Laurence Levy, Chairman & CEO, Rand Logistics
A Conversation With Matthew Simmons
THE MARITIME EXECUTIVE
July/August 2010
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Volume 14, Edition 4
J u ly / A u g u s t 2 0 1 0
3
Case Study:
Germanischer Lloyd In a Class of Its Own By tony munoz
Executive Interview:
Dr. Hermann J. Klein, Member of the Executive Board, Germanischer Lloyd
THE MARITIME EXECUTIVE
Contents 28 34 by tony munoz
Executive Achievement
Upgrades and Downgrades
Chairman and CEO, Rand Logistics, Inc.
20 | The SEA Escape and Other Adventures in Maritime Investing
24 | A Conversation With Matt Simmons
by Jack O’Connell
by nichole williamson
8 | Laurence Levy by MarEx Staff
Washington Insider
12 | Washington Grapples With Deepwater Horizon Proposals by Larry Kiern
Maritime Education & Training 40 | Maritime Education Rises to the Challenge by Robert C. spicer, cpt
MarEx OP-ED
16 | The BP Oil Spill and Its Impact
44 | New Developments in Maritime Software
by Michael J. Economides
By richard carranza
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Special Feature
48 | Is There a Corpsman Onboard? by barbara saunders
52 | Combating Piracy on the High Seas by edward stewart
54 | Maritime Education & Training Directory
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Half Page Vert
1/18/10
3:29 PM
Page 1
publisher / Editor-in-Chief
Tony Munoz :: tonymunoz@maritime-executive.com Senior Editor
Jack O’Connell :: harvardjo@maritime-executive.com Assistant editor
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Evan Naylor :: enaylor@maritime-executive.com Assistant Art Director
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Brett Keil :: bkeil@maritime-executive.com Director of Sales - Asia
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Carlos Dominicis :: cdominicis@maritime-executive.com Internet Services Manager
Steven Gonzalez :: sgonzalez@maritime-executive.com
The Maritime Executive, LLC (ISSN 1096-2751) 3200 S. Andrews Avenue, Ste. 100 Fort Lauderdale, FL, USA 33316 Telephone: +1 954 848 9955 Toll-Free: 866 884 9034 Fax: +1 954 848 9948 www.maritime-executive.com TME: China Office No9 EPD, Yangzhou Export Processing Zone Yang Zi Jiang South Road Yangzhou, CHINA, 225131 Telephone: +86 514 8752 7700 or +86 159 9512 9423 For subscriptions please visit www.maritime-executive.com The Maritime Executive (ISSN 1096-2751) is published bi-monthly by The Maritime Executive, LLC, 3200 S. Andrews Avenue, Suite 100, Fort Lauderdale, FL 33316, Tel. +1 954 848 9955. SUBSCRIPTIONS: Domestic subscription rates are $36, per year. International subscription rates are $86, per year. Application to mail at periodicals postage rates is pending at Fort Lauderdale, FL and additional mailing offices. For single copies of the magazine or reprints of articles appearing in this magazine, contact The Maritime Executive at (866) 884-9034. COPYRIGHT: © Copyright 1996-2010 by The Maritime Executive. All rights reserved. The Maritime Executive is fully protected by copyright law, and nothing that appears in it may be reproduced, wholly or in part, without written permission. We cannot be responsible for the claims of manufacturers in any of the items. Editorial manuscripts and photos will be handled with care but no liability is assumed for them. POSTMASTER: Please send address changes to The Maritime Executive, 3200 S. Andrews Avenue, Suite 100, Fort Lauderdale, FL 33316. Change of address notices should be sent promptly with old as well as new address and with ZIP code or postal zone. Allow 30 days for change of address.
