Forum No_2_2003 by DNV GL (old account)

Forum

THE CORPORATE MAGAZINE OF DET NORSKE VERITAS NO.2/2003

OPEC achieving stability in turbulent times • World-Wide builds up gas head of steam • Singapore contains the terror threat • Denmark running after the wind in Europe

CONTENTS

Editorial: Rallying behind a common cause

OPEC bringing market forces into line

CNR drilling for excellence

10 Camacari: The heartland of safety

12 Full steam ahead for World-Wide gas play

16 Leading authorities adopting hard line on security code

18 Singapore contains the terror threat

20 UASC: Sailing with the trade winds in the Arabian Gulf

22 DNV RESEARCH: Shaping tomorrow´s DNV

26 Shipbuilders prepare for a virtual leap in shipbuilding design

28 Placer Dome going for gold

30 World Bank preparing the birth of the carbon economy

33 Denmark running after the wind in Europe

DNV Forum is the corporate magazine of Det Norske Veritas PUBLISHED BY Corporate Relations and Communications N-1322 Høvik, Norway Tel: +47 67 57 99 00 Fax: +47 67 57 91 60 EDITOR Stuart D. Brewer Tel: +47 67 57 85 11 Mobile: +47 915 22 360 Stuart.D.Brewer@dnv.com ADMINISTRATION Gro Huseby Tel. +47 67 57 86 01 Gro.Huseby@dnv.com DESIGN DRD DM, Reklame & Design as PRINT Stens Trykkeri COVER PHOTO Courtesy of Reuters/Aladin Abdel Naby No responsibility is accepted by the publishers for statements made by authors, nor for attributable comment. Reproduction permitted with acknowledgement of source. © Det Norske Veritas 2003

36 News

38 Last Word: A good story to tell

39 DNV Worldwide

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DNV (Det Norske Veritas) is an independent, autonomous Foundation working to safeguard life, property and the environment. DNV comprises 300 offices in 100 countries, with 5,500 employees. VISIT OUR WEBSITE WWW.DNV.COM

MANAGING RISK

EDITORIAL

Rallying behind a common cause

Carl Arne Carlsen

Geopolitical tensions in recent years, and indeed months, have turned the oil market into a very fine balancing act. Technically, the Organization of Petroleum Exporting Countries (OPEC) is an experienced player when it comes to fine-tuning, but it is the market that dictates the levels of oil prices. And it is when prices either rise too high, or drop too low, that OPEC becomes concerned.

Time, inevitably, cannot stand still, but progress must be facilitated by today’s research and development. Carl Arne Carlsen, head of DNV Research, steers an organisation that is invariably thinking many years down the technological timeline. His is a group that will help determine how business is done, by both DNV and a large handful of industries, into the next generation.

In an interview with DNV Forum (page 4), OPEC Secretary General Dr Alvaro SilvaCalderón makes clear his commitment to a "stable and balanced oil market of reasonable prices for both consumers and producers" and emphasises the importance of continuing co-operation between all producers inside and outside OPEC if a balanced oil market is to be achieved.

"Society in general is pushing change. A popular culture of zero tolerance is demanding that industry do things better all the time and document performance. Government regulators respond to this by making laws and rules. Our role in research lies in discovering a workable regulatory framework that satisfies public demand and is acceptable to industry."

Indeed, co-operation is the underlying theme of many of the articles in this issue of DNV Forum. World-Wide's chairman, Helmut Sohmen (page12) reveals that he has a long-term, clear strategic vision of how he plans to incorporate the pride of the recently acquired Bergesen fleet into his expanded empire. Environmental issues underpin his long-term thinking and he believes "the future lies with gas" rather than traditional fossil fuels like oil, reflecting the growing demand for renewable energy sources for sustainable economic development.

Working with a constellation of European research organisations, DNV Research is participating in numerous programmes, including bio-risk management, energy & resources, lightweight and multifunctional materials, transport systems and organisations of the future.

Various estimates suggest that, by 2050, nearly one-third of the world's energy needs could come from renewable sources such as solar and wind power, geothermal energy and hydrogen fuel cells.

“A popular culture of zero tolerance is demanding that industry do things better all the time”

These umbrella terms cover projects aimed at ensuring the safe transportation of hydrogen gas, preventing the release of invasive species into the environment, producing super-strong composite metals with embedded sensors, assessing risks in ICT investments and others which you can read more about on page 22. We hope this issue of DNV Forum makes for useful and enjoyable reading.

Stuart D. Brewer Editor

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OPEC bringing

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Photos: Courtesy of OPEC

market forces into line With the recent conflict in Iraq and tensions running high in the Gulf, OPEC (Organization of Petroleum Exporting Countries) has demonstrated a high degree of flexibility and foresight in its efforts to manage oil prices and production. But for Dr Alvaro Silva-Calderón, OPEC’s Secretary General, the key to stabilizing the oil markets in the future will require a new focus on international co-operation.

"We are all in the oil business together," says Silva-Calderón, "and we all have a duty to ensure that the industry functions effectively and that the oil market remains in good shape at all times. In order to achieve the objective of stabilizing the oil market and defending the legitimate interests of all oil producing nations, it is not only appropriate, but necessary to co-operate with each other." Meeting demand According to Silva-Calderón, the war in Iraq has emphasized OPEC’s role in maintaining a balance that benefits both producers and consumers during periods of volatility. He explains that crude oil prices are often associated with world instability, but this does not have to be the case. Oil producing nations have increasingly acknowledged the benefits of having a dialogue with the countries that use their oil in order to ensure that oil is not synonymous with insecurity. Such dialogue has proven that a willingness to comprehend the worries of others leads to the oil market functioning better and he hopes, to a more peaceful, harmonious world. Silva-Calderón notes that, over the past few years, geopolitics and its effect on the global economy have taken on a more prominent role in oil markets. Crude oil and security have thus become even more relevant, securing OPEC’s commitment to supplying sufficient oil to the market to justify fundamentals. According to published figures, present global demand

is approximately 77 million barrels a day. Non-OPEC producers supply some 48 million barrels per day, OPEC producers supply approximately 24.5 million barrels and natural gas liquids make up the rest. Since OPEC supplies only 31 percent of the global demand, Silva-Calderón believes the organization should not be held solely responsible for any shortfalls caused by geopolitical tensions. à

The conflict in Iraq had a destabilising effect on the oil market

Courtesy of Reuters/Aladin Abdel Naby

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These tensions and the recent Iraqi conflict are the cause of supply and demand fundamentals becoming slightly less important recently. Many analysts agree that a war premium of up to USD 8 was added to the price of a barrel of crude oil during the period preceding the conflict in Iraq. The premium varied according to the severity of the tensions. Interestingly, crude oil prices plunged as soon as it looked like a war was likely and dropped even further when the war started.

"Maintaining a constant atmosphere of fear in markets simply serves to push prices even higher, thus affecting the entire energy chain"

High volatility The OPEC basket price dropped by about 18 percent in one week, and West Texas Intermediate fell by 20 percent, possibly owing to traders’ initial expectations that the war would be over quickly. But within days, prices increased at the same rate as they had fallen as traders started to believe that a short war was unlikely. However the relative brevity of the conflict re-established the correlation between market fundamentals and crude prices, which fell towards the lower end of OPEC’s price band range of USD 22-28 per barrel. Open dialogue To Silva-Calderón, the best thing for producers and consumers to do is to continue having a dialogue to make sure that supply is in line with fundamentals, and he notes that OPEC members have been remarkably cooperative during this difficult period. "Owing to the huge increase in prices before the war, in part due to the situation in Venezuela, OPEC decided to boost its oil supplies to more than its formal quota levels in December and January," he says. "If the extra oil had not been on the market, prices would have been much higher." However, prior to the OPEC conference in March, the supply/demand balance was a bit different, due to OPEC’s decision to increase production in the months prior to this. At the March conference, the oil and energy ministers of OPEC countries acknowledged that there was sufficient oil supply to cope with market requirements and maintained OPEC’s production ceiling of 24.5 million barrels per day, in spite of the fact that geopolitical tensions were still pushing prices upwards. Once the conflict ended, the war premium disappeared and OPEC met in April to lower the actual production level in order to keep the market stable.

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Geopolitics and stockpiling It is clear that geopolitics and fear have affected prices, but Silva-Calderón also points to how stock levels are perceived and how they influence prices. "There are many reasons for stock levels not being as high as they were 20-30 years ago but this is mainly due to corporate businesses being concerned about maximizing their profits," he says. "This concern makes stockpiling crude oil risky, especially when the world is undergoing a period of instability." Silva-Calderón explains that buyers also want markets to be stable because when they buy crude at a certain price they must be reasonably sure that they will not make a loss a little while later. However, traders often overreact to slight changes in stock levels and the other players tend to follow suit. "Maintaining a constant atmosphere of fear in markets simply serves to push prices even higher, thus affecting the entire energy chain," SilvaCalderón adds. "Naturally, the greater the price fluctuation, the more tempting it is for traders to manipulate the market, as we have seen lately." Silva-Calderón notes that OPEC has relied on its price band to make the oil market more stable over the past three years. Normally, this band is extremely successful. In 2001 and 2002 the price of the OPEC Basket of seven crudes was a reassuring average of USD 23 and USD 24 respectively. However, over the past two years, the quarterly average has only exceeded this range twice. After September 11, when the

OPEC Secretary General Dr Alvaro Silva-Calderón believes a close dialogue between producers and consumers is key to maintaining stability in the global oil market.

