BC Shipping News - June 2012 by McIvor Communications

INSIDE: TRADE ROUTES — WORLD CANALS

BC SHIPPING NEWS

Volume 2 Issue 5

www.bcshippingnews.com

June 2012

Commercial Marine News for Canada’s West Coast.

Industry insight Robert A.Ho, President, Fairmont Shipping (HK) Ltd. The big picture

Ports & terminals

Current B.C. terminal upgrades top $5 billion

LNG bunkering

Lloyd’s Register LNG bunkering infrastructure study results

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Plus: West Coast SAR — Part One: Community marine resources

June 2012

Volume 2 Issue 5

On the cover: A view of Vancouver Harbour from Neptune Terminals. Photo courtesy of Ray Dykes, PR Plus.

Contents

Cover Story - P.20

Current B.C. terminal upgrades top $5 billion By Ray Dykes Photo courtesy of Port Metro Vancouver

10 Industry insight The big picture: A global perspective of shipping BCSN speaks with the the President of Fairmont Shipping (HK) Ltd. to gain insight into the global shipping industry.

26 Search and rescue

West Coast SAR (Part One)

In this first of a three-part series, Joe Spears examines the importance of the Canadian Coast Guard Auxiliary and community marine resources in rescue operations.

52 Technology

Lloyd’s Register LNG bunkering infrastructure study Jesper Aagesen, Senior Surveyor and Ship Design Specialist, Lloyd’s Register in Denmark, considers the options to meet the coming emission control area regulations.

D E P A R T M E N T S

F E A T U R E S

Robert A. Ho

News briefs / industry traffic

History lesson

Nautical Institute

Mari-Tech 2012

International shipping

International trade

Trade routes

Legal affairs

Maritime security

Letters to the editor and news Postcards from the crew By Lisa Glandt

A recap of the Nautical Institue, BC Branch annual general meeting A summary of the Mari-Tech Conference and Expo in Ottawa The shipping industry of India By Syd Heal

Seizing Canada’s potential: A renewed trade policy agenda By Darryl Anderson World canals: Facilitating global logistical operations By Captain Stephen Brown When the train falls off the track. By David K. Jones Combating piracy and oil theft in Nigeria (the new piracy hotspot) By Georgina Nicoll June 2012 BC Shipping News 3

June 2012 Volume 2/Issue 5 Publisher McIvor Communications Inc. President & Editor Jane McIvor

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EDITOR’S NOTE

Around the world in 56 pages

his month’s issue of BC Shipping News takes us around the world and reminds us of the inter-connectedness of the global shipping industry. While the connection in itself is an important one, lessons to be learned from shipping practices in other countries are valuable for B.C.’s industry to consider here. This is no more evident than in our interview with Robert Ho, President of Fairmont Shipping (HK) Ltd. His perspective on global issues and their impact on local activities is eye-opening. From his views on the economy (10 more years of poor, mediocre markets) to shipyard productivity to terminal and port development, Ho is able to relate the experiences of other maritime countries as they strived to develop their own shipping hubs. The value-add here is that Ho puts it in context for B.C. His views and advice should be wellheeded by government policy-makers and industry stakeholders alike. Following along on the theme of international shipping, articles by Captain Stephen Brown, who has done a masterful job of relating the importance of the world’s canals to international trade routes; Darryl Anderson, who reviews Canada’s international trade policies; and Syd Heal, who identifies the major

players in the Indian shipping industry, give us a great opportunity to examine activities, policies and future variables that will inevitably affect us here. The international theme continues through a submission from Jesper Aagesen, Senior Surveyor and Ship Design Specialist with Lloyd’s Register in Denmark. Mr. Aagesen’s summary of LR’s LNG bunkering infrastructure study is a must-read for any ship owner/ operator, port manager or government regulator who has been wondering whether LNG is the solution to issues of supply for low-sulphur fuel with the coming North American Emission Control Area (which, by the way, has been delayed by Transport Canada with implemenation now being estimated for later in the year). We also travel to Nigeria through the eyes of Georgina Nicoll who describes the (somewhat) new hotspot for piracy and efforts to mitigate the dangers in the Gulf of Guinea. Not to be outdone, Lisa Glandt from the Vancouver Maritime Museum provides a glimpse into the past of the world’s shipping industry through “Postcards from the crew”, a collection of memories from local seafarers as they travelled to distant ports and exotic lands.

And because we’re always keeping our eye on the local industry, Ray Dykes has given us our cover story — “Current B.C. terminal upgrades top $5 billion”. Ray’s in-depth review of the activities of B.C.’s terminals reinforces the notion of British Columbia’s dependence on foreign markets but also that, while we’re just one part of a global industry, we’re an integral part of the world’s supply chain. Not forgetting about our neighbours to the south, Joe Spears’ article on West Coast search and rescue provides some interesting insight into the importance of local community marine resources in rescue operations by using the example of the evacuation of Manhatten following the attacks on the Twin Towers on September 11, 2001. I strongly recommend watching the video, The Boatlift (available through www.bcshippingnews.com/video) which describes how over 500,000 people were moved from Manhatten’s seawall in nine hours — the largest marine evacuation effort ever. Each article in this month’s BC Shipping News demonstrates that, while it’s important to have a good understanding of local issues, we must be ever mindful that we are part of something larger. BCSN — Jane McIvor

Member of: International Sailor’s Society Canada

June 2012 BC Shipping News 5

INDUSTRY traffic Website looks for input into creating a Maritime Centre of Excellence

he B.C. Government and the Ministry of Transportation and Infrastructure are looking for your input on how to create a globally recognized Maritime Centre of Excellence by 2020. The discussion stream, part of the BC Jobs Plan and the Pacific Gateway Transportation Strategy, is already generating some unique ideas and comments, including experiences of similar initiatives in other parts of the world. The Pacific Gateway Transportation Strategy 2012-2020 was released in early

April and, as one of its actions, identifies the goal of developing Vancouver as a Maritime Centre of Excellence. The concept will be to “bring together a critical mass of expertise...to become a hub of activity...that attracts both highly skilled people and new investments...” To review the Pacific Gateway Transportation Strategy 2012-2020, visit: www.pacificgateway.gov.bc.ca. To review comments and provide input into the discussion, please visit http://engage.bcjobsplan.ca (discussion 12).

In Memoriam Captain David James Bremner 10 April 1929 – 15 April 2012

aptain Bremner crossed the Bar on April 15, 2012. He is survived by his loving wife Thelma. They would have celebrated their 61st wedding anniversary on May 16, 2012. Captain Bremner was a highly respected icon of the marine industry and will be remembered as a pleasant, knowledgeable person dedicated to the welfare of his fellow seafarers. He was born in Kirkwall, on the Orkney Islands, Scotland, and went to sea in 1946 at the age of 17, serving on coastal vessels. In 1957 he transferred to foreign-going vessels, sailing in all ranks to Chief Officer until 1967. Captain Bremner held a number of nautical certificates, namely Master Home Trade, Master Foreign Going, Extra Master and Master of Business Administration. On arrival in Canada he joined the Department of Transport and served in the following positions: Marine Surveyor, Examiner of Masters and Mates, Port Warden of Vancouver, Marine Advisor of West Coast Oil Port Inquiry, Acting Chief of Vessel Traffic Management, Senior Surveyor of Vancouver Ship Safety Office, Regional Superintendent Ship Safety Western Region and Regional Superintendent Ship Safety Technical services. Captain Bremner was a long-time member of The Company of Master Mariners of Canada. He served in the positions of National Secretary, National Master and National Councillor and, with the Vancouver Division, served as Divisional Secretary and Divisional Master. He was also a member of the Canadian Life Boat Institute where he had served as Secretary. As well, Captain Bremner was a member of the North of 60⁰ Chapter Order of Arctic Adventure. 6 BC Shipping News June 2012

NEWS BRIEFS CIMarE: April dinner meeting

wenty-one members, students and guests attended the April dinner meeting of the Vancouver Branch of the Canadian Institute of Marine Engineering at Cheers Restaurant in North Vancouver to hear Chris Kim, manager of BCIT’s The CUBE explain and demonstrate its operation. Branch Chairman Russell Oye thanked Chris for his interesting presentation. Vancouver Branch Directors Al Dawson and David Rahn presented scholarships to BCIT students Andrew Frank, Rui Feng Sun and Brian Janssens.

Miss something? Each month, BC Shipping News provides an exclusive interview with industry leaders. Their insights into B.C.’s shipping industry are just as relevant today as they were at the time of the interview. If you missed an issue, contact jane@bcshippingnews.com and we’ll mail you a past issue.

Industry Insight alumni 2011: April: Captain Stephen Brown, Chamber of Shipping of British Columbia May: Captain Jamie Marshall, BC Ferries

Chris Kim, BCIT’s The CUBE, and Russell Oye, CIMarE Vancouver Branch Chairman.

June: Kaity Arsoniadis-Stein, International Ship-Owners Alliance of Canada July/August: Peter Hinchliffe, International Chamber of Shipping September: Bernie Dumas, Nanaimo Port Authority October: Captain John Clarkson, BCIT Marine Campus November: Rear-Admiral Nigel Greenwood, Royal Canadian Navy December: Captain Phillip J. Nelson, Council of Marine Carriers

2012: February: Andy Smith, BC Maritime Employers Association March: Peter Bernard, Q.C., Bernard & Partners April: Greg Wirtz, North West and Canada Cruise Association

Left to right: David Rahn, Andrew Frank, Rui Feng Sun, Brian Janssens and Al Dawson.

May: Robert G.Allan, Robert Allan Ltd.

Memo outlines budget cuts for Transport Canada

etails of the impact of budget cuts to Transport Canada programs and services were outlined in an internal memo released shortly after the Budget 2012 was tabled in the House of Commons. Changes will affect all areas of TC as they strive to achieve a 10.7 per cent reduction in the reviewed spending base. This translates into a reduction of $61.8 million in funding by 2014-2015. Changes fall under three broad categories: overall efficiencies, back-office streamlining and program changes and include everything from reductions in overall travel expenses to integrating the Marine Safety and Marine Security

Programs. Other efforts include: • Reducing procurement spending in targeted professional services areas: management consulting, research, engineering, scientific services and temporary help. • Centralizing the marine safety vessel registry function in the National Capital Region. • Re-aligning and streamlining TC’s main research functions. • Modernizing select Marine Safety service delivery models. • Streamlining the Recreational Boating Safety Program to focus on core regulatory responsibilities. • Modernizing the Navigable Waters

Protection Program and reducing the regulatory burden. The guiding principles for implementation of cuts included minimizing impact on employees; ensuring that core safety and security functions were not compromised; minimizing impact on Canadians; focusing on long-term benefits; improving internal processes and identifying efficiencies; and focusing on core functions in line with TC’s mandate. The memo, written by the Deputy Minister and the Associate Deputy Minister of Transport Canada, notes that additional developments will be communicated as they arise. BCSN June 2012 BC Shipping News 7

INDUSTRY traffic Fredette-designed vessels still seen the coast Dear Jane, I was thrilled to read Lisa Glandt’s story in the May issue (“Ship shape: A man behind the design of ships”) as I was the “reference request” she mentions at the beginning of her piece. Frank Fredette has an influence on my life as I own a boat he designed back in 1955: Night Wind. She is a 38foot double-headed ketch, moored at the Heritage Harbour out back of the Vancouver Maritime Museum. Frank originally drew her as a yawl. The builder, Derek Verhey, got Frank to make up a sail plan for her rigged as a ketch, which Derek then built in 1964. I was looking for the book because last October we were down at the Port Townsend Wooden Boat Festival when a very charming lady pointed at my boat and stated, in a very matterof-fact way, this is a Fredette. She was one of the authors of the book and is

looking to update it with the current disposition of Frank’s designs that are still afloat. I promptly lost her contact information —hence the call to the museum. Fredette popped into my life once before. I write a blog on my adventures and caretaking of Night Wind: www. sailorswhipping.com. A B.C. lady, now living in Hawaii, somehow saw my blog and contacted me to say Frank Fredette used to sail with her parents, with the attached photo of Frank, well into his eighties lounging on the back deck of Passing Cloud. I do not know the boat but I sure liked the photo. Frank Fredette is one of those coastal figures that was held in very high regard by those who knew him. It is one of the great joys of owning Night Wind that I get drawn into the circle of those with a connection to Frank, if only in a small way.

Keep up the good work on BC Shipping News! Michael Davis Owner and caretaker of Night Wind

Frank Fredette on the back deck of Passing Cloud.

The Night Wind — originally designed as a yawl, Fredette made up a sail plan to rig her as a ketch. Something to say? Send a letter to jane@bcshippingnews.com. BCSN

8 BC Shipping News June 2012

letters to the editor Where do we go from here? Dear Jane: I wrote my first letter to you in August 2011 and at that time the issue of banning tanker traffic on B.C.’s coast had been raised by a local MP. I suggested then that the shipping community should make a better effort to educate the public about the realities and improvements in tanker safety and shipping movements in general. Since then, a lot has been done to educate and raise public awareness and generally, the approach to increased tanker traffic has become more positive and realistic rather than, as George Adams puts it, ‘’based on emotion and presumption’’. No doubt that BCSN has played a great role to make this happen by attracting concerned individuals, groups and organizations to participate in sharing their knowledge and expertise from both sides of the debate. Your statement in April’s editor’s note, when you declared that “I confidently support increased volume and traffic”, is an important announcement which is the result of more than one year’s hard work. The work of people like Captain Stephen Brown, Joseph Spears (with his dedicated and thoroughly exciting and informative articles and analyses) and many more excellent contributions from Ray Dykes, Syd Heal, Bernard & Partners, Kaity ArsoniadisStein, Vancouver Maritime Museum and so on. One of the goals of education is to raise awareness and facilitate discussion — that is the greatest role that BCSN has played since it came to existence more than a year ago. BCSN’s April issue is living proof of this success. So where do we go from here? With clear support from all levels of government and a willingness to promote and expand trade with Asia through the Pacific Gateway, Joe Spears, in his article in the April issue, aptly summarized what should be our goal: “Canada’s economic future and prosperity depends on a robust

shipping infrastructure to the IndoPacific Ocean and globally.’’ Of course, this is not an easy task but can be made easier if the views and advice of the shipping community are sought, as noted by George Adams. This is an important issue which has been raised very frequently by industry experts in seminars, meetings and, particularly, in BCSN. There is no doubt that shipping in B.C. is on its way to find its deserved status but this cannot be achieved unless we have a ‘robust shipping infrastructure’. While numerous government and private organizations are involved in building this infrastructure, the role of independent industry experts should not be ignored. I have taken part in many seminars and have seen outstanding works presented in BCSN proving that the region is extremely rich with experienced

individuals in all fields of maritime activities. In these forums, many industry experts have participated in lively, educational and professional discussions — the outcome of which can be seen in the April issue where reality and positive attitude with national interest at heart have overridden ‘emotion and presumption’. BCSN has become ‘HOME’ for the B.C. shipping industry but it should go further. I believe BCSN can lay down the foundation to establish an ‘independent panel of experts’ to take part in debates, discussions and advise government on the shipping industry’s views of important issues. With this knowledge and experience available to policy makers, there is no doubt the shipping industry will greatly benefit from this panel’s services. Captain Ardeshir Yousefi ASTA Marine Services Ltd.

Customs Brokers • Steamship Agents Complete Import & Export Services Quality Service Since 1911 401-1208 Wharf St., Victoria, B.C. V8W 3B9 Tel: 250-384-1653 • Fax: 250-382-3231 E-mail: kingbros@kibro.com

June 2012 BC Shipping News 9

INDUSTRY INSIGHT

The big picture:

A global perspective of shipping

Robert Alexander Ho President & CEO, Fairmont Shipping (HK) Ltd. Vice-Chair, International Ship-Owners Alliance fo Canada Inc.

p until now, most, if not all of the profiles done for the Industry Insight segment of BC Shipping News have focused on the views and opinions of local industry leaders. Our interview with Robert Ho, President & CEO of Fairmont Shipping (HK) Ltd., changes that. While Mr. Ho is very familiar with the economic and industrial landscape of British Columbia, his knowledge and experience extends well beyond our borders and provides us with true insight into the issues, challenges and opportunities that exist globally. Not only does Mr. Ho provide us with a bird’s eye view of B.C.’s shipping industry, his experience on the international scene gives us much to consider as we strive to create an International Maritime Centre of Excellence here on Canada’s West Coast. BCSN: I’d like to start by looking at the economy and how shipping has fared with the highs and lows of the past four years. Could you also include a forecast for what you think we’ll see in the short to long-term? RAH: We had an unprecedented boom from 2004 to 2008 followed by 10 BC Shipping News June 2012

the sub-prime crisis and the resulting financial fallout. We’ve now felt the full, extensive decline in the economy — virtually all sectors within shipping have been affected. Even though everyone is projecting growth, the reality is that we are in a contracting economy — illustrated best by the consolidation and retrenchment of banks worldwide. We’re seeing a lot of European banks cutting back offices and operations, even in Asia. Some of the banks are saying this retrenchment will last for five or six years. With that in mind, we’re not being overly optimistic within the industry. You’ll likely see another 10 years of poor, mediocre markets. Anyone with significant debt has an issue — that is a dangerous position to be in right now. Also, we’re pressed with shortages of resources and huge inflation when it comes to commodity prices — food and so forth. With oil prices going further up, we could be faced with some unpredictable developments. I’m hoping that different kinds of fuel will be coming to the market as well as new inventions to increase efficiency but even those developments would just

add new dimensions of problems for existing ships. There are so many unpredictable events that could occur as a result of higher prices for fossil fuels — more technology and inventions could be developed that would alleviate that market but we really don’t know how to prepare for these except to be very cautious.

