T H E C O R P O R AT E M A G A Z I N E O F D E T N O R S K E V E R I TA S
NO.3/2001
Catching the trade winds COSCO’S CAPTAIN CAPTA N WEI STEERING A GLOBAL COURSE
ALSO INSIDE: Culture challenges at Chevron Phillips Nuclear power safety Integrated management at Hydro Gas & Chemicals Scrapping: Breaking up is hard to do
CONTENTS
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EDITORIAL: The need for entrepreneurship and an aggressive business strategy
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CHINESE SHIPPING, thanks to COSCO, is fast becoming a global force
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FINANCIAL SERVICES cannot afford failure of software or systems. DNV helps eliminate the risks
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entre
10 HYDRO GAS & CHEMICALS: leading supplier gains from integrated management 12 SHIPBREAKING William O’Neil puts forward the IMO’s policy on the problems of scrapping ships … 14 … while Rolf Westfal-Larsen of ICS cautions that environmental concerns must not overrule life-cycle safety 16 MERGING CULTURES: a success story for Phillips’ and Chevron’s chemicals venture
DNV Forum is the corporate magazine of Det Norske Veritas PUBLISHED BY Corporate Communications N-1322 Høvik, Norway Tel: +47 67 57 99 00 Fax:+47 67 57 91 60 HEAD OF CORPORATE COMMUNICATIONS Tore Høifødt
18 GERMANY’S NUCLEAR POWER: safety culture enhanced thanks to DNV rating system
EDITOR Stuart Brewer
21 LINDA ADAMANY explains her fleet strategy for BP Shipping
ADMINISTRATION Gro Huseby
24 SOLAR GAS TURBINES embraces quality certification to reach international markets 26 BUILDING CONFIDENCE: the Greeks lead the world in new ship orders 29 LNG POWER supplants diesel for Lauritz Eidesvik’s new supply ships
EDITORIAL CONSULTANT R.Keith Evans
DESIGN DNVE Graphic Communications PRINT Gan Grafisk, Norway 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 2001 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.
32 NEWS 34 LAST WORD 35 DNV WORLDWIDE
Visit our website www.dnv.com
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EDITORIAL
ntrepreneurial enterprise entrepreneurial enterpris Entrepreneurial entrepreneurial enterpriseentrepreneurial enterpri Enterprise epreneurial enterprise entrepreneurial enterprise e Roger Howe
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Sometimes dealing with realities – economic uncertainty, ever-increasing competition, political instability – compels a company leader to take a chance. Captain Wei Jiafu, president and CEO of the China Ocean Shipping Company, is a stellar example. Faced with the challenges of adverse market conditions and increasing competition, Captain Wei is pursuing an aggressive strategy to help the company achieve its goal of becoming a world leader in shipping and logistics services. As part of its push to go global, under Captain Wei’s leadership COSCO has established an integrated quality, environmental and safety management system. In July this year, the company became the first Chinese company to be awarded these three certifications. Captain Wei is convinced the certificates, awarded by the China Classification Society and DNV, will help protect the safety of people and the environment and, furthermore, give the company more business in the international market. Indeed, managing a business and steering it through both good times and bad, calls for entrepreneurial enterprise and good business practices. The latter are often embodied in systems at various levels in the organisation, according to Roger Howe, director of operations, DNV Certification. ‘Since the late 1970’s businesses have invested in Quality Management Systems to manage product quality. More recently the investment has been in Environmental Management Systems to give respon-
sible consideration to both internal and external aspects and impacts. And now the corporate world has started to seriously consider the need for systems to manage companies’ social responsibilities. ‘Independently, each of these systems brings benefits. However, a business is not managed in discrete “packages”. Businesses are continuums in which all decisions and actions have consequences across that continuum. ‘For this reason the need for integrated control mechanisms is essential. These mechanisms are offered by a management systems approach, bringing together all business control requirements. Combining the discrete management systems, which were largely developed in the last quarter of the 20th century, is one of the prime challenges facing industry today.’ Howe maintains that business will renew, regenerate and move forward. ‘Management systems will never lead this entrepreneurial drive, but they must follow very closely and achieve integration both within the disciplines and within the business concept.’ Typical examples of the management services DNV is currently providing to its clients across the industrial spectrum are included in this latest issue of DNV Forum. It is clearly evident that, in the modern world of industrial commerce, business survival depends on many factors, not least good business practices and entrepreneurial enterprise.
STUART.D.BREWER@DNV.COM
EDITOR
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COVER STORY
Flagship hoists
global sails TEXT: STUART.D.BREWER@DNV.COM PHOTO: COURTESY OF COSCO
While the rest of the world struggles to avoid the slipstream of an American recession, COSCO, one of China’s flagship enterprises, is striving to be a world leader in shipping and logistical services. In an exclusive interview with DNV Forum, Captain Wei Jiafu, the company’s president and CEO, here shares his thoughts about the current status of the shipping industry and the outlook for the future.
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Forty years have passed since the China Ocean Shipping Group Company (COSCO) was established in 1961. In that time, the COSCO group has developed into a vast multinational undertaking with shipping at its core. At present, the group owns and operates a varied commercial fleet of some 600 vessels, with a total carrying capacity of around 23 million dwt. Based on its core business of shipping, and investing heavily in computer technology, COSCO is changing from a traditional ocean-shipping enterprise into a comprehensive logistics provider, incorporating a shipping agency, marine bunker supply, road transport, airfreight-forwarding and E-commerce services. Says Captain Wei, ‘This year, world trade has suffered economic deceleration. The U.S.A., largest importer in the world, was struck by the attack on 11 September and cannot improve in the short term. In 2001, commercial trade growth is forecast to fall by 2% and then to rise again in 2002. In the long run, however, I am convinced it will recover and grow steadily.’ According to Captain Wei, such a development of global shipping mainly depends on the growth of international trade, and this in turn on the international economy and politics. ‘With the rapid developments in global technology, the knowledge value of merchandise is increasing. So the actual volume for a given net value will be less. However, in the long term, the volume of trade will continue to grow steadily as a result of globalisation, and freight rates will be increased, as will the quality of transportation required. In the meantime, the price of raw commodities in international trade will decrease. Accordingly, as a shipping company, we
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COVER STORY
IN SUMMARY: • As a result of an adverse market and the challenges of increasing competition, the shipping industry is currently facing a changing market environment • Wishing to remain competitive, shipowners around the globe are investing in safety, reliability and efficiency • COSCO, one of China’s flagship enterprises, is no exception and is now in the process of implementing an aggressive strategy to help achieve its goal of becoming a world leader in shipping and logistic services
should watch out for changes in the structure of international shipments, so that we can adjust our transportation structure in time, improve our methods of transportation, and obtain much higher freight rates for high value-added commodities.’ COMPREHENSIVE LOGISTICS SYSTEM Captain Wei believes that international transportation will become a comprehensive logistics system. ‘With the development of an international economy and trade,’ says Captain Wei, ‘more and more transnational companies are demanding global transport services. Following bulk-carrier specialisation and containerisation, international shipping is entering the era of modern logistics. In the 21st century, new transport systems will turn many isolated transport segments into one whole system. In the future, every shipping company will operate a wide variety of transportation. One carrier will not only transport the commodities from port to port, but also from door to door, from point to point.