Basket price dropped to less than the lower limit of USD 22 per barrel for a few months, and during the first quarter of this year, before the Iraq conflict broke out, when the prices exceeded the upper limit of USD 25 per barrel. OPEC is determined to stabilize prices within this band in order to gain support for fair and reasonable prices, which are in the interest of both consumers and producers, in spite of the manipulation of markets that has become increasingly common over the past few years. European co-operation Many countries have declared their support for the OPEC band. Recently, the Russians, who were observers at the March Conference, announced that they were in favor of prices of USD 20-25 per barrel for the Russian blend in order to make the oil market correspond with the OPEC price band. After taking into account the difference in prices for Russian oil, Loyola de Palacio, Europe’s Energy Commissioner, also announced that Europe does not wish prices to fall below USD 20 per barrel, for reasons of capital expenditure, reduction and supply side tensions. With regard to avoiding supply-side tensions, Silva-Calderón says that OPEC has a good track record in making up for shortfalls in difficult times. During the Gulf War in 1991, OPEC supplied extra oil to the market. In 2000, when the USA was experiencing major supply problems due in part to a lack of refining capacity, OPEC increased production by up to 3.7 million barrels a day. OPEC member countries have also

pledged, over the years, to boost their spare capacity in order to make the oil supply more secure, and have built various export routes to further counter any threats of shortfall. "OPEC maintains very close contact with all involved parties so that it can continuously evaluate its options in order to ensure there is no shortage in the crude oil markets," says Silva-Calderón. Balancing act Over the past few years, as geopolitical tensions have turned the oil market into a very fine balancing act, OPEC has demonstrated its skill in fine tuning supply and demand issues. But Silva-Calderón notes that it is the market that ultimately determines the level of oil prices, not OPEC. And it is when prices are either too high or too low that OPEC starts to worry. But Silva-Calderón remains cautiously optimistic about the future. "We can only hope that, following the end of the war in Iraq, which was a founding member of OPEC, the situation will return to normal as quickly as possible so that stability is restored to the oil market," he says. "The conflict had a destabilizing effect on all markets, including the crude oil one, as well as on the global economy. Now it is over, we can hope the world will be a more peaceful and tolerant place, in which diplomacy and understanding are again re-established." Stuart Brewer and Alexander Wardwell

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Different strokes in the DNV is working with North Sea newcomer CNR International (UK) Ltd, a subsidiary of Canadian Natural Resources, to help the company realise its goal of excellence in integrity Management.

As North Sea oil and gas activity matures, a new breed of smaller independent operator is moving in to take over fields and facilities that are no longer profitable for larger organisations. CNR is one of a number of Canadian independents helping to maximise the life of, and return from, mature fields. CNR regards the North Sea as a valuable area, and since entering this market over 2 years ago has acquired several assets in the East Shetland Basin, including three platforms in the Ninian field and the single platform in the Murchison field.

CNRâ&#x20AC;&#x2122;s Casey McWhan, left, and Richard Turnbull believe there is still significant value in North Sea assets.

Casey McWhan, CNRâ&#x20AC;&#x2122;s offshore production operations manager, believes there are a lot of opportunities in the North Sea. "At present this market is very similar to what Western Canada was when CNR started out in the early '90s. When the big oil companies can no longer make a profit due to high operating costs. we are successful as we are a streamlined, profit organisation that is focussed on efficient delivery," he says.

Ambitious plans CNR is not just in the North Sea for short term gain - the company expects to be in the North Sea until at least 2020 and has ambitious plans for its acquisitions. These plans can only be realised with an assurance of process integrity delivered through a fully developed and implemented strategy focussing on the specific needs of mature assets.

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North

Sea

However, like other new investors in the North Sea, CNR found that its recently acquired assets were not in excellent condition due to cost cutting measures and reduced maintenance by the previous operators. The company has experienced problems in the Ninian field, where a ruptured oil process line on the Ninian South platform resulted in a prohibition notice from the UK Health and Safety Executive (HSE) in February this year. Richard Turnbull, facilities manager at CNR, says: "Ninian South had problems in areas we didn't expect when we took it over. Some of the lower risk systems we normally wouldn't have had a strong focus on, such as the processed oil system, gave us some problems." CNR has learnt quickly from this. "We're safety conscious and are now refocusing on changes to the integrity management system that was in the process of being revamped. In recognition of the business critical nature of the integrity management, we've elected to bring that focus internally," says Turnbull. Integrity management DNV is able to provide a multi-discipline integrity management team with responsibility for offshore facility integrity. Personnel from DNV Consulting and DNV Technology Services are now working offshore and within CNR's Aberdeen headquarters to help the operator develop and implement a detailed integrity management system for all its North Sea assets. This follows on from an earlier DNV review of CNR's integrity management arrangements for pressure systems and technical support during an intensive programme of process reconfiguration and inspection on the Ninian South platform after the HSE notice. "We had DNV assist us in the early days of the Ninian South problems. We saw a professionalism there that could help us," says Turnbull. DNV is currently assisting CNR to identify needs and define best practices for integrity management, and CNR aims to have its new system in operation by the end of this year.

CNR's Ninian South platform

"I donâ&#x20AC;&#x2122;t think that appropriate focus has previously been placed on integrity management by the regulatory authorities, but it is going to become more prominent," says McWhan and concludes, " What we're now trying to do is implement a behavioural safety regime across all of our platforms that enforces safety management both bottom up and top down. This will ensure our offshore personnel are more involved in the management process. The HSE is looking at this very positively." Stuart Brewer

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The heartland of safety

Camacari, South America’s largest petrochemical complex, is committed to being one of the world’s safest industrial zones.

With over 58 companies operating in the 50 square kilometre Camacari industrial zone, improved safety is a priority. These companies are represented by COFIC, an association that has been working with DNV for more than ten years to make the Camacari zone the safest industrial zone in the world. It is a partnership that has produced positive results.

The industrial zone occupies a 50 square kilometre area of Bahia, in northeast Brazil. The zone is home to many petrochemical companies, including giants such as Braskem, Dow Chemical, BASF and Petrobras. But other companies, such as the Ford Motor Company and AMBEV, a brewery, have significant operations in Camacari as well. Camacari stimulates growth The implementation of chemical and petrochemical industries in Camacari began with a political decision. Since 1550, Salvador, Bahia’s most important city today, was Brazil’s first capital. Over the next two hundred years, beginning in the 1760s, the city suffered from a lengthy period of low development. In the 1970s, the Brazilian government decided to pave the way for

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industrial development some ten kilometres north of Salvador, making Camacari the basis for further growth and development that now extends far beyond the 50 square kilometre industrial zone. Antônio José Ferreira Saraiva is the manager of one of Braskem’s sites – a large petrochemical company in the Camacari complex and one of Brazil’s five largest privately owned companies. As a highly respected professor and vice president of COFIC, he has played a major role in Camacari’s efforts to improve safety. “An industrial area such as this necessitates a major focus on safety. The potential consequences of an accident and the losses that an accident can generate are huge. Everyone is dependent on everyone operating safely,” explains Saraiva.

DNV increased safety focus DNV was hired by COFIC ten years ago to conduct an extensive risk-assessment study – Appolo 1. The first phase, related to scenarios identification and consequences analysis, of its successor – Appolo 2 - has just been completed.

“An industrial area such as this necessitates a major focus on safety. Everyone is dependent on everyone operating safely”

Appolo 1 and 2 have been extensive. DNV Salvador has had all its focus trained on Camacari. Each of the 58 companies has been reviewed. More than 22,000 accident scenarios have been identified and classified according to categories of frequency, severity and risk previously established by COFIC. Measures to reduce risk have been proposed for the more significant scenarios and employee training programmes have been implemented in all the companies as an integral part of their production plans. Risk management programmes will be implemented in the next phase of the project. “There is no doubt that DNV has helped to increase our focus on safety,” continues Antônio José Ferreira Saraiva. “Developments during these years have been very positive. While the individual companies previously had most knowledge of and the greatest focus on managing their products, they now have extensive knowledge of and a focus on managing their risk.” Camacari best of the class And the results can be documented. Centrally located in Saraiva’s own company, Braskem has a board that shows that it has now been almost 1900 days since the last event that led to a registered injury to an employee in his company. The last major accident that affected the entire Camacari complex took place in 1993, when one of the facility’s many pipes burst, causing a fire. No one was seriously injured in that accident. The results for the whole Camacari plant are positive. While the H-value - the lost-time accident frequency calculated as number of work days absence per million worked hours – in 1998 was 6.9. The same value in 2002 was 2.1. Compared to the figures for the Brazilian Chemical Industry Association, which have also been developing positively way, the Camacari figures are much lower – some 1/3 below those figures. Antônio José Ferreira Saravia explains: “The reason we were able to achieve these results is the focus that each company has placed on risk assessment and risk management. Based on COFIC’s initiative and DNV’s work, suggestions

and recommendations regarding improvements have been put forward. The companies have assessed measures and carried improvements. Far from all of these have been major or comprehensive, but in total they have resulted in safety improvements for the entire Camacari complex, each company, each employee and the entire local community outside Camacari.” Safety work continues But the companies not only cooperate – they compete with each other, too. Safety prizes in various categories are awarded each year. “This is not an oddity - it is an important tool, with the requirements for each individual category and each individual company being thoroughly prepared and forming part of Camacari’s overall safety work,” emphasises Saravia. Saravia also tells us that representatives of other major industrial complexes in different parts of the world have visited Camacari to benefit from its experience and learn how to develop their own safety improvements. “I don’t know of any official ranking list, but I would claim that Camacari is one of the top five in the world based on safety,” he says.