...what we see happening now is consolidation, shrinking economies and probably more protectionism. BCSN: Could you put this into context of Canada and British Columbia? RAH: Canada is very lucky to be in a sound economy. Canadian financial institutions haven’t been affected as much but banks worldwide are very under-capitalized. It’s not just Europe — the U.S. is still very fragile. It’s a global issue and any one bank that fails will affect all banks. There is a lot of under-capitalization in derivatives that are linked to the failure of mortgages. We live in a very digitized economy and the linkage on a global scale is a

INDUSTRY INSIGHT challenge. Essentially, economies have grown much more than what countries and some companies can really produce. You can’t grow faster than monetary growth so what we see happening now is consolidation, shrinking economies and probably more protectionism. Inflation and unemployment are both much higher than reported. Unemployment figures are skewed by those that are not bothering to stand in employment lines anymore and a lot of the calculations in measuring inflation have changed as well. New formulas of calculating inflation show increases of two per cent or so, but if you look at corn prices for the past six years, they’ve gone up 400 per cent. Steel, iron ore and raw materials have gone up a lot as well. It’s just that governments are using mostly commodities that consumers buy to measure inflation which is overwhelmingly low. That’s changing now — you’re starting to see prices for clothing and food go up. BCSN: Is there any one sector within shipping that is being hit harder than others? RAH: We’re all affected by oversupply of ships. The problem lies in the capacity that China has produced. They have basically doubled their capacity to build ships so even in this current crisis of supply, you have Chinese yards that, through the support of government, are building ships that are far more discounted than those in Japan or Korea. At the same time, the liquidity of the banks is very low so everyone thinks about buying ships. The affect this has on trade is huge. BCSN: Could you provide additional insight into the Asian shipbuilding industry? RAH: Yes, China is really catching up. There is an influx of naval architects from Europe and elsewhere who are passing along technology. At the same time, machinery punches out a template and everything is cut by computers. I think Japan and Korea have a problem. Many of the Japanese and Korean companies are investing in other countries to build ships. Korea has selected the Philippines and

Vietnam, and Japanese companies are placing orders with shipbuilding facilities in China. A lot will depend on the governments in Korea and Japan to see how much they can do to make their industries survive. For instance, one issue is the tax on steel, which is very high. Also, several other industries are being subsidized through the shipyards so a lot of that might have to go. Japan still has the chance to survive — they’re very efficient. I remember seeing one major yard which directly employed only 400 people in the shipyard — everything was subcontracted out. No lights were required as everything was robotized. The aforementioned yard is an LNG shipyard and

it revenued $1.5 to $2 billion per year with just 400 employees. That’s very impressive. In China, it takes thousands in the yard to build the ships. BCSN: Regarding the vessels being built, what trends do you see for things like size, orders as well as emerging technology? RAH: I should start off by reminding readers that a ship is still based on technology that hasn’t really changed over the past 100 years. Shipyards might promote newer ships where the fuel consumption can go down by 20 per cent, for example, but it’s really just a gimmick to attract people to come back into the building market. You saw it in the 1980s when the Japanese made their ships just a bit different in shape

The M.V. China Leader, the second purchase by Robert C.F. Ho, father of Robert A.Ho. There is a good summary of the Fairmont-Magsaysay history in shipping on the website for the Magsaysay Transport and Logistics Group at www.magsaysay-logistics.com.

The Chuetsu Spirit, a wood chip carrier owned by Magsaysay and managed by Fairmont Shipping Canada, is assisted by the Seaspan Falcon in Vancouver Harbour. June 2012 BC Shipping News 11

INDUSTRY INSIGHT — longer with lighter engines and they promoted them that way. But these lighter ships could not perform. The only technology that has really been prominent is the construction of bigger ships to achieve economies of scale. There’s nothing new and unfortunately, growing bigger in an economy that is not robust is an issue. I think we’re going to see a big change toward a more resource-based economy which will encourage smaller ships. The global monetary growth policy has failed and we’ll see a growing importance of natural resources which will determine the type of ships in the future. I think we’re going to have smaller ships again because resources are going to be worth a lot more so freight will be more expensive. The reason for moving the goods so cheaply in an economy of scale is because the goods are so cheap. It’s going to be a very different market. Environmental issues are also going to be a very critical factor in ship design for the future — for example, hydrogen engines aren’t yet available to shipping but should be. There are buses and cars in Europe that are hydrogen-based and this could very well be one area where we’ll see advancements. I’m hoping that

12 BC Shipping News June 2012

initiatives like this will come sooner rather than later but it’s that type of technology — or something even more innovative — that will change the whole complexion of what we’re doing. We’re living in very exciting times.

The know-how is there but for some reason...new technology has been prevented from being available in the market. BCSN: Do you have any estimate of timing, when we could be seeing that trend? RAH: We’re already seeing the introduction of LNG and that’s a huge change from gas. Shell Oil is basically changing their profile from being 70 per cent crude into a company that is 50 per cent LNG — they’re downsizing a lot of their crude activities so that’s a very positive step. What would be even more interesting is technology that has nothing to do with fossil fuels. That would be fantastic. The know-how is there but for some reason — perhaps there are interest parties who want things to stay just the way they are — new technology has been prevented from being available in the market. The

public needs to push manufacturers for innovative technologies to be brought into the market faster. BCSN: In reflecting public desire, do you think government regulations are constructively moving us forward? RAH: From an environmental perspective, I wish we had sources of fuel other than fossil but I’m afraid this won’t be resolved any time soon. It is going to get more difficult for shipping companies as we see more regulations. The introduction of the Emission Control Area in North America, for example — we buy the ship but we are not the ones making the engines. It’s just like buying a car — we, like all of the environmentalists, are consumers and have been asking for sustainable products. We’d love not to have to pay for oil however, the more expensive oil becomes due to regulations, the faster new technology will develop. As for the availability of low-sulphur fuel, it will become available. Oil refineries are always looking for higher value product and it is hard to imagine that they are not going to produce more distillates. The more we defer any kind of costs or change, nothing will happen. In other words, I think it’s good that governments are making this move and forcing the industry and refiners to make the change. As for market-based measures to address greenhouse gases, the system, whatever is chosen, must be kept very simple. Developing more market-based instruments, which are basically functioning as derivatives, doesn’t help the environment, it only helps the bankers. If industry is forced into market-based instruments, it is because advancements in technology have not kept up with the fast pace of global trade and the environmental demands of our society. This failure of innovation is wrongly aimed at the consumer — the ship owner — who is in the business of transportation and not innovation. If a market-based instrument is developed, then it should be a very simple, fair levy — if you burn more, you pay more — and should be centralized within the

INDUSTRY INSIGHT International Maritime Organization. The amount of levies collected is huge and from the industry’s perspective, it would be smart to direct a portion of those funds to support research and development and new technologies that benefit the shipping industry. That could really make a difference. If you look at a car or a ship, all of the machinery we use today is basically technology from 1920. It hasn’t changed and it won’t change until we run out of oil. The technology is there but for some reason, we’re not moving forward with it. For example, there is a scientist in Italy who has been working with thermal energy which is cheap to produce and can generate significant amounts of heat. The process involves putting a thermal rod in water to create a chemical reaction which generates 10,000 degrees of heat. In addition, all of the water that comes out is potable — you could put seawater in and it comes out drinkable. But the argument from the government’s side is: ‘imagine if this comes into play, the unemployment that would result, the breakdown of the economy, etc.’ They have good reasons for resisting change but hopefully change will finally happen. The current economy is sinking and maybe we need that before something really new comes forward. BCSN: Is there any one regulation that is causing the biggest challenge for the shipping industry? RAH: Frankly, I’ve sat in enough of the meetings in London to realize that no matter what governments throw at industry, they will not throw something that is impossible to achieve and they will throw it in a gentle way so that the regulations come about bit by bit. I think you see that in every industry around the world — it’s all about taking tiny bites. BCSN: What about regulations concerning the criminalization of seafarers? RAH: The shipping industry has a very strong commitment to the environment and does not oppose Canada’s strict liability regime with penalties of up to $12 million dollars a

day as well as the ability to arrest a vessel which can then be held by the Crown as an asset. This robust Canadian regime provides the necessary “teeth” to legislation to ensure the conviction of the guilty. However, in Canada, legislation has been introduced making a pollution incident a crime regardless of whether there was any wilful misconduct on the part of the accused. This legislation is not consistent with Canada’s international treaty obligations. MARPOL 73/78 makes a fundamental distinction between accidental and intentional pollution. Moreover, the United Nations Convention on the Law of the Sea supports MARPOL and points to monetary penalties rather than imprisonment as the sanction. In addition to this contravention, Canada in fact goes even further. Not only does it have criminal penalties for pollution, it removes the right to be presumed innocent. In other words, the accused is automatically presumed guilty and can be imprisoned for failing to prove due diligence without the Crown having to prove anything at all. This type of legislation is entirely incongruous with the

principles of a free and democratic society which constitutionally upholds and guarantees the presumption of innocence — a fundamental human right.

...in Canada, legislation has been introduced making a pollution incident a crime regardless of whether there was any wilful misconduct... This issue — the unfair treatment of seafarers — is of great concern to our industry. Criminal penalties, without the right to be presumed innocent, impacts the recruitment of seafarers to the shipping industry and currently, the industry is facing a growing shortage of well-trained and qualified sea-going personnel. It is important that we can attract such skilled workers to safely navigate our seas and it is our duty to ensure that our seafarers and indeed, the employees of our companies, are afforded constitutional protections as codified in the Canadian Charter, the Universal Declaration of Human Rights and customary international laws.

About Robert Alexander Ho

r. Robert Alexander Ho has been in the ship owning and ship management business since 1977 when he first joined Fairmont Shipping (Japan) Ltd. Today he holds the position of President & CEO of Fairmont Shipping (HK) Ltd. which is the corporate headquarters for the group. After selling over 15 vessels over the past seven years, Fairmont continues to be engaged in ship owning and ship management of 30 vessels. He also holds a directorship at MMC and its parent company Magsaysay. MMC is engaged in domestic and regional liner services (NMCCL and Lorenzo) and oil distribution through charters to the major refineries. “Magsaysay” has also been very engaged in the development of the Filipino people through investments in schools and software. The Human Resource development has been focused on the training of maritime officers and seafarers for over 50 years and now has a pool of over 50,000 seafaring staff from Philippines to Indonesia, China and Croatia. The Human Resource development has also entered into the medical health and care sector. Mr. Ho was born in the Philippines, attended the Philips Exeter Academy and Harvard University and holds a degree in Economics. He is Vice-Chairman of the London Steamship Mutual; Executive Director of the International Chamber of Shipping in London; Deputy Chairman of the International Ship-Owners Alliance of Canada, a ship owner association based in Vancouver, Canada. June 2012 BC Shipping News 13

INDUSTRY INSIGHT BCSN: One thing that we see changing fairly rapidly is the opening up of new shipping routes in the Arctic. How will this, plus the expansion of the Panama Canal, change shipping activities?

RAH: Both are going to be a problem. For example, the Panama Canal expansion will mean that bigger ships will be able to cross through that passage — this equates to less tonne miles to get

Background on the Fairmont-Magsaysay Group of Companies

ith roots going back to 1946 when Robert C.F. Ho purchased his first vessel, the M.V. China Victor, the Fairmont-Magsaysay Group of Companies has grown into a diverse, international conglomerate with interests in people resources, transport and logistics, business process outsourcing, insurance brokerage, travel and distribution. On December 29, 1948, Robert C.F. Ho and his father- in-law, Don Ambrosio A. Magsaysay established A. Magsaysay, Incorporated. Throughout the early 1950s, Robert C.F. Ho, together with his brother-in-law, Miguel A. Magsaysay worked actively in the Filipino Shipowners Association to draft and promote the approval of the Philippine Shipping Act of 1955. The legislation remains to this day the foundation of Philippine overseas shipping. In 1988, government shipping arm National Marine Corporation (NMC) was privatized and this led to its acquisition by Magsaysay Lines, Inc. and FIM Holdings HK, Ltd. NMC now forms part of Magsaysay Transport & Logistics Group with several strategic business units directly under its management, including Fairmont Shipping (HK) Ltd. To date, Magsaysay Transport and Logistics Group is primarily engaged in fullcontainer liner shipping, third-party logistics, tankering and petroleum barging, ship management, marine bunkering, agency and brokerage, chassis leasing and hauling, port equipment, tour operations and fast-ferry charters, marine repairs and services and marine consultancy. Most notable about the Fairmont-Magsaysay Group is its significant investment in the training and welfare of seafarers — the Magsaysay Institute of Shipping (MIS), founded in 1992, trains 500 cadets per year. Programs in basic seamanship are followed by a guaranteed on-the-job training position for three years onboard a Fairmont and Magsaysay vessel or a Mitsui vessel. The Fairmont-Magsaysay Group have offices in the Philippines, Canada (Vancouver), Hong Kong, England (London), Japan (Tokyo), Indonesia (Jakarta), China and Croatia.

Robert C.F. Ho.

14 BC Shipping News June 2012

Don Ambrosio Magsaysay.

goods to their destination and this will aggravate the supply side much more than is currently being felt. The supply of ships will increase. When a ship is loaded and travelling on a long leg, it’s basically out of the market until it arrives at its destination. With developments such as the Arctic routes and the Panama Canal expansion, ships will be able to get to their destinations in less time and more ships will be available. It’s great for the consumer because the voyage will be cheaper but we’re already pretty cheap. It will mean an over-supply of everything. BCSN: Looking at infrastructure on the West Coast and the Asia-Pacific Gateway Initiative, do you think adequate steps are being taken to meet an expanded market? Are there additional improvements that you think would add to the effectiveness of our supply chain? RAH: The only way for B.C. to be really dynamic as a port — and I think this is a real possibility — is if it expands on a location like Deltaport by reclaiming land. Japan is modernizing its ports in this way and they do very well-planned layouts that include squared hundreds of miles of land and sea supported with causeways. It’s not too close to shore and it’s away from residential communities. From there, they build everything related to industry. They are near or next to the manufacturing base to reduce the impact on the environment and sensitive areas. I think the B.C. Government should be considering expansion along these lines. Canada has been no different than other developing countries that export their raw materials and resources. You look at countries like Finland, Japan or Germany — they are not cheap with wages and yet they are still able to produce finished products. By taking all of the port development out of Vancouver proper and relocating it to that new island or reclaimed land, it will satisfy a lot of people in the communities. Keep industry separate. Countries are changing policies to achieve this. They’re also changing policies so that their resources are moved in ships

that are identified with the exporting country — Brazil, for example. Canada should be creating incentives to have Canadian ship owners as part of the transportation network. Also, the resource is going to be much more valuable and if factories can be built in those highlands that are created, Canada could become the exporter.

One priority for us is to encourage the development of an International Maritime Centre... BCSN: As the Vice-Chair of the International Ship-Owners Alliance of Canada (ISAC), what do you see as the organization’s main priorities for the future? RAH: One priority for us is to encourage the development of an International Maritime Centre that makes it attractive for investors to come to Canada. It’s a slow process but I really believe that, being a country rich in natural resources, Canada has to make that happen. Why are all the goods moved on foreign ships? The purchase and sale of products would need to be very different in the future if Canada wants to have a vibrant maritime industry. Corporate taxes are competitive in Canada but it isn’t promoted enough. Employment taxes are high but that’s true everywhere so really shouldn’t make a difference. For ISAC, our priorities include connecting with all levels of government to get them to see the potential dynamic that the shipping industry has to offer. It’s about illustrating the examples of places like Yokohama and Shanghai — real trade/finance/industry hubs that are not just focused on real estate. The other priority is to encourage dialogue with environmentalists so that we, as an industry, can become spokespeople to address concerns. The more we’re exposed to the concerns of vested interests, the better we can steer practices in our industry. BCSN

June 2012 BC Shipping News 15

HISTORY LESSON

Postcards from the crew By Lisa Glandt

Librarian/Archivist, Vancouver Maritime Museum Lisa Glandt has been the Librarian/Archivist for the Vancouver Maritime Museum since 2007. She started volunteering at the museum in 1999 sharing maritime stories with school children and now she preserves the stories. She can be contacted at archives@vancouvermaritimemuseum.com.

ver the past couple of months I have come across some rather unexpected and captivating images tucked away in our photograph collection. Carefully mounted in photo albums beside views of ships under sail and steam to destinations around the world were photographs taken by crew while on shore leave. These images bring us back to an era when a life dedicated to the sea meant hard work and time away from family and friends for often months at a time. Crew could relax when they arrived in a new port — even if only for a short layover, it was a chance to steady one’s feet, explore their surroundings and even seek out adventure! Captain Samuel Robinson is remembered as one of Vancouver’s maritime leading personalities. He spent 48 years at sea and spent most of it (37 years) with Canadian Pacific steamships. As Captain of the Empress of Japan, he routinely travelled to ports between western Canada and Asia. An album from 1901-1903 contains photographs of an afternoon spent visiting a Japanese city — snapshots that capture a sense of everyday life that must have been a rich contrast to his own lifestyle.