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Over the next decade, the demand for flexible, responsive cargo transport is expected to grow faster than ever
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‘Many large shipping groups have already made modern logistics their strategy. Maersk, for instance, has announced that logistics will be its principal business in the future. OOCL plans to become a logistics provider in five years’ time. With the expansion of the value chain, shipping companies are facing more and more pressure to lower their costs and improve their services. ‘At the same time, a seaport is no longer the transportation terminal, but simply a part of the entire international-trade transport chain. As a result, ports will be changed completely to become comprehensive transportation centres. Shipping companies are
increasing their investment in port development and will continue to do so.’ ‘A BUYER’S MARKET’ Commenting on the market, Captain Wei believes that the international shipping market is becoming ‘a buyer’s market’, and shipowners must provide tailor-made services in order to compete. Says Captain Wei, ‘Currently, the global shipping sector has turned into a “buyer’s market”. Competition in the shipping industry is becoming heated as shippers require carriers to perform more specialised services, such as providing express services and calling into fewer ports. In order to provide these specialised services, and accomplish their own economies of scale as well, some far-thinking shipping companies are ready to provide the “mass customisation” services that can satisfy both sides. They are building larger ships and faster, specialised vessels. ‘At the moment, the design speeds of post-panamax containerships are between 25–27 knots. Many shipyards and shipping companies are designing vessels with capacities of 8,000–12,000 TEU and speeds of up to 30 knots. Norasia is already operating a 1400 TEU ship that can achieve 25 knots, and Fastship has plans to develop a 38-knot container ship for transatlantic service. Their aims are not only to compete with other liner services, but also to compete with the air-freight market.’ GLOBAL INFORMATION NETWORK Shipping companies are building a global information network, typified by the recent licensing agreement between COSCO and OOCL for use of IRIS, an integrated regional information system. Comments Captain Wei, ‘Today’s economy is based on information technology. Shipping companies should also benefit from the advantages brought by IT. They should attach great importance to modernising their information systems, which will help them make better use of their resources and become more competitive. ‘The Japanese Maritime Research Institute recently conducted a general survey on the development of information systems. About 20 liner companies responded to the survey. It was clearly evident that information technology has become a key way for shipping companies to cut their management costs, and improve their service quality.’ The role of liner conferences is being significantly restricted, according to Captain Wei. He explains, ‘The shipping policies of the EU and United States tend to be more and more liberal, rendering a heavy blow to liner conferences. The emergence of Asian liner shipping carriers places tremendous pressure on traditional liner conferences, as does the rapid devel- >>
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opment of global alliances. One can see the changes in recent years from the evolution of liner conference organisations for East-West trunk services, which have lost their power as cartels. ‘With the further development of world economic globalisation and trade liberalisation, international shipping will be further opened up, which in turn will prompt the adjustment of shipping policies. Traditional methods of protection have taken other forms, such as indirect hidden supporting measures versus direct economic subsidies, and technical and environmental measures rather than administrative protection. ‘The Free Port is a highly efficient international trade policy aimed at promoting trade, developing regional economies and improving shipping services. It has a wider coverage than the ordinary bonded warehouse policy, and is free of the customs supervision clause that is quite common in the latter. With the opening up of the shipping industry and the reform of shipping policies, more and more countries will gradually phase in this free-port policy.’ AGGRESSIVE STRATEGY The COSCO group is in the process of implementing an aggressive strategy which, in the main, focuses on quality, cost-efficiency, IT and logistics. Explains Captain Wei, ‘As a global shipping operator, we at COSCO aim to further enhance our overall competitiveness in the international shipping industry, gradually broadening our logistics-service activities, optimising our organisational structure and making better use of our global shipping and logistics resources.’ Captain Wei highlights five key success elements:
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• TO CONTINUOUSLY STRENGTHEN THE OCEAN-SHIPPING BUSINESS ‘We will continue to attach great importance to developing our container-liner business and further strengthening our dry-bulk shipping business, while at the same time gradually expanding our liquefied bulk shipping and specialised cargo-shipping operations. We plan to optimise the value chains of all our shipping businesses, covering such areas as fleet structure, service network, information technology, port infrastructure facilities and marketing and sales systems. Apart from maintaining our owned fleet in good condition, the number of vessels operated by COSCO will fluctuate greatly according to the market, and the percentage of chartered-in tonnage will be gradually increased. On the trading side, the key to the adjustment of our services will be emphasised by the pattern of our service network and distribution of our available resources, as a part of our efforts to implement a port-development strategy. ‘Our marketing strategy will focus on providing differentiated products for our customers, while cooperating closely with our business partners in the future. Through constantly improving our services and strengthening our competitiveness in the market, we believe that COSCO will become a world-class global shipping operator. • TO FURTHER EXPAND THE LOGISTICS BUSINESS ‘Expanding into the modern logistics business is a natural step for COSCO and a key to the success of our development strategy. We plan to expand our service spectrum from transportation alone into such areas as warehousing, processing, distribution
Global player: COSCO has around 80,000 employees, with offices and subsidiaries in 38 countries and appointed agents in some 1,200 ports in more than 160 countries.
and even manufacturing. Putting the customer first, it will increase both our profitability and our competitiveness. Our target customer groups are those transnational companies that have global supply chains. We will offer full-process logistics solutions to them, supported by advanced information technology and our global logistics systems. Our agreement with OOCL to use their IRIS-2 system indicates our willingness to use only proven, efficient technology.
• TO BE A ‘GREEN SERVICE’ PROVIDER ‘COSCO always supports and abides by the safety and environment protection regulations issued by the International Maritime Organisation, such as the SOLAS and MARPOL conventions, and it aims to be a “Green Service” provider. The group and all of its shipping subsidiaries have been awarded both ISM and ISO 9000 certificates. According to the latest statistics, the port-state detention rate of the inspected vessels owned or operated by the group decreased to 0.6 per cent in 2000, and no detention has been reported up to now in the year 2001.’ As a part of its push to go global, COSCO has established an integrated quality-, environment- and safety-management system. In July this year, the company successfully passed the third-party authentication of ISO 9001-2000 quality management system standards, the ISO 14001 environmental management system, and the OHSMS 18001, occupational-hygiene management system. COSCO is the first Chinese company to be awarded these three certifications.
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• TO OPTIMISE SHORE-BASED ACTIVITIES ‘We also have shore-based businesses within our Group. In expanding into new shore-based business areas, we have two principles. One is that the business cycle in that sector should be independent of shipping. The other is that the sector must have a high growth potential. Industries fitting these requirements include the information industry, environmentalprotection, energy-saving equipment and new materials industries. All of these can compensate for the cyclical fluctuations in our current businesses. • TO DEVELOP A GLOBAL INFORMATION NETWORK ‘The combination of an information and network economy is the characteristic of a knowledge economy. Our current task is to build such a network for our company. This lies at the core of our Technology Innovation Strategy. What we aim to do is to optimise our current physical network and to integrate it by connecting our physical networks more closely over the internet. Our aim is to efficiently allocate our shipping and logistics resources worldwide.’
Operating across international borders, and incorporating ships, trains and trucks in the transport chain, increases the need for risk assessment and risk management tools
‘Because our operations mainly involve the highrisk ocean shipping industry,’ says Captain Wei, ‘COSCO has always attached great importance to risk management and, in particular, to protecting the safety of people and the environment. The certificates, awarded by CCS and DNV, will help give the company access to the international market.’ Bearing in mind that the decks have been cleared for a ground-breaking trade alliance between China and the Association of South-East Asian Nations (ASEAN), Captain Wei’s vision and efforts are exemplary. The proposed free trade area will encompass a market of 1.7Bn people in the ten ASEAN countries and China, which together have a combined GDP of USD 1.7Trn. A similar deal between ASEAN and India is on the cards at a meeting scheduled for early 2002. The future bodes well for COSCO – and for its customers. ◆
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CONSULTANCY
Common Goals: DNV CEO Helge Midttun and EDB Teamco AS President JohnArne Haugerud share the goal of managing risk in operations.
Banking in
the non-stop society TEXT: ANDERS.OVREBERG@DNV.COM PHOTO: KAIA MEANS
The 24-hour society is here and with it non-stop banking, especially on the Internet. EDB Teamco AS, a specialist in advanced IT operations and services, attacks the challenges of running mission-critical banking systems round-the-clock with the help of DNV Consulting.
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Modern society is dependent on a host of services running smoothly at all times, such as electricity, water and communications. If these break down it will adversely affect peoples’ lives, especially in urban areas. While banking services are not as vital in terms of life and property, they are of the utmost importance to the banks themselves and their business and consumer customers. Says EDB Teamco’s President John-Arne Haugerud, ‘In the last four years, with the Internet banking revolution, banking has become a round-the-clock affair. Now customers have direct access to the banks’ systems, whereas before they had to go through a bank employee. This has exposed the internal bank systems in an entirely new fashion and has brought with it a whole new set of challenges for us.’ EDB Teamco AS, a part of EDB Business Partner
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ASA, has more than 1,000 skilled employees and last year a turnover of nearly US$ 225 million. The company specialises in non-stop operations of critical IT solutions, and is one of the largest suppliers of these services in Scandinavia. DISCOVERING THE WEAKEST LINK In August of this year parts of their systems suffered a three-day breakdown. It caused a wide disruption of bank services throughout Norway, especially for Internet-based banks and their users. Work was carried out night and day by EDB Teamco’s employees in an all-out effort to solve the problems. Says Haugerud, ‘What happened in August was very unfortunate, but the real values our systems handle, such as user accounts, transaction data and the money itself, was undamaged. At one time we had
CONSULTANCY
EDB Business Partner ASA comprises eight companies with more than 3,500 employees and a turnover last year of US$ 505 million. The group’s main focus on telecommunications, banking and finance forms the basis for international expansion beyond the Nordic countries. The company is well represented in the major Norwegian cities as well as in Stockholm, Amsterdam, Dublin, Madrid, Philadelphia, Denver and San Diego. EDB Teamco AS represents the group’s computer-operating services and outsourcing activities. It is a wholly owned subsidiary of EDB Business Partner ASA. EDB Teamco’s main business areas are bank/finance, public sector, telecom, trade and Industry. The company is certified according to ISO 9001 by DNV. Web address: www.edb.teamco.no/english
35 million transactions on hold, with new ones coming in continuously. Not one was lost or misplaced.’ The event, which caused headlines in the press, has led EDB Teamco to investigate in detail its missioncritical systems, routines and security measures. Says Haugerud, ‘Our first priority was to discover exactly what caused the problems and learn as much as possible from that experience. Second, we aim to put in place an even better business risk-management system that can pinpoint our weakest areas, so that we can deal with those in a proactive and systematic manner. Using DNV to help us in this process has been received positively by the market, our customers and our employees.’ MANAGING RISK Business Risk Management Consulting (BRMC) is a new strategic area for DNV. Says DNV CEO Helge Midttun, ‘It is important for DNV to expand into new markets other than those we are traditionally associated with, such as shipping and offshore. The IT industry is very dynamic, technologically advanced and capital intensive, which allows us to grow and use our unique risk methodology and competence in new and challenging ways.’ DNV’s Jan Thomsen is enthusiastic about working with EDB Teamco: ‘This project is a major undertaking on the part of DNV. We have been involved from the start with the accident investigation, and now we are in the process of systematically reviewing and analysing the company’s systems and routines. Finally, together with EDB Teamco’s Vice President and project manager Ole Urdahl and President John-Arne Haugerud, we will develop an action plan and put in place a business risk management system.’ As IT systems become increasingly complex with more and more users, the risks involved in running non-stop mission-critical IT operations will grow. Says
Haugerud, ‘There is a risk that disruptions to the complex systems we operate will happen again, much like accidents happen in other areas of life. Our goal must be to limit these to an absolute minimum.