Vice president of COFIC, Antônio José Ferreira Saravia, is proud of the results achieved at Camacari, which he attributes to a “greater focus placed on risk assessment and risk management”.

However, the companies that belong to Camacari’s enormous industrial complex have not concluded their safety work. “This is work that can never end. No one can at any time lean back and conclude that the goal has now been achieved,” underlines COFIC’s vice president. “I would claim that 90 per cent of the complex’s companies are healthy. The other 10 per cent have to catch up quickly. No company can be hidden behind the general health of the plant. Everyone has to continue to pursue their specific safety activities and improvements.” The first phase Appolo 2 risk-assessment study carried out by DNV has just been completed, and the suggestions and recommendations will be dealt with in the individual companies. In addition, the focus on safety will be followed up by a quantitative risk analysis which is expected to take another 12 months. Per Wiggo Richardsen

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World-Wide builds up gas head of steam While integration of Bergesen is running smoothly, a mountain of rules mean shipping is losing its traditional freedom of the seas, international character and diversity according to World-Wide Shipping Group chairman, Dr Helmut Sohmen

Demands for capital intensive investment and a high level of technical competence have hitherto closed the door to many conventional shipowners looking to break into the LNG market, which is characterised by a few specialist players with great growth potential. But World-Wide Shipping Group chairman, Dr Helmut Sohmen, believes World-Wideâ&#x20AC;&#x2122;s strategic acquisition of strong gas carrier operator Bergesen will enable the tanker owner to overcome these hurdles by creating a larger and more diversified organisation with greater capital-raising potential and solid technical and operational experience in the gas shipping sector. While the combined company will maintain a foothold in traditional tanker activities, it intends to increase its exposure to businesses that are expected to generate higher returns and more stable earnings, with particular emphasis on LNG. The Bergesen takeover, finalised this spring, has given World-Wide ownership and commercial control of 84 vessels, of which 71 are tankers (gas, chemical and oil) and 13 are bulk carriers. The inclusion of the Bergesen vessels in the World-Wide fleet (26 VLCCs, with two more on order, and several smaller tankers and bulk carriers) brings balance to the World-Wide organisation and diversifies its cash flow.

Dr Helmut Sohmen, chairman of World-Wide, believes the Bergesen deal strengthens the shipping groupâ&#x20AC;&#x2122;s ability to gain more business and generate higher returns in the LNG sector.

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Gaining business Aware of the need to be a heavyweight player to succeed in the LNG sector, Dr Sohmen believes the Bergesen deal strengthens World-Wide's ability to gain more business in the future.

"I am pleased that the transaction and change of control have been smooth, and that, despite the initial surprise of many observers in Norway, the business logic of the deal has by and large been accepted. Both Bergesen and World-Wide Shipping have their origins in strong founding figures, similar operating philosophies and an inclination for solid financials. Both enjoy an excellent brand name in the bulk shipping industry built on the professionalism of our people." Dr Sohmen continues: "The consolidation of ownership of these two companies should produce synergies as well as an ability to explore new business opportunities together. It has been agreed that the companies will continue to operate from their existing bases and with their own respective management and Board of Directors."

Dr Sohmen (second from left) onboard Berge Everett. From left, Bergesen's Per Olav Røed, Viggo Bjørnsgaard and Captain Geir Bratland, the Master of Berge Everett.

The company is eyeing business opportunities in "several markets", says Dr Sohmen, including China and Japan. China is looking to increase gas consumption to 6% of all fuel used by 2010, up from the current 2%. Its first and second LNG terminals are already under construction. A Bergesen office in Tokyo was set up last year and the plan is to target Japan more, the most important gas-carrier market in the world.

LNG commitment Signalling its long-term commitment to the LNG market, Bergesen has recently taken delivery of a second newbuilding and has five more ships currently on order. The company plans to own 15-20 vessels by 2010.

Says Dr Sohmen: "We are working actively on several new LNG projects and the prospects for stepping up the company's involvement in this area are good. The charterers are, to an increasing extent, looking to operators to take total responsibility for oil and gas transportation, which demands a higher level of expertise from the operator."

The World-Wide – Bergesen partnership gives clear strategic benefits to both companies. "Bergesen has long experience and a good reputation in the gas sector, in which a high level of technical and operational expertise is essential to compete effectively. The partnership with Bergesen will give us access to extensive competence in the gas-carrier market," says Dr Sohmen. à

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The protracted nature of the Bergesen deal shows that Dr Sohmen has a long-term, clear strategic vision of how to incorporate the pride of the Norwegian fleet into his expanded empire.

Bergesen's current deputy managing director, Jan HĂĽkon Pettersen, who will become managing director of the new-look Sohmen-family-controlled version of the company at the end of this year, believes the two companies have complementary areas of competence and fit well together. "Although the future LNG market will probably feature stiffer competition between players, the long-term contract market is expected to remain the exclusive preserve of companies above a certain size and with good financing. With this in mind, we believe the Sohmen buyin gives Bergesen an even more solid capital base and thus strengthens its ability to gain more business with new charterers," says Pettersen. The protracted nature of the Bergesen deal shows that Dr Sohmen has a long-term, clear strategic vision of how to incorporate the pride of the Norwegian fleet into his expanded empire. He is taking a longer term view of the market and positioning himself for the next 20 years. The environmental issues are close to his mind and pure reliance on oil transport over the longer term "is not particularly sensible".

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Roller coaster ride This view is set against a recent background of boom and bust freight rates in oil transportation. For the bulk shipping industry, the last quarter century has been like "riding a roller coaster" according to Dr Sohmen. The slump in freight rates due to the oil-price rises in the 1970s lasted for 10 years. Then the first Gulf War led to a short-lived rise in rates, followed by another eight years of recession. Rates only started to rise in 2000 and are currently almost at their peak believes Dr Sohmen. "Another slump will come again, especially with the global worries about economic growth, the capacity of the worldâ&#x20AC;&#x2122;s shipyards, and the looming deflation in the developed world," he warns.

Of the performance of other shipping sectors in this same quarter century Dr Sohmen notes an impressive growth in container shipping, in terms of cargo volumes shipped and vessel size. He also alludes to the relatively recent emergence and strong expansion of the floating oil production and storage unit sector which, like the gas carrier sector, Bergesen has brought experience of to World-Wide. On the shipbuilding front he points to the "huge increase" in shipbuilding capacity in South Korea and China in recent years.

The two latest newbuildings at Daewoo - Berge Everett and World Luck - bow to bow

Rule mountain While such developments are far from insignificant, Dr Sohmen believes it is the change in the regulatory environment in the past quarter century that has had most impact on shipping. "Governments' increasing involvement in shipping affairs has been the most important change during the period. This started off due to the perceived need to impose stricter ship construction and operating standards following a few disastrous accidents and environmental pollution cases, and to worldwide calls for greater transparency and accountability in business in general," he says. "Matters that used to be subject to self-regulation and the standards of classification societies and professional bodies are now subject to a mountain of rules and regulations with which shipowners and operators must comply in order to be able to trade their vessels. "Shipping's traditional freedom of the seas, international character and diversity, which have historically been viewed as positive characteristics of an extremely competitive and cost-efficient service industry, are now being replaced by rules that are specific to each part of a ship, member of a crew and aspect of a ship's operation at sea and on land.

"Politicians everywhere are now imposing legislation, stringent controls, penalties and higher insurance coverage on shipping in their search for quick and popular solutions." Leaders required "Due to the fact that the industry has no leaders and no political influence, flag and port states have easily managed to place new responsibilities on the shoulders of the shipping companies without usually having to share the ensuing costs," continues Dr Sohmen. "Nongovernmental organisations view targeting the shipping industry as an easy way to achieve their aims of improving the world. They often conveniently forget the maritime industries' initiatives and contributions aimed at aiding worldwide economic growth and promoting and protecting the well-being of most of the world's population.

â&#x20AC;?Shipping does not deserve to be treated as a convenient scapegoatâ&#x20AC;?

"Like other industries, the shipping industry must continue to strive and improve. However, it does not deserve to be treated as a convenient scapegoat or a ready source of funds. Maybe we have not made such a lot of progress over the past 25 years, or managed to make people in general understand shipping and its importance." Stuart Brewer

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Leading authorities adopting hard line on security code The USCG and the European Commission appear to be taking a hard line on enforcement of the International Ship and Port Facility Security (ISPS) Code – no matter what the consequences.