Lt. A. Turner served onboard the Empress of Russia during the First World War. Active service saw the crew in Philippine waters and later, the Indian Ocean. Turner documented his service through a series of photos taken between 1914-1916 that show the crew disembarking and exploring Aden, a seaport city in Yemen. While on shore they visited the water tanks built in the crater of a volcano, the salt works, local native villages, and the government farm at Sheik Othman, all-thewhile looking rather smart in their full-dress uniforms.

16 BC Shipping News June 2012

VANCOUVER MARITIME MUSEUM

The great Kanto Earthquake of September 1923 is captured in another of Captain Robinson’s photo albums. The Empress of Australia was docked at Yokohama in Tokyo Harbour and Captain Robinson was getting ready to leave port when the earthquake struck. After the ground stopped shaking, the aftermath of the earthquake was recorded in black and white photos that show the devastation around the ship. Captain Robinson was later recognized for his efforts in saving the ship, his crew and passengers plus more than 3,000 refugees who he helped evacuate from the area. Crew of the mighty Empress vessels — Russia, Asia, Canada and Japan met every year in Hong Kong when the ships were undergoing their annual overhaul at the Kowloon Dockyard. According to Terence Burgess, a crewman in the Engine Department on the Empress of Russia, the crews competed against each other in series of different sports while together in port. The 1934-1935 Empress of Russia soccer team posed for this photo on the pitch — Burgess is the fifth man standing in the back row (L-R) and Andy Duncan, standing to his left, was a dockyard Engineer who organized the matches. One can only image the commradery and competition that developed between the different crews as they looked forward to these yearly sporting events.

The Empress of Canada regularly navigated the Trans-Pacific route between western Canada and the Far East until 1939. This photograph was taken in Egypt in 1939 when some of the crew visited the pyramids along the west bank of the Nile River. Riding on camels through the desert and experiencing the traditions around them must have been very different from life onboard. This photo would have been a pleasant souvenir of the wonders that existed on the other side of the world. June 2012 BC Shipping News 17

nautical institute Nautical Institute, B.C. Branch annual general meeting

he B.C. Branch of the Nautical Institute held its 23rd annual general meeting in Tsawwassen in April. Chairman Captain Andy Patterson reported that the past year had seen a number of successes, including most notably, the Command Seminar held in Victoria in 2011 which provided excellent visibility for the B.C. Branch. The conference received great feedback from NI members worldwide and was financially very successful for the local branch. Membership received a boost as well during the conference with 18 new membership applications received. In addition to noting changes within the governance structure of the Nautical Institute headquarters, Captain Patterson congratulated Duke Snider as he steps into the role of Vice President at the international headquarters. Captain Patterson also complimented the team who developed NIBC’s new website and encouraged members to visit (www.nibcbranch.ca). For the upcoming year, Captain Patterson noted that the executive would be looking at ways to encourage new members to get involved with the Institute. He also indicated that this would be his last year as Chairman. Events being planned for 2012/13 include the annual barbecue in late August/early September and a formal dinner in Victoria in January/February. Captain David Whitaker provided an overview of the Nautical Professional Education Society (NPES) of Canada

18 BC Shipping News June 2012

Left to right: Richard Smith, Andy Patterson, John Roberts and Chris Frappell. and highlighted the bursaries provided over the past 10 years to cadets through the BCIT Foundation as well as the Vancouver Foundation for a total of almost $20,000. While bursaries are typically in the range of $1,000, Captain Whitaker was pleased to report that awards for this past year were $1,500. He reminded members that they should be showing their support for the grant program by donating a small amount — typically in the $40 to $50 range. Following the AGM, Jay Straith of Canadian Artificial Reef Consulting gave a presentation that highlighted how the local, North Vancouver company has exported their expertise worldwide. With the help of Straith and the CARC, Canada was the first country to develop standards for the cleaning and placement of vessels — standards which have now been

adopted in Australia, New Zealand, the United Kingdom and the United States. In addition to providing scuba diving experiences, artificial reefs provide a stable and flourishing habitat for marine life. For more about artificial reefs, please visit www.artificialreefs.net or www.artificialreef.bc.ca. BCSN Additional business at the AGM saw the election of Table Officers and Directors. For 2012, Table Officers are: Chairman Captain Andy Patterson Vice-Chairman Captain Chris Frappell Treasurer Captain David Willows Secretary Mr. Richard Smith Directors: Captain Alan Shard (Honourary Life Director) Lt-Cdr. Gerald B. Stanford (Honourary Life Director) Captain Brian Johnston Captain Zak Farid Captain David Snider Captain John Lewis Captain Thomas Wood Captain Barry Preece Captain Roderick Weir Mr. James Brown Mr. John Roberts Mr. Dinesh Kewalramani

mari-tech 2012 Strong attendance and participation at Mari-Tech 2012

• Commodore Patrick Finn, Director General Maritime Equipment Program Management, Canadian Forces, provided an overview of challenges and opportunities in supporting current and future Royal Canadian Navy fleets. Technical presentations provided the latest information on technology and best practices from companies such as BMT Fleet Technology, Thordon Bearings, Rolls-Royce Canada, Siemens PLM Software, as well HAMANN AG, MAN Diesel & Turbo Canada and Babcock Canada. Panel sessions generated a great deal of discussion. One session in particular, “Engineering smarter marine businesss — sharing experiences”, looked at the U.S. National Shipbuilding Research Program which facilitates a collaborative approach to problem-solving with participation from all major shipyards in the U.S. The discussion led to a suggestion that the value propositions put forth by Irving Shipyards and Vancouver Shipyards in the winning bids of the National Shipbuilding Procurement Strategy be combined to create such a vehicle here in Canada. Peter Cairns, President of the

Shipbuilding Association of Canada, was keen to see this happen and volunteered to take the lead. Over the coming months, BC Shipping News will be featuring articles from presentations given at Mari-Tech, starting next month with Jeffrey Smith’s review of the IMO Polar Code and the role of stakeholders including designers, government regulators, classification societies, underwriters and vessel owners. In between sessions, attendees were able to browse through the displays of exhibitors — all of whom had excellent feedback on both the number and quality of attendees. Next year’s Mari-Tech will be hosted by CIMarE’s Atlantic Branch in Halifax, Nova Scotia, June 25 to 27, 2013. CIMarE and SNAME are also hosting a two-day event in Ottawa in February 2013 that will feature technical papers covering a number of topics relevant to the marine industry. Information on both of these events will be available soon at www.mari-tech.org. Photos, courtesy of Brian McCullough with the National Defence Maritime Engineering Journal, can be found at www.bcshippingews.com. BCSN

Photo credit: Brian McCullough

ith attendance numbers topping 500, Mari-Tech 2012 in Ottawa this past April was a huge success. In addition to over 30 sessions, including keynote speeches, panel discussions and technical presentations, attendees were able to browse through the Expo hall with over 50 exhibitors. Co-hosts Jeffrey Smith, Chair, National Council of the Canadian Institute of Marine Engineering, and Glenn Walters, Chair, Eastern Canadian Section, Society of Naval Architects and Marine Engineers, welcomed industry representatives from all across Canada and all sectors of the maritime community. In keeping with the theme “Re-birth of the Marine Technical Community”, conference speakers presented and discussed topics that ranged from marine safety; engineering; naval and coast guard fleet renewal and maintenance; shipyard productivity and innovation; plus much more. Keynote speakers provided valuable insights into a number of issues and projects: • Michel Vermette, Deputy Commissioner, Canadian Coast Guard, gave an update on ongoing shipbuilding projects including the recent announcement of an additional $5.2 billion for fleet investments. • Peter Noble, Chief Naval Architect, ConocoPhillips, spoke on the importance of professional societies and their contributions to continued training and education for upcoming generations. • Wendy Tadros, Chair, Transportation Safety Board, described the process behind TSB investigations, noting that there were three statements that guided their work: 1) no accident is ever the result of one single factor; 2) no two accidents are ever exactly alike; and 3) no one ever sets out to have an accident (this last point, while obvious, Tadros indicated that most people ignore it and search for blame).

Glenn Walters, Chair, ECS, SNAME; Captain (Ret’d Royal Canadian Navy) Tony Goode; and Jeffrey Smith, Chair, CIMarE. June 2012 BC Shipping News 19

ports & terminals

Current B.C. terminal upgrades top $5 billion By Ray Dykes

ome $5 billion in capital investments here and there may not seem much in the days when nations talk of trillion-dollar debt, but it does represent a significant amount of current expansion and upgrade work when applied around British Columbia’s ports and individual terminals. The cash registers are ringing a merry tune with projects underway, but there is probably just as much again at the feasibility or engineering drawings stage among the wide variety of terminals in our ports on the West Coast. Port Metro Vancouver (PMV) alone has $4 billion or more of infrastructure improvement projects on the books over the next decade. Deltaport boost Early attention at PMV is on projects such as the $717 million Gateway Infrastructure Program — part of the federal government’s AsiaPacific Gateway and Corridor Initiative of 2007 — with its widespread expansion of road and rail networks in the Lower Mainland. Greater Vancouver has been divided into three main Trade Areas — North, South and the Roberts Bank Rail Corridor in the south. One high-profile aspect of the work is the Low Level Road Project on the

20 BC Shipping News June 2012

North Shore which is at the detailed design phase after a month-long consultation process. This project is designed to enhance rail and port operations as Canada’s busiest port continues to grow.

...as part of the Gateway Infrastructure Program there are nine projects underway in a $307-million Roberts Bank Rail Corridor investment. Also, as part of the Gateway Infrastructure Program there are nine projects underway in a $307 million Roberts Bank Rail Corridor investment. The projects involve grade separations which take vehicles away from the rail movements by building overpasses or track re-alignment. Another key project is the Deltaport Terminal Road and Rail Improvement Project which has four main elements: • An overpass on the existing Roberts Bank causeway that will separate road and rail traffic (trucks and Westshore vehicle traffic are currently held up by container train movements at a level crossing); • Reconfiguration of rail track and additional container handling equip-

ment within the existing Deltaport Terminal; • Additional rail track within the existing rail corridor and a portion of the Delta option lands; and • Road improvements on Deltaport Way to facilitate easier movement of container trucks going to and from Deltaport. The work is part of a plan to upgrade existing infrastructure and increase Deltaport’s container capacity by 600,000 TEUs (20-foot equivalent units) to a total of 2.4 million TEUs. Further down the track, PMV conducted field studies in April this year as part of ongoing environmental and technical work for the separate new container terminal at Roberts Bank, known at this stage as the Roberts Bank Terminal 2 Project. If it goes ahead — some say it could be in operation by 2020 — Terminal 2 would add another two million TEUs to the port’s overall container capacity — good enough to meet expected demand through 2030. If the project passes the environmental approvals process, it will likely be designed and built alongside Deltaport and Westshore Terminals, but the green light will only be given if market conditions dictate.

ports & terminals And then there are the 28 separate terminals in the port, of which several have major upgrade projects underway. Coal upgrades High on the projects underway list has been the upgrade or expansion of the province’s three coal export terminals — Westshore Terminals and Neptune Bulk Terminals in Port Metro Vancouver, and Ridley Terminals in the Port of Prince Rupert. All are still managing to run at a record pace in spite of the upgrade projects underway.

(the big machines that either stockpile coal in the yard or reclaim it for loading onto the ships); plus additional conveyors; and the replacement of one single rotary dumper in the existing twin set.

Westshore has now begun a two-year $53 million equipment upgrade that will take its throughput capacity from 29 to 33 million tonnes... That upgrade work helped the terminal set its best ever throughput total last year at 27.3 million tonnes — well over the previous best effort of 23.5 million tonnes in 1997 — easily maintaining its title as the busiest coal export facility in all of North America. But, that’s not all. Westshore has now begun a two-year, $53-million equipment upgrade that will take its throughput capacity from 29 to 33 million tonnes without adding to its land footprint alongside the Deltaport Container Terminal at Roberts Bank. This new project has already replaced or upgraded four of the seven conveyor transfer stations onsite with new chutes; is adding a new twin rotary dumper set and removing the single dumper now in service; and is installing three new coal train positioners or indexers, including two exit positioners for the first time.

...there simply isn’t any other facility on the U.S. West Coast for the American mines, particularly the high-producing mines...

Westshore plans Canada’s leading coal export terminal, Westshore at the Roberts Bank outer harbour of Port Metro Vancouver in Delta, completed a $47 million equipment upgrade in 2010, which saw the addition of a fourth stacker-reclaimer

Fraser Surrey Docks In a move that helped diversify its product handling into bulk for the first time, Fraser Surrey Docks — the largest multi-purpose terminal on the Fraser River — converted its Shed 1 warehouse to handle agri bulk in 2011.

Photo courtesy of Westshore Terminals.

The terminal upgrades will bring at least another 20 million tonnes capacity to West Coast coal exports. No wonder there are two coal export facilities seeking approval in Washington State and another just announced for Oregon, which will spice up the competition for U.S. coal exports. Westshore shipped a record 8.2 million tonnes of U.S. coal in 2011 compared to 5.6 million tonnes in 2010 as there simply isn’t any other facility on the U.S. West Coast for the American mines, particularly the highproducing mines in the Powder River Basin in Montana and Wyoming. So keen have been the U.S. coal mines to get their surplus energy coal to world markets that they now regularly ship coal through Ridley Terminals, a rail journey of about 3,500 kilometres from the mines to tidewater. Yet they still manage a reasonable profit as prices range around $90 to $100 a tonne for this lower grade of coal used in power generation around the world.

The work should be finished by year’s end. The first phase involving the transfer stations was completed in a 14-day “half terminal shutdown” in March and April, which for the first time in Westshore’s 42-year history saw no trains dumped, while shipments involved just two of the four stackerreclaimers from stockpile and only one of the two deep-sea berths. The next major shutdown will begin October 1 and stretch for almost 42 days as the old single rotary coal car dumper is taken out and a new twin set installed. The existing twin dumper and both deep-sea berths will remain operational making the shutdown of only one dumper line more tolerable than the disruption in March-April. “The new transfer chutes were installed as planned in the first shutdown and we performed a lot of other work onsite at the same time,” says Westshore Vice President & General Manager Denis Horgan. “All the work we wanted to get done got done although the commissioning took longer than expected,” he adds, “but we were satisfied with the results.”

Train dumper exit positioner work started in April at Westshore Terminals. June 2012 BC Shipping News 21

ports & terminals

In the Inner Harbour, Neptune Bulk Terminals...had its best ever year in 2011 at 12.85 million tonnes, while undergoing construction work onsite.

Since acquisition in 2007, Kinder Morgan has been upgrading Vancouver Wharves.

Ridley doubling Up north in the Port of Prince Rupert, the doubling of Ridley Terminals

Photo courtesy of Neptune Terminals.

Neptune spends In the Inner Harbour, Neptune Bulk Terminals also had its best ever year in 2011 at 12.85 million tonnes, while undergoing construction work onsite. The record year was 12 per cent higher than the previous best.

Last year, Neptune added a new $6.5 million rail car positioning system and spent $12 million on a power system upgrade to optimize energy efficiency onsite. In 2012, Neptune is investing another $63.5 million on new equipment including a $45 million stacker-reclaimer being built locally by Ramsay Machine Works in Sidney, B.C. Neptune hopes to have the new stacker-reclaimer in place in the First Quarter of 2013 and once it is in operation, the terminal will be able to handle trains up to 8,500 feet long and throughput capacity will jump from about 8.5 million tonnes a year to 12.5 million tonnes. Neptune also spent $50 million on upgrades for the potash-side of its business, completing the work in 2011, which sped up the conveyor belts in a new direct route to Berth 2. A new surge bin was added for potash and the existing car dumper renovated. “We’ve been able to successfully increase our handling capacity and also improve our environmental performance,” says Neptune Terminals President & CEO, Jim Belsheim of the strategic investments.

Photo courtesy of Port Metro Vancouver.

The 50,000 square foot former forest products warehouse now handles a variety of agri bulk products including malt, lentils, canola meal and canola meal pellets. It opened in May 2011 and in its first year handled 130,000 tonnes. Fraser Surrey Docks Assistant Manager of Sales & Marketing, Brady Erno, says installing a bulk rail car bottom dumper and automatic switcher has helped greatly and the facility may add wood pellets to its growing list of bulk products in future as it continues to grow and diversify. On the container side, FSD recently completed a repaving of its box storage area, increasing the weight capacity of the container yard in the process.

Neptune Bulk Terminals on the North Shore had their best year ever in 2011 — 12 per cent higher than their previous best. 22 BC Shipping News June 2012

completed its first phase of upgrades and expansion in 2011 and managed a record year at 9.6 million tonnes as well despite the construction. As the work continues, the terminal, served exclusively by Canadian National Railway, is predicting another record year in 2012. There are four annual stages to the $90 million project, which will see terminal coal export capacity jump from 12 to 24 million tonnes by early 2015. In the first stage, completed last year, the terminal began clearing land to create an extra stockpile area and replaced both barrels of its existing tandem rotary dumper so it can better handle the aluminum coal cars now predominant in the industry. This year, site civil works to the cleared land are underway and a third stackerreclaimer will be added to service the new stockpile area and should be in operation by the First Quarter of 2013. As well, the terminal is adding another 14 kilometres of rail track to give it five incoming and four outgoing lines. Year Three in 2013 will see new conveyor lines as the new and old stockpile areas merge plus a possible major new piece of stockyard equipment once federal approvals are given for the purchase. In the final stage in 2014,

ports & terminals the terminal plans to add another twin rotary dumper set and conveyor line, doubling its unloading capacity, and to build a second thaw shed — a facility with which B.C.’s other coal facilities don’t need to bother.