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At one time we had 35 million transactions on hold... not one was lost or misplaced
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We also need to be able to handle these possible disruptions in the best way, which entails having business risk systems, routines and effective security measures ready. Managing risk is part of our core business every hour of every day.’ PIONEERS ON THE ELECTRONIC FRONTIER The Scandinavian countries have from the beginning shown a unique willingness to take into use the latest and ‘hottest’ technology, from cell phones to the Internet and electronic banking. Norway and the United Kingdom were in fact the first countries to connect to the United States’ ARPANET in 1973, just four years after the start of what would eventually become the Internet we know today. This quick adoption of new technology has been fuelled not just by eager consumers, but also by pioneering companies. EDB Teamco AS, founded in the late 1960s, has always been driven to provide the latest services for its customers. Now it finds itself positioned in the nexus of electronic commerce in Scandinavia. With the dawn of ‘electronic money’, where consumers carry digital cash in their cell phones instead of paper or metal in their wallets, this could bode well for the company’s future. No word yet, though, on the risks involved. Says Haugerud, ‘We have always been early adopters of new technology. This is not about to change.’ ◆
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INTEGRATED MANAGEMENT
Applying the gas on the management highway TEXT: STUART.D.BREWER@DNV.COM
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For Hydro Gas & Chemicals, the starting point for providing optimal business performance is sound management systems. The company recently achieved a first for its industry, having gained certification for its integrated management of quality assurance, safety and environmental awareness from Det Norske Veritas.
‘As a result of the integration, we can ensure that our products are manufactured and supplied to customers in the most efficient way, while maintaining the highest environmental and health and safety standards,’ says Maria Sanderson, the company’s Quality and Safety manager. UK-based Hydro Gas & Chemicals is part of Norsk Hydro, a Norwegian industrial group, and supplies bulk and packaged industrial gases (including dry ice), chemicals and associated products to customers in sectors ranging from brewing and soft-drink manufacture to power generation, refrigerated transporta-
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tion, food processing and water-effluent treatment. Says Sanderson, ‘Following the merger of the Gas and Chemicals businesses, HGC management used the opportunity to review all the existing practices and operating systems to improve business performance. We subsequently developed an integrated management system (IMS) based on national and international standards.’ This was assessed by DNV, which found it met the management-system standards BS EN ISO 9002:1994 (quality), BS EN ISO 14001:1996 (environment) and OHSAS 18001:1999 (health and safety).
INTEGRATED MANAGEMENT
‘GET IT RIGHT FIRST TIME’ ‘With its common set of management-control principles, the company is in a better position to meet the demands of a wide range of customers from diverse industry sectors,’ says Sanderson. ‘The “right firsttime” approach is the key to our efficiency – it keeps customers happy, decreases our costs through reduced product or delivery failures and safety incidents, and improves our accident statistics. Now we are building strategic alliances with our suppliers and subcontractors so we can be kept up-to-date with the latest market developments.’
‘ ’ Integration was new to us all. It wasn’t questioned; it was just accepted as the way forward to properly manage our risks
According to Sanderson, Hydro Gas & Chemicals has received encouraging feedback from customers for its initiative, especially from those developing their own integrated management systems who can identify the contribution the Hydro system will make to the success of their own systems. One of the world’s major soft-drink manufacturers supplier quality systems has already been integrated into the Hydro Gas & Chemicals’ system. DNV auditor, David Powley, who is an experienced HSEQ integrated management systems auditor, echoed Sanderson’s comments with regard to challenges faced during the audit process. Powley says that in order to conduct an IMS audit so that the benefits are felt, it is necessary to spend some time in fully understanding the organisation and its structure and to apply sufficient time in the planning for the audit. A well planned and conducted IMS audit, based on HSEQ risk management, will be operationally more efficient for the auditor and the organisation, claims Powley.
‘ ’ Our system has generated real benefits in helping meet customer requirements
He also says that an organisation implementing an IMS must appreciate that integration of management systems is more fundamental than just ‘re-arranging the paper aspects’. The whole approach or culture of the organisation may need to be altered in order to apply a concerted approach to HSEQ risk manage-
Maria Sanderson and Paul Bloss monitoring the automatic road tanker loading station onsite at Hydro’s CO2 Import Terminal, Purfleet.
ment. Powley claims that HGC grasped this concept at a relatively early stage in its implementation process. Hydro says it is now in the process of incorporating a carbon-dioxide standard that is crucial to ensure the quality of CO2 products for the food and drinks industry as well as the company’s food-safety management system. THE VALUE OF INTEGRATION Based on the company’s experience to date, Maria Sanderson believes there are sound economic and business reasons for developing integrated management systems. ‘It is common knowledge that some companies still fight standards that could enhance their competitiveness, but there will always be those which take a proactive stance on issues and these are the companies that will win in the 21st century. ‘As for the management at Hydro Gas & Chemicals, they have long since recognised that business performance is an economic and competitive opportunity, and that integrated systems can be an important element in modern business survival.’ ◆
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SHIPBREAKING
Reaching the breaking point The IMO does not have any straightforward mandate to solve the environmental problems caused by the recycling of ships. Nonetheless, IMO Secretary General William A. O’Neil is worried about the problems related to a ship’s last phase. ‘Our Organisation has influence, and this will be used to prevent marine pollution,’ he points out. TEXT: PER.WIGGO.RICHARDSEN@DNV.COM
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The International Maritime Organisation (IMO) is a United Nations agency whose goal is ‘safer shipping – cleaner oceans’. The Organisation is based in London, and William A. O’Neil has been its secretary general since 1990. Several hundred large ships end up in scrapyards every year. The number of ships varies, but the tonnage has been stable at around 15 million dwt over the past decade. It is expected that in the next decade the tonnage will increase. The biggest scrap facilities are to be found in India and Bangladesh, where around two-thirds of the total tonnage is cut up and scrapped. By Western standards of health and environment, conditions at the scrapyards fail to comply in almost every respect. Based on the same standards, the consequential negative impact on natural resources, and more generally the environment itself, is far from acceptable. ‘The rules and routines safeguarding the workers, and requirements protecting the natural environment surrounding the yards, are up to each individual country. The IMO cannot and should not be involved in these,’ emphasises Secretary General O’Neil. But he adds: ‘On the other hand, the IMO, together with shipping companies, classification societies and the shipbuilding industry should show an interest and take initiatives to ensure that a ship’s path to its final end is better arranged. A ship’s death should be
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prepared for even before its birth. The ship’s design and construction must take into account how dismantling and recycling can be carried out. During the ship’s operational phase, too, choices and decisions must not only take short-term results into account, they must also have a long-term perspective that includes the recycling process.’ PUBLISHING THE SHIP’S HISTORY According to its objectives, IMO must ensure that ships maintain a high safety and environmental protection standard – not only during their first years, but also, even more important, during their final years. ‘No ship should sail without meeting the requirements stipulated to maintain a high standard,’ underlines O’Neil. Looking back at what IMO has achieved – not least through SOLAS (the International Convention for the Safety of Life at Sea, 1974, as amended) and MARPOL (the International Convention for the Prevention of Pollution by Ships 1973/78, as amended) – the Organisation can demonstrate its influence and contribute to safer shipping and cleaner oceans. Looking to the future, IMO is determined to use its position to achieve further improvements. One intention is to ensure that the ship-recycling process does not put an unnecessary strain on the environment. ‘Sub-standard ships worry me,’ says O’Neil. He is looking to the future and indicates that IMO’s
SHIPBREAKING
IN SUMMARY: • The end of a ship’s life has seldom been given consideration when it is designed and built. Now, however, environmental groups are putting pressure on shipowners and the authorities to ensure that shipbreaking takes place in safe, environmentally sound conditions. • IMO Secretary General William O’Neil believes that both IMO and the classification societies should encourage ship designers, builders and operators to take into account a vessel’s ultimate dismantling and recycling. • The International Chamber of Shipping is planning an international convention which, through IMO, will lay down a code of practice; but it also recognises that the shipping industry cannot become involved in the internal affairs of the countries involved in shipbreaking.
