels equipped many years prior to its introduction, it should have said, ‘Member Governments are invited to apply these standards as amended to ships constructed on, or after 1st January 2013 and to ships constructed before 1st January 2013, no later than the first scheduled drydocking carried out on, or after 1st January 2013.’ Even that is not sufficient to counter the argument that an amendment to a circular, or code, cannot extend its authority to a period before it existed.

No requirement The Danish Maritime Authority (DMA) accepted that there is no requirement in the revised standard for existing approved equipment to be recertified; however, it maintained that the relevant valves must be recertified to MSC/Circ. 677. In doing so, it relied on Chapter II of SOLAS to provide the retrospective authority. Regulation 1.3.2, which it cited, states ‘Repairs, alterations and modifications, which substantially alter the dimensions of a ship, or the passenger accommodation spaces, or substantially increase a ship's service life and outfitting related thereto, shall meet the requirements for

ships constructed on, or after 1st July 2002 in so far as the Administration deems reasonable and practicable.’

On first reading it seems unlikely that recertifying a P/V valve with a different test gas would constitute a substantial increase in a ship's service life. The DMA expressed the view that by being able to carry an extended list of chemicals, the life of the vessel will be extended. This might be considered by some to be a specious argument and open to legal challenge.

In June 2004, the IMO issued a Unified Interpretations Of Solas Chapter II-2, The FSS Code, The FTP Code and Related Fire Test Procedures, under MSC/Circ. 1120. It provides an example of substantial increase of a ship's service life - renewal of passenger accommodation spaces on one entire deck; renewed accommodation spaces should comply with chapter II-2 of SOLAS 1974, as amended. However, in this case, means of escape in the areas not subject to renewal are not required to be reviewed in the light of new requirements.

The DMA declined to provide a formal statement in which it could have formalised its position. This obfuscation is unwelcome and surprising.

Ironically, MSC.1/Circ. 1324 was introduced to correct the anomaly in MSC/Circ. 677 that allowed a tanker certified IIA to carry a mixed cargo of products designated IIA and IIB. It has succeeded in this; but has left the industry with another mess, that unless resolved quickly, could leave the industry facing high costs that it can ill afford at this stage of the economic cycle.

The question that the classification societies and administrations must answer is ‘Are you looking for IIB compliance or MSC/Circ. 677 compliance?’ They need to determine this quickly, and not take the 27 years it took to resolve the problem of mixed IIA and IIB products loaded on the same tanker.

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TANKEROperator January/February 2013

TECHNOLOGY â&#x20AC;&#x201C; TANK SERVICES

Mechanical float level switch range extended PSM Instrumentationâ&#x20AC;&#x2122;s comprehensive range of mechanical marine float level switches has now been extended to include replacement solutions for Mobrey products that fail in service. echanical float level switches are among the simplest, most widely used, level products in marine tank level measurement and pump control.

The newest additions to the companyâ&#x20AC;&#x2122;s KD series provide a practical replacement alternative, especially where original products may now be difficult to obtain, due to obsolescence, or cost issues, the

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company claimed.

PSM has successfully sold its hazardous use approved and marine certificated range of KD series mechanical float level switches to shipbuilders and repair yards all over the world. With options to cover all common construction options, now also including the Mobrey a pattern square flange, the KD series offers an economical solution, available for fast delivery, the company said.

Mechanical float level switches, which can be horizontally, or vertically mounted, provide high-level, or low-level, detection of liquids in all types of vessels and often form an important control, or safety function. Typical fluids measured include fuel oil, lubricants, sea water and bilge waste.

These fluids provide a challenge because of the compatibility issue with the with float switch construction materials used, such as

,WÂľV QRW D 0,5$&/(

January/February 2013

TANKEROperator

51

TECHNOLOGY - TANK SERVICES

PSM's KD30s vertical switch (left) and the KD12a horizontal switch (right).

metals, plastics and rubbers. There may also be a flammable gas, or liquid, present near the installation requiring a device certified as safe for use in this hazardous area.

The environment on board ships is harsh with wide variations of temperature and humidity, as well as a build-up of oil, or grease waste. In addition, the limited space on board means that the installation is not always easy to access for routine testing, or maintenance, so any switches installed must

be capable of operating for many years without fault.

Consequently, the demands placed on these products are onerous and only those designed and constructed specifically for marine use will prove to be reliable and safe over the long term, PSM claimed.