Meanwhile, the Prince Rupert Port Authority is spending $30 million in a new Ridley Island Rail Utility Corridor project... Meanwhile, the Prince Rupert Port Authority is spending $30 million in a new Ridley Island Rail Utility Corridor project which is expected to start construction this year. Canadian National ($30 million) and the provincial and federal governments ($15 million each) have also invested in the project which is separate from the extra rail track being built at the coal terminal. The project is expected to “pave the way” for future terminal developments on Ridley Island which currently houses

the Ridley Coal Terminal and the Prince Rupert Grain Terminal. The port also has a $30 million wood pellet shipping facility project now at its environmental assessment stage. Fairview expansion Prince Rupert’s gem of a container facility, the ever-growing Fairview Terminal should begin its second phase expansion by the end of the year. The project will add another 15 acres to the existing terminal and a second container ship berth by 2014-2015. This will jump container capacity after the Phase 2 Stage 1 expansion to 1.2 million TEUs, while a further expansion through Phase 2 Stage 2 project will take it to over two million TEUs. The port is awaiting a commercial decision to go ahead by the terminal operator, Maher Terminals, but environmental permitting is already underway. New pipeline Although it’s nowhere near approved or underway as a project, Kinder Morgan’s $5 billion plan to more than

double the output of its Trans Mountain pipeline moving Alberta crude oil to its Westridge Marine Terminal in Burnaby in the Inner Harbour has grabbed the headlines. Kinder Morgan plans to triple the capacity of its storage tanks in the Burnaby facility.

While opposition mounts and government support grows, Kinder Morgan doesn’t plan to file for regulatory approvals until 2014... While opposition mounts and government support grows, Kinder Morgan doesn’t plan to file for regulatory approvals until 2014 and construction likely won’t begin until 2016 and be ready until 2017 at the earliest. However, the doubling of pipeline capacity, largely for Asian exports, would dramatically boost oil tanker traffic through the Inner Harbour of Port Metro Vancouver from the current five to 10 a month to 25 to 30 tankers

The Nanaimo Port Authority purchased this crane for $1 from CenTerm. A new short-sea shipping service, with DP World as the operator, will be ready to launch by July. Photo courtesy of Nanaimo Port Authority.

June 2012 BC Shipping News 23

ports & terminals a month. The Mayors of both Vancouver and Burnaby have opposed what they call the “colossal” Kinder Morgan expansion and are gearing up public relations campaigns to fight it. Currently, the Trans Mountain pipelines system carries over 90 per cent of the gasoline, diesel and jet fuel products delivered to B.C.’s Central Interior and Lower Mainland regions. Kinder Morgan acquired Vancouver Wharves in 2007 and since then the new owners have spent over $150 million on facility expansion and environmental improvements at the site. Chief among these was the installation of an indoor mineral concentrate rail car handling system and the addition of a new concentrate ship loader. Other recent infrastructure improvements include the revival of liquid product facilities that provide access by ship, rail and truck for diesel and jet fuel. Further liquids and bulk expansion is being considered. Kitimat waits One result of the April announcement of Kinder Morgan’s expansion plans for oil through Port Metro Vancouver is that it has effectively divided the attention of the opponents of the Enbridge Northern Gateway Project, which would see a twin pipeline built between the Alberta oilsands and Kitimat — one pipeline to pump crude oil west to the tankers, and the other to carry condensate used to dilute the oilsands.

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The earliest a crude oil export terminal could open is expected to be 2017, but there are many huge hurdles still to be jumped in the expected two more years of the approval process. Meanwhile, Kitimat waits. As a private port, it has attracted many billions of dollars of project ideas over the past decade and waiting for something concrete to happen has become a full-time job for the 8,000 residents. District Mayor Joanne Monaghan has been hopeful and patient, but still has nothing solid to report yet beyond a claim that “three industries want to come in here to build new deepsea docks.” There is nothing further yet on a suggestion that Kitimat could build its own public dock because the three existing facilities — all privately owned — aren’t available. Shell owns and is now revamping the former dock once operated by Methanex. Aluminum giant Rio Tinto Alcan operates its original dock and a second facility once owned by the closed Eurocan pulp mill. Currently, Rio Tinto is upgrading the offices and power supply, and installing new fencing on the old Eurocan Dock to make it “secure and operationally efficient for our use,” says Colleen Nyce, the company’s Corporate Affairs Manager. Kitimat is also expected to house the first LNG export facility in B.C. and two are in the works through Shell Canada and Apache Corp. Vancouver Island The big news on Vancouver Island is what DP World will do as the new operator of the Nanaimo Port Authority’s two main general cargo terminals —Assembly Wharf and Duke Point. The most likely new business, says Port Authority President & CEO, Bernie Dumas, is an independent bargecontainer service to CenTerm in Port Metro Vancouver. The new short-sea shipping service will employ the old but lightly used single container crane languishing at Duke Point. The NPA recently spent $75,000 refurbishing the crane which it bought from CenTerm for $1 over five years ago. The new service could be ready to launch by July on a oncea-week basis bringing empty boxes to the Island for export loadings at a rate of about 150 a week. More and more customers are expressing interest and while most business will be forest product-related, Natural Glacial Waters Inc. of Fanny Bay is keen to export bottled water to Japan, a designer stone business could also be a customer, and eventually the service could bring laden containers to the Island for the big box stores such as WalMart, London Drugs and Canadian Tire in the area from Campbell River down to Duncan. DP World is setting up its offices at Duke Point and is also proposing to redesign the terminal as well as bringing the port authority’s business online for cargo handling for the first time.

ports & terminals Port Alberni Raw log exports are the main business outside marina operation at Port Alberni these days and talk of past years about an aggregate facility being opened is just that — talk in these times of a slow construction industry throughout North America. However, there’s still hope of a coal export terminal if a new mine is approved near Campbell River. Consultation continues through the environmental approval stage.

see a new international ferry terminal built adjacent to the “gorgeous old building” and that would add another string to the GVHA bow and enhance the Inner Harbour.

Ray Dykes is a former journalist who has worked his way around the world. He is now based in Nanaimo as a writer/ photographer. Ray can be reached at prplus@shaw.ca.

Victoria plans Big projects are in store for the Greater Victoria Harbour Authority if all goes to plan. A recent Master Plan for Ogden Point and its four berths and helipad shows how the GVHA could better consolidate and use the facility. And recently, the authority bid and won the lease for the old CPR Steamship Terminal, which it is now revamping and redeveloping. Eventually, GVHA 1/2 pg h #4_1/2 pg horz 3/31/12 PM to Page 1 President & CEO, Curtis Grad,8:56 hopes

Over a century of service to BC’s marine industry

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www.seaspan.com June 2012 BC Shipping News 25

search and rescue

West Coast SAR...

Part One: The importance of CCG Auxiliary and community marine resources in rescue operations

By K. Joseph Spears

any large commercial vessels, ferries and smaller craft ply Canadian waters. Incidents can and will happen. As a coastal nation, we need to be ready. It is too late after an incident to say we should have been better prepared. While public attention has focused on the centennial of the sinking of the RMS Titanic, closer to home, in 1914, the RMS Empress of Ireland sank in the St. Lawrence River off Rimouski with the loss of 1,012 lives (840 passengers and 172 crew). Almost a century later, the modern cruise vessel M.V. Costa Concordia partially sank on January 13, 2012 after hitting a reef off the Italian coast and running aground at Isola del Giglio, Tuscany, requiring the evacuation of the 4,252 people onboard. Thirty-two people are known to have died. This first of a threepart article examines Canada’s marine search and rescue (SAR) capability on the West Coast starting with a look at the unpaid professional volunteers of the Canadian Coast Guard Auxiliary (Pacific) (CCGA-P) and their key role in a marine mass casualty in particular, and marine SAR in general. Marine safety management requires a robust marine SAR response that

must be ready, exercised and include plans for a major marine mass casualty. Response is not solely a government function — rather, it must involve all elements within the marine sphere, mariners and coastal communities alike. Mass casualty/rescue operations are low–probability, high-consequence events. They have happened in the past and will happen again in our waters and we, as a coastal nation, must be ready to respond. We have domestic and international legal obligations to respond. Effective leadership and training, proper equipment and mission-critical inter-operability, and robust communication are central elements and key to a successful and effective SAR response. The West Coast of Canada, an ex-

Effective leadership and training, proper equipment and mission-critical interoperability...are central elements...to a successful and effective SAR response. posed and remote coastline is not unlike the Canadian Arctic which has received a great deal of attention in recent years. Members of the Arctic Council recently

signed an International Arctic Search and Rescue agreement. There are many challenges to our SAR response on the West Coast — lack of infrastructure, exposed coastline, complexity of marine traffic, lack of navigational aids and sparse search and rescue assets — to cover a large north-south area of 800 kilometres and an indented remote coastline of 25,000 km with 6,000 islands sprinkled throughout, subject to tidal currents and open ocean conditions in which fog shrouds and Pacific storms pound. Seaward Canada’s international SAR obligations extend offshore 350 nautical miles in the north and 900 nautical miles in the south. To say the Victoria Search and Rescue Region (SRR) presents challenging conditions is an understatement.

Above: Auxiliary 35 (Victoria), the Tolonen, a 40-foot twin water jet drive dedicated rescue vessel. (Photo from the HBMG collection.) 26 BC Shipping News June 2012

search and rescue events but still require a robust SAR response. Mariners assisting mariners can be traced back to the mists of marine history. It is the way of the sea and a connection not to be discounted or taken lightly. The importance of community involvement cannot be under-estimated or discounted in marine SAR, especially if a major incident involving a vessel like a cruise ship were to occur. While marine SAR is a federal responsibility with the Department of National Defence as the lead agency, we are seeing a resurgence and revitalization of the importance of community involvement and the need to create capability and capacity along our coasts. The CCGA-P is a volunteer organization that has existed since the late 1970s and assists the Canadian Coast Guard in marine search and rescue. It is made up of 1,000 people from a broad cross-section of backgrounds who volunteer their time to train, to be trained and to be on stand-by to respond to a SAR incident. Over time, the CCGA-P has acquired vessels that are suited to West Coast operations and have made these available 24 hours a day, 365 days a week. A high standard has been created. A new class of SAR vessels, the Falkins class have recently been commissioned and are now operational. These vessels cost $600,000 each and, as they enhance response in remote locations, are a welcome addition to Canada’s SAR capability.

The Victoria SRR is described as the most demanding in the country. Recent incidents here in Canada, such as the Queen of the North accident, call into question our ability to handle a mass casualty event and our need to reassess our marine SAR capability. Discussion and debate on this issue is of concern to all mariners and search and rescue professionals of the Canadian Coast Guard, Canadian Forces, CCGA-P and the Civil Air Search and Rescue Association (CASRA) who make up Canada’s marine SAR response.

The importance of community involvement cannot be under-estimated or discounted in marine SAR...

Photo from the HBMG Collection.

In many places on the West Coast, there is very little land-based infrastructure. With access to significant portions of the coastline limited, including only a few locations north of Port Hardy (such as Prince Rupert and Bella Bella) that have major roads that bisect the mainland coast, air and water are likely the only two options to get people and resources to an incident. Weather conditions on the coast during much of the year can be harsh with cloud cover and a low ceiling which can prevent aircraft from operating during critical times. Therefore, CCGA-P volunteers, mariners and residents of coastal communities are the first responders until help can arrive. With cruise ships now carrying well over 3,000 passengers in our waters, an incident of this magnitude would stretch local resources and coastal community infrastructure. In addition, there are many smaller marine and aviation SAR incidents which are more frequent and occur in isolated and remote areas of the coast. For example, there is a great deal of aviation on the coast using fixed wing float planes that are used to travel between coastal communities. All of the recent float plane incidents that involved crashes required a marine SAR response, often from the CCGA-P. These are high-probability, lower-risk

These vessels are tasked by the Victoria Joint Rescue Co-ordination Centre (JRCC). There are 36 stations with vessels between Victoria in the south and Gingolx in the north, extending into the lakes of the B.C. interior. For the most part, these vessels are rigid-hull inflatable’s operating from 61 stations. The majority of vessels are less than five years old. There is a fleet of 41 vessels owned by each Society. There is an ongoing fundraising campaign to maintain a high level of operational readiness through the purchase of vessels, rescue hardware, protective clothing, training and shore-side assets. It is safe to say that the level of training creates the concept of unpaid professionals who work and train closely with other professional rescue agencies to provide world-class rescue response in the most demanding SAR region. This is a community-based initiative and these SAR assets can be used for other purposes and create resiliency in the community to respond to other types of incidents. Last year, the CCGA-P responded to 714 SAR missions. We don’t have to look much further than the sinking of BC Ferries’ Queen of the North off Gil Island to realize that significant marine incidents do occur in B.C. waters. The ferry, which was certified for over 700 passengers, had approximately 66 passengers onboard. The resulting loss of the lives of two passengers was two lives too many in a modern, regulated marine industry.

Volunteers from Squamish exercise extraction from a rock face using Auxiliary 4. June 2012 BC Shipping News 27

Photo from the HBMG Collection.

search and rescue

Stations 31 Brentwood and Station 34 Mill Bay (Auxiliaries 31 and 34) exercise in Saanich Inlet. The Gitga’at people of Hartley Bay, near the site of the grounding, heard the call for help and swiftly rose to the occasion to assist in the rescue and the subsequent handling of passengers and crew. It was the West Coast at its finest. It made all of Canada proud to see the prompt and heroic response. Hartley Bay now has a CCGA-P unit. At the time, it did not. For their fine efforts, the Lieutenant Governor of British Columbia awarded a citation to the entire village. Nowhere is the importance of mariner response to a coastal incident better illustrated than during the evacuation of Manhattan following the 9/11 attacks. This was the subject of a recently released video (available at www.bcshippingnews.com/video) and is relevant to this article’s discussion. The Center for National Policy in the United States organized a video called The Boatlift, narrated by Tom Hanks and honouring the untold 9/11 story of marine heroes. Following the Twin Tower attacks on September 11, 2001, over 500,000 people were moved from Manhattan’s seawalls in just nine hours — the largest maritime evacuation in history. To put this feat into perspective, the largest boatlift prior had been during the Second World War when 339,000 British The CCGA-P is about to announce major changes! Pick up the July issue of BC Shipping News for full coverage. 28 BC Shipping News June 2012

and French soldiers were evacuated from Dunkirk in nine days. Hundreds of tugboats, ferries, fishing boats, Coast Guard cutters, charter vessels and yachts heeded the call from the U.S. Coast Guard over VHF radio for any and all vessels to assist. The story of the 9/11 boatlift serves as a reminder of the innate sense of duty and purpose that all mariners hold and the natural instinct to assist. As Steve Flynn, a former Commander in the USCG and now with the Center for National Policy noted: “First responders will always do their best to assist us. But, in real life, success or failure in our moments of greatest need is usually determined by the actions of regular people”. In the video, one of the first mariners to respond to the events of 9/11 appropriately summed up his instincts and actions: “I have one fear in life. I never want to say the words ‘I should have’.” When we look at marine SAR, we should be guided by those comments. We need to plan and exercise and that is why the role of the unpaid professionals of the CCGA-P is so critically important to our SAR capability on this coast — whether it is a mass casualty or smaller SAR event. While the boatlift in New York Harbour on 9/11 was an ad hoc response with an outstanding result, preparation and training for a marine mass casualty or smaller incident should not be overlooked, especially when regular folks from local communities are involved.

The CCGA-P provides a ready network that is highly skilled and dedicated with specialized equipment. The volunteers of the CCGA-P serve to buttress and enhance the SAR response that is detailed in the Department of National Defence’s National SAR manual. This is especially important along our lengthy and remote coastline. We need to ensure our coastal communities, along with provincial, regional and municipal agencies, are integrated into this response with CCGA-P volunteers. The Boatlift should be required viewing for all mariners and elected officials at all levels of government. The video highlights that adequate resources are the key to resiliency. The video seeks to ”build the reflexes and instincts necessary at every level...to respond quickly and wisely to future crises”. This applies to future marine SAR incidents both large and small. We need to nourish and allow the CCGA-P and communities to flourish to solve these SAR challenges in a creative and cost-effective fashion, working in conjunction with the DND and the CCG. Creativity and a team and community approach will develop innovative and cost-effective solutions built upon local knowledge which is invaluable given the intracacies of our coastline. This approach will build resilience, competence and capability along the West Coast at a time when the potential for new types of incidents, such as the looming tsunami debris from Japan, is at an all-time high. On Canada’s West Coast, when it comes to marine SAR during an Empress of Ireland moment, we should never be in a position of saying “we should have been prepared”. Joe Spears, a principal of the Horseshoe Bay Marine Group, is a former CCG Rescue Coxswain and has been involved in SAR incidents on the Atlantic, Pacific and Arctic Oceans and assists the Canadian Rangers of 2 CRPG Nunavik (Quebec Nord) with SAR. He can be reached at: kjs@oceanlawcanada.com. Watch the video: The Boatlift at www.bcshippingnews.com/video.

international shipping

The shipping industry of India By Syd Heal Modern India is rated as one of the emerging economic giants of the 21st century. Following up from last month’s article on port development in India, Syd Heal looks at prominent Indian ship owners.

he origins of a distinctively Indian shipping industry are lost in antiquity, but they certainly predate the arrival of Western explorers by many centuries. If any culture had an influence on Indian shipping prior to the arrival of the Europeans, it was the Arabians from the Persian Gulf who brought their shipbuilding skills and trading practices to India and took back much of the raw materials needed to sustain their own shipbuilding activity. Wooden shipbuilding is still practiced for small native or ‘country’ craft, no doubt with modern touches thrown in. Ship owning is as old as shipbuilding and among leaders who brought shipping practices to India were the prominent Parsees of Bombay. These people were followers of the prophet Zoroaster and had left Persia to escape religious persecution as long ago as the 10th Century. Trusted by the British overlords for their integrity and strength of character, they prospered as a distinct self-contained community. As successful merchants with a grip on shipping, they accumulated the capital that financed much of Indian commerce so that they occupied a powerful position before, during and after the British

colonial era. They were probably the first formally organized ship owners in India. The Wadia family of Bombay were prominent Parsees who developed as big shipbuilders by Indian standards. They built trading ships for the British East India Company as well as several all-teak battleships for the British Navy during the Napoleonic Wars. As a community, the Parsees still exist and occupy many of the most powerful positions in the Indian economy and control some of the largest companies including those with ship owning interests.