So what will happen on July 1, 2004 ? Two scenarios appear likely, yet both seem almost too extreme to actually occur. Enforcement of the code is coming down to an either/or situation: either the code is enforced and the majority of the world’s fleet cannot trade, or the code becomes a virtual nullity. In connection with DNV’s first-ever security audit onboard Bergesen’s Berge Boston, the USCG commanding officer and captain of the Port Boston, Brian M Salerno said that "although enforcement guidelines are not yet on the street, I anticipate that the Coast Guard will require strict compliance with the code." Full compliance From the perception of an individual port, captain Salerno expects that ships entering Boston will comply with all of the requirements of the code, as well as with the soon to be published U.S. regulations promulgated under the Maritime Transportation Security Act. As for ‘bought’ certificates, Captain Salerno states: "We will evaluate the certificate in accordance with the code and our own requirements. If we go onboard a ship and find the security plan and system do not conform to requirements, we’ll have questions to ask."

ISPS CODE IN BRIEF Under the new International Ship and Port Facility Security (ISPS) Code to enter into force in July 2004, minimum functional security requirements will include: • For ships: ship security plans, ship security officers, company security officers and certain onboard equipment • For ports: port facility security plans, port facility security officers and certain security equipment • For ships and ports: monitoring and controlling access, monitoring the activities of people and cargo and ensuring security communications are readily available

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The USCG is not alone; the European Commission is also reported to be taking a hard line on enforcement. It has made it clear that compliance checking will commence on the due date and that ships which fail will be in trouble. In Asia too, authorities seem to be prepared to cut owners and operators little slack on the issue. "Owners and operators must ensure that all maritime security measures are in place by the deadline. Maritime security is here to stay and we all have a part to play," stated Lee Seng Kong, the senior director of Singapore's Maritime Port Authority (MPA), in his opening speech at a recent maritime security seminar in Singapore. Many companies do not appear to be taking the code very seriously, if the numbers are anything to go by. Even now, with little more than a year to go, only a few of the world’s shipowners/operators have actually complied with code requirements. Given that there are an estimated 40,000 ships requiring compliance with the code, and that meeting the tenets of the code can take between two and six months per vessel, the outlook looks quite gloomy to say the least. Awesome task At the recent Nor-Shipping conference, DNV Maritime Industries’ chief operating officer Tor Svensen gave a thoughtful exposé of the security situation and the huge amount left to do before the code comes into force next summer. Speaking about how the risk picture has changed, he reminded his audience that the ISPS Code represents the fastest ever implementation of International Maritime Organisation legislation. "The shipping industry

Bergesen has been working closely with the Norwegian authorities and DNV to find practical solutions, particularly regarding assessment procedures. Captain Odd Stein Djøseland believes many of the requirements are general, and leave considerable flexibility and interpretation to both the flag states and the port states. "We consider this flexibility to be important as it makes it possible to adapt the security measures to ship type and trading area," he said DNV is committed to helping its customers deal with the new code. For the past two years, the Society has conducted extensive research and pilot studies to prepare ahead. DNV’s security project manager Karl Morten Wiklund comments: "With over 40,000 vessels and 20,000 port facilities to be incorporated under the code, it is very important that the new requirements for shipping are made as practical as possible to avoid stopping the flow of trade, at the same time as increasing the security level."

Captain of the Port Boston, Brian M Salerno (right) seen here with Lieutenant Commander Brian Downey, Chief of the vessel inspection division.

now knows reasonably well what it is expected to contribute to this development in the shape of security officers, plans and the all-important International Ship Security Certificate," he said. However he suggested that, for ports, the situation is a lot more complicated while there are many questions that remain to be settled on the security front. According to Svensen, many countries have yet to settle the question of which government body is to be responsible for ship and port security. "Administrations sometimes move slowly, and time is running out," he said and warned, "It is the industry that will suffer if the authorities remain dilatory or fail to delegate their security remit to responsible organisations."

Wait-and-see attitude In an effort to assist its shipowner clients, DNV, like several other classification societies, has introduced model training courses and has trained staff to deal with the demands likely to be brought on by the code. "The expected rush to certify has not materialised, however. This is mainly due to the fact that most flag administrations are adopting a wait-and-see attitude before they approve the major classification societies as their Recognised Security Organisations," says Finn-Erik Dahl, DNV’s senior security advisor. He continues, "What many shipowners and management companies do not seem to realise is that port state control on ISPS matters is going to be very tight. One prominent example here is the US, which has been indicating for a long time that ships which do not have a security plan that

With the advent of the ISPS Code, an auditable standard of security management has been bestowed upon the shipping industry. Here, principal surveyor Sam Aase is seen carrying out DNV’s first-ever security audit onboard Bergesen’s Berge Boston. From left, Capt. O.Djøseland, DNV’s David Larimer, Magne Magnussen, Sam Aase and Bergesen’s security officer Lars Hallum

meets the requirements of the code or whose plan has not been implemented according to the code, may be deferred from entering ports." Dahl emphasises it is not enough for owners just to have a certificate. "The security plan and its implementation must be according to the code’s regulations. And if an owner loses the certificate, it will not be able to trade internationally until it has been approved once more," he says and warns, "But by then, the owner will have been put on the high-interest list in some countries and can expect frequent port state inspections. To avoid this, owners must have a security plan that has been implemented properly so it can stand port state inspections." Stuart Brewer

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Singapore contains the terror threat Singapore is taking tough measures to prevent terrorist attacks on ships without hampering trade. In his opening speech at a recent maritime security seminar, the Senior Director of the Maritime and Port Authority of Singapore (MPA), Lee Seng Kong, stated that "the maritime security measures adopted by the IMO are necessary to further safeguard the world maritime trade from the threat of terrorist attacks."

The discovery in Singapore last year of a terrorist network called Jemaah Islamiyah, a group with reputed links to Al-Qaeda, means that this threat is very real. For this very reason Singapore, in June last year, became the first Asian nation to join the US Container Security Initiative (CSI). Under its agreement with the US Customs Service, Singapore will work with US Customs to establish a pilot CSI in port. Its endorsement of the US move thus allows joint screening of containers bound for the US at its terminals.

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Swift process sought Speed is essential here. Security measures should not slow down trade, since this is exactly what the terrorists, who thrive in chaos, want. As Lee said, this would seriously affect the "wheels of international commerce". According to Lee, one of the main challenges is to develop measures that apply worldwide yet do not hamper trade. A trade standstill would mean that the terrorists had won without having to do anything else.

Backing an uphill task Singapore's MPA has given wholehearted backing to the IMO's efforts to forge a united front against the dangers posed to maritime security. The IMO, however, faces an uphill task. It not only has to get its members to agree to specific proposals, it has to get the proposals implemented through each country's various government, security and intelligence agencies.

The focal point of some 400 shipping lines, Singapore is the worldâ&#x20AC;&#x2122;s busiest port in terms of shipping tonnage. The economic consequences of an attack could be huge.

Lee explains, "Maritime security must become as much an integral part of the shipping community as safety has been. To successfully accomplish this objective and firmly establish maritime security in the community, we must work closely together. We must not only ensure that we implement the maritime security measures agreed upon at the diplomatic conference in December last year, but also ensure that they are clearly understood and actions taken to ensure that maritime security can be firmly established." Recognised security organisations The MPA has, to date, provisionally appointed five classifications societies as Recognised Security Organisations (RSOs), including DNV. The RSOs are authorised to act on MPA's behalf to review and approve Ship

Security Plans in accordance with Chapter XI-2 of SOLAS and the ISPS Code. Says Lee, "RSOs appointed must have the competencies needed for ship security certification. This means that they must have trained staff, procedures and the organisation to enable them to review and approve the ship security plan, assess and verify the ship security system and the competencies of the Ship Security Officer and the Company Security Officer, and issue the International Ship Security Certificate on behalf of the Administration. "The processes and documentation required under the ISPS Code have to be in place by 1 July 2004. If shipowners and operators do not have them in place by then, they risk the chance of disruption to their operations," says Lee. "Like the caution I delivered when I spoke on the International Safety Management Code some years back, I am repeating the same caution: owners and operators must ensure that all maritime security measures are in place by the deadline. Maritime security is here to stay and we all have a part to play," he concludes.

Stuart Brewer

Photos: Courtesy of MPA Singapore

The vital importance of port and maritime security in todayâ&#x20AC;&#x2122;s world of terrorist threat and economic uncertainty was powerfully underlined by Senior Director Lee Seng Kong at the Maritime and Port Authority of Singaporeâ&#x20AC;&#x2122;s recent international conference on the subject.

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Sailing with With the end of the Iraq war, shipping is booming again in the Arabian Gulf, but how long will it last? Abdulla Mady Al-Mady, the president and chief executive officer of the United Arab Shipping Co. S.A.G, is not afraid of a short term recession in the shipping market in the Arabian Gulf - in fact he sees new possibilities for expansion on a long-term basis.

"I think Middle East shipping is more exposed to long term influences, rather than short term trends. Trade in the region has been built up over the past 30–40 years from almost nothing. The Iraq invasion of Kuwait in 1990 and the 11 September attacks pushed the rates and the insurance premiums up for a short time, but trade in the region has been steadily growing despite political unrest. Most of the Arab countries have built up a very good education, health and infrastructure system during these years, which has contributed to a continuous increase of regional trade," says Al-Mady.