With a rugged construction suitable for extreme marine environments, PSM’s KD series mechanical float level switches are claimed by the company to be capable of

meeting all these demands and, in addition, are approved and certificated for marine applications by many of the leading worldwide type approval organizations, as well as hazardous use by ATEX EEXd. PSM offers a wide range of both vertically and horizontally mounted float switch models to suit each specific application, with single, or dual, levels switches and multiple combinations of high and low level TO functions.

Technology News - Satcoms

TA KEROperator

Globe Wireless’ Italian agreement Globe Wireless and Italian satcoms provider Arimar have entered into a long-term cooperation agreement to provide the company’s products and services to Italian flagged vessels.

As part of this agreement, Arimar will act as the billing agent for Globe Wireless’ Italian vessels. This collaboration will significantly enhance the company’s offering of communication services to Italian and Mediterranean maritime customers and industry, Globe Wireless said.

Arimar deepsea manager Marco Marcuccilli, said, “Globe Wireless has been extremely successful in servicing the maritime market due to its unique products and services capabilities. We are excited to 52

work with Globe Wireless one of the world’s leading maritime communications providers. We feel that adding Globe Wireless as a partner for Italian flagged vessels will further enhance our own products and services that we are able to offer to the market.”

“Both parties bring distinct strengths and infrastructure to the table; I am confident this collaboration will considerably strengthen both our business.” said David Kagan, President & CEO of Globe Wireless.

“By collaborating with Arimar, Globe Wireless now has a partner with in depth knowledge of the Italian and Mediterranean maritime market and we are now able to offer our wide range of solutions to our joint customers, who will benefit in terms of better service and more innovative solutions.”

TO

The latest news, updated weekly, is available on www.tankeroperator.com. Register by entering your e-mail address in the box provided. You can also request to receive free e-mail copies of TA KEROperator by filling in the form displayed on the website.

Free trial copies of the printed version are also available from the website. These are limited to tanker company executives and are distributed at the publisher’s discretion.

TANKEROperator January/February 2013

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TECHNOLOGY - NEWS - SATCOMS

KVH upgrades to business class KVH Industries has launched new unrestricted rate plans featuring its business class service for all types of vessels on its mini-VSAT Broadband network.

Designed to meet the booming demand for maritime connectivity, KVH’s new service provides an unrestricted, prioritised, multimegabit service with access to all Internet applications and protocols, including streaming media formats, popular Voice over IP (VoIP) services like Skype, and rich media websites.

This premium quality service, previously only available with very expensive dedicated satellite capacity and used exclusively by high-end cruise ship or mega yacht customers, is competitively priced with other shared maritime VSAT services, but delivers significantly faster service and a superior user experience, KVH said.

“The launch of our new Business Class Service culminates a twoyear initiative to upgrade our network, increase our capacity, integrate network management capabilities into our core product offering, and devise unrestricted rate plans that provide unprecedented performance while also being cost effective,” said Brent Bruun, executive vice president of KVH’s Mobile Broadband Group. “We’re working hard to keep up with the exponential growth of the Internet and mobile data services. In the past five years there has been an 18-fold increase in the use of mobile data, while more than half of all Internet traffic is now video.

“There are more than 700,000 apps for iPad, iPhone, and Android devices, millions of which are sold every year. Connectivity services that don’t embrace these new technologies will not be able to keep up with the new cloud-based services and other exciting innovations we are sure to see in coming years. KVH is constantly working to improve our service to ensure we provide our customers with the connectivity they need,” he said.

Rather than block popular high-bandwidth services, or limit access through deliberately reduced speeds, KVH’s new usagebased rate plans provide a defined amount of data in a monthly package and give the customer the opportunity to buy more service at a reasonable price, if the package threshold is exceeded during the month.

Heavy users are free to consume as much bandwidth as they need because they are paying for the additional service. Further, with these new plans, KVH dynamically monitors usage and can quickly add satellite capacity as required to stay ahead of customer demands. With bundles from 5 GB to 40 GB and additional gigabytes for as little as $200 ($0.20 per megabyte), these new plans are faster than comparably priced fixed rate plans and offer speeds as high as 4 Mbps, the company said.

To support its new service, KVH has incorporated the features of its CommBox ship/shore network manager into the integrated below decks unit of its new TracPhone V7-IP and TracPhone V11 products.

This fully integrated solution can be set up as distinct, firewalled networks for operations and crew use. On many vessels equipped with maritime VSAT service, crew use accounts for 85-90% of the total bandwidth consumed, so helping vessel owners manage the crew’s Internet access is a key aspect of managing the on board network.