As successful merchants with a grip on shipping, [the Parsees] accumulated the capital that financed much of Indian commerce... Indian nationalism grew alongside the East India Company and, following the Indian mutiny of 1857, it stopped active trading in the following year. The nationalist movements grew stronger and one of their political tenets called for the establishment of a strong merchant marine capable of carrying Indian trade overseas. Much of this was motivated by jealousy of P&O and

a dozen other British ship owners who were prominent in the Indian trades, but there was little the nationalist could do about it as the British controlled and financed so much of the external trade of the country until independence in 1947. As a boy, I frequented Birkenhead docks in the late 1930s intrigued by the sight of ships of the joint Clan-EllermanHarrison lines service to India. Every week, a ship in this service left Britain loaded — usually with British-made locomotives and rolling stock; railway steel loaded at Middlesborough; mining and most other forms of machinery plus other cargo. These India traders always carried one trademark of the service with the long poles that extended athwartships out of the crosstrees from which floodlights could be rigged when working cargo through the night in open roadsteads into country craft and lighters. Ten years later, I was to witness the start of the dismantling of this service — just one facet of the importance of the India trade to Britain and its merchant navy and the loss it constituted after Indian independence. When I arrived in Bombay for the first time in late 1944, I was part of the build-up of the British forces gathering June 2012 BC Shipping News 29

international shipping for the final invasion of South East Asia. As a Royal Navy junior officer, I usually had easy access to any aspect of Indian shipping that interested me. As we lay at anchor awaiting a berth, I was struck by the large number of sailing craft, large and small, that passed our ship. In most other places in the world, commercial sail was virtually dead but here it seemed to be thriving. I soon made the acquaintance of the only Indian author of books on the subject, the late K.B. Vaidya, and visited him in his office at Amritlal Ojha & Sons Ltd., commercial managers of a large fleet of sailing vessels and ship brokers dealing in commodity shipments. While I was there a dapper gentleman came in. He was the tindal or master of a Seychelles schooner that had just arrived in Bombay with a sugar cargo from those islands. The master explained to me that they had to keep radio silence on passage until they were in sight of India and then they could report their impending arrival to their agent. He and Vaidya carried on an animated conversation in English about ocean currents, the monsoon and the factors affecting sailing craft. It was like a peek back to 100 years ago when similar conversations must have taken place between masters and owners in British sailing ship offices. I learned much from Mr. Vaidya and his excellent book and met him socially on several occasions when in Bombay. Up to that time, a very large part of cargoes generated by Indian producers for Indian consumers were delivered or picked up by Indian coastal sailing craft. Such vessels ranged as far as Singapore in the east and Mozambique in the west with a great deal of traffic in and out of the Persian Gulf. Despite the fact that P&O affiliate British India Steam Navigation Company dominated the coastal trades and ran services from India to many places overseas, such as South East Asia and East Africa, the native-owned dhows, sambuks and khotias, all lateen-rigged sailing craft still carried a large part of Indiaâ&#x20AC;&#x2122;s

coastal trade and traded to East Africa and, before the war, as far east as Singapore. In wartime, much of the British India fleet was engaged elsewhere so the sailing craft became doubly important wherever they were free to trade.

The British lines were forced to retreat from the Indian trade as Scindia and a few small Indian operators took over and the new state-sponsored India Steamship Company put ex-U.S. Victory ships onto the India-U.K.-Europe route... With independence in 1947, India instituted new policies clearly aimed at capturing a substantial part of its external carrying trades as well as starting the process of excluding foreign shipping from the Indian coastal trades. Scindia Steam Navigation Company, which had been established in 1919 by Bombay Parsees, Narottam Morarjee and Walchand Hirachand, had its eye on the India-U.K. and India-U.S. trades from the beginning but following an agreement with the British shipping companies, confined itself to the Indian coastal trades for the first 10 years. By 1947, after years of wrestling with the Great Depression of the 1930s, competitive issues, mainly with the British lines that boxed it in and a wartime economy during much of the 1940s, independence brought Scindia an open field that at last put it into a strong position to seize a whole new position that also fulfilled

A traditional dhow â&#x20AC;&#x201D; a mainstay of the early Indian shipping industry. 30 BC Shipping News June 2012

international shipping the expectations of a strong Indian Nationalist movement.

Shipping Corp of India (SCI), Great Eastern, Essar, Mercator, Chowgule, Varun and India Steamship Co. are now all prominent names among the list of Indian ship owners. Scindia opened services between India and the U.S. in 1947, India-U.K. in 1948, India-Singapore in 1950 and to East Africa in 1954. These were all routes previously served by the British lines such as P&O-BI, Ellerman, Clan, T&J Harrison, Brocklebank and the Bank Line. The British lines were forced to retreat from the Indian trade as Scindia and a few small Indian operators took over and the new state-sponsored India Steamship Company put ex-U.S. Victory ships onto the IndiaU.K.-Europe route to reinforce Scindia. The loss of the India trade sounded the death knell of many British lines and over the next 25 years, virtually all had gone out of business. Today, only a single tramp company, Greig of Cardiff, survives. An exception is Cunard — a brand name under the Carnival Corporation which controls the majority of the big ship cruise industry.

Shipping Corp of India (SCI), Great Eastern, Essar, Mercator, Chowgule, Varun and India Steamship Co. are now all prominent names among the list of Indian ship owners. SCI is a holdover from the time when the Indian government was following a socialist agenda with state-owned enterprises in shipping, banking, mining and other key industries. None of them appear to have been a roaring success and while some continue, including Shipping Corporation which is also the biggest Indian ship owner, the private sector has received a lot of encouragement in recent years. Now partly in private ownership, SCI is heavily engaged in enlarging its fleet and phasing out old units — SCI owns 76 vessels with a total tonnage of about 5.5 million DWT — about half of the tonnage of the Indian ocean-going fleet. The tanker section includes a mixed bag of VLCCs down to a substantial number of product tankers. The rest of the fleet includes bulk carriers, container ships and offshore supply ships. SCI recently announced that it was setting up a port management division presumably to take advantage of opportunities arising from the massive expansion of Indian ports both in capacity and numbers. It seems to be a recurring theme where some muddy backwater is being turned into a modern port and since

Today, vessels like the Garv Prem above — a bulk carrier owned by Mercator — can be seen in Canadian waters like the Port of Quebec City.

time immemorial it has been a fact that sea-trained personnel are always looking for opportunity ashore, while management ashore looks to experienced seagoing officers as a natural field from which to recruit.

Great Eastern has long claimed to be the largest fleet owned by the private sector. Great Eastern has long claimed to be the largest fleet owned by the private sector. With a fleet of 25 mixed crude carriers and product tankers, including one LPG carrier plus 10 bulkers and a subsidiary offshore supply fleet, it is obviously feeling the effects of an oversupplied tanker market and it is making moves to downsize its fleet. It’s a tough proposition in a market flooded with unemployed tankers and owners fighting to avoid bankruptcy. Great Eastern has recently contributed its fleet of offshore vessels to a joint venture with Bharati Shipyards Group, operators of 11 shipyards along the Indian coast. With a capacity for ships of up to 100,000 DWT in just one shipyard, Bharati is an important builder of offshore vessels for the Indian oil industry and plans to give competition to other Far Eastern building industries in seeking foreign orders. The larger Indian ship owners seem to like diversity in their fleets and investments. Such an owner is Mercator Ltd. of Mumbai and Singapore. A fast developing company within the private sector, its CEO is H.K. Mittal which immediately suggests a strong working connection with the world’s largest steel company, Arcelor-Mittal. With a total of 14 tankers and bulkers, plus four large ocean-going dredgers, it is in the oil exploration business, coal mining in Indonesia and Mozambique with guaranteed markets in India. With port developments in India there appears to be a great deal of work for the dredgers. Arcelor-Mittal has interests in Canada including a potentially large June 2012 BC Shipping News 31

international shipping iron mining operation in the making on Baffin Island, so we may yet see Mercator bulkers engaged in delivering iron ore from this Arctic mining site to Arcelor-Mittal steel plants in Europe. Essar Shipping is another private sector company with a diversified 25-vessel fleet including VLCCs and product tankers serving the Indian oil industry. Its activities include a comprehensive

logistics division that provides services at ports the company uses. It manages a fleet of 4,200 road vehicles for the delivery of steel and petroleum products to customers in the interior of India. New ports keep popping up and one such is Vadinar in Gujarat state which has been developed as a private venture by Essar with a planned throughput of 37 million tonnes annually.

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32 BC Shipping News June 2012

Chowgule group originates in the former Portuguese colony of Goa where it is a major miner of iron ore that it pelletizes for export to Oriental steel mills in China and South Korea as well as domestic steel producers. It owns its own shipyard building small craft to about 5,000 DWT and it has been successful in building coastal freighters for British and European owners. Its mining operation is very large-scale with ore being loaded into powered barges on a river within its operation that then deliver alongside freighters in the harbour at Join u nearby Marmegao.

World Oc Vancouver for grain, but Vancou if Mr. Harper We occasionally see an Indian bulker in

is able to encourage greater trade with Celebration – Connec India it might well include crude oil...

Two companies that are wholly committed to the oil industry are Varun Shipping, a private sector company with 10 LPG carriers, three crude carriers and seven offshore anchor-handling and supply boats, and India Steamship Company referred to above which has moved out of government control and abandoned the liner business to now operate a fleet of eight Aframax tankers as a subsidiary of a large conglomerSunday Jun ate run by the Birla family, prominent Whytecliff Park, Parsees based in Mumbai. 11:00 am This completes my roundup the – D Rain orofshine most prominent Indian ship owners, but all told there are about 200 officially recognized owners of which a minority are in the ocean trades. We occasionally see an Indian bulker in Vancouver for grain, but if Mr. Harper For more www.bcsh is able to encourage greaterWebsite: trade with HBMG crude Oceanoil House (P India it might well include as India is largely dependent on the Sponsored by: beyond Persian Gulf for its supplies what it produces mostly offshore from its own Continental shelf. Syd Heal, a veteran of the marine indusNEWS tries and a prolific writer and publisher of marine books, can be contacted at: richbook@shaw.ca.

BC SHIPPING

INTERNATIONAL trade

Seizing Canada’s potential: A renewed trade policy agenda By Darryl Anderson Managing Director, Wave Point Consulting

anada’s access to world markets depends largely on our transport connectivity, especially in regard to bulk and container shipping services. Supportive international trade policies that promote market access, reduce technical barriers to trade and provide foreign investment in other countries with legally binding rights are catalysts that will drive our future economic growth and subsequent trade volumes. Canada has made important strides in improving our transportation infrastructure. The Asia-Pacific Gateway Initiative is perhaps the most visible manifestation. Gary LeRoux, Executive Director for the Association of Canadian Port Authorities states: “the 2008 changes to the Canada Marine Act allowed federal stimulus funding to flow to infrastructure projects which helps to ensure that there is sufficient port capacity in place so Canada is not caught flat-footed when more trade arrives on our shores.” From Canadian shores it is hard to tell whether the international maritime transportation community was aware that during the previous five years the Conservative Party was slowly advancing Canada’s trade interests.

The international shipping community’s prime focus and attention is often directed towards policy developments in larger markets and tends to ignore low-profile Canadian domestic policy discussions. This is not surprising since Canada is a small market in terms of the overall flow of international trade. For example, the United Nations Conference on Trade and Development (UNCTAD) data indicates that in 2009 Canada ranked 28th in the world in annual container throughput traffic volumes and 26th in their Liner Shipping Connectivity Index.

...since the June 2011 election of a majority Conservative government, a renewed and vigorous trade policy agenda has been unfolding. Yet since the June 2011 election of a majority Conservative government, a renewed and vigorous trade policy agenda has been unfolding. The Honourable Jim Flaherty, the federal Minister of Finance, articulated this strategy when he presented the Economic Action Plan 2012 in March. He stated in his

budget speech that the government was ”undertaking the most ambitious trade expansion plan in Canadian history”. For this reason I believe it is important to explore some of the factors driving the change in Canada’s policy emphasis and examine where our international trade policy may be headed. The changing nature of negotiating forums Since the start of the World Trade Organization’s (WTO) Doha Round in 2001, little substantial progress has been made. Professor Debra Steger of the University of Ottawa, recently concluded in her article, “WTO Resilient But Changed After Ministerial” that the United States, the European Union and others, including Canada, have, for all intents and purposes, abandoned the WTO as the primary focus of their trade negotiation initiatives. Professor Steger’s article states that “instead, the priority in developed-country capitals is on negotiation of preferential “new generation” economic and trade agreements with other major partners, as well as plurilateral negotiations, such as the Trans-Pacific Partnership”. Political leaders in other countries have pragmatic economic reasons for June 2012 BC Shipping News 33

INTERNATIONAL trade adopting an alternative approach to WTO trade liberalization. They needed to find a way to quicken the pace of trade liberalization for domestic policy reasons. For example, in April 2012 the China Council for the Promotion of International Trade indicated that as China moves away from its dependency on export markets and encourages more trade with countries with which it has signed FTAs, the value of goods moving between the ASEAN bloc and China is forecast to increase at a faster rate than imports and exports between China and its more established trade partners. The members of the 2010 ASEAN-China Free Trade Agreement are set to become China’s largest trading partners by 2015.

International production trade and investment are increasingly organized within so-called global value chains... The second reason is that the evolution of international trade requires a more responsive trade policy. The Organization of Economic Cooperation and Development (OECD) researchers Koen De Backer and Norihiko Yamano, in their 2010 paper International Comparative Evidence on Global Value Chains, write that a rapid globalization of economic activity has significantly changed the outlook of the world economy. A growing number of firms, countries and other economic actors have become increasingly connected across borders. International production trade and investment are increasingly organized within so-called global value chains where the different stages of production processes are located across different countries. De Backer and Yamano’s research provides evidence that clearly shows that countries’ exports are increasingly composed of intermediate inputs that are imported from abroad; between 1995 and 2005, the import dependency of exports increased in almost all countries. This trend was particularly 34 BC Shipping News June 2012

strong in Luxembourg, Poland, the Slovak Republic, China and Greece. In sharp contrast, the import content of Canadian exports decreased between 1995 and 2005 from 30 to 24 per cent. De Backer and Yamano’s research further reveals that Canada showed a relatively higher vertical specialization in final goods and services in 1995, indicating a relatively stronger commitment of Canada to final assembly activities. But Canada’s position has weakened since that time. The import content of Canadian exports of intermediate goods/services has stayed relatively stable over the period, suggesting that the position of Canada has changed somewhat in terms of global value chains, from downstream activities of final products to more upstream production of intermediate products.

manufacturing supply chains. For example, improved market access for Canadian energy exports of liquefied natural gas and crude oil to overseas markets has the potential to reinforce the existing trend to more upstream production of intermediate products. In sharp contrast, a Free Trade Agreement with the European Union would provide more value-added opportunities for Canadian manufacturers. So port authorities, shippers, railways, pipeline companies and others have an acute and vested interest in knowing the Conservative government’s priorities and most importantly the steps the government is taking to ensure public support for their ambitious trade agenda.