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editorial
J u ly / A u g u s t 2 0 1 0
Beyond Petroleum – A Global Impetus for Clean Energy
THE MARITIME EXECUTIVE
6
The global economy and especially the U.S. are driven by a material that was created in geological processes over millions of years and is now being rapidly depleted in fewer than two hundred years of consumption. However, there is the dawning of a new worldwide industry – clean energy – which has experienced a 230 percent increase in investment since 2005. In 2009, $162 billion was invested in clean energy around the world and during the worst financial downturn in more than half a century, and the clean energy sector declined only 6.6 percent. Solar thermal, photovoltaics, wind power, ocean energy, biomass and geothermal are not predicated on deposits built over the Earth’s millenniums of existence, nor will they leave behind a legacy of debt for future generations to pay off. In fact, it’s quite the opposite: Renewable energy could become one of the fastest growing sectors in the U.S. economy, much like it is in the European Union and China. While China is emerging as the clean energy powerhouse, the U.S. stands at the crossroads beTony Munoz tween continued fossil fuels reliance and clean energy leadership. The Chinese invested $34.6 billion Editor-in-Chief in clean energy in 2009 and took the top spot in G20 investments as the U.S. lagged behind with $18.6 billion. The U.S. would have fallen even further behind if it had not been for long-term extensions of federal production and investment tax credits and initial funding from the American Recovery and Reinvestment Act. Compared to other G20 nations, the U.S. has a weak clean energy policy and ranks 11th. Furthermore, nations like Germany, Brazil, Spain and China have taken leaderships roles in adopting national renewable energy and efficiency standards, incentive feed tariffs, carbon reduction targets and/or financial incentives for investment and production of clean energy. The U.S. has no carbon policies and maintains a patchwork of state-driven energy initiatives, but it possesses entrepreneurial abilities and huge intellectual resources that can quickly gain ground in the race for clean energy leadership. The Cape Wind Project is a great start, but the planned capacity had to be reduced because of its visual effect on the historic landscape, and now its nearest distance to the coast is about 5.2 miles. It will have a capacity of 468 megawatts with 130 turbines of 3.6 megawatts each. In the EU, every nation had to provide a plan of action under the 2009 Directive for Promotion of the Use of Energy from Renewable Sources to ensure that at least one fifth of energy consumed by 2020 is from renewables. Each country must formally announce how it intends to make its 20 percent contribution by the end of 2010. What is critical is that the EU intends to expand and integrate power grids with wind and solar energy resources. Knock, knock… is anybody awake on Capitol Hill? But in a volatile world of conflicts and wars over oil and governments nationalizing natural resources, let’s hope that the winds of political change can finally empower the U.S. to swing the pendulum in favor of clean energy. In this edition, MarEx is privileged to have worked with Germanischer Lloyd AG and two of its top executives, Dr. Hermann Klein, Member of the Executive Board, and Captain Kevin Coyne, Executive Vice President of the Americas, to write about one of the most highly recognized maritime companies in the world. Since 1867, GL has been a leader in vessel classification, exemplifying along the way its core values of technical expertise, safety and quality. I would personally like to thank Dr. Olaf Mager, GL’s Director of Corporate Communications, for his invaluable assistance and for making the process so enjoyable. Famed energy expert and author Matthew Simmons shares his insider’s point of view on the Deepwater Horizon catastrophe and renewable energy in this edition as well. Simmons doesn’t hold back, so please enjoy. Dr. Michael Economides adds his opinions on the spill and, as our readers already know, you can count on an earful from the famed professor of energy. Not to be outdone, maritime attorney and Washington expert Larry Kiern describes the political and legislative fallout from the spill on Capitol Hill. Senior Editor Jack O’Connell worked with Laurence Levy, Chairman and CEO of Rand Logistics, one of the top companies still standing on the Great Lakes, for the Executive AchieveTony Munoz can be contacted ment feature and completed his duties with the latest installment of “Upgrades and Downgrades,” a at tonymunoz@maritime-exec- must read in these volatile times. Finally, returning writers Bob Spicer, Richard Carranza and Barbara Saunders offer comprehenutive.com with comments, input sive looks at the worlds of maritime education, software and health care, respectively, all of which are and questions on this editorial or any other piece in this maga- required reading for executives. Last but not least, Edward Stewart of Drum Cussac shares his expert zine. The Maritime Executive views on maritime security. It’s been an extremely interesting two months since the last edition, so welcomes your participation in spend some quality time reading what a few of the top maritime writers of the day have to say, and thanks again for opening these pages. our editorial content. Mar Ex
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J U LY / A U G U S T 2 0 1 0 THE MARITIME EXECUTIVE
8
ExecutiveAchievement By MarEx Staff
Laurence
LEVY
Chairman and CEO, Rand Logistics, Inc. LAURENCE LEVY SPEAKS IN A DELIBERATE, enunciateevery-syllable South African lilt that reflects his Johannesburg upbringing and keen intellect. Every word counts and he is as precise in his language as he is in his investments. He came to the United States in 1981 to attend Harvard Business School where he graduated as a Baker Scholar. Following graduation he joined the prestigious Boston consulting firm of Bain & Company, home to such luminaries as Mitt Romney. There he learned the leveraged buyout business and, three years later, cofounded his own firm in New York, Hyde Park Holdings. His first deal at Hyde Park was an unsolicited takeover of New York Stock Exchange-listed High Voltage Engineering, which he considered undervalued. Now, almost 25 years and dozens of deals later, the naturalized American citizen is mellow, more refined in his approach, but still focused on value.