KVH also offers Internet café and VoIP calling card services to TO help the crew manage their own use of the service.

TANKEROperator January/February 2013

CONFERENCE REPORT

Making money in a tough market In part II of our conference report, we cover the issues thrown up in the panel discussion during Tanker Operator’s October’s Singapore meeting. he panel included the morning’s speakers, plus Douglas Robinson, president Asia, Advanced Polymer Coatings, formerly COO, V Ships Asia and Aswin Atre, semi-retired, formerly managing director, NYK Shipmanagement.

The panel came up with up some interesting debates, especially on the subjects of crewing retention, costs and motivation/mentoring.

Aswin Atre, formerly managing director, NYK Shipmanagement, came out of semiretirement and said: “I find that somebody has to think, or companies must think on how to retain the crew not by reducing the costs.

One cannot start going back to the old days when people used to stick to a company. I worked for a company in Hong Kong for 25 years. And my son thinks I am a fool.

“Nowadays the young lads think that if you are working for a company too long, you are no good. Now I can empathise with the idea of having the same crew and coming back, but that can only be done by giving them something to hold on to.

I did try many moons ago to have something like a provident fund scheme, which was acceptable to most of the sea staff and they found that after five or six years they

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could make some money. Then the market went haywire and they thought they can invest their money in better ways instead of putting about 5% of their salary with the company who used to manage the fund and added to it.

Having said that, I am getting many emails from cadets - who are not getting any perks on board.

“I saw that with a whole lot of IT, the Masters and Chief Engineers feel that they are covered. They say they love to play around with the computer but they don’t look at the engines. So what I think these lads who are looking for work can be used for is to sometime help Masters and Chiefs in the following ways.

“One is maintaining the inventory. If somebody tells me their inventory is up to date, they are talking rubbish. No ship has got proper inventory. Every manager will say we have a fantastic inventory system, agreed, but you are not having a real inventory. That’s why you are spending so much money on spares and stores," he said.

Training has been talked about for some time. Atre said that the one thing he was surprised at was that nobody talked about mentoring. “On board the ship, you are on

your own mate and that’s you answer. Nobody is sitting down and talking to these guys about a problem, what is the problem with the ship.

So for manning, you have to have some mentoring. All this nonsense we started with, I call it ISM and I can quote you many incidents talking about quality, which started because of ISM - the problems. Groundings, engine breakdowns, everything happened because of ISM. I don’t want to mention more, but there are certain points we can seriously consider,” Atre said.

A second point he made was that some ships, or even on all ships, the fuel is not measured properly. “The flow meters, which we use, are not accurate. And the chief engineers, they might be better qualified than me because many of them are MBA’s and what I know…they do not do proper temperature corrections. The answer to that is having some systems whereby one can definitely find exactly how much fuel you are consuming. Now we are shooting in the dark.

Just saying that we are 140 litres something like that, but we are not getting the right figure. This is something one should really think about - I am talking about saving.

“The third point, which I found that everyone is talking about is crew negligence, crew this, crew that…but have you ever thought why these breakdowns take place?

They don’t know how to open stuff and put it back. I have studied over the last 40 years the biggest problem, which never comes out because of insurance, or something, is because the thing was not properly put back. Why? The manuals are rubbish. It is like my grandmother gets a TV manual and she says ok what’s wrong: check the plug point. And did you really read the manual? I recently read one accident report of a product tanker which had a huge fire- Why? They didn’t know how to put back the nozzles properly.

“Now my point is, how much enthusiasm do the lads have on board if the manual is not correct. All the guys on board, or guys in

Aswin Atre makes his point.

January/February 2013

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55

CONFERENCE REPORT office are aware of it because we have become excel and word processor masters. So what you have to do is - my only personal impression- improve the manuals, then your technology and software helps. You can use these three-dimensional drawing methods so that they don’t make a mistake, ie, each step is properly shown. And now as I see that the younger people don’t like to read it. So why don’t we look at this, as if you stop the generator, or a turbo charger breakdown, you are straightway talking about $200.000 saving.

It is these intangible expenses that people are not talking about, we are talking about fuel consumption, we are talking about this and that. This is what we have to look at,” he concluded Capt Padhi said: “Yes what you say with respect to only technics-culture, probably it’s true to some extent, but if you can think of today’s time, in any company for that matter, we can’t think of going for a systematic approach, or without accepting that picture.