Current situation Discussions with Mr. Jean-Michel Laurin, Vice President, Global Business Policy for the Canadian Manufactures and Exporters (CME) reveal that business and government trade officials are aware that the international global value chains are changing. Without new trade agreements, Canada’s manufacturing firms miss the opportunity to become fully integrated. Mr. Laurin cited record sales of CME members in markets as diverse as China, South America and the Middle East as examples where specialized Canadian manufacturing firms are globally competitive. While the federal government’s international trade policy agenda may have been relatively obscure during the days of a minority parliament, the key question being asked now by B.C.’s business and transportation community is whether there are solid reasons for increased optimism? Which countries and when will tangible results occur now that there have been bold public pronouncements of an ambitious trade agenda? Answers to the above questions are likely to influence the future direction of the trends driving Canadian

pipeline companies and others have an

...port authorities, shippers, railways,

acute and vested interest in knowing the Conservative government’s priorities... To date, progress on completing new international trade agreements has been very modest. Before 2006, Canada signed only three new trade agreements in 13 years. Since the Conservative government was first elected, Canada has signed new trade agreements or associations with nine countries. The agreement with the largest market potential to generate significant trade volume growth was the Canada-European Free Trade Association. This agreement primarily involves tariff reductions and a full Free Trade Agreement. However, an expanded European Union Comprehensive Economic and Trade Agreement (CETA) has remained elusive. The remaining FTAs have been concluded with one country in the Middle East and four countries in Central/ South America. While these accomplishments may represent the potential for increased trade volume for some eastern Canadian ports, none of these agreements truly provide Canadian firms significant opportunities to become integrated into the global value

INTERNATIONAL trade chains in the world’s fastest growing markets, according to Jean-Michel Laurin. Gary LeRoux, of the Association of Canadian Port Authorities, observes, “the completed agreements are mostly with smaller countries. The federal government has to get serious and sign deals with the EU and other BRIC countries, the big guns, to have any real effect on our trade numbers. The Prime Ministers and other Ministers’ visits to ASEAN countries is late evidence that they realize this.”

...the Canadian Government has also been negotiating Foreign Investment Promotion

and

Protection

Agree-

ments...where legally binding rights and obligations have been established... While the number of completed trade agreements is important, it is also instructive to observe that the Canadian Government has also been negotiating Foreign Investment Promotion and Protection Agreements (FIPA) where legally binding rights and obligations have been established in bilateral negotiations. Professor Steger stated: “on his recent trip to China, Harper signalled his intention to conclude a FIPA with China, although the agreement has not been signed as yet. We are also close to concluding a major investment agreement with India”. Government priority initiatives The Canadian government has indicated that the United States will remain our largest and most important trading partner and priority. They plan to continue working with the U.S. to implement the joint Beyond the Border plan to strengthen and deepen the economic and security links between the two countries. The CME’s Mr. Laurin agrees that enhancing trade and regulatory co-operation within North America should be a priority due to the existing level of manufacturing production integration between the two countries.

In the 2012 federal budget speech, the Conservative government stated that they would conclude negotiations on new trade agreements with the European Union and with India, begin entry talks with the Trans-Pacific Partnership, and continue to build a growing trade relationship with China. The recent decision to pursue free trade negotiations with Japan is a sign of a renewed trade agenda with a major significant Asian market. However, the Korean trade negotiations are on hold. Professor Steger stated that “the E.U. and U.S. both already have major new trade agreements with Korea and the U.S. agreement is awaiting ratification by the Korean legislature”. Business community priorities Mr. Jean-Michel Laurin, Vice President, Global Business Policy for the Canadian Manufactures and Exporters indicated that priority markets for his members would be the European Union, India, the Trans-Pacific Partnership (TPP), South America and China. The “TPP is likely to become a blueprint for Asia” and the fact that the U.S. was a participant was also cited as being vital to Canada’s strategic trade interests. Yet, Professor Steger noted that Canada has “asked the nine parties currently involved in the Trans-Pacific Partnership negotiation to allow us into that negotiation, but formal approval to admit us has not yet been given by the parties to that negotiation.”

...a renewed trade agenda presents the government with an opportunity to improve the effectiveness of the business community’s input... Building public support for a renewed trade agenda The April 2012 release of the Asia Pacific Foundation National Opinion Poll: Canadian Views on Asia serves as an important reminder that a successful international trade agreement requires domestic support. The

research revealed that Canadians generally support entering into free trade agreements with countries around the globe, especially the European Union and Japan. However, the poll yields significantly lower levels of support where other Asian Countries such as China, India and South Korea are concerned. Mr. Laurin emphasizes the fact that a renewed trade agenda presents the government with an opportunity to improve the effectiveness of the business community’s input, and better coordination by the government will help ensure that government policy outcomes are aligned with the priorities of Canadian firms. Members of the transportation community need to become more active participants and voice their opinions on trade liberalization priorities to help build domestic policy support for free trade agreements, if Canada is to seize its full international trade potential. Conclusion From an international shipping perspective, Canada is primarily viewed as a NAFTA trade-dependent nation. To change this perspective tangible results from the current government’s strategy are required. Steger suggests that the CETA “negotiations are the most likely to lead to a conclusion soon — by sometime next year” but other agreements may take more time to finalize. Michael Hart, the Simon Reisman chair in trade policy at Carleton University, noted in his book, Fifty Years of Canadian Tradecraft, that as a “relatively small player Canadians need to be quick, early and creative if we are to influence the content and course of a trade negotiations”. B.C.’s shipping community would be well served if our political leaders heed Mr. Hart’s advice. Darryl Anderson is a Victoria-based maritime and transportation consultant. He maintains an active independent research practice focusing exclusively on maritime transportation and policy issues. Darryl can be reached at wavepoint@shaw.ca. June 2012 BC Shipping News 35

36 BC Shipping News June 2012

trade routes

World canals:

Facilitating global logistical operations By Captain Stephen Brown President, Chamber of Shipping of British Columbia

ost of us are guilty of taking the fluency of world trade for granted and few of us take the time to consider the enormity of the daily global logistical operation which quietly grinds along. Key to this fluency are the world’s greatest man-made waterways — namely the Suez, Panama, Kiel, and, to a lesser extent, Corinth canals as well as the St. Lawrence Seaway. Suez Canal The concept of a canal through the Isthmus of Suez was born in the late 1700s when Napoleon promoted the construction of a French-controlled Suez Canal. Unfortunately, a miscalculation of sea-level height between the Mediterranean and the Red seas resulted in the project being abandoned. A new project to build a canal was launched in the mid-1800s when French diplomat and engineer, Ferdinand de Lesseps, convinced Egyptian Viceroy Said Pasha to support his vision. In 1858, the Universal Suez Ship Canal Company was founded and given the right to begin construction and to operate the canal for 99 years with the

Egyptian government assuming control thereafter. Construction officially began in April 1859 and the 163-kilometre-long canal opened 10 years later on November 17, 1869 at a cost of $100 million. The new canal had an immediate and positive impact on world trade, however in 1875, debt forced Egypt to sell its ownership share to the U.K.

...few of us take the time to consider the enormity of the daily global logistical operation which quietly grinds along. Winding the clock forward to 1936, with omens pointing to a new world conflict, the U.K. was given the right to maintain military forces in the Suez Canal Zone. Following the end of the Second World War, British forces again withdrew in favour of those of the host country but the seeds of yet another new conflict had been sewn. Following the creation of the State of Israel in 1948 by the United Nations, the Egyptian government banned ships trading between Isreali ports and the canal.

In 1956, the Egyptian government seized and nationalized the canal, prompting an Israeli invasion. The U.K. and France sent troops, provoking Egypt to block the canal by sinking 40 ships. The so called Suez Crisis ended in late 1956 when the U.N. brokered a truce resulting in the canal being re-opened in March 1957. This was but a temporary halt of hostilities. The canal was closed again from May 1967 to June 1975 following the Six Day War and again during the Yom Kippur War between Israel and the combined military might of Egypt and Syria. Fourteen merchant ships were trapped and later abandoned in the canal until Egypt was successful in freeing the Canal Zone from Israeli occupation. Today, an efficient canal is operated by the Suez Canal Authority and can safely accommodate ships up to around 200,000 DWT and 62 feet in draft. With no locks to navigate, it takes around 12 (generally hot and humid) hours to transit under the guidance of an Egyptian pilot. Some 50 ships transit the 300-metre-wide canal daily but it doesn’t come cheap. A 10,000 TEU June 2012 BC Shipping News 37

trade routes container ship pays close to $600,000 in transit fees plus (as all seamen will recall) 50 to 100 cartons of Marlborough to “grease” the wheels. Panama Canal Emboldened by their success in building Suez, France turned its attention to the challenge of a canal to connect the Atlantic and Pacific oceans through the Isthmus of Panama. In 1876, an international company, La Société internationale du Canal interocéanique, was created which, two years later, successfully obtained a concession from the government of Colombia, then the sovereign power. Once again, Ferdinand de Lesseps was called upon to lead the project — his appointment played no small part in the successful raising of some $400 million in financing. The problems of construction in the difficult and hugely

variable tropical terrain were immediate but it was the lack of medication to treat an epidemic of malaria and yellow fever amongst work crews that proved disastrous. The project was also plagued by a lack of engineering expertise. Based on his Suez experience, de Lesseps was adamant that a sea-level canal could be completed but he could not have been more wrong. Construction began in January 1882 but was suspended in 1889 through a combination of bankruptcy and a death toll estimated at over 22,000. Only in 1887 did de Lesseps concede that it would be necessary to change tack and construct a lock canal but it was too late to save a project only 40 per cent complete. Still, France hated to contemplate failure and an attempt was made to revive construction. However, financing was

undermined by competing U.S. plans to construct a canal through Nicaragua. When President Theodore Roosevelt took office in 1901, he instructed staff to prepare plans for taking control of the project and, following negotiations with Colombia in 1903, a treaty was signed by both countries. Colombia’s senate failed to ratify the treaty and Roosevelt encouraged Panama to rebel, ultimately resulting in independence being declared in November 1903. Thanks in no small part to the gunboat diplomacy support from the U.S., Panama formally ceded control of the Panama Canal Zone to the U.S. in February 1904, for US$10 million. Even so, progress was slow given the continuing magnitude of challenges. A frustrated President Roosevelt eventually made a personal visit to Panama in 1906 to review progress — the first

Photos: clockwise from top left: St. Lawrence Seaway; Kiel Canal; Corinth Canal; Suez Canal; Panama Canal. 38 BC Shipping News June 2012

trade routes

Above: current Panamax-size vessel passing through Miraflores Locks. Below: new Panamax Maersk Edinburgh with a 13,092 TEU capacity.

trip outside the United States by a sitting President. He ordered that the U.S. Corp of Army Engineers assume full control of construction and that an aggressive program of mosquito eradication be implemented. These two measures were, in no small part, responsible for enabling completion of construction in 1914 and the canal was officially declared to be open on August 15 that year with the passage of the S.S. Ancon in the same month as the outbreak of the First World War in Europe. The words of Theodore Roosevelt are engraved on a plaque on display in the Rotunda of the Canal Administration Building: “It is not the critic who counts, not the man who points out how the strong man stumbled, or where the doer of deeds could have done them better. The credit belongs to the man who is actually in the arena;

whose face is marred by dust and sweat and blood; who strives valiantly, who errs and comes short again and again; who knows the great enthusiasms, the great devotions, and spends himself in a worthy cause; who, at the best, knows in the end the triumph of high achievement; and who, at the worst, if he fails, at least fails while daring greatly, so that his place shall never be with those cold and timid souls who know neither victory nor defeat.” As with the Suez Canal, the issue of sovereignty was contentious until the host country was handed control and so it proved with Panama. In September 1977, a treaty was signed by President Jimmy Carter under which Panama guaranteed the permanent neutrality of the canal as an international waterway. Panama assumed sovereignty of the Canal Zone at Noon on December 31, 1999, and the Panama Canal

Authority (ACP) assumed command of the waterway. Whilst a masterpiece of 20th Century construction, there had long been recognition that the canal would require expanded capacity if it were to meet the international trading needs of the 21st Century. Accordingly, a referendum was held in October 2006 wherein a $5.25 billion, eight-year expansion project was approved by the people of Panama by a wide margin. The project will create a new lane of traffic through the canal by way of: • The construction of new threechamber lock complexes, at both the Atlantic and Pacific ends of the canal. • The dredging of the navigation channels and the elevation of Gatun Lake’s maximum operating level. The new lock chambers will feature sliding gates, doubled for safety, and will be 427m long, 55m wide, and 18.3m deep. The plan is to permit the transit of vessels with length overall (LOA) of up to 366m, a beam of up to 49m, and a draft of up to 15.6m. Kongsberg has been retained by ACP to work with canal pilots in conducting transit simulation trials with the new definition of a Panamax container ship — the 2011-built Maersk Edinburgh with an LOA of 366m, a beam of 48m, 141,000 DWT and 13,092 TEU capacity. Since the prospect of an expanded Panama Canal was first muted, there has been speculation as to what it will mean for world trade. Whether it’s crude oil shipments to China or Chinese-made iPads to New York, an expanded canal opens up a world of logistical options. Needless to say, every railroad in North America has forensically analyzed the implications with a view to taking maximum advantage of new opportunities. U.S. East Coast ports in particular have been licking their lips at the prospect of attracting container vessels that are currently confined to the Pacific. As examples: • The Port of New York/New Jersey, the busiest port on the eastern seaboard and second only to the Port of Los Angeles, has initiated a $2.3 billion June 2012 BC Shipping News 39

trade routes

•

project to offer a draft of up to 15.2m. However, the Bayonne Bridge spanning the shipping channel is too low for the biggest ships, and it is estimated that a further $1.3 billion of investment is needed to raise that span. The Port of Baltimore will complete a $105 million project by July this year to accommodate new Panamax-sized vessels with a draft of 15.2m within a new 200-acre terminal. The Port of Savannah sought $105 million of infrastructure funding for dredging a deeper shipping channel but was awarded only $600,000. As a consequence, the projected draft will be 14.3m. The Port of Miami has permission to dredge to 15.2m but is looking to raise the necessary $75 million to pay for it. Ft. Lauderdale and Jacksonville are also both preparing plans to get a slice of the action.

Many of these projects are facing opposition from environmentalists and the lack of funding for dredging has only added to the debate... Many of these projects are facing opposition from environmentalists and the lack of funding for dredging has only added to the debate as to where the accumulated Harbor Maintenance Tax funding is when it’s needed. However, in April this year it was announced that $1 billion will be released from the fund to assist U.S. East Coast ports with their dredging programs. The government of Panama maintains that the enlarged canal will open

on schedule in the fall of 2014 but following recent construction delays and labour strikes, that date is beginning to look optimistic. A 13,000 TEU container ship transit will cost in the region of $1 million (pricing depends on the number of loaded versus empty containers). Kiel Canal To the surprise of many, the 99-kilometre-long Kiel Canal connecting the North and Baltic seas is the world’s busiest artificial waterway with some 40,000 transits per year. Historically, Germany’s navy was keen to have ease of access to its bases without sailing around the Skaw and in June 1887, Emperor Wilhelm I laid the foundation stone for the modern-day canal. Thereafter, it took 9,000 workers eight years to complete the project and in June 1895, Emperor Wilhelm II opened the newly completed canal which he named Kaiser-Wilhelm Kanal. In 1995, the centenary of the Kiel Canal was celebrated with a convoy of ships led by the German sail training ship, Gorch Fock and the British Royal Yacht Britannia. Corinth Canal The idea of a Corinth Canal was pursued after Greece gained independence from the Ottoman (Turkish) Empire in 1830. However, it was not until 1869 when the Suez Canal was opened that the Greek government authorized construction. After a couple of false starts, a concession was granted to the consortium Société Internationale du Canal Maritime de Corinthe in 1881, which was commissioned to construct and operate the canal for 99 years. With many parallels to the unhappy French experience in Panama,

First transit of Panama: S.S. Ancon and S.S. Kroonland at the Culebra Cut (right). 40 BC Shipping News June 2012

things did not work out well and the project was soon bankrupt. In 1890 the project was transferred to a local company and was finally completed in July 1893 after 11 years of stop and go construction. The canal was damaged in 1941 during the Battle of Greece between defending British troops and invading German forces when the Germans attempted to seize control and again during the German retreat from Greece in 1944. However, the U.S. Army Corps of Engineers cleared the waterway for traffic in 1948. With single lane traffic, a maximum allowable beam of only 16.5m and a draft of 7.3m, Corinth is too constricted for most shipping but is nevertheless popular with coastal and pleasure traffic. A final word When we reflect on the ingenuity and engineering brilliance of 19th Century construction engineers and the often appalling conditions in which they worked, one has to admire their accomplishments. The Suez and Panama canals in particular are of huge strategic importance to international trade but are, thankfully, well-managed by their respective host nations regardless of regional turmoil. In a future article, I’ll focus on the St. Lawrence Seaway. For former seamen like myself who have made many transits through Suez, Panama and Kiel, the memory is represented by long hours standing on the bridge, forecastle or poop deck. For sure I’ll be paying a visit, whenever the expanded Panama opens, to witness this latest marvel of engineering. Hope to see you there. Stephen Brown joined the Chamber of Shipping of British Columbia in September 2008. He currently sits on several committees and boards representing the interests of the B.C. shipping community. He can be reached at stephen@cosbc.ca. For more information on the Chamber, please visit: www.cosbc.ca.

legal affairs

When the Train Falls Off the Track:

Issues Arising From a Multi-Modal Shipment of Goods By David K. Jones

A Vancouver lawyer with Bernard & Partners

he 2009 decision of the Federal Court in Cami Automotive Inc. v. Westwood Shipping Lines Inc. was recently affirmed by the Federal Court of Appeal. The lower Court decision is of interest for its analysis of a number of issues including liability in the case of goods damaged in a train derailment following ocean shipment. This article focuses on two issues considered by the Court: the distinction between a bill of lading and a waybill, and how a “package” is defined. Facts The facts of the case are that the plaintiff, Cami Automotive Inc., an Ontario car manufacturer, purchased automotive parts manufactured in Japan from a second plaintiff, Aisin World Corporation of America (AWA). Cami had an existing commercial relationship with Westwood Shipping Lines (WSL), operator of the WSL Anette, for the carriage of containers from Japan to Ontario. The plaintiffs, Cami and AWA, claimed damages against WSL and the owners of the ship, and against Canadian National Railway Co. (CN Rail) for damage to automotive parts carried in containers on the ship from

Nagoya, Japan to Vancouver, and by rail from Vancouver to Toronto. During the course of the rail transit, a derailment occurred and the cargo was damaged. WSL had issued a shipping document to Cami, which indicated that WSL acknowledged receiving 15 sealed containers on board the ship. The cargo in the containers was automatic transmission assemblies (Assemblies) and automatic transmission control modules (Modules) carried on custom designed racks. WSL sub-contracted the carriage of the containers from Vancouver to Toronto to CN Rail. By consent of the parties, the trial proceeded on issues of limitation of liability only. Bill of Lading or Waybill? There was a dispute between the parties concerning whether the WSL shipping document was a straight bill of lading or a waybill. The characterization of the shipping document as a straight bill of lading was argued by the plaintiffs because the Hague-Visby Rules would then be compulsorily applicable, and would provide for a higher limitation of liability than if the shipping document was

a waybill. If the document was a waybill, the Hague-Visby Rules would not be compulsorily applicable, and the US COGSA limitation of liability of $500 per package would apply. To answer this question of whether the document was a bill of lading or a waybill, the Court engaged in an analysis of the distinction between the two types of documents.