Photo: Courtesy of Mohd .Idress

According to United Arab Shipping president and chief executive officer Abdulla Mady Al-Mady, a free-trade market in the Middle East might not be unrealistic in the near future.

"The successful US-led invasion of Iraq and the rebuilding of the country will benefit all operators"

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He continues; "The successful US-led invasion of Iraq and the rebuilding of the country will benefit all operators. Also, if the Road Map to peace in the Middle East succeeds it will be fundamental for long-term development in the region. Crown Prince Abdullah’s latest initiative in this process has proved most people in the Arabic world are geared up for peace and eventually for development, which will benefit the shipping industry." Massive capacity leap United Arab Shipping has become one of the dominant forces in Middle East shipping. The Kuwait-based container line has grown to operate a fleet of 30 ships and is now looking for new opportunities. "We have therefore decided to replace our old general cargo ship fleet and move into the post-Panamax area. We expect to phase out the last part of our K-class vessels within a few years," says Al-Mady. "In 1998 we ordered ten new ships and we also plan to order another eight 6,500-teu container vessels by the end of this year." In spite of the shift towards containers, the company has decided not to loosen its grip on general cargo business just yet. "A lot of business exists in the rebuilding of Iraq. Once the country is moving again it will have to rebuild its infrastructure, which will require huge cargo movements for the next 5 – 10 years. We consider this a short-term, but good business market for us. We have therefore decided to go for charter deals to meet these specific needs," explains Al-Mady.

the trade winds in the Arabian Gulf

Al-Farahidi. one of United Arab Shippingâ&#x20AC;&#x2122;s 10 latest newbuildings.

Consolidating for success United Arab Shipping was founded in 1976 by Saudi Arabia, Kuwait, the United Arab Emirates, Iraq, Qatar and Bahrain, and is one of the first shipping companies to introduce the joint venture philosophy in international shipping. "We considered this move to be realistic in terms of surviving international competition, not only in the Middle East but worldwide. We have consolidated the existing cargo business in the region. It has proved to be a success in spite of political unrest, and we are expanding our services to serve global trade as well. Politics does not play a part in how we run our business. The board of directors represents the owners of six governments. They set the agenda, but the business is run by professionals. That is why our company has become a success," concludes Al-Mady.

THE UNITED ARAB SHIPPING CO. S.A.G. (UASC) is jointly owned by six shareholding states from the Arabian Gulf. Its primary mission is to serve the shipping needs of the Arabian Gulf region, but it has expanded its container services to serve global trades between North Europe, the Mediterranean, the Far East, South and North America, South Africa and the Indian subcontinent.

UASC offers a comprehensive range of containerised and break bulk services. It provides a range of shipping services including shipping agencies, freight forwarding, land transportation, sea and air cargo, petrochemical transportation, chartering, container repairs and storage.

UASC is set to make a major move into the post Panamax area in order to remain competitive.

Beate Viktoria Ă&#x2DC;rbeck

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Shaping tomorrow's The head of DNV Research, Carl Arne Carlsen, leads an organisation that is invariably thinking many years down the technological timeline. His is a group that will help determine how business is done, both by DNV and related industries, into the next generation.

Nestled carefully under the responsibility of DNV's CTO and working at the headquarters just outside of Oslo, DNV Research is a tremendously powerful and skilled group within the organisation. Their director, Carl Arne Carlsen, notes off-hand that a large number of DNV's current products and services started their life within the R&D department from 5 to 30 years ago. And today's work concerns business two decades hence. "We aim to build strategic competence for emerging technologies. We explore future scenarios to identify opportunities and threats to DNV and our customers. Our approach is to combine research with innovations to solve important challenges in a way that meets the objective of DNV: safeguarding life, property and the environment," says Carlsen.

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This is power and responsibility. Carl Arne affably gives it all a democratic and procedural spin: "A research board sits down once a year to lay out a group of research programmes that are equally market- and technology-focused." The current programmes are: bio-risk management, energy & resources, lightweight and multifunctional materials, organisations of the future and transportation systems. These innocuous umbrella words belie projects for safely transporting natural gas and hydrogen, preventing invasive species' release into the environment, producing super-strong lightweight materials with embedded sensors, assessing risks in ICT investment and a host of others. Once one of these projects approaches commercial viability, it usually moves over to one of DNV's business units.

DNV

Who really decides? Carlsen does not hesitate to assign credit for today's rapid state of innovation: "Society in general is pushing change. A popular culture of zero tolerance is demanding that industry do things better all the time, and document performance. Government regulators respond to this by making laws and regulations. Our role in research lies in discovering a workable regulatory framework that satisfies public demand and that is acceptable to industry."

DNV is actively applying the risk-based approach to steel performance after years of research. In offshore operations, for example, prescriptive rules may stipulate a steel thickness and quality to withstand a combination of conditions (wave height, temperature, wind speed, etc.) whose probability of actually occurring simultaneously is equivalent to zero. So DNV is exploring ways of assessing the real risks inherent in steel and its failure. Ă

DNV Research uses risk-based analysis, in contrast to prescriptive rules. Risk-based analysis combines the probability of an event happening and its consequences; Prescriptive rules, on the other hand, stipulate a certain level of performance given any and every condition.

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The picture was taken by the third officer on board the handymax bulk carrier SELKIRK SETTLER in the North Atlantic, Feb. 1987.

Working with a constellation of European research organisations, DNV Research is participating in a project to analyse rogue waves, their occurrence, their properties and their impact on design practices. Obviously a vessel plying its trade in waters where rogue waves occur needs to be built to withstand such waves. "We work pro-actively with regulatory authorities worldwide to help them develop effective regulations. They should encourage industrial involvement, and not evasion, which is often the unfortunate result of a draconian legal framework," says Carlsen.

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The Global Pay-off For today's environmentally conscious global citizens, high environmental performance is an absolute good, in and of itself. For companies that need to deliver goods and services in global competition, high environmental performance needs a good business case. "If we can demonstrate that a company will benefit on the bottomline by undertaking change, and suffer by not doing so, then they will do it," says Carlsen. An example that illustrates DNV's high-technology research capacity, a solid business case and environmental improvement is the case of ballast water. Ecosystems worldwide are threat-

DNV Research is participating in a project to analyse rogue waves, their occurrence, their properties and their impact on design practices.

ened by the introduction of new species from other ecosystems, which can be transported via deep-sea shipping vessels' ballast tanks. United States' authorities estimate that invasive species cost the country over USD 100 billion every year. With so much money involved, the business potential is a given. DNV Research is currently analysing the biological threats associated with emissions into the sea, and developing guidelines to manage this risk. As a result, shipowners and managers will be given a case for improving on current performance, and hopefully a framework for doing it. "Environmental performance is one part of a larger CSR [corporate social responsibility] picture that will only grow in importance. Many of America's Fortune 500 companies include a CSR report in their annual report. We started working on this field long ago, and have already turned CSR service concepts over to DNV's business units. This is developing even quicker than we could foresee, particularly the need for independent performance verification," says Carlsen. Fundamental to applied Eventually, much of DNV Research's work gets passed on to business units, where further research and commercialisation takes place. With his background in the shipping business, Carlsen draws attention to the current research work in DNV Maritime's business unit.

"Formal Safety Assessment, unified ship construction standards, knowledge management, load and response, systems and equipment and the environment programme are maritime research areas directly tied to DNV services." And what new projects will DNV Research move over to the maritime business unit? "We are working with a number of potential projects: nano-technology may be used to develop ultralightweight materials with superior coating, as well as superlight fire-resistant walls; innovative ship designs may employ lightweight concretesteel sandwich materials for improved ship safety; fuel cell technology; IT security; and methods to better ensure the quality of software that is being applied to operate critical equipment and systems onboard ships. Those are just a few," says Carlsen.

DNV RESEARCH AT A GLANCE • 60 man-years in strategic research (not including ICT research) • 100+ man-years in applied research (in business units) • NOK 150 million annual budget, considerable funding from EU research programmes and joint industry projects • Co-operate with European research organisations, industry and regulatory bodies • Frequent skill transfer between research division and business units to increase technical and market knowledge • For more information, see www.dnv.com/research

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A virtual leap in shipbuilding design Odense Steel Shipyard Ltd. A/S in Denmark is joining forces with Japanese and Korean shipbuilders to test out brand new technology that is expected to revolutionize modern shipbuilding. IntelliShip utilizes virtual reality to enable simultaneous engineering projects to be completed more rapidly.

Torben Andersen

â&#x20AC;&#x153;From our extensive tests we can conclude that IntelliShip has increased the capacity of the ship designers by 100% percentâ&#x20AC;?