authority might be used against players that utilise sub-standard ships. ‘We will demand that the ship’s history must follow the ship. In the same way that it is easy to find out about any encumbrances in the finance world, and an object’s financial history, it should be equally easy to find out about a ship’s history. Irrespective of whether the ship has been transferred from one classification society to another and whatever owners the ship has had, its history should be readily accessible.’ CIRCUMVENTING THE RULES ‘Ships must not be able to move unless they meet the requirements stipulated in IMO’s conventions and codes,’ he emphasises. By move, O’Neil means much more than just the ship sailing from one port to another. Movement in the form of a ship being purchased and sold by shipowners during the ship’s final phase of life should also meet the requirements. It is a poorly kept secret that some not-so-serious shipowners buy and sell old, rundown ships in order
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A ship’s death should be prepared for even before its birth
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to exploit the ships’ market opportunities and to avoid meeting regulations. For example, attempts are made to circumvent the Basel Convention, which is intended to prevent environmentally hazardous waste from being exported to developing countries by countries that have ratified this convention, through ships being first sold to countries that have not ratified it. O’Neil does not comment on ‘secrets’ or ‘rumours’, but emphasises his more general com-
ments: ‘Our goal is to have ships that are safe for seafarers and the environment throughout their entire lifetime. All shipowners to whom I have spoken support this goal. Between 90–95 per cent of all vessels have a high standard and are maintained in accordance with the prevailing requirements. But it’s the rest – those few owners and ships – that worry me as secretary general. We must focus even more on these
IMO Secretary General William O’Neil. Photo: Espen Haslene
in order to resolve these problems, and we will take the initiative to have a greater degree of openness and collaboration between the IMO, Flag and Port States and classification societies.’ O’Neil does not agree with critics who say this work is going too slowly. He stresses the importance of avoiding too hasty conclusions, of involving those affected, and of revealing the core of the problem before deciding on solutions. As an example of the fact that extensive changes can be implemented rapidly, O’Neil points out the changes made to SOLAS as a result of the Estonia accident in the Baltic Sea. As an example of the fact that changes, and, not least, the consequences of changes, have to be assessed thoroughly, he points to the EU proposal to introduce unlimited liability as a result of the Erika shipwreck off the coast of France. ‘I don’t want to go into detail about this here, but the IMO plays a major role in international shipping. On behalf of the UN, we have a responsibility in the field of international shipping that extends to cover all the phases of a ship’s life – including its scrapping and recycling. Within the framework we have to relate to, however, there is room for flexibility – a flexibility that we practise but for which we are not praised,’ he says. ◆
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SHIPBREAKING
‘No compromise’ on ship safety
TEXT: PER.WIGGO.RICHARDSEN@DNV.COM PHOTO: ODD MELHUS
‘We must not choose construction materials solely from an environmental point of view and end up with poorly constructed ships. The ship’s quality throughout its lifetime must be given priority over all other requirements.’
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Rolf Westfal-Larsen, chairman of the International Chamber of Shipping (ICS), is clear in stating what is most important for shipowners. The background to his concern is the criticism that has been made of the shipping industry for not taking into account the burden that the recycling of ships puts on the environment. Greenpeace has created a wide, international focus on how the recycling of ships takes place. The organisation criticises the sites where the ships are scrapped and the methods adopted, but they also criticise the owners of the ships. Greenpeace claims that the owners are not interested in this problem and do not focus on it at all. ‘Greenpeace is impatient – too impatient to find solutions, in my view,’ parries Westfal-Larsen. He disagrees that the problems related to the recycling of ships are not taken into consideration by the many national shipowner associations. ‘We all have to focus on the tasks we can influence, and help to find solutions that can be complied with. The ICS has traditionally contributed to the International Maritime Organisation by advising on best industry practices that have later been accepted by IMO as the basis for guidelines or international conventions. We will continue to do this. ICS is focusing on developing and understanding the responsibilities of each of the players.’
Bergen-based shipowner Rolf Westfal-Larsen, Chairman of the International Chamber of Shipping.
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ACCESS TO THE INVENTORY LIST Currently, through collaboration between all the players in the shipping industry – from the shipyards where the ships are built to the sites where they are
SHIPBREAKING
‘ ’ Recycling is more than a catchword, it is a reality
Rolf Westfal-Larsen
scrapped – the ICS is focusing on establishing an international understanding that clearly stipulates the responsibilities of all the players. However, Westfal-Larsen emphasises that the industry must focus on its own concerns and not become involved in countries’ internal affairs. As an example of the industry’s own concerns, he points to the importance of access to the ship’s inventory list. This is a list of what is to be found onboard the ship, the construction materials and where they are used. ‘The regulations must be clear and unambiguous.’ He again emphasises the importance of choosing materials that ensure a ship’s high quality throughout its lifetime. Explaining what he means by a country’s internal affairs, he says: ‘Personally, I look to the work that the International Labour Organisation carries out to improve the conditions of those working at the recycling sites as the most important driving force behind the national authorities.’ GRAZING ON ONE COMMON PASTURE Rolf Westfal-Larsen also respects those who become involved in the problems related to the recycling of ships in general – and he also recognises Greenpeace, which has shown a particularly strong involvement in this. ‘But I doubt whether they are thorough enough, and believe they give priority to making their views known instead of to finding long-term solutions. We are all keen to ensure that the recycling of ships should not cause any unnecessary strain on the environment. So we have to find solutions that can work. Solutions that have been thoroughly assessed and which can be used over time.’ Westfal-Larsen is pragmatic. He complies with the guidelines laid down by the organisation that has elected him. He in no way rejects the criticism of the shipping industry, but a long life as a shipowner, president of the Norwegian Shipowners’ Association and now also the head of the International Chamber of
Shipping has taught him to respect other people’s opinions, and not least to respect nature and the environment, of which we are all a part. ‘The ICS cannot impose sanctions. The ICS cannot demand the few, rogue shipowners’ heads on a platter. But, in addition to shipowners being dependent on the market’s opinion of them, and to the fact that the ones behaving responsibly are those that will be preferred by their customers, they themselves are operating in an environment that is vulnerable. We all borrow from those that come after us, and we all graze on one common pasture’. ◆
The International Chamber of Shipping (ICS) is the international trade association for merchantship operators. It represents the collective views of the many nations, sectors and trades involved in the international shipping industry. ICS membership comprises national shipowners’ associations that represent more than half of the world’s merchant fleet. A major focus of ICS activity is the International Maritime Organisation (IMO) – the United Nations agency responsible for the safety of life at sea and the protection of the marine environment.
DNV has carried out numerous projects on the decommissioning of ships and offshore installations: these include Decommissioning Guidelines, and development of the most environmentally acceptable means of disposal.
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INTEGRATED MANAGEMENT SYSTEM
DNV has finalised pilot audits at the Sweeny facility in Houston.
Coping with a corporate
culture clash TEXT: BEATE.VIKTORIA.ORBECK@DNV.COM
For business mergers to succeed, handling culture differences has become an important factor. Merger of the American oil majors Chevron and Phillips’ chemical operations into the CPChem Company (Chevron Phillips Chemical Company) had to take these concerns into consideration when implementing a new Environment, Health and Safety (EHS) management system.
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‘We take the culture problem seriously as we develop a new management system throughout the organisation,’ says Robert J. Hunt, vice president Environment, Health and Safety. ‘By having a mixture of consistency and flexibility we have established a self-perpetuating system that will enable us to modify the management programme as we go. HARMONISED PRACTICES ‘We have established a Best Practice Network for all facilities. We share best practices from both cultures, try new approaches and, where it makes sense, harmonise procedures. In this way we are establishing a management system that is creative in that it keeps our minds continuously open. It is flexible as it is not a frozen system, but opens up new approaches to our
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ways of thinking. By building a structure like this we will achieve consistency, as changes will be continuously implemented in the organisation as best practice. We believe this approach will contribute to improve the efficiency of the whole organisation.’ During the revision of the new management system, CPChem found that even though practices from both companies had been thoroughly examined and harmonised, small culture differences could lead to misunderstandings. In one of the facilities local staff investigated incidents, while in another the tradition was to use someone outside the organisation to investigate. The difference was not appreciated as all involved assumed the others knew what they were doing. ‘This is why it is so important to always keep an
INTEGRATED MANAGEMENT SYSTEM
‘ ’ It’s important to find out why companies’ practices differ
Robert J. Hunt
open mind on what we are doing,’ says Hunt. ‘It does not necessarily have to be wrong the way we do things, but it is important to find out why practices differ and what we can do about it.’