FINDING THE RIGHT INVESTMENT
“We have a rigid set of criteria that we look for in the companies
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we purchase,” Levy told MarEx. “These include a sustainable business model, excellent management team, high barriers to entry, attractive and irreplaceable assets, predictable cash flows and the potential for growth, both internally and externally.” He especially likes middle-market plays in logistics and infrastructure. Among Hyde Park’s holdings are companies with names like Essex Rental, Ozburn-Hessey Logistics, Warehouse Associates, and Rand Logistics. Rand Logistics? Yup, you heard me right. Except Rand Logistics is really a shipping company, doing business as Grand River Navigation in the U.S. and Lower Lakes Towing in Canada. Rand is named for the South African currency and is the publicly traded holding company (Nasdaq: RLOG) that operates the maritime businesses. Rand began life in 2004 as a blank check company or SPAC (Special Purpose Acquisition Company), funded by Hyde Park and seeking an appropriate acquisition. It found an attractive opportunity two years later when private equity investors decided to sell their Great Lakes shipping businesses, which had eight vessels
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A heavy hitter in the world of private equity sees value on the Great Lakes.
PUTTING UP BIG NUMBERS
In 2009 – in an exceedingly difficult business climate, both on the Lakes and off – Rand had its best year yet, and Levy expects even better things to come. Despite volume declines of 20 to almost 50 percent in some key Great Lakes’ commodities (like iron ore, limestone and coal), Rand’s volumes were down only two percent, and it posted an impressive $21 million in operating income plus depreciation and amortization, more than three times the $6 million earned just four years before and, according
to Levy, even this level represents “the floor of the Company’s earnings” going forward. Remember, there are only nine months in the Great Lakes sailing season. Vessels are laid up during the January-March period when the Lakes are frozen over and largely unnavigable. Rand has to make its money in the nine months from April 1 to December 31. There is an advantage to this: It allows companies to drydock their vessels and make other necessary repairs and investments during the down period, assuring they will be fully available once the new sailing season starts – theoretically on April 1, though sometimes earlier. This past winter was one of the mildest in recent memory, and so the 2010 sailing season got off to a good start. Levy is optimistic: “Vessel sailing days have improved meaningfully compared to last year, and we are seeing increased demand for certain key products.” Rand’s Canadian operations are going full bore (seven of Rand’s 12 vessels are Canadianflagged), and the U.S. is picking up steam. Last year Rand had 3,143 revenue-generating sailing days (number of vessels x available sailing days) versus its theoretical maximum of 3,300. Since each additional day represents about $11,000 in vessel-level income, the bottom-line impact can be dramatic. Rand expects the majority of sailing days not utilized in the 2009 shipping season to be utilized this year due to new contracts with customers. Wall Street has taken notice. The company’s stock is up more than 50 percent this year and trading around $5, versus its book value of about $4, making it one of the bright spots in an other-
J U LY / A U G U S T 2 0 1 0
between them and operating income of about $6 million. The following year Rand bought a bulk carrier business from Voyageur Marine for about $24 million and in 2008 added three self-unloaders from Wisconsin & Michigan for an attractively priced $20 million, or less than three times the vessels’ cash flow. With 12 vessels in its fleet, Rand is now a major player on the Lakes, though not the biggest (that distinction goes to American Steamship, a GATX subsidiary, with 18). It is likely the most profitable relative to its revenue, however, although figures are hard to come by since Rand is the only publicly traded brand. Its profitability stems largely from the fact that it is the biggest “River Class” operator with ten 635-foot, shallow-draft, self-unloading bulkers capable of reaching ports that competitors can’t, as well as the only Great Lakes carrier with both U.S.- and Canadianflagged vessels – a key advantage, especially when the majority of its profits, and growth, come from the Canadian side.
EXECUTIVE ACHIEVEMENT
9
THE MARITIME EXECUTIVE
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EXECUTIVE ACHIEVEMENT wise gloomy market for stocks.