IntelliShip has been jointly developed by Odense Steel Shipyard in Denmark, Samsung Heavy Industries in Korea, and Universal Shipbuilding (Hitachi) in Japan. DNV and Intergraph have been working in close cooperation with the three yards on further development, as well as the integration of work processes. The three yards are currently conducting simultaneous tests before the new shibuilding information system is fully implemented for commercial production at the yards by the end of 2003. Torben Andersen, executive vice president at the Odense Steel Shipyard and chairman and chief executive officer of the Global Research and Development Company Inc, has been heavily involved in the development of IntelliShip since its creation in 1995. "We realized that the computerized techniques still in use from the 70s were about to be retired, and that we had to do something if we wanted

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to stay in business. We therefore decided to join forces with other shipbuilders to develop an integrated system that incorporated knowhow from owners, yards and class," explains Andersen

Beyond current CAD-based solutions By using standard Microsoft programming tools, the new software is considered to be a significant advance beyond current CADbased solutions in terms of data-centricity, customizability, flexibility, productivity, rulebased engineering and integration. "Our specification identified that the system should be easy to use and be able to run simultaneously on a global basis. From our extensive tests we can conclude that IntelliShip has increased the capacity of the ship designers by 100% percent, proving that we have succeeded in introducing the next generation of computerized design and production," states Andersen.

Intelliship visualises a 3D model of the hull

DNV SOFTWARE has been preparing for the introduction of IntelliShip in the market for some time. The first release is already available to shipbuilders who wish to explore the possibilities of the system early on. DNV offers evaluation and implementation services to early adapters, where, together with the customer, they will look at the overall design and production process at the yard, identify best work practices and plan implementation of IntelliShip and effective integration with the yard's information infrastructure.

Concurrent advantage Andersen believes the real advantage of IntelliShip is its concurrent system. "Unlike traditional design-and-build methods, the entire newbuilding project can now be modelled, changed and communicated simultaneously rather than consecutively. All parties involved in a project can work on the same data, which enables us to do the design from remote locations as well as on site," he says. "Having used IntelliShip at our shipyard for a year, we can already prove increased productivity. The new solution has reduced the time spent on newbuilding design and construction, and has lowered construction costs. I think this is the best investment in shipbuilding for years to come. It will contribute to help us double our capabilities and improve the total quality of design," he adds.

Life-cycle support According to Andersen, the new tool opens up the unbeatable opportunity for ship life-cycle support. "The core technology of IntelliShip enables new ways of using the information captured by the system. It is possible to combine administrative systems with information from a virtual reality design, and it will be possible to carry design information over to the operation of ships. If something goes wrong onboard a vessel, class and owners can view different solutions at the same time in the same virtual reality, which will reduce costs and increase the speed to overcome problems," he says. DNV Software is currently working on this concept and is planning to launch commercial products within three years.

Beate Viktoria Ørbeck

The IntelliShip solution has been jointly developed by the Global Research and Development (GRAD) consortium, which represents worldwide shipbuilders such as Samsung, Universal Shipbuilding and Odense Steel Shipyard. The new software is owned by the US-based software company Intergraph. DNV Software has the distribution rights in the shipbuilding industry.

ODENSE STEEL SHIPYARD LTD. A/S is a company in the A.P.Møller Group. Their activities comprise shipbuilding, ship repair, container manufacture and industrial machinery manufacture, a shipping company and a property rental firm. The company has bases in Denmark, Germany, Lithuania and Estonia. In 2002 Odense Shipyard handed over a 3,700 TEU container ship to A.P.Møller as well as four 6,600 TEU container ships that are part of a series that comprise the world’s largest container ships. The net turnover for the Group in 2002 was DKK 8,314,892, with an annual profit of DKK 104,643. The company has 8,302 employees.

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Going for Gold The processes required to mine precious metals dictate the management of a variety of major accident hazards. Consequently, the successful delivery of a robust and comprehensive risk management programme is a critical business performance indicator.

As the fifth largest gold mining company in the world, the Placer Dome Mining Corporation is committed to delivering world-class performance in the areas of managing health, safety, the environment, community-care and employee welfare. To assist Placer Dome in achieving their corporate objectives, DNV consultants have conducted comprehensive management systems reviews for the company in Canada, South Africa, the USA and Chile. These system reviews have been supported by Leadership Risk Management workshops and training courses for senior managers throughout the Placer Dome organisation. Further comprehensive system reviews are planned this year for mines in Australia and Papua New Guinea.

Drop in injury numbers "We felt that the ISRS and IERS were a better choice to meet our needs because they allow us to control the programme. Also, they come with introductory training and support, provide us with a map that assists with identifying the way forward, and help us identify our priorities and areas for management attention," says Tony Anderson.

Place Dome’s Walter Benko (far left) and Tony Anderson (third from left) working together with DNV consultants to develop a risk based customised audit/improvement protocol.

Placer Dome’s safety directors Tony Anderson and John Scott have a long association with DNV. As early as 1997, they both recognised the benefits of DNV’s International Safety Rating System (ISRS) and the International Environmental Rating System (IERS). These safety management and rating systems were taken on board by the Asia Pacific region of Placer Dome in 1997 after a thorough evaluation of other system audit tools available in the region.

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He continues: "Starting at safety levels around zero and one, the Asia Pacific sites have since progressed to rating levels five and six. With this progression there has been a consequent drop in injury numbers, resulting in a decision in 2002 to use the ISRS and IERS as the measurement tool across all of Placer Dome’s sites world wide. We have noticed that sites which have used other audit tools, or have not been audited before, are returning levels at zero or one. Typically the same as sites in Asia Pacific when the protocols were first introduced." Good collaboration The use of these systems has significant impact on the operations and overall site safety. "Now sites are actively using the ISRS and IERS audit reports and documents

to assist the development of their programmes. Internal auditors find the protocols simple to use and report that the extended guidelines are of invaluable assistance," adds Tony Anderson. Keith Ferguson, Placer Dome’s vice president for safety and sustainability, underlines the benefits of cooperation with the DNV consultants, saying: "DNV made a significant contribution to improving the safety management systems in Placer Dome in the last year. The ISRS audits were well-managed and helped us prioritise our improvement plans. We look forward to working with DNV throughout 2003 to complete the reviews at our operations world-wide." Tony Anderson adds: "We are very happy with the assistance, support and level of expertise provided by DNV in the area of systems auditing, coaching and development." The Placer Dome/DNV collaboration has resulted in a joint working initiative to develop a risk-based customised audit/improvement protocol for the organisation. DNV consultants and Placer Dome personnel have formed a development team to work together to ensure that DNV’s major hazard experience and Placer Dome’s mining expertise are fully optimised.

PLACER DOME is the world’s fifth largest gold mining company and largest gold producer in Australia, pursuing quality assets around the world. Its core gold business is strengthened by the contributions of its copper and silver assets. Headquartered in Vancouver, Canada, the Placer Dome Group (PDG) now has interests in 18 mines employing 12,500 people in six countries around the world. PDG is also actively involved in major exploration and construction activities on a global scale. With a market capitalisation of US$4.7 billion as of December 31, 2002, Placer Dome is traded on the New York, Toronto and Australian Stock Exchanges, as well as Euronext-Paris. Placer Dome expects to produce 3.5 million ounces of gold, 427 million pounds of copper and 4 million ounces of silver in 2003.

Kristian Lindøe

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Preparing the birth of the carbon economy Facing the severe consequences of global warming, climate change has emerged as a key concern for the World Bank. The Prototype Carbon Fund, which was established four years ago to demonstrate how project-based emissions transactions can mitigate climate change, is now being fine tuned with the help of DNV.

Sea level rises, warming temperatures and increased variability and volatility in weather patterns will have a significant and disproportionate impact in the developing world, where the world's poor remain most susceptible to the potential damages and uncertainties of a changing climate. The World Bank is engaged in a variety of activities to mitigate climate change. This process includes exploring mechanisms that will provide opportunities for addressing climate change while facilitating new resource flows for its clients.

"Under the Clean Development Mechanism, companies are permitted to finance emissions-avoiding projects in developing countries and receive credit for doing so," says World Bank Senior Manager Ken Newcombe.

In 1999 nations and companies worldwide were invited to invest in the newly established Prototype Carbon Fund, which was soon fully booked with 180 million US dollars invested by six governments and 17 companies. The fund is managed by Ken Newcombe, who has worked for the World Bank for 20 years and is also fund manager for the newly established Community Development Carbon Fund and the BioCarbon Fund. "It is a key role for

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the World Bank to help the developing world benefit from the enormous investments required by the developed countries to combat the climate change problem. Our mission is to pioneer the market for project-based greenhouse gas emission reductions within the framework of the Kyoto Protocol and to contribute to sustainable development," he says. Flexible mechanisms The Kyoto Protocol provides for the possibility of creating transferable greenhouse gas emission reductions through investment in mitigation projects operated under so-called flexible mechanisms. One of these is the Clean Development Mechanism, where industrialised countries or companies are permitted to finance emissions-avoiding projects in developing countries and receive credit for doing so. In this way companies can supplement their commitments at home by purchasing lower cost emissions in developing countries.

Through the Chacabuquito project in the Chilean Andes, one million tons of carbon dioxide emission reduction credits are delivered to the Prototype Carbon Fund participants. The power company is forecast to receive some 3.5 million US dollars in return.