‘ ’ The review processes will give each unit a check and pulse of their own organisation
To make sure our staff feels an ownership of the new system, we have established focus groups of field users that are involved in deciding, implementing and revising the system. In this way we give our people in the field a voice, empower them to modify and change practices in their daily work. Involvement by those affected is a good way of providing ownership of new management systems when two cultures are merged.’ INTEGRATED SYSTEM When CPChem decided to design a new EHS management system for the whole organisation, DNV was asked to create a corporate compliance auditing programme. The purpose is to provide assurance to company management that strategic business units and their operating sites are effectively implementing and supporting the elements of CPChem’s EHS management system. Best practices from both companies have been combined during the design, reflecting commitment to regulatory compliance and the American standard for the chemical industry Responsible Care. A training system has been established and a client needs analysis performed. DNV has finalised pilot audits at one former Chevron and one Phillips facility. The results are being evaluated and will be included in the new management system. Corporate staff from the CPChem organisation will start implementing the new system worldwide from January 2002. Within the overall design of the auditing programme, the CPChem corporate staff will be utilising
DNV Summit Software to maintain its protocols, question sets, and historical data. Summit allows CPChem to design and query every individual review, based on decisions made during the pre-assessment scoping activity. Hunt believes that as implementation takes place worldwide there will be a need for continuous adjustments. CPChem has not created a set of laws and rules, but a way of thinking that should enable the company to protect people and the environment. The review processes included in the programme will give each unit a check on the pulse of their own organisation. It is a good starting point to demonstrate the essence of the standard Responsible Care to be good neighbours: a major criterion for the chemical industries of the future. ◆
Responsible Care is a voluntary American standard for the chemical industry. It has been developed by the American Chemistry Council, whose members account for 90% of the chemicals produced in the U.S. The Council promotes Responsible Care to businesses all over the world. Today 42 countries have adopted a Responsible Care initiative. Chevron Phillips Chemical Company (CPChem) is one of the top five worldwide olefin and polyolefin producers, and among the top three suppliers of aromatics, alpha olefins, styrenics, and speciality chemicals. CPChem has 35 manufacturing facilities plus seven research and technical centres in eight countries worldwide. Headquarters are in Houston, U.S.A.
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Germany’s nuclear safety
stimulates reaction TEXT: HARALD.BRATHEN@DNV.COM
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Wolfgang Schwarz is safety manager of the Neckarwestheim power station, on the river Neckar in central Germany. ‘In their technical aspects,’ he says, ‘Germany’s nuclear power plants are as safe as they can be. But human error is still an uncertainty factor that we are constantly trying to eradicate.’ An incident in one German power plant which had to be reported to the authorities encouraged Dusseldorf-based E.ON Nuclear Power to contact
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Nuclear power plants and those who run them are under constant pressure from politicians, regulators and public opinion to prove that they operate under safe conditions. Now DNV has become active in enhancing safety for Germany’s nuclear power industry.
DNV to learn if British Energy’s experience of DNV’s International Safety Rating System (ISRS) could be used to assess and improve the safety culture in German power plants. It was that which initiated DNV’s role in Germany’s nuclear power industry. The E.ON research department contacted British Energy (operator of many of Britain’s nuclear stations), which related its useful experience of the ISRS.
ADDRESSING THE HUMAN FACTOR ‘We realised we had a human-factor issue and that we had to look at more than just technical aspects,’ says Gerd Reinstrom, E.ON’s safety manager. ‘We searched for a tool and found it in DNV.’ The company gave DNV the opportunity to present its Loss Control Management philosophy and the ISRS to senior executives, who included the technical directors of all the E.ON power stations. As a result, a pilot project was launched; this proved successful, and E.ON then involved the rest of the VGB Association, whose members include all the nuclear-plant operators in Germany. These had already developed guidelines for a safety culture in nuclear power plants, and were seeking a method of assessing them. Following the success of the pilot project in E.ON, a decision was therefore made to develop a comprehensive Safety Culture Assessment System. PRACTICAL COOPERATION ‘At first’, says Reinstrom, ‘staff were sceptical as to
whether we would achieve anything useful. But a practical relationship was soon established.’ Explaining the project is Dr Dieter Hansen, director of DNV Consulting in Germany: ‘If we are to achieve improvements, we must find out how a company is organised and how it carries out its daily operations. The employees in this case have cooperated in exemplary fashion – even offering information we had not asked for. Our relationship with the workers’ unions has also been important. They soon became convinced that this was something positive for the employees.’ MEASURING A SAFETY CULTURE Before DNV commenced work with E.ON, its safety culture group had defined just what was meant by that expression. ‘But how to implement and measure it?’ asks Dr Hansen. ‘We needed answers which could tell us whether or not our measures were producing results. ‘We depend on having a continuing system which >>
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NUCLEAR POWER
becomes a positive means of internal benchmarking. This gives everyone in the industry an opportunity to learn the best practices – and for us to prove that nuclear power plants can indeed operate safely.’ Wolfgang Schwarz emphasises that the German power-generation industry has some of the safest operators in the world. ‘But it’s still important to have an independent third party such as DNV to conduct such an assessment. It ensures objectivity and credibility – both within the power plants and among public opinion.’ FIVE NEW NUCLEAR STATIONS EACH YEAR Nuclear plants today account for more than 30 per cent of the electrical power generated in Germany, and one quarter of that produced worldwide. Though new forms of ‘green’ energy, such as wind and tidal power, are becoming popular they account for less than 10 per cent of German power generation. And while nuclear power is generated continuously, other energy forms are vulnerable and dependent on wind and weather. Reinstrom and Schwarz have worked in the nuclear power industry since 1982 and 1974 respectively. ‘In the 1970s and early 1980s the government planned to build five nuclear power stations annually’, says
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Schwarz. But due to public protests about nuclear power, construction work stopped and the last such plant in Germany was completed in 1989. Today neither man is optimistic as to the nuclear power industry’s future in their country. ‘It is a political issue, rather than any factual response to safety,’ they believe. But after spending their careers making Germany’s nuclear plants as safe as possible, with DNV’s help they hope now to have gained a new tool to further improve and document the industry’s safety culture. ◆
FLEET MANAGEMENT
DNV board member Linda Adamany is chief executive of BP Shipping. BP has a major newbuilding programme under way, which it sees as essential to bolstering its present fleet of tankers; it also relies extensively on voyage or time-chartered vessels, all of which must meet the company’s stringent quality standards. >>
Survival of the fittest INTERVIEW BY: STUART.D.BREWER@DNV.COM PHOTO: NINA RANGØY
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Making use of condition assessment surveys and being able to rely on the class societies’ evaluations are hugely important to our ability to accept a vessel or not. How do you see the status of the shipping industry today, and how do you see it developing in light of the current economic slowdown? Certainly, an oil company like BP has a really fundamental need for ships, they are the backbone of our transport system. And that need is not going to change. Around the margins, the economy may have a potential impact on us, to the extent that some businesses may cease to exist and therefore don’t need what ships provide, but, generally speaking, the robust freight rates that we have seen during the past year, basically since the Erika incident, have fallen in the past few months. As to the prospects for next year, I leave it up to those who are closer to the market to forecast those, but I don’t think we are likely to see the kind of rates that we have seen over the past 12–18 months. Shipowners certainly have every right to expect fair returns on their very significant investment, so, over the coming years, companies like BP that depend on very high quality ships for their business will be looking to the quality shipowner. What rates might look like remains to be seen.
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All parties need to understand that what they do is critical with regard to decisions on how ships are to be built and operated.
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What is BP doing to monitor the quality of the ships it charters? We dedicate a significant amount of our resources to what we call the assurance activity. This is very much about assessing the quality of the ships we consider chartering. We have a rigorous process for carrying out those assessments and vetting the ships before we actually start to use them. In this connection, we, like other oil companies, are highly dependent on classification societies. This whole industry is, in my opinion, only as strong as its weakest link. We depend on each other to bring to bear the skills and resources which each of us delivers. Class, in particular, touches so many aspects of what we do and what we need.