J U LY / A U G U S T 2 0 1 0
BLUEPRINT FOR GROWTH
Rand's leveraged customer network benefits from numerous backhauls.
in the high teens. In fact, Laurence Levy has “a maniacal focus on cost-containment.” In a market where demand is stagnant and even declining, and the supply of ships is also stagnant and slowly declining, the way to maximize profits is to wring every last penny out of your operations by reducing costs. Last year Rand reduced the average cost of running its vessels by a staggering 20 percent, albeit largely due to lower fuel prices. This was the difference between a profit and a loss for the year. Another way of boosting profitability is to maximize backhauls. Rand has done a good job in this area, which is a tribute to the Company’s schedulers and the agility of its fleet in getting in and out of small harbors.
THE MARITIME EXECUTIVE
10
Time was when the Great Lakes teemed with traffic, when Duluth was the fourth largest port in the world and Buffalo the fourth largest city in America, when the great Mesabi Range in northern Minnesota was the world’s largest iron ore producer, when the smelters along the Lakes – from Gary to Erie – led the world in steel production, fed by the coal mines in Pennsylvania, West Virginia, Kentucky and Indiana, when you had the “Motor City” and the “Glass City” and the “Tire City.” Today the Lakes are but a shadow of their former selves, having been hurt by cheap steel imports. No new vessels have been built for use on the Great Lakes in nearly 30 years because the cost is prohibitive. And none will be. But no matter, really, because theoretically these “Lakers” have an indefinite lifespan due to the fresh water environment. So the emphasis is on preservation and maintenance and upgrading old equipment. When Laurence Levy speaks of “irreplaceable assets,” this is exactly what he means. The remaining Lakers are irreplaceable. One of the secrets to success on the Lakes is to extend the life of these assets and improve their efficiency, thereby squeezing additional economies (and profits) out of them. Two years ago Rand replaced the steam engine in the Saginaw with a modern diesel engine and reaped all kinds of benefits: faster speeds, lower fuel consumption, reduced emissions, and a return on investment
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EXECUTIVE ACHIEVEMENT
The repowered Saginaw is faster and more fuel-efficient.
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In addition to organic growth, there is always the possibility of another acquisition or two to bolster the Rand fleet. Rand has already done two of them and continues to look for other attractive investment opportunities, both on and off the Lakes. The
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Levy points to “built-in price escalators” in Rand’s contracts as another source of increased profitability. Most of Rand’s contracts are long-term so these escalators are important and become more valuable over time. These contracts also have fuel surcharges, which means that the fluctuations in fuel costs are borne by Rand’s customers.
synergies of a deal on the Lakes can be compelling, given the finite supply of vessels and the likelihood that no new vessels will be built. Yet Rand is not restricting itself to the Great Lakes and last year made a $255 million bid for US Shipping Partners, the beleaguered Jones Act products carrier that filed for Chapter 11 and only recently emerged from bankruptcy. The bid was ultimately withdrawn due to valuation concerns, but it suggests that Rand will cast a wide net in its search for suitable growth opportunities and has the wherewithal to do so. We asked Levy what he liked about US Shipping. “They are Jones Act-protected, have modern assets that are expensive to duplicate, good management and a solid customer base,” he responded, echoing some of the same sentiments that led to the purchase of Lower Lakes and Grand River four years earlier. Don’t be surprised if he pulls another rabbit out of the hat in the not-too-distant future. Unlike most private equity investors, who have a three-tofive-year time horizon and then flip their holdings and pocket the profits, Levy insists that he is in Rand for the long haul. “We build and grow our investments over a substantial period of time in businesses that are competitive and sustainable over different business cycles,” he stated. If someone like Laurence Levy sees value on the Great Lakes – and his ability to generate value at Rand is ample testimony to that fact – then there is hope for not just the Great Lakes but for other sectors of the American economy that are in desperate need of renewal. Mar Ex
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WASHINGTON INSIDER
Written by Larry Kiern, Winston & Strawn LLP
J U LY / A U G U S T 2 0 1 0
WashingtonInsider
THE MARITIME EXECUTIVE
12
Washington Grapples With Deepwater Horizon Proposals FOLLOWING A FEDERAL COURT order enjoining its May 28, 2010 moratorium on deepwater drilling, Secretary of the Interior Ken Salazar issued a new moratorium on July 12 to cure the flaws exposed by the industry challenge. Importantly, the new moratorium focused on three issues which the Secretary said required a “pause” in deepwater drilling: (1) the shortage of oil spill response resources because of the ongoing cleanup; (2) an assessment of well blowout prevention resources, methods, and strategies, and (3) the ongoing investigations into the causes of the Deepwater Horizon casualty. The American Petroleum Institute and Louisiana political leaders immediately announced opposition to the new moratorium, emphasizing its adverse economic impact. Presidential commission chairman and former Florida senator Bob Graham also criticized it as overly broad and injurious. But as a practical matter the new moratorium extends only to November and will likely prove more difficult to challenge successfully in federal court. With a determined Secretary of the Interior citing serious safety and environmental threats, some domestic operators have already opted for friendlier venues abroad.