To answer...whether the document was a bill of lading or a waybill, the Court engaged in an analysis of the distinction between the two types of documents. The Court first referred to the bill of lading by quoting Edgar Gold in his book Maritime Law in defining a bill of lading as “a document used in international sales to process the delivery of goods by sea. It is widely employed in liner shipping and on chartered ships in some trades.” The Court stated the well known three purposes for which a bill of lading serves: “it is a receipt for the goods, it represents the contract of carriage and it is a document of title.” June 2012 BC Shipping News 41

legal affairs The Court then noted that in the late 20th Century, with advances in cargo handling and computers, new documents have emerged and are used in place of bills of lading, for example straight bills of lading and waybills, described by the Court as follows: “Straight bills of lading ‘are those which make the goods deliverable to an identified person as consignee and either contain no words importing transferability or contain words negativing transferability’ (Carver on Bills of Lading …) Straight bills of lading remain, however, documents of title and as stated above, must be presented at the port of discharge in order to effect delivery. …a bill of lading may be negotiable or non-negotiable depending on its terms. Both forms of a bill of lading require, however, that the carrier, or its agents, may only deliver the cargo to the holder of the bill... A waybill, on the other hand, is distinguished from both bills of lading and straight bills of lading based on the fact that waybills are not documents of title. As such, they need not be presented to the carrier...A waybill remains, however, a receipt for goods and evidence of a contract of carriage.” Moving to the shipping document in issue, the Court referred to Supreme Court of Canada authority that the terms must be considered in the context of the intention of the parties as evidenced by the contract as a whole. The factors the Court considered in interpreting the document included looking at the plain language of the documents, and considering the intention of the parties. Looking at the plain language of the terms of the contract, the points referenced by the Court were as follows: • WSL’s evidence included a comparison of its own bills of lading and waybills, the bill of lading identified at the top of the first page by the words “straight bill of lading”, and the waybill with the words “waybill”. • The waybill stated that delivery 42 BC Shipping News June 2012

would be made to the named consignee or agent on production of proof of identity at the port of discharge or delivery, and there was a stamp stating “Non-Negotiable Waybill”. • For the waybill, only one document was signed, but for the bill of lading there are three to be signed. Bills of lading, which are documents of title, are issued in triplicate so that a copy is available at the port of discharge compared to the single waybill which is not a document of title, and need not be presented at the port of discharge as delivery is to be made to the named consignee “on production of proof of identity at the port of discharge”.

Cami and WSL had been doing business together for many years and they had dealt on a “waybill” basis in order to simplify the transportation arrangement... In considering the intention of the parties, the Court stated that there was little evidence of the intention of the parties regarding the shipping document, but Cami and WSL had been doing business together for many years and they had dealt on a “waybill” basis in order to simplify the transportation arrangement because the document was not meant to be negotiable and production of the document was not necessary for delivery of the cargo. Based on the Court’s analysis of the difference between bills of lading and waybills, the plain language of the document, and the intention of the parties, the Court concluded that the shipping document was a waybill. The terms of the waybill provided that US COGSA would apply if the Hague Rules or Hague-Visby Rules were not compulsorily applicable to the waybill. The Hague-Visby Rules apply to “contracts for carriage” defined as

those contracts covered by “a bill of lading or similar document of title”. Since the shipping document was not a bill of lading or similar document of title, the Hague-Visby Rules were not compulsorily applicable and US COGSA applied and the limitation of liability was $500 per package. This lead to the question of the meaning of “package”.

The plaintiffs argued that the “package” was the individual Assemblies and Modules. The defendants argued that “package” should be defined as a pallet. Package Since the US COGSA limitation of liability of $500 per package applied, it was obviously in the plaintiffs’ interests to have the package count higher, while the defendants would argue for a lower package count. The plaintiffs argued that the “package” was the individual Assemblies and Modules. The defendants argued that “package” should be defined as a pallet. On the face of the waybill the column for number of packages referred to “15 containers”, but it was not argued that a “package” should be defined as a package. There were other references on the waybill to “15 containers (300 pallets <2,280U/T&2,280P/C>)”, meaning 15 containers with a total of 300 pallets and 2,280 Assemblies and 2,280 Modules. The evidence was that each of the 15 containers held 20 pallets, 19 of which held eight Assemblies and one which held 152 Modules. Consequently, a limitation of liability based on 20 pallets would be $10,000 per container, while a limitation of liability based on each of the 152 individual Assemblies and 152 individual Modules defined as a “package” would be $152,000 per container. The Court addressed the issue of how to define a “package” as dependent on the intention of the parties as evidenced from the terms of the waybill

legal affairs and the surrounding circumstances, including how the cargo was prepared for transport. The key wording of the waybill was as follows: • on the face of the waybill, in the column entitled “DESCRIPTION OF PACKAGES AND GOODS,” were the following words: “15 containers (300 pallets <2,280U/T&2,280P/C>)”, meaning a total of 300 pallets and 2,280 Assembles and 2,280 Modules. • the second page of the waybill included a “container summary sheet” where all 15 containers were listed, including a column titled “Packages”, and for each individual container was written “20 P/T (152 U/T&152P/C)”, meaning 20 pallets with a total of 152 Assemblies and 152 Modules. In the Court’s view, a plain reading of this wording indicated the pallet was the package. As support for this interpretation, the Court referred to an Australian decision stating that under the Hague Rules, “[i]f the bill identifies X packages each containing Y pieces or items of cargo then there will be X packages not Y units enumerated.”

The Court also referred to the evidence that the eight transmission assemblies on the pallet were not individually wrapped, but the whole pallet was wrapped... Further support for this interpretation was provided by an American case where it was found that a pallet was not simply used to secure the goods in place, but to prepare the goods for shipment. In Cami, the Court heard evidence that the parts manufacturer fabricated special racks or pallets in accordance with Cami’s specifications and it was the plaintiffs’ decision to use the pallets. The Court also referred to the evidence that the eight transmission assemblies on the pallet were not

individually wrapped, but the whole pallet was wrapped, and the purpose of the wrapping was to protect the goods from water damage or debris, which the Court stated is a common reason for packaging goods. The Court concluded its analysis of the issue of defining a “package” with the following comments regarding the specific packaging of the transmission parts in this case: “As the jurisprudence teaches, a plain language meaning of “package” must connote some form of preparation for shipment or protection during handling. The Assemblies and Modules, in this case were never intended to be shipped individually or outside of a pallet. Indeed the evidence of Ms. Osborne suggests that packaging involved the placement of the transmissions on the pallets. While the Plaintiff ’s U.S. law expert, Mr. Russell Williams, Esq., cites cases for the proposition that pieces of cargo within a pallet were packages, these cases involve pieces which are themselves individually wrapped and referred to as cartons, pails, or the like. The circumstances here are different, the transmissions and modules are not individually wrapped, they are simply placed and secured on the pallet and then the pallet is covered in plastic as a single unit. The Assemblies and Modules at issue here are not individually prepared for transportation. The evidence clearly points to the placement of the units on the pallets as the method adopted to prepare the goods for transportation. This supports the contention that a pallet constitutes the “package” for the purposes of the waybill. I find therefore, based on the intention of the parties as evidenced by the language of the waybill, the method by which the Goods were prepared for transportation, the purpose of the pallets and the lack of individual wrapping for the Assemblies and Modules, that a “package” for the purposes of the waybill is defined as a pallet.” The Court’s conclusion that a pallet was the package for purposes of limitation of liability meant that the lower limit of liability — $10,000 per

container — applied, based on 20 pallets per container at $500 per package. The Cami Automotive decision is useful for the Court’s review of the difference between bills of ladings and waybills, and for its analysis of the factors to be considered in deciding what is a “package” for the purposes of limitation of liability. For interpreting limitation of liability based on a package limitation, the principles of this case provide useful guidance to apply to the specific facts of other cases to determine what is a “package”. David K. Jones is a partner with Bernard & Partners. His practice includes maritime cases relating to the carriage of goods, marine insurance, collisions, salvage, ship source pollution, regulatory issues and commercial matters. David can be reached at jones@bernardpartners.com

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LNG BUNKERING

Lloyd’s Register

LNG bunkering infrastructure study By Jesper Aagesen, Senior Surveyor, Ship Design Specialist, Lloyd’s Register, Denmark

he year 2015 is an important year for the shipping industry. At that time, stricter requirements on fuel oil sulphur content will enter into force in emission control areas (ECAs). From 2015 onward, the maximum allowable sulphur content in fuel oils is 0.1 per cent in the ECAs. The confirmed ECAs are Baltic Sea, North Sea and the North American Coast together with the U.S. Caribbean. From 2020 onward, a global requirement of maximum 0.5 per cent sulphur (outside ECAs) will apply. It is a matter of fact that the vast majority of the world merchant fleet will enter ECAs during their lifetime

Figure 1 — The stages of the study. 44 BC Shipping News June 2012

and, since more ECAs are expected to be introduced in the future, the subject is becoming ever more relevant. In this respect, action is required.

It is a matter of fact that the vast majority of the world merchant fleet will enter ECAs during their lifetime... There are basically three main options for future compliance with the above: • Operation on low sulphur fuel oil/ marine gas oil (MGO). • Operation on heavy fuel oil (HFO) with an exhaust gas scrubber.

• Operation on liquefied natural gas (LNG) or alternative fuels. In addition to the above-mentioned options there are indeed more alternative fuels (e.g. methanol, DME, nuclear, etc.), but currently, the general perception is that the above-mentioned are the main options. Lloyd’s Register considers all three options as being feasible with some more appropriate for some ship types than others. Choice of compliance option is very much dependent on ship type and trade pattern — i.e. range, availability of LNG, percentage of expected time in ECAs, investment costs, etc. LNG as fuel is a solution but not the only solution. Another important aspect when talking about LNG as fuel is the whole infrastructure and supply chain. This is considered a significant barrier to the widespread adoption of LNG as fuel. As many are aware, there exists a kind of chicken and egg situation: The gas providers/bunker suppliers are not very keen to invest in the infrastructure necessary to supply the merchant fleet with LNG if the need from the ship owners is not there and will therefore wait until sufficient mass of demand is present. On the other hand, ship owners do not

LNG BUNKERING wish to invest in LNG-fuelled ships if the LNG is too difficult to obtain. Objectives and methodology of the LNG bunkering infrastructure study Lloyd’s Register has commissioned a study with the aim of understanding how LNG bunkering infrastructure may develop. The study will allow Lloyd’s Register to support clients with planning for the adoption of LNG as fuel for deepsea shipping.

Lloyd’s Register has commissioned a study with the aim of understanding how LNG bunkering infrastructure may develop. The reduction of emissions from shipping needs to be approached from different geographical levels — locally, with respect to air pollution from ships at ports; regionally, through emission control areas; and globally, through global limits and co-ordinated action between shipbuilders, designers, ship owners, LNG suppliers, bunker suppliers and ports. This study looks at the subject from a global perspective and assesses the opportunities for LNG bunkering. In the study, a top-down approach has been taken to provide a perspective on future LNG fuel demand in deepsea trades — looking at trading patterns, bunkering demand and LNG supply availability issues in order to derive the demand. A model to forecast the demand for LNG, based on different scenarios, will provide an outlook for new build demand in the future. The stages of the study are shown in Figure 1. The overall objective is to review the case for LNG as a fuel for deepsea shipping by: • Defining the main global trade routes by deepsea ship type and size range for container ships, dry bulk, tankers and passenger (cruise) ships. • Analysis of the main global trade patterns and current bunkering hubs.

• Analysis of the distance and average bunker consumption per main trade route and equivalent LNG consumption. • Analysis of the current global bunkering locations, looking particularly at main bunkering hubs relative to trade routes. • Identification and mapping of all the LNG export and import terminals currently in operation and due to be opened in the future, relative to main global bunkering hubs. • Stakeholders’ surveys (ship owners and ports) to understand how key industry stakeholders respond to the sulphur controls in the short, medium and long-term. • Future demand for LNG-fuelled deepsea ships and volumes of LNG consumed on deepsea trade routes based on a proprietary interactive model. The conclusions of the study will provide an assessment of the potential market size for LNG-fuelled deepsea ships based on a range of assumptions on new build demand and market

penetration of LNG-fuelled ships under different scenarios. This assessment will be based on an interactive spreadsheet-based calculation model. A part of the analysis work and collection of data has been carried out by Maritime Strategies International Ltd. (MSI) on behalf of Lloyd’s Register. The study is due to be complete by late spring 2012. Delimitations of the study The study does not look at the technology behind LNG-fuelled ships or the onshore supply technology for LNG bunkering, although developments in technology as a driver of LNG as fuel adoption for ships are considered. Analysis of the pricing and pricing mechanisms of fuel is beyond the scope of this study although reference to pricing is made. Shipping trade routes The global deepsea trades for container ships, oil tankers, bulk carriers and cruise ships were assessed based on a simple tonne-mile calculator extracted

Table 1 — The main trade routes/areas for the ship types considered.

Figure 2 — Global ship movements per year. June 2012 BC Shipping News 45

LNG BUNKERING

Figure 3 — Location of main bunkering hubs and LNG terminals. from MSI’s models. For cruise ships, the movements of every cruise ship in the fleet was analyzed to identify the top routes/operating areas, (see Table 1). In order to make the development of the model practical, the main routes per ship type and size were selected

with reference to the ECA transit/proximity and likelihood of LNG bunker availability. Clearly these are not the only amenable routes. For example, in the container sector there is likely to be significant new building for deployment on the

Table 2 — Top 10 global bunker locations by HFO throughput.

Figure 5 — Primary bunkering locations from ship owner survey. 46 BC Shipping News June 2012

Figure 4 — Distribution of global bunker locations. north-south trades (and feeder trades as well) which will provide opportunities for deployment of LNG technology. Figure 2 illustrates the volume of global ship movements in a one-year period showing the network of links between ports and regions. Current demand for bunkers Figure 3 shows the location of the main bunkering hubs and location of the LNG importing and exporting terminals. Clearly there is a direct correlation between the location of primary bunkering hubs and the main shipping trade lanes. Also LNG import and export terminals are located either at these bunkering locations or close to them therefore allowing for the supply of LNG to the primary bunkering hubs. In 2010, global bunker demand was about 232 Mt [MSI, 2011]. This is well in line with the International Energy Agency’s estimate of 235 Mt in 2010. The total global bunker demand represents around five per cent of total oil product demand in 2010 with HFO accounting for 76 per cent of bunkering and 24 per cent for MGO [IEA, 2011]. Demand for MGO is highly concentrated around ECAs and is negligible elsewhere. The distribution of bunker oil throughput by region is shown in Figure 4. Singapore, NW-Europe and the Persian Gulf account for about half of bunkering throughput globally. Looking more closely into the locations of bunkering, Table 2 shows the top 10 global bunkering locations and

LNG BUNKERING throughput. Singapore is the largest of the global bunkering ports and is located on the main trade lanes between Europe, Middle East and the Far East. These top 10 ports account for almost 40 per cent of the global bunkering volume throughput. Some market observers believe that there will not be enough low-sulphur fuel/MGO supplies to meet expected demand. This will likely lead to a rise in product prices. For this study we have assumed that bunker demand will rise from about 232 Mt in 2010 to about 430 Mt based on MSI’s forecast for the development of the global fleet up until 2025. A survey of ship owners was carried out to get a view of their deepsea bunkering locations along the main trade routes. Figure 5 shows their primary bunkering locations — as is clear from the graph, about one-third of those bunkering locations identified (nine of

28) are in confirmed ECAs, therefore making the need for the ship owners to permanently reduce their emissions in the medium to long-term imperative. When comparing the current bunkering hubs to the location of the LNG terminals, it can be concluded that these are well-positioned.

most importantly, price. Currently, marine gas oil is about 300 USD/t more expensive than heavy fuel oil and it is likely that this gap may increase further. The second option is abatement technologies which are primarily exhaust gas scrubbers. The increasingly more stringent regulations will force many owners to change their fuel type.