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There has been a spate of industry mergers and consolidations of late. Do you see this trend continuing? In general, I think it will probably continue wherever synergies exist. The collaborative approach to business certainly seems to work. Business in general has evolved over the years to a state where competition is intense and I think this keeps us all on our toes to find ways to do even better. I do believe you will see shipowners continue to form joint ventures and operating pools for that reason. The Erika loss reopened the debate over multilateral versus regional regulation of shipping. In your opinion, how will this debate be resolved? We’ve been active at BP, both as an independent company and as a member of the Oil Companies International Marine Forum (OCIMF), and we take an international approach to regulation. I am very averse to a regional solution which, in my opinion, introduces a much greater probability of shifting the problem to a different part of the world and that’s not what we should be about. We should be about raising the game and operating in the same way across the globe, so that the environment and safety of people are upheld as extremely important aspects
FLEET MANAGEMENT
In the shipping operations room at Hemel Hempstead: BP is one of the world’s largest tanker charterers.
of what we do. I think this is most effective at the IMO level. Regarding the policing of the industry and the roles of port state, flag state and class. Is this the optimum structure or is there a case for the redefinition of any of these roles? I do think that all of those entities can play a more robust role, whether it’s class, flag or port state control. And I have to say that DNV has really taken on a leadership role to harmonise the classification societies, with the aim of providing the robust kind of assurance that we need. What are the safety responsibilities of the key players in the safety chain, including charterers, underwriters and shipbuilders? As I said, we’re all as strong as the weakest link in the chain. While I certainly believe the focus on shipowners is appropriate, all parties need to understand that what they do is critical with regard to decisions on how ships are to be built and operated. What are the implications of the accelerated phase-out of single-hull tankers? Recapitalisation. In an ideal world, reinvesting in high-quality ships should be rewarded, and an attractive option for a shipowner. It is unfortunate that it has taken an incident like the Erika and legislation to
force people to do things that might otherwise have taken many more years. So i welcome the change. I just lament the factors that actually triggered it. What is your opinion of the ‘LAN’ agreement between LR, ABS and DNV to improve ship safety? Since Erika a lot of questions have been raised regarding the role of class, and OCIMF in particular was very keen to work with class to discuss the needs of the oil companies and allow the class societies to respond appropriately. There was a series of meetings last year that I think produced some invaluable results, and ABS, LR and DNV were crucial to making those things happen. I think it is fair to say that BP Shipping’s concerns had been understood and listened to, and I’m very encouraged by the changes that are being made and endorsed by the classification societies. A number of issues are being addressed. I believe that some of these are particularly critical, especially the transparency of information and how to make transfer agreements more robust so that they are understood and on record when there is a suspension or transfer of class. Certainly, I will say that I’m very concerned about the lack of harmony between IACS members in terms of standards.’ ◆
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CERTIFICATION
Solar Turbines:
Turning the wheels of industry TEXT: BEATE.VIKTORIA.ORBECK@DNV.COM
In 1992, Solar Turbines in San Diego became one of the first companies in the U.S. to be certified to the international quality standard ISO 9000. Six years later it received the Malcolm Baldrige National Quality Award.
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Solar Turbines’ vision is to be a world-class provider of energy solutions. An internationally accepted quality system is considered one of the gateways to succeed in new markets. Today, Solar is a leading producer of industrial gas turbines for power generation, natural gas compression and pumping applications. There is, however, more to the quality culture than reaching new markets. According to Tom Dadson, senior lead auditor in DNV, Solar Turbines is at the top of the list of companies that have embraced the ISO 9000 quality management philosophy at the highest levels. It has used the ISO 9000 standard as a foundation to build a business focused on quality. REDUCED PRODUCTION TIME ‘To approach new markets abroad we had to look at what was required to be accepted as an international supplier to our market segments,’ says Peter Heavey, Solar’s director of Engineering Operations Oil and Gas. ‘Customers required a quality system that was internationally accepted. We decided on ISO 9000. Now we have built up an advanced quality system based upon formalised procedures. We have tightened up documentation of how we do our business, to increase the awareness in the organisation. It has become a “living system” that has made our production more efficient. ‘At our Kearny Mesa facility in San Diego one item’s production time has been reduced from 100 to 27 days during the past four years. If something goes wrong during testing the product goes back to the workstation where it was originally produced. That station then is responsible to resolve any problems occurring during testing. In this way the workstation owns the product from start to end, which contributes to a more efficient and streamlined production than when it was split up between different production units.’
Solar’s gas turbines range in power from 1,000 to 25,000 hp.
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CONTINUOUS IMPROVEMENT From original implementation in the early 1990s, when ISO 9000 was a procedure- and document-
CERTIFICATION
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To approach new markets abroad we had to look at what was required to be accepted as an international supplier
Peter Heavey
oriented standard, it has become more and more process oriented in line with Solar’s business philosophy. Solar is now going beyond the original ISO 9000 standard by implementing continuous self-assessment of all procedures in its system on a monthly basis. ‘By empowering people to access their own workplace on a regular basis we use feedback as a tool for continuous improvement,’ says Heavey. ‘We are happy to see that by implementing ISO 9000 we have managed to lay the foundation for a system that is helping us combine business and quality into a successful entity. We have become more process-oriented in the way we operate our quality system, which enables us to be more solution-focused towards our customers.’
‘ ’ Production time has been significantly reduced
CORE OF A GOOD SYSTEM Going through the process of being considered for the Malcolm Baldrige Award was a testament to how well Solar’s quality system worked. ‘It was a goal for us to learn from this process,’ says Edward J. Zell, director of Turbomachinery Operations. ‘Prior to the award we were reviewed by a group of quality experts who gave us valuable feedback on how our system worked and what needed to be improved. It was encouraging to win the award, but most important for us was going through the review process and gaining an impartial look at the whole business. The continuous feedback system proved to be satisfactory, and this is the core of a good quality system: having a “living” experience feedback system that contributes to continuous improvement in a company.’ COST BENEFITS Solar Turbines has had a relationship with DNV for the past 20 years. At first DNV certified equipment for oil exploration in the North Sea; now it has
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extended cooperation into such services as type approval of engines for marine propulsion, manufacturer product quality assurance and compressor and generator package certification. DNV conducted preliminary assessments of the Solar Turbines plants in late 1991. During the early part of 1992, certification assessments were performed and the original ISO 9000 certificates date back to March 1992. Since then DNV has been maintaining a surveillance of Solar’s quality management systems every six months. Solar is a prime user of the new ISO 9001:2000 Standard, which is based on the following quality management principles: • customer focus • leadership • involvement of people • process approach • system approach to management • continual improvement • factual approach to decision making • mutually beneficial supplier relationships. ‘A handful of companies are recognised for their integrity, and DNV is one of them,’ says Denice Thiss, manager of Product and System Certification Power Systems Operations. ‘We value the long-term relationship because it meets our expectations in terms of value. Our business is continuously exposed to customer review of every item throughout production. If DNV had done a bad job, our customers would have noticed. We experience cost benefits by making use of a world-wide company. We no longer need repetitive audits by all customers, as most approve the work executed by DNV.’ ◆
Solar Turbines is a wholly owned subsidiary of Caterpillar Inc., producing industrial gas turbines ranging from 1,000 to 25,000 horsepower. More than 11,000 gas turbine systems have been sold, operating on land and offshore to provide rugged, reliable power for base-load electricity, cogeneration and standby power, and producing, processing and transporting natural gas and oil.
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GREEK SHIPPING
Greeks lead the way in
newbuilding contracts TEXT: KEITH@EVANSDNV.FREESERVE.CO.UK
A boom in new vessel contracts over the past two years has put Greek shipowners in first place for worldwide newbuildings. Are they now vulnerable to a falling market?
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No fears of overcapacity appear to daunt the optimism of Union of Greek Shipowners president John Lyras. Summing up last year’s record total of Greek newbuilding orders – an investment double the country’s annual budget – he commented ‘Emphasising the great importance of shipping to the nation’s economy, Greece in 2000 benefited from $7.8 billion in invisible earnings – 38 per cent of its total export revenues’. Hence the boom in new investment by Greek owners between 1999 and 2001: a boom which may now have run its course, but which still sees close to 250 vessels under construction or on order worldwide, representing a total of almost 23 million dwt.
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38 per cent of Greece’s export revenues last year came from invisible earnings.
Says Piraeus-based Nic Boussounis, DNV’s maritime manager for the Eastern Mediterranean, ‘Not only have Greek owners placed this wealth of newbuilding orders, but they are once again active in secondhand purchases. Their steady growth in the market – one of the world’s most important shipowning groups – is an indication of their experience and expertise as fleet owners and operators.
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GREEK SHIPPING
Tankers for Thenamaris under construction in Korea.