Photo: Courtesy of The World Bank

As a result, projects in developing countries gain a new source of financing for sustainable development in the energy, industrial and waste management sectors, within land rehabilitation and clean technologies. The Mechanism also enables industrialised countries and companies with greenhouse gas reduction commitments to purchase some of their required reductions in developing countries. It ushers in a new era of possibilities for developing countries, in which reductions in greenhouse gases are exchanged for development cash. One of the reasons for establishing the fund is the need to understand and test the processes and procedures for creating a market in projectbased emission reductions under the flexible mechanisms. "To make these mechanisms work, it is vital to get practical project experience, as well as making sure that the lessons learned are disseminated properly. The Prototype Carbon Fund is therefore operated from a "learning-by-doing" approach," explains Newcombe. "While we are now more experienced than when we started in 1999, our enthusiasm for this new process has not decreased," he adds.

The Chacabuquito project So far 15 projects have received funding. One of them, the Chacabuquito hydropower project in the Chilean Andes, is already installed and in operation. The 26-megawatt plant is scheduled to deliver one million tons of carbon dioxide emission reduction credits to the fund participants, and the power company is forecast to receive some 3.5 million US dollars in return. The independent verification has documented that 112 thousand tons of carbon emission reductions can be sold the first year of operation. "These were the first verified greenhouse gas emissions reductions in the developing world, following the rules and procedures of the Clean Development Mechanism of the Kyoto Protocol," says Newcombe. Credibility assurance As the Kyoto Protocol only allows industrial countries to offset their emission with real, measurable and additional emissions reductions, it has been important to develop international regimes to assure the credibility and quality of emission reductions. This requires the application of an agreed framework, Ă

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Inside the pipeline at the Chacabuquito 26-megawatt hydropower project. The independent verification has documented that 112 thousand tons of carbon emission reductions can be sold the first year of operation.

Photo: Courtesy of The World Bank

which can assure international investors and other interested parties that verified and certified emission reductions fully satisfy all Kyoto Protocol criteria. The Protocol has therefore introduced validation, verification and certification by independent entities. The term validation means the approval of a project’s design documents, while verification is the periodic auditing of monitored results. Certification is the written assurance that, in the verification period, a project has achieved the stated emission reductions. The World Bank has collaborated with the industry in developing standards for this work in connection with climate change projects. "DNV has had a pioneering role in this work, and they have also validated more than half of the 15 projects being funded so far, including the Chacabuquito project," explains Newcombe Carbon market trade between the OECD and the rest of the world is forecast to exceed one billion dollars a year by 2008. It is the World Bank’s responsibility to make sure that an equitable share of this money, much of it from the private sector, ends up in the hands of the poorer countries and benefits poor communities. "We are now fine-tuning our strategy and expanding our product line to add depth and credibility to the global carbon market with a view to increasing private sector confidence and participation in carbon trading with developing and transition economies," says Newcombe. Eva Halvorsen

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EMISSIONS TRADING DIRECTIVE ADOPTED IN THE EU • The European Parliament this summer adopted "The Emissions Trading Directive". • The directive will apply in at least 28 of the 37 countries that accepted commitments under the Kyoto Protocol. • Emissions trading will commence on 1 January 2005.

Horns Rev – a pioneering project involving 80 windmills.

Running after the wind in Europe The giant Horns Rev windfarm development off Denmark confirms the country’s leading role in the renewable energy sector of Europe, rivalling the position of its neighbour Germany. The project, it appears, has put wind in the sails of the European race to be first in the field.à

Photos: Courtesy of Elsam AS

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Opportunities in the UK Jens W. Bonefeld of Denmark’s Tech-wise – a subsidiary of electricity producer Elsam – is one of these wind power experts. In 1998 he was appointed project manager for Horns Rev windfarm development off the west coast of Denmark and is now involved in the creation of a windfarm on the Shell Flat sandbank in Liverpool Bay, some 8km offshore Blackpool. Other companies working on this project include Elsam, Shell Renewables and Celt Power, a joint venture between Japan’s Eurus Energy and Scottish Power - one of the largest windpower producers in Scotland. Project manager Jens W. Bonefeld

Led by energy minister Brian Wilson, the British government has made an ambitious commitment to windpower as a means of renewable energy and as a tool for reducing CO2 emissions. The goal is to increase renewable electricity sources to 10% of the UK total needs by 2010, and 20% by 2020. Windpower will be the most important source to achieve these targets. "The UK has a very good windpower potential due to its location," says Bonefeld. He also highlights Germany which offers similar opportunities, as do the Netherlands, Belgium and Sweden, although these are on a slightly smaller scale.

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Denmark sets high targets Denmark has had a focus on windpower for more than 20 years, and its commitment to offshore windfarms is due to the fact that there is no more room for these onshore. The country also has many square kilometres of low water-depth areas of 5-15 metres that are ideal and financially optimal for windfarms. In western Denmark, 25% of the electricity currently comes from windpower, while the figure for the country as a whole is 20%. The long-term goal is 50% by 2030. At present, most of the energy still comes from coalfired power stations, but some electricity is also produced by gas-fired power stations using the Danes’ natural gas in the North Sea. Unlike Sweden and Germany, Denmark does not have any nuclear power stations. 160 MW from Horns Rev The prestigious Horns Rev windfarm is a pioneering project. Located 14 km from land and covering an area of 20 square km, with water depths varying from 6.5 metres to 13.5 metres, the windfarm consists of 80 windmills with a total output of 160 megawatts. The Horns Rev windmills have a rotor diameter of 80 metres and are located 560 metres from each other. To achieve the greatest

possible windfarm output, the ideal situation is for the windmills not to "hide" each other, preferably spaced at a distance of seven times the rotor diameter so that reductions in output are kept at a reasonable level. Tech-wise was responsible for the design and project management of the park. Even as an experienced civil engineer who has built all types of power stations, Jens W. Bonefeld admits that he is always wondering whether it is windy on Horns Rev and whether production is going according to plan. This is despite the fact that the operations now are taken over by Elsam Wind Service. This company runs all Elsam’s windmills, which produce a total output of 430 megawatts. "We have been the focus of an incredible amount of attention, and there has been a great deal of interest in our homepage, www.hornsrev.dk," says Bonefeld. "From being a rather new and special field, the windpower industry is now extremely important to many countries – not least as a result of the Kyoto Agreement and its goals of using more renewable energy and reducing CO2 emissions. More windpower stations than nuclear power stations are currently being installed worldwide. Large companies such as General Electric, Shell, Eon and Vattenfall now participate in this new, future-oriented industry, which currently employs 20,000 people in Denmark alone. It will be exciting to see how this sector develops in future," he adds. Offshore commitment State secretary Wilfried Voigt, who was a Green Party candidate in the latest German Federal Government (Forbundsdagen) elections, is a self-confessed windpower enthusiast. A decision to limit windfarms to 1% of Schleswig-Holstein’s land surface has led to a commitment to offshore farms in both the North Sea and Baltic Sea. In order to minimize the potential for conflict, the Land Government of SchleswigHolstein has defined the limits of offshore development from the outset, and has is-

sued early confirmation that the national park, Wattenmeer, will be a no-go area. The installation of windfarms will also avoid trawling areas. "Offshore offers the potential for the new windpower industry to join with the traditionally strong maritime economy of SchleswigHolstein in the development of new futureoriented projects," states Voigt. "Our own shipyards, which are not currently riding the crest of a wave, will be able to embark on the production of offshore tower sections," he continues. The Federal Ministry for the Environment estimates that up to 25,000 megawatts of capacity might be installed in the coastal waters of Germany. Given these expectations, it is no surprise to find all eyes turning to this area. "On land, we have many small windmills that were established at the beginning of the 90s. These will gradually be replaced by larger windmills with higher capacity. We can then reduce the number of windmills significantly and further protect the environment," says Voigt. "Our target of covering 50% of our electricity consumption through windpower generation by 2010 is based on both onshore repowering and the construction of offshore windfarms," he adds.

State Secretary Wilfried Voigt of Schleswig-Holstein in Germany.

State secretary Voigt even believes that windpower may promote world peace. "Wars can be fought over oil, but not over wind and sunshine," he concludes. Harald Brathen

DNV AND WIND ENERGY DNV has been part of the wind-energy world for more than 20 years. The company’s main knowledge base for wind energy is to be found in Denmark. DNV provides certification based on experience gathered over the years from its work within the wind, offshore oil and gas, and maritime industries. The company currently performs type approval and verification of wind turbines on land and verification services for offshore wind farms. DNV’s aim is to establish a modern third-party system for creating trust and confidence among all parties in the wind-energy business.

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NEWS à

DNV has committed to the UN Global Compact DNV’s CEO Miklos Konkoly-Thege is committed to supporting the nine core principles of the UN Global Compact agreement as part of advancing Corporate Social Responsibility in DNV. In 1999, UN Secretary-General Kofi Annan launched the Global Compact agreement to provide a framework to assist companies in the development and promotion of global, value-based management. To show a more explicit commitment to responsible corporate citizenship, DNV has now signed the Compact as one of more than 1,000 companies worldwide. Corporate Social Responsibility (CSR) is defined as one of ten priority areas in DNV’s corporate strategy.

Miklos Konkoly-Thege

“CSR must be an integral part of our management system, business culture and our attitudes”, says Sven Mollekleiv who leads DNV’s work in the area of Corporate Social Responsibility. “And there must be accountability for this issue at all management levels throughout DNV.”