As IMO regulations become more strin-

LNG supply Natural gas reserves are vast and widely dispersed globally compared to oil. MSI expects LNG cargo trade to rise to just under 500 Mt in 2025 compared to 219 Mt in 2010 corresponding to an increase from nine per cent of natural gas demand to 13 per cent in 2025. (Natural gas demand in 2010 was 2,858 million tonnes oil equivalents (TOE) and LNG cargo demand was 263 million TOE. Total LNG cargo demand is effectively LNG demand as there is no LNG storage and therefore all that is traded is consumed.)

gent, ship owners are likely to gradually change fuel types and use mitigating factors in order to comply. Future demand for HFO and LNG As IMO regulations become more stringent, ship owners are likely to gradually change fuel types and use mitigating factors in order to comply. As mentioned above, MGO is the first option for owners but future issues include supply availability, sourcing and,

Figure 6 — Results from the shipowner survey.

Figure 7 — Results from the port survey. June 2012 BC Shipping News 47

LNG BUNKERING If, as an example, by 2025, 25 per cent of current bunker volumes (58 Mt fuel oil) were to be converted to LNG (46 Mt), under the assumption that it is a viable option for deepsea ships, this would increase global LNG cargo demand by about 10 per cent up to about 540 Mt. Although there will be a sufficient exportable surplus of natural gas to cater for demand for LNG as a fuel for ships, demand could rise quickly.

determinant of supply availability — itself already the key factor of existing bunkering locations. Bunkering hubs throughput is primarily driven by low, competitive pricing, with location being a secondary driver of demand.

The ship owner survey A ship owner survey was carried out among leading shipping companies to assess their likely adoption of LNG as a fuel and what timelines they are considering. Fourteen out of 26 companies responded to the survey. The information gathered showed the trading routes of each owner’s fleet by ship type and size and the options under consideration to mitigate ECA regulations in the short, medium and long-term. The survey also identified what other options ship owners were considering in terms of mitigating emissions. Based on the ship owner survey, Figure 6 shows clearly that LNG and dual-fuel engines are a long-term objective, particularly for container ship and cruise ship owners, but there are also a large proportion of ship owners who “don’t know” what they will do to deal with the emission regulations, especially tanker owners. Fundamentally, ship owners see the use of MGO as a short-term solution. Exhaust gas scrubbers are seen as a likely option to mitigate emissions. LNG offers a long-term option to deal with the ECA regulations and is seen as a solution particularly suited for ships on liner trades. If there were clear goals, guidelines and intentions for supply then it is probable that the proportion of ship owners that “don’t know” may turn to developing LNG-fuelled ships. Having said that, the future demand for LNG as a fuel may not be dependent on technology or availability of supply but quite simply on price which is likely to be a

still some doubt among tanker owners...

48 BC Shipping News June 2012

...LNG-fuelled ships are a viable option in the long-term, particularly for container and cruise ships, however, there is

The port survey The port survey examining the LNG bunkering infrastructure developments was completed at the end of 2011. The intention was to provide an assessment of the outlook of ports regarding LNG as a viable fuel option for deepsea shipping and what plans they may have to provide LNG bunkering in the future. In total, 25 ports were approached of which 14 responded. Almost two-thirds (62 per cent) of the ports see themselves as drivers of change in the use of LNG as a fuel and 54 per cent of the ports have carried out research into LNG bunkering. Further main results from the port survey are summarized in Figure 7. Many of the respondent ports are ‘landlord ports’. As a result, port services such as bunkering operations within the terminals are carried out by third parties. A majority of the ports however agree that they will have to provide the necessary regulatory environment for LNG bunkering. Subsequently, ports are considered to be key drivers in the development of LNG bunkering operations. Furthermore, most ports conceded that any development of LNG bunkering would have to be done alongside private investors and third-party operators (bunker suppliers, etc.). The key driver of a change to LNG from a port perspective is demand and therefore will have to be driven by the ship owners. European ports have carried out most work and research into LNG

as fuel and provision of LNG bunkering facilities. Consequently, they have a clearer view that LNG bunkering is likely to happen starting with short-sea shipping and may eventually cascade into deepsea trade facilitated by regulations. However, the key driver — demand — is highly dependent on pricing of LNG and its comparable price difference with competing fuels like HFO and MGO. It is quite obvious from the responses that although ports know about the possibility of LNG as a fuel in the future, there is a consensus that it is still too early for the ports to offer firm answers on their plans as it simply does not feature in any long-term strategy. It will be dealt with as soon as LNG becomes a clearer option as a marine fuel. The model Based on the above information collected from owners and ports, all the strands of this study are brought together: • Demand — the main trade routes, bunker consumption volumes and equivalent LNG. • Supply — availability (exportable surplus). • Bunker locations — identified locations for LNG bunkering, most suitable ships for deepsea LNG bunkering. • Factors that will drive LNG bunkering in deepsea shipping identified through the two stakeholder surveys. This has led to the development of a model that allows sensitivities to different input assumptions (factors driving LNG bunkering demand and supply) to be tested. LNG bunkering demand on any given trade route is assumed to be a function of: 1. Regulatory pressure to burn cleaner fuels within designated waters; 2. Availability of LNG bunkers at key ports; and 3. Deployment of new builds on selected trade routes. The key components of the model are dynamic and interactive with the user able to change conditions based

LNG BUNKERING on a changing regulatory environment, technological developments or pricing of fuel and equipment. Overall, this gives a view on demand for LNGfuelled new builds up to 2025. The model is currently subject to a validation being carried out both internally in Lloyd’s Register and with external players in the industry. Conclusions As the global emissions regulations become more stringent, demand for low sulphur fuel oil/ MGO will increase but, with limited capacity to cater for the increase in demand, supply is likely to be constrained. This will force owners to look at alternative sources of fuel or abatement technologies. The result from the deepsea ship owners’ survey shows that LNG-fuelled ships are a viable option in the longterm, particularly for container and cruise ships, however, there is still some doubt among tanker owners with many saying they “don’t know” what mitigating technologies they will use in the future. Solutions will be ship type and trade route specific — that is, LNG is a solution but not the only solution. Existing global bunkering ports are well positioned to supply LNG for ships with nearly all located close to a LNG import or export terminal and along the main trade routes. Some ports already have plans to develop LNG bunkering infrastructure. The ports are aware of LNG as a fuel possibility and they see demand, price and location near an ECA as the driving factors. Lloyd’s Register is pleased to be in the forefront of the development of LNG as a fuel and we are already working with industry partners to make this happen. Lloyd’s Register is very much looking forward to the finalization and validation of the model in the spring of 2012 and the results will create a basis for the new building market outlook as well.

“LNG Bunkering in DeepSea Shipping, December 2011”. Jesper Aagesen has more than 15 years of experience within the field of ship design and other marine engineering subjects. He graduated as a Naval Architect, M.Sc., from The Technical University of Denmark in 1997 and holds a Diploma in Economics (Pt. 1) from Copenhagen Business School and a Diploma in Ship Management from

The National Sea Training Centre, North West Kent College. In 2010, Aagesen joined Lloyd’s Register EMEA in Copenhagen as a Surveyor in the Design Support Office and from 2011 as Senior Surveyor and Ship Design Specialist in the Nordic Marine Business Department. This role includes the project management of LNG as fuel within Lloyd’s Register.

References • International Energy Agency: “MediumTerm Oil and Gas Markets 2011”. • Maritime Strategies International: June 2012 BC Shipping News 49

MARITIME SECURITY

Combating piracy and oil theft in Nigeria By Georgina Nicoll

Royal Roads University, the Asia Pacific Center for Security Studies, and Maritime Forces Pacific will be holding the biennial Maritime Security Challenges conference in Victoria, B.C. from October 1-3, 2012. One of the conference panel discussions will focus on security issues in the Gulf of Guinea. This article explores key maritime concerns in this region and discusses some of the political and economic factors that make improving security in the Gulf of Guinea such a challenge. uch has been written about Somali piracy and its threat to the international shipping industry. However, there is also a growing piracy problem on the other side of the African continent, in the Gulf of Guinea. According to the International Maritime Organization, 2011 marked a peak year for pirate activity in the region, with 64 reported attacks, a 28 per cent increase over 2010. The waters off Nigeria are particularly risky: Africa’s most populous country and top oil producer is home to a strong network of criminal organizations that have Locator map...the Gulf of Guinea on the West Coast of Africa has been in the news of late increasingly targeted ships carrying with reports of increased pirate attacks. valuable cargo. In coming years, shipping traffic off the coast of Nigeria is put a permanent end to piracy and oil allegations that government officials projected to increase as world demand theft. have turned a blind eye to the issue, for its oil grows. The risk of hijacking, or have actively colluded with crimTheft at sea however, could discourage internationThe International Maritime Bureau inal groups to receive a share of piracy al shipping vessels from approaching has recorded 10 attempted hijackings profits. Nigeria’s ports. In the past decade, Nigeria has inoff Nigeria in the first quarter of 2012, creased its naval and coast guard cathough the real number is likely much The [IMB] has recorded 10 attempted higher. The majority of the attacks oc- pabilities. Nigeria opened a regional Maritime Rescue Co-ordination Centre hijackings off Nigeria in the first quar- curred near the Niger Delta and targeted (MRCC) in Lagos in 2008, and signed ships carrying oil. Unlike Somali pirate attacks, which have focused primarily a multilateral agreement with neighter of 2012... on hostage-taking for ransom, Nigerian bouring countries on streamlining Improving security in Nigerian wat- attacks have focused on stealing cargo. search and rescue operations. This ers will not be easy. It will require co-or- The pirates are usually equipped with February, the Nigerian Navy hosted dinated action among naval and coast automatic weapons, communication naval forces from 11 other nations in guard fleets to fend off pirate attacks. devices, and improvised oil tankers a four-day exercise focused on crime It will also require taking action against to transport their plunder. They have prevention at sea. The Navy has also land-based criminal groups, and the been known to attack ships over 70 budgeted funds to purchase more than two dozen new patrol vessels this year. government corruption that allows nautical miles from shore. them to thrive. In addition, a long-term Although piracy has occurred in Despite recent improvements however, strategy against piracy and organized Nigerian waters since the late 1970s, the country’s maritime forces are still crime must include measures to ad- the problem has received relatively under-equipped for the considerable dress the extreme poverty and inequal- little government attention and has task of patrolling Nigeria’s 853-kiloity that have driven Nigerians to pursue flourished unchecked. There have metre coastline. illicit activities. Piracy is a symptom of been many reports of crews broadcast- Fighting piracy on land deeper economic, political and environ- ing distress calls, but receiving no reWhile it is important to increase the mental problems, all of which need to sponse from the Nigerian authorities. capacity of the coast guard and navy be examined and rectified in order to Furthermore, there have been many to prevent pirate attacks, piracy at sea

50 BC Shipping News June 2012

maritime security

Cracking down on oil theft and organized crime with military force has proven complicated. The various groups in the Niger Delta have different motives for stealing oil. Insurgent groups such as the Movement for the Emancipation of the Niger Delta (MEND) have turned to oil theft — as well as kidnapping — for political reasons, mainly to raise funds for their armed struggle for control of local resources. They are opposed to the state’s alliance with oil companies, and claim that oil theft is a just form of vigilante wealth redistribution. Other criminal groups have the more immediate motive of personal enrichment. Cracking down on oil theft and organized crime with military force has proven complicated. During the 1990s and the early 2000s, the region became increasingly militarized; as state

Photo courtesy of: U.S. Navy Mass Communication Specialist 1st Class Darryl Wood

stems from the deeply engrained landbased problem of organized crime. Nigeria’s coastline is notorious for its criminal networks, armed insurgents, and thriving black market, especially in the oil-rich Niger Delta region. Criminal groups have established hidden camps among the mangrove forests of the Delta, taking advantage of the labyrinth of swamps and creeks. From these camps, they launch waterborne attacks against ships then retreat to the complex waterways of the Delta. Many of the camps belonging to criminal groups house illegal refineries used to process oil that has been stolen from ships or from pipelines. An estimated 100,000 barrels of oil per day are illegally diverted from the pipelines that criss-cross the Delta in a process referred to as “illegal bunkering.” Approximately 10 per cent of Nigeria’s refined oil supply comes from illegal bunkering and refining operations. There is a well-established black market, which is reported to involve officials at all levels of government, selling oil to customers across Nigeria and in neighbouring countries.

Cmdr. Darryl Brown, commanding officer of the guided-missile frigate USS Robert G. Bradley (FFG 49), speaks with Nigerian army Brig. Gen. Muhammad Inuwa Idris during a tour of the ship as part of Africa Partnership Station (APS) West. APS is an international security co-operation initiative designed to improve maritime safety and security in Africa. security forces increased their presence to protect oil fields and pipelines, criminal operations and militias acquired huge stocks of modern weaponry. The military launched counter-insurgency campaigns, and the ensuing clashes with armed criminal and rebel groups resulted in many casualties and a significant displacement of civilians. Violence eased following an amnesty in 2009, but there are still regular reports of clashes and bomb attacks launched by militia groups. The conflict has hindered oil production, with output dropping 20 per cent between 2006 and 2011. Currently, the military is again trying to ramp up its operations in the Niger Delta. In early 2012, the Air Force opened a new Mobility Command Headquarters in the Delta, and the Navy is also looking to establish a permanent presence to facilitate raids on criminal hideouts. A joint military task force, code-named Operation Pulo Shield, was launched in January 2012 to combat oil theft, and has raided close to 100 bunkering and refining operations. The authorities are making a serious attempt to strengthen the rule of law, although some fear that the

increasing military presence in the region will anger local communities and renew the cycle of arms accumulation and violence. Addressing root causes The government’s strategy against piracy and organized crime has received criticism from some community leaders and analysts for failing to address the key economic and political issues that engender conflict and criminality in the first place. Indeed, a long-term strategy against piracy and oil theft in Nigeria must somehow address the severe poverty of the Niger Delta region, as well as the endemic corruption and mismanagement in the Nigerian oil sector that see revenues go only to the top echelons of society. The foreign oil companies that began drilling in the Niger Delta in the 1960s have made billions of dollars in profits. The Nigerian government has also benefited immensely, with oil profits representing 80 per cent of federal revenues. The country’s political and business elite have received a hefty share, as have the ruling elite in the Niger Delta. Oil revenues that could have been invested in social programs, infrastructure and economic opportunities in the June 2012 BC Shipping News 51

maritime security Delta have largely been diverted to projects in other regions, inflated government and industry salaries, or simply pocketed by corrupt officials. The people of the Niger Delta perceive this as a grave injustice. The local people who are most affected by the industry have watched in frustration as rich foreign oil workers come to stay in luxurious enclosed camps, while most of the nearby villages lack basic services. Over 70 per cent of the Deltaâ&#x20AC;&#x2122;s 30 million people have no access to electricity, clean water, or medical care. Despite government and industry claims that oil would bring development to the country, the average Nigerian in the Delta region is probably worse off now than before oil was discovered. Some reports suggest that in the Niger Delta, piracy and illegal oil operations are among the only economically rewarding occupations available in a region where the adult unemployment rate is around 70 per cent. Traditionally, Niger Delta communities survived on

52 BC Shipping News June 2012

fishing and agriculture, but 50 years of irresponsible oil industry practices have poisoned the water and soil, turning the Niger Delta into one of the most contaminated zones on earth. Crop yields have declined, and fish stocks have collapsed almost completely. Foreign oil companies are not entirely to blame, as illegal bunkering and refining operations have also been very damaging.

...improving long-term security for tankers and oil rigs cannot be accomplished with military force alone. The UN Environment Programme estimates that it would take up to 30 years of intensive clean-up efforts to restore the region. In 2011, the Nigerian government was discussing a billiondollar clean-up plan, but progress has stalled, and there are rumours that the project may be cancelled altogether. Yet restoring the environment and nurturing economic alternatives are

key steps to improving security for the local population, the oil industry, and the shipping industry. Conclusion Nigeria is facing a grave problem with crime on land and at sea, and the country has begun to address the issue by strengthening its maritime security forces and cracking down on organized crime in the Niger Delta region. The government is financially dependent on oil revenues and is aware that it needs to improve security in order to maintain oil production and export levels. However, improving long-term security for tankers and oil rigs cannot be accomplished with military force alone. There is a need for a two-pronged strategy, which both deters criminal activity by increasing military patrols and addresses the underlying problems of poverty and corrupt governance that make criminality so appealing. For more information on the Maritime Security Challenges Conference, please visit www.mscconference.com.

MARITIME SECURITY CHALLENGES 2012 OCTOBER 1-3, 2012

VICTORIA, B.C. CANADA

Presenting topical maritime security issues in a stimulating global environment. Security issues in the Gulf of Guinea

Photo by: Corporal (Cpl) Brandon Oâ&#x20AC;&#x2122;Connell, MARPAC Imaging Services, Esquimalt ÂŠ 2011 DND-MDN Canada

The illegal movement of people & illicit cargoes at sea

Decision making during a crisis situation Maritime applications of unmanned and autonomous vehicles

Developments in aircraft carriers

Shipbuilding and future naval requirements

Find out more about conference speakers and the MSC 2012 programme. Register now for special Early Bird Rate.

www.mscconference.com Presented by Royal Roads University

Connect with maritime and industry leaders!

In co-operation with Maritime Forces Pacific of the Royal Canadian Navy

Contact the MSC 2012 Secretariat for sponsorship opportunities. 250.472.7644 / msc@dearmondmanagement.com