Now you tell a crew, or a master to go on board, they will tell no ISMs…can you manage? He cannot manage that…he is tuned to that…. Everybody is tuned to working with their respective management culture, but the weakness here is it is not only from the audit point of view, where the raised efficiency is under maintenance, but we’ve have had many incidents, which are direct result of operational blunders.

“Just like the Herald of Free Enterprise, she sailed on a common route. So what we need to do is to focus more on how to control the operations. Not to do with the policy so much,

but to control the operations input, the cargo operations. Navigation and the critical positions – I think that matters a lot, and if you have systematic guidelines available for you, stick to that,” he said.

Aswin Atre: Now I don’t disagree if you have a systematic system, how many of the guys on board really know the system? It’s very fine to have a paper system, in all the companies nowadays you are getting discs to take your companies name, and you will have the SMS manual via the PC. What I am trying to say is ISM knocked the professional pride of people, you might blame superintendents, you might blame everything, what I believe is one has to look at how things are run.

“It’s no point in thumping them with so many audits nowadays if you have a clever Chief Engineer, or a clever communicator on board, he can fool any auditor. Give him the right information when he wants. I know you have been audited and it will be insulting, but not all audits are good and some of them are waste of time. Here this conference is about making money, or at least saving money…it’s not on wasting time and trying to say I didn’t have accident. We can always talk about Herald of Free Enterprise…that can happen with the best ISM. Human beings are human beings and the one point which none of us has forgotten is that the fear has gone from a normal seafarer. Because he knows he can get a job,” he said.

Chariman Dimitris Lyras: “I think the point here is that machinery also has longer overhaul periods, it is more reliable, when I

These conferences are an ideal forum for networking.

56

Douglas Robinson addresses the delegates.

was at sea, 6,000 - 8,000 miles was reasonable for a piston. Today its 35,000. So I think we are focusing on what the real issue, or the real difficulties on board are. For example, this has to be changed, because we have regulations, we have check books, we have more challenges.”

Douglas Robinson, president Asia, Advanced Polymer Coatings, formerly COO, V Ships Asia, said: “I think you may put a good point to bed the fact that now that there is a longer time between maintenance…but what has evolved is this experience, people get experience. And they will only get experience by doing…and if we look at the systems that were imposed on us, realistically these systems are trying to defend you although not entirely in a similar way as in this industry, we have actually had these things imposed on us because we were not particularly legislative.

“So whatever things have been put in place, we have to work on it, we have to make money in top markets and we have got to continue to kick people…and I come back to retention, because I think retention is a very critical thing. I don’t remember this kind of thing like in….retaining…gaining those people,…because how many companies have you been with, which says our people are the best things since slice bread, we must keep them,…and I think we are looking for a cheaper Master somewhere else, or a cheaper crew somewhere else, and then the ship has problem.. so they are not really the best TO people to retain, or train,” he said.

*The next conference in this series takes place in Athens on 3rd April. For details contact Karl Jeffery – Jeffery@tankeroperator.com

TANKEROperator January/February 2013

Making Money in a Tough Market Metropolitan Hotel, Athens, April 3rd 2013 Can you improve operational strength and reduce operational costs at the same time?

In our second Tanker Operator Athens conference, we'll look at how the world’s top tanker operators make sure they survive the current difficult market conditions.

Morning discussion theme: Can oil major safety emphasis be risk based rather than prescriptive?

Afternoon discussion theme: Simplifying the Ship Energy Efficiency Management Plan (SEEMP) and getting the most out of the least effort and risk.

Speakers include: •

Harry Vafias, president and CEO, Vafias Group

•

Alexander Hadjipateras, vice president, Eagle Ocean, Inc (panel discussion participant)

Expected presentation topics

•

• Case studies and strategies to make the business stronger

Stylianos Mavrelos, technical director, Capital Ship Management

•

Georgios Poularas, chief operating officer, Enesel SA

•

Emmanuel Vordonis, formerly executive director, Thenamaris Ship Management Inc

• Working closer with your crew

•

Kostas Gkenes, naval architect, ENESEL

• Contribution of communications and software technology

•

Chairman: Dimitris Lyras, director, Lyras Shipping

• Crew competency management • Reducing fuel costs • Reducing lube costs

Contact Karl Jeffery, publisher and event organiser, Tanker Operator Magazine Ltd E: jeffery@tankeroperator.com, Tel: +44 (0)20 8150 5292 Web: www.tankeroperator.com/athens2013.htm Organised by

TANKEROperator

Produced in association with

Officially supported by MARTECMA, the Marine Technical Managers Association

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