The Global Compact’s Nine Principles Human Rights Businesses are asked to: 1. Support and respect the protection of international human rights within their sphere of influence; and 2. Make sure their own corporations are not complicit in human rights abuses. Labour Businesses are asked to uphold: 3. Freedom of association and the effective recognition of the right to collective bargaining; 4. The elimination of all forms of forced and compulsory labour; 5. The effective abolition of child labour; and 6. The elimination of discrimination in respect of employment and occupation. Environment Businesses are asked to: 7. Support a precautionary approach to environmental challenges; 8. Undertake initiatives to promote greater environmental responsibility; and 9. Encourage the development and diffusion of environmentally friendly technologies.

Corporate Conscience Award for Italian sweets company Italian confectioner Maina Panettoni, SA8000 certified by DNV two years ago, has won the prestigious Corporate Conscience Award in the US. Thanks to its determined search for quality, the small shop in Turin has grown into a modern company that now produces more than 14 million sweets a year. It employs more than three hundred workers and had a turnover of some 42 million euro in 2002. Maina is currently in the final phase of its move to ISO 9001:2000. The SA 8000 certification has brought results: accidents at work down 23 percent over the past two years, absenteeism down 2 percent and a 27 percent increase in the number of consumers who purchased Maina products more than three times in one year. These results have also encouraged new investments. DNV nominated Maina for the prestigious award in March on the basis of the company’s constant commitment and attention to its employees’ work conditions and efforts to enhance customer and supplier awareness of social accountability. The award will be presented to Maina this October in New York. Maina Panettoni S.p.A., founded in 1964, is today one of the most famous confectionery companies in Italy. “A quality product and quality work have always been Maina’s two supreme goals,” declares Roberto Di Gennaro, Maina’s Quality Manager.

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Photo: Scanpix/AP

European Mars Express searching for life Europe has formally joined the race to Mars with the launch of its Mars Express Satellite, a giant project in which DNV is also playing a part. On June 2, the European Space Agency launched Mars Express, its first mission to the red planet, Mars, from Baikonur, Kazakhstan. Once the Mars Express reaches Mars in December 2003, the mission’s main objective is to search for sub-surface water from the Martian orbit. The spacecraft’s landing probe, Beagle 2, will then separate and descend to the surface, where it will deploy its scientific instruments to search for traces of life, past or present, on Mars. Data collected by both the orbiting spacecraft and the landing probe will be temporarily stored onboard Mars Express and when possible - transmitted back to Earth. The mission is planned to last until 2007. DNV has been responsible for the reliability, availability, maintainability and safety tasks at system level for the Mars Express Spacecraft. The 400-million-kilometre (250-million-mile) trip should see Beagle transmit its first signal from the surface of the red planet on Christmas Day 2003.

BP cuts costs in North Sea

Security first for Bergesen

Thanks to DNV, BP is finding success in sustaining profitability in mature North Sea oil fields using a risk-based approach.

The 93,844gt LNG tanker Berge Boston, below, has become the first vessel to receive an International Ship Security Certificate from DNV

Declining oil and gas reserves in the North Sea have driven operators to evaluate alternative scenarios, including sales, outsourcing, changing or re-engineering installations, as well as enhancing the effectiveness of their organisation. To meet the requirement of reducing operating expenditures by 30 percent, BP decided to start a wide range of improvements in the organisation. As part of this process, BP is selling the Gyda field to Talisman Energy and is re-engineering the operation of the Ula and Valhall fields.

Captain Ernst Hanssen, the master of the NIS-registered vessel, was presented with the certificate – which confirms that the ship has developed and implemented a ship security plan in accordance with the International Ship and Port Facility Security (ISPS) Code – at a ceremony in Boston. DNV’s senior security advisor Finn-Erik Dahl warned that the industry is facing a major challenge, with ships found in breach of the Code after July 2004 risking the danger of being detained or barred from ports.

DNV has assisted BP by performing risk-based screening and analysis of activities related to production support, both on land and offshore. DNV has provided solutions to streamline work processes and technical modifications to reduce annual operating costs by as much as 10-15 percent.

The use of risk-based methodology has proven to be a very effective means of: • Ensuring that high health, safety and environmental standards are sustained and leveraged throughout the change process • Identifying substantial economic opportunities • Involving the organisation in the change process Together, BP and DNV are now preparing to implement the identified opportunities by developing new and more effective processes for BP’s new onshore organisation in Norway.

FPSO conversions risk study DNV has conducted an FPSO conversions risk study for the Monaco-based French/Dutch company SBM (Single Buoy Mooring) Inc. DNV has looked at the FPSO (floating production, storage and offloading unit) conversions of Suezmax and VLCC tankers built in the 1980s and 1990s in order to improve SBM`s decision-making process when selecting possible conversion candidates. Four main areas were addressed in the study: • Risk identification of the general problems associated with tankers built in the 80s and 90s, compared to tankers built in the 70s. • Risk mitigating measures relating to structural issues. • A generic summary of lessons learnt from project critical activities. • A comparison of new-built FPSOs with tankers built in the 70s, 80s and 90s and a cost-benefit study. “SBM is impressed by how DNV turned a few questions to DNV Glasgow into this very useful study,” says SBM’s Project Development Director Rik Scott. “We now have a new tool to provide us with information for future decision-making.” The contract was carried out in close co-operation between Maritime Solutions and DNV Consulting at Høvik and the customer service and project manager for SBM who is based in Glasgow.

BP is reengineering the operation of the Ula and Valhall fields in the North Sea. DNV Consulting’s vision and proven track record of "safely and responsibly helping its customers improve business performance" made it a natural partner for BP in this case.

SBM operates 17 FSOs (floating storage and offloading units) and FPSOs worldwide and has various current newbuilding and conversion projects in Dubai, Singapore and Malaysia. Other future projects are in the pipeline as well. The company is an important customer, with business covering SEP, ISM, ISO14001, OHS 18001 and SA8000 coming up over the next 4-5 years.

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LAST WORD

A good story to tell Showing through everyday operations that shipping is a responsible business is the only way to improve the public image of this industry. Here also lies the key to convincing politicians, bureaucrats and the media that shipping deserves to be heard when controversy arises.

DNV’s head of media relations Tore Høifødt

"Improved credibility is not gained by saying ‘No comment’. There is a price to be paid by the industry, and that is to be more open, active and honest."

Shipowners, flag states and class share a responsibility in gaining the acceptance of the "man in the street" that maritime transport is a safer and more environmentally friendly form of transport than trucking, railroads and airfreight, according to Senior Vice President Tore Høifødt. "Shipping is a vital instrument in promoting trade between nations and will remain so," he says. "However, if the industry really wants a say in its own future, we should collectively shoulder the task of a improved profile and an ‘open door’ information policy." Høifødt believes shipping’s public image has suffered over the past years, not only because of environmentally damaging accidents but even more so because of the industry’s reluctance to face the media spotlight. The time has now come, he believes, for top shipping leaders to tackle the communications challenge head on and stand up to be counted when confronted with controversial issues. Submarine mentality "Traditionally, the maritime business has been secretive and reluctant to communicate with the surrounding world, especially when forced to handle a major crisis. Instead of facing the press, the tendency has been to run for cover or throw up a wall of silence, which has worsened the industry’s image," says Høifødt. "As long as we have that image, we are forced to play a defensive game – and not very successfully," adds Høifødt. "We have to turn the tide and get on the offensive." Høifødt has identified signs that the industry is starting to do this and that shipping leaders are gradually beginning to understand the need for greater openness. "This is not just because it is a nice idea to communicate with the outside world; it is because the industry has no choice." Høifødt believes the shipping business needs increased public acceptance so that it can be perceived as an attractive industry in a world which is primarily concerned about safety. This is vital if it is

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to meet its future recruitment needs and increase its standing with the international authorities so it can achieve better operating conditions. "Improved credibility is not gained by saying ‘No comment’. There is a price to be paid by the industry, and that is to be more open, active and honest." Evidence to the contrary Høifødt points to a wealth of facts that demonstrate how shipping outperforms other modes of transport in terms of its environmental and economic costs. Yet its continued "image problem" weakens, and has serious potential to negate still further, the impact of these very strong competitive advantages, he says. "It is clear to me that we are facing a losing battle unless we change our approach. Rather than hammering the public and the politicians with facts, we have to find the arguments that change their feelings towards us." Høifødt reckons that raising the profile of shipping can reap economic benefits in the long term. Some major shipowners, he says, have stated they cannot tolerate another serious shipping accident, not because of short term financial losses, but because of the resulting damage to their public image which can ruin their reputation in the market. The industry must realise that greater openness is not a downside risk, but has big upside potential." It will take a collective effort on behalf of all the actors in the industry to promote an image of responsible shipping in a global society and bring through the full benefit of shipping’s competitive advantages over other modes of transport, says Høifødt. "If we convince the voters, we will also convince the politicians and the bureaucrats," he reckons. "If we succeed with those, we might even convince the media. We have, after all, a good story to tell."

DNV WORLDWIDE

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MANAGING RISK