‘Greek newbuilding orders have traditionally focused on tankers and bulk carriers. It is clear from the current order book that this trend is being maintained, with orders for such ships in a wide range of sizes. They run from small products tankers to VLCCs, and from handysize to capesize bulkers. Other operators, of course, are involved in ordering and operating other types of vessel, such as car carriers, LPG tankers and container ships.’ TOWARDS THE CENTURY August saw delivery of the year’s 70th panamax bulker to a Greek owner, the 76,300dwt CIC Piraeus from Tsuneishi Shipbuilding (Japan) for Golden Union. By mid-October a further 15 had been delivered; year’s end will see the total close to 100. Possibly this sector of the market, from the Greek viewpoint, is close to saturation. Says Boussounis, ‘The year 2001 saw fewer orders placed for bulkers and container ships, but the Greek market was very active in tankers, especially panamax-sized vessels and products tankers up to around 45,000dwt.’ One such order, four panamax products tankers for delivery to Athenian Sea Carriers in 2003–04, will be the first vessels to be built in the new 300,000dwt capacity dry dock at China’s Jiangyang yard at Jiangsu – one of several large dry docks under construction in China with an eye to a future upsurge in overseas orders. For the moment, though, most of those 250 ships still on order for the Greek market will come
from yards in Japan and Korea. CONFIDENCE IN KOREA … Athenian Sea Carriers, for example, as well as the panamax tankers mentioned above, has six 159,000dwt tankers on order at Hyundai Heavy Industries in Korea, due for delivery between December 2001 and January 2003. Other contracts at HHI include three tankers and three bulk carriers for Arcadia Shipmanagement, three container ships for Costamare, and eight products tankers for Eletson Corp; and at Hyundai Mipo six 35/37,000dwt products tankers for Thenamaris. At Daewoo, no fewer than seven large tankers – two of 150,000dwt and five of 300,000dwt – were contracted for delivery to Kristen Navigation (see box, page 28) between January 2001 and mid-2004; plus four VLCCs for Hellespont Steamship, a 300,000dwt tanker for Aeolos Management, and four 70,000dwt tankers for Stelmar. … AND IN JAPAN In Japan, significant contracts still in hand include a series of five bulk carriers for Angelikos, and two 156,000dwt tankers for Olympic, all at Namura Shipbuilding, Imara. Other Greek owners with new vessels under construction include Allied Maritime, Marmaras Navigation (again at Namura), and Dynacom Tankers. Though in many cases standard shipyard designs
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are ordered, some are modified according to individual owners’ requirements. ‘The larger, more experienced owners, with considerable expertise in-house, closely scrutinise specification and design,’ says DNV’s Nic Boussounis. ‘For all Greek owners we can assist with pre-contract specifications, design review and support services in general. We also offer an extensive range of training courses in Piraeus, a complete Condition Assessment Programme for ships in service, and the review and approval of proposed transfers into Class.’ DNV’s market share of Greek-owned or operated vessels is close to 17 per cent.
CREW RECRUITMENT A PRIORITY Maritime training is now a formal part of the Greek education system, with realistic incentives such as a reduction in the length of military service for maritime academy graduates. The perceived annual demand for officers is around two thousand; the current aim and capacity is 1100 new places per year. Though the newbuilding order boom appears to be over, due in part to this year’s sharp fall in freight rates and concerns about the economy in general, Greek investment is still strong in certain areas such as medium-sized products tankers and the offshore industry. ◆
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Not rates, but quality and reliability will be the most important future factor in shipping
John Angelicoussis of Agelef Shipping
AN INTERNATIONAL VIEWPOINT One of the key figures in Greek shipping is John Angelicoussis of Agelef Shipping Company (London) Ltd. From offices in Piraeus,London and New York he manages companies operating more than 50 vessels – mainly bulk carriers and tankers. The two main management companies of the Group are Anangel Shipping Enterprises, which operates about 35 bulk carriers, and Kristen Navigation with some 20 tankers. Both have major newbuilding programmes under way. Says Angelicoussis: ‘It is important to find your market segments and expand in those. Shipping being a cyclical industry, safe and profitable operations also depend on how liquidity is managed. Quality is crucial. In our companies, we put huge efforts into quality: for example, adding more steel than the Rules require, often involving a 7–9 per cent increase in costs. ‘From an owner’s point of view, building ships at far-away shipyards is difficult. Quality has not been valued before, but now it is more appreciated and I believe this trend is irreversible. The liability side is growing more and more important. Up to now, rates have been the most important factor in shipping, but in future quality and reliability will be the most significant issues.’
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Showing the way: Lauritz Eidesvik is a luminary of shipping in his local community on the island of Bømlo
An industrial prophet TEXT: STEVE-M@ONLINE.NO
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Visionary Norwegian shipowner Lauritz Eidesvik is looking to the future by ordering – in partnership with Norwegian state oil company Statoil – the world’s first gas-fuelled supply vessels, posing a bold challenge to traditional diesel propulsion systems.
‘As a fisherman, I had to take responsibility and take chances – both physical and economic – because fishing is a competitive business and it’s all about being first to the catch,’ says Lauritz Eidesvik. The fourth-generation fisherman learned some hard lessons in commercial survival as a trawler captain plying the rugged waters of the North Sea, and these have proved equally relevant since his transition in the mid-Seventies to become a shipowner at the helm of a fleet of supply and seismic vessels operating from the Norwegian west coast. The 69-year-old veteran of the sea sees risk-taking and innovation as essential elements of a business strategy geared to remaining ahead of the competition in the offshore market. His company Eidesvik Shipping, based in Langevåg on the idyllic island of Bømlo south of Bergen, has a strategic goal of continually developing new and better solutions through innovative thinking, according to Eidesvik.
This latest ground-breaking move into gas-fuelled vessels opens the door for this type of technology to gain wider application across the maritime sector, according to Terje Torget, station manager at DNV’s local office on nearby Stord island. Conventional environmental wisdom is that cleanburning gas is the fuel of the future, with considerably less toxic emissions than traditional fossil fuels, and harnessing this power source could yield significant commercial advantages for ship operation in years to come, not to mention the political benefits of adopting green technology. Eidesvik has developed and ordered the pair of newbuildings in co-operation with Simon Møkster Shipping, with one going to each. ECONOMICS THE KEY The gas-fuelled engines of the supply ship newbuildings will cut NOx emissions by up to 90% and CO2 discharges by up to 30% compared with convention- >>
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al diesel engines. This is a fact that is likely to make oil companies, for which the environmental equation figures importantly on the bottom line, sit up and take notice. DNV has played a key role in development of the gas propulsion system, in co-operation with Eidesvik Shipping, right from the initial conceptual stage through design development and engineering to final placement of the newbuilding contracts at local yard Kleven Verft. The vessels are due for delivery in November 2002.
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Norwegian companies must have a forward-thinking strategy. It is not possible to remain competitive in the long term with the same product
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The classification society was the first to develop new rules for gas-fuelled engine installations on newbuildings that facilitated progress by Eidesvik on the technological front. It is also actively engaged in further development of this technology. ‘Clearly DNV has had to break new ground in developing these regulations,’ says Torget. ‘But this technology also represents a logistical challenge as it necessitates a network for gas bunkering, which is not currently available.’ Notwithstanding the logistical hurdles that still need to be overcome, Torget believes the time is
ripe for gas power as the Marpol Annex VI agreement – still awaiting final ratification by member states – will place stringent demands on diesel emissions that will give further impetus to the drive for alternative, less pollutive propulsion technology. However, conversion of existing diesel engines is a costly business and economic incentives, such as tariff breaks on bunkers, may need to be introduced at the political level to make such a move commercially defensible for shipowners, according to Torget. He believes though that if the Eidesvik/Møkster supply ships prove successful in the market, this could change oil companies’ thinking about chartering such vessels versus diesel-fuelled ships. ‘While this type of propulsion is more expensive to install, looking at the big picture that takes into account fuel consumption costs and maintenance, the economics work out at break-even,’ explains Torget. A SPECIALISED FLEET For Eidesvik Shipping, the newbuildings are an extension of Lauritz Eidesvik’s philosophy that environmental considerations should not be sacrificed for the sake of profit. The company has taken a proactive approach in this area by adopting DNV rules on Management of Safety and Environmental Protection (SEP) with procedures for both its landbased and marine organisation. Eidsvik currently operates a fleet of 14 specialised ships, including supply, seismic, survey, anchor-handling, cable-laying and subsea maintenance vessels, and has another seven newbuildings under construction exclusively at Norwegian yards, of which one is fully owned by the company and the other six jointly with other companies. A seismic newbuild – Veritas Viking III – has been contracted under its long-standing partnership with US company Veritas DGC. Eidesvik is also developing a network of North Sea supply
Pride of the fleet: Eidesvik Shipping’s multi-purpose support vessel Subsea Viking.
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SHIPOWNING
Pioneering spirit: Lauritz Eidesvik has a strategy of developing new solutions through innovative thinking at his company’s Langevåg headquarters.
bases located along the western and northern Norwegian coast, in co-operation with Møkster and Aver Maritime, that is geared to strengthening logistical support for offshore operations. While the North Sea remains the shipowner’s main market for supply vessels, its seismic ships are active worldwide including offshore West Africa, Brazil and North America. A part of the company’s strategy is to develop longterm partnerships, such as that with Statoil, with the aim of improving existing technology and giving birth to new concepts. Eidesvik believes the company’s close co-operation with DNV on the gas-driven vessels, involving an exchange of operational competence and technical expertise, has been a critical factor in the project and is evidence of Norway’s ‘maritime cluster’ working more closely together to continually develop new ideas. ‘Norwegian companies must have a forward-thinking strategy. It is not possible to remain competitive in the long term with the same product; there must be constant product development and creativity. We need to come up with new ideas and solutions by working together. Otherwise others will come in and take over,’ Eidesvik says. COMMUNITY SUPPORT The shipowner could appropriately be described as a ‘bridge-builder’, both because of his promotion of economic ties within the domestic maritime community and his involvement in civic projects such as the Nkr1.8 billion ‘Trekantsambandet’ scheme for construction of two bridges and an underwater tunnel linking the islands of his shipping heartland. This is reflected by his preference for Norwegian
yards. Apart from Kleven, the other beneficiaries of his newbuilding contracts are Aukra Industrier, Karmsund Maritime and Mjellem & Karlsen. He is also a vigorous proponent of the recruitment of Norwegian seamen through increased training and motivation, while he hopes the newly-elected coalition government will contribute to stimulating badlyneeded enterpreneurship to reverse the creeping decline of the domestic maritime sector.
‘
We need to come with new ideas and solutions... otherwise others will come in and take over.
’
The down-to-earth shipowner shuns the more highprofile image of his industry peers, preferring to work behind-the-scenes to plant the seeds of industrial growth within his local Bømlo community of 10,800 people, among whom he is held in high esteem. It is this work that contributed to his award of the King’s Order of Merit (Knight of St Olav – first class) last year. His support for the creation of new business invites comparisons with Hans Nielsen Hauge, the itinerant 19th century Christian evangelist whose preaching of the gospel went hand-in-hand with developing industrial enterprise in Norway’s towns and villages. Today, too, he believes, religious principles must play a part in safeguarding the maritime workforce of the future. ‘I feel I have a stewardship role,’ he explains. ‘My primary interest is not in making money but in leaving a lasting legacy for the local community to which I owe so much.’ ◆
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NEWS
mental performance, involving the participation of all employees. Both units also have specific teams that have supported and guided the environmental development work undertaken by the units.
DNV moves on Games doping in China
DNV awarded major Conoco contract
As China prepares for the 2008 Olympic Games,
After a vapour cloud explosion at a refinery
the authorities plan to improve their quality
earlier this year, Conoco aims to improve its major
system of doping control and practice.
accident systems and cultures.
DNV has been assigned by the Norwegian Ministry for Cultural Affairs to assist the Chinese Olympic Committee Anti-Doping Commission in developing a quality management system. The project started in March 2000 and will be finalised by June 2002. The quality system will be developed in compliance with the international doping control standard ISO/PAS 18873 and the quality management standard ISO 9000:2000. According to DNV’s representative in the project, Aage Enghaug, it is important for China to develop and strengthen its anti-doping work to make it transparent and create confidence internationally. ‘It is valuable for us to get DNV’s assistance in this project as Norway is considered a leading state in the anti-doping field,’ says project manager Zhao Jien. ‘The quality management approach and methodology used by DNV is a good method to use because it shows us how to improve the quality of our practice, which in turn will make us more effective.’
DNV has been awarded a major contract with the Conoco downstream organisation to carry out a review of mechanical integrity-management systems throughout its assets. This follows a serious vapour cloud explosion at Conoco’s Humber Refinery in the U.K. earlier this year. Conoco has one of the safest operating statistics of all the oil majors. Now it aims to ensure that its accident systems and cultures are as effective as those concerning personal injury.
Wartsila goes green DNV has granted Wartsila’s Finnish companies, Wartsila Finland and Wartsila Technology, ISO 14001 status in recognition of Wartsila’s environmental management system. ISO 14001 status is, Wartsila believes, highly respected by its customers and offers it competitive advantage in the marine and power plant markets. The company says that its engines meet all current environmental requirements and its goal is to exploit new technologies to achieve further reductions in emission levels. The certification is the result of systematic work by Wartsila’s Finnish units in pursuit of better environ-
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The project will address initially five refineries in the U.S. and U.K. and the extensive associated pipeline transportation systems. The assessment will cover those aspects of the full safety management system that address mechanical integrity or have a significant influence on it. The baseline review will be carried out during October to December 2001 and will involve a sampling of all staff from top management to operational personnel. This will be followed by DNV’s world-class gap analysis and recommendations to develop a systematic approach to mechanical integrity which will truly make a difference to Conoco’s operations. Possible extensions to scope currently under consideration are to address all of Conoco’s upstream activities, and partly-owned or operated facilities. The next phase after recommendations may be to assist Conoco implement this system worldwide. The initial scope of work is worth some US$450,000.
NEWS
Verification of Shell U.K. offshore installations DNV has recently been appointed by Shell U.K. as Verifier of Offshore Installation Safety Cases. Contracts have been placed with DNV for Shell’s Brent Charlie Penguins project and the Brent Alpha installation redevelopment. DNV’s Aberdeen office will develop schemes for the verification of the safetycritical elements of these projects and manage all associated tasks through the design, procurement, construction, hook-up and commissioning phases. Shell states that it was DNV’s track record in the performance of project verification that led to the contract award. Verification work has also been awarded to DNV in Shell’s southern North Sea Sector.
DNV Consulting to assess Arabian Oil Company (AOC) The Kuwait Oil Company is to acquire a share
the management system on the Hout and Khafji assets and onshore facilities • Determine the liability KOC would be exposed to in taking ownership of the assets DNV Consulting will assemble a team from Australia, Oman and the U.K. with skills in asset integrity, management systems and environmental issues. Work will commence in late October.
Petrobras P-36 report published DNV has acted as an independent advisor and verifier of the investigation into the P-36 rig accident offshore Brazil. The commission’s report is now published. Petrobras has announced that essential elements of the P-36 design will not be used again. The investigation found some serious operational shortcomings in addition to design limitations, resulting in some vital functions not being error-tolerant. There had been inadequate assessment of risks and design safeguards, and when those safeguards were out of service there was no limitation on operations.
of AOC. DNV will evaluate the risks regarding the integrity and HSE aspects of the company. KOC will expand its assets through acquisition of a share of the Arabian Oil Company’s offshore and onshore facilities in the Neutral Zone between Kuwait and Saudi Arabia. KOC needs to understand the risks to which it is exposed in this undertaking. DNV Consulting has been awarded the contract to undertake a due diligence assessment to evaluate the risks regarding the integrity and health, safety and environmental aspects of AOC. The contract is worth between £200,000 and £250,000. In particular DNV will: • Review and understand AOC’s contractual obligations for integrity • Determine adequacy and effectiveness of AOC HSE management systems • Identify the effectiveness and implementation of
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LAST WORD
Is ISO 9001:2000 green and safe? Experience has now been accumulated in auditing to the 2000 version of ISO 9001 and it is evident that the latest revision presents a better structure and business logic to quality systems auditors and implementing organisations. But, in these days of integration, does it relate to the requirements of the standard ISO 14001 for environmental management systems (EMS), and the quasi-standard OHSAS 18001 for health and safety management systems (HSMS)?
C
‘
Integration of quality, environmental and safety risk management is more than just ‘paper’ aspects of management systems
’
34
Compared to its 1994 predecessor, the short answer is a definite yes. Before going further it is worth recognising the following: • Integration of quality, environmental and safety risk management is more than just the ‘paper’ aspects of management systems. It is a philosophy to combine descriptions, mechanisms, regimes and preferably the organisational structure so as to achieve one concerted management system with a view to attaining efficiency of operation. • All management systems have various relevant interested parties depending on the type of risk being managed. For quality the customer is king, for environment we have regulators, reputation, investors, neighbours and for health and safety those primarily concerned are the employees and others affected by the organisation’s activities. • Any standards that are meant to address risks to quality, environment and safety and health (QESH) should contain requirements that address the three qualitative principles of risk management. These are (a) identify the risk (b) manage the risk and (c) monitor the effectiveness of the management of the risk and aim for continual improvement.
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So how does ISO 9001:2000 relate to its counterparts for environment and safety? ISO 14001 and OHSAS 18001 require processes for identifying risk, always bearing in mind the interested parties. The new QMS standard does not explicitly require a quality-critical risk assessment, but there is strong implication to do so through several of its clauses and sub-clauses. The HSE standards demand that organisations have procedures to understand the regulatory framework in which they are meant to work – so too does ISO 9001:2000 with regard to the product or output of the organisation. A first step in minimising risk of a legal breach is to understand the pertinent laws. The concept of continual improvement and the processes for setting measurable objectives and targets are fundamental to ISO 14001 and OHSAS 18001. There are similar demands in the 2000 version of ISO 9001. For the HSE standards, gaining assurance of the capability of employees involves appropriate deployment on tasks as well as continually ensuring appropriate competence. This is now the case with the new version of the QMS standard with respect to quality of product and customer expectations. The 1994 version of ISO 9001 demanded a documented procedure for every aspect of life! Like its HSE counterparts, the 2000 version of ISO 9001 is not so insistent and in effect relates the need for a documented procedure to risk. Communications with interested parties are given considerable importance in ISO 14001 and OHSAS 18001. The new standard is equally useful to a business in that it encourages feedback from customers with a view to not only forestalling complaints but also to facilitate improvement. In summary – ISO 9001:2000 is ‘green and safe’.
DAVE.POWLEY@DNV.COM
DNV WORLDWIDE
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www.dnv.com
PS
A VISIONARY AT THE HELM As the world’s largest shipowner, operating some 600 vessels, China Ocean Shipping Company is a major force in China’s domestic and overseas trade. Largely independent of political control, COSCO operates in a true global context; its president, Captain Wei Jiafu, recognises the need for the Group to become a comprehensive ‘logistics provider’, including road transport, air freight and manufacturing. He also appreciates that shipping, like most multinational industries today, has become a buyers’ market – one in which only tailor-made services will be able to compete.