Legislative Proposals Expose Underlying Policy Differences
While 24-hour coverage dramatizes events unfolding in the Gulf of Mexico, the legislative process steadily advances in Washington, D.C. One essential change was enacted swiftly to fund oil pollution response; others have garnered bipartisan support, but one in particular – climate
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change legislation – highlights policy differences too difficult to bridge.
Emergency Funding Measure Enacted Into Law
The extraordinary scope and prolonged nature of the oil spill quickly exhausted the $150 million in emergency funding and borrowing authority available to the U.S. Coast Guard and other federal agencies through the Oil Spill Liability Trust Fund (OSLTF). Consequently, following a letter from Coast Guard Admiral Thad Allen warning that the agency would exhaust available emergency funding within two weeks, Congress and the President on June 15 increased the emergency funding available from the OSLTF. The Senate passed the measure by voice vote and sent it to the House, which quickly approved it by a vote of 410-0, thereby ensuring uninterrupted funding for this unprecedented government response. The legislation amends the Oil Pollution Act of 1990 (OPA 90) to permit additional emergency advances to the Coast Guard and other federal agencies of up to $100 million per advance, but only for the Deepwater Horizon incident and provided that Congress is notified “of the amount advanced and the facts and circumstances necessitating the advance.”
Compensation Legislation Advances
Next, congressional leaders pushed legislation expanding the compensation available to those injured or killed in certain maritime accidents and their survivors. On July 1 the House approved by voice vote the Securing Protections for the Injured from Limitations on Liability Act, H.R.
5503, proposed by Rep. John Conyers (D-MI) and Rep. Charlie Melancon (DLA). The legislation targets longstanding legal limitations on the rights of certain maritime victims to recover damages. The measure would repeal the Limitation of Liability Act of 1851, which allowed shipowners to limit liability in certain circumstances. The recent invocation of that law by Transocean Ltd. sparked opponents to seek repeal. Additionally, the measure removes federal limits on damages by amending the Jones Act and the Death on the High Seas Act (DOSHA) to allow for recovery of non-pecuniary damages, e.g., loss of consortium, loss of society, etc. Companion legislation in the Senate, the Survivors Equality Act, S.3463, was introduced by Senate Judiciary Committee Chairman Patrick Leahy (D-VT) and Senator Chuck Schumer (D-NY). They hosted an emotional press conference on Capitol Hill in early June featuring the families of those who perished on the Deepwater Horizon. Their compelling stories presented powerful testimony. But on July 22 Senator Jay Rockefeller’s (D-WV) companion bill encountered stiff resistance from a phalanx of maritime industry opponents, who argued the bill should be limited only to hazardous offshore drilling.
Ending Oil Pollution Limitation of Liability
Beyond personal injury and death claims, pollution liability proposals aimed at BP and other operators of offshore facilities also advanced. Sen. Bob Menendez (D-NJ) introduced The Big Oil Bailout Prevention Act of 2010, S.3305, to require BP to pay the entire cost of the Deepwater Horizon pollution cleanup and compensate
7/23/10 9:14 PM
WASHINGTON INSIDER
The Obama Administration Issues Another Moratorium
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Climate Change Legislation
The Administration – and particularly White House aide Carol Browner – have urged supporters to seize the opportunity presented by the Deepwater Horizon disaster to advance the cause of climate change legislation. Secretary Salazar highlighted his recent approval of the Cape Wind offshore energy project as a practical example of what the Administration will do in the future to avoid similar disasters. But Senate opponents remain confident they can distinguish between the need for
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On June 30 the Senate Energy and Natural Resources Committee approved the Outer Continental Shelf Reform Act of 2010, S.3516, targeting the agency formerly known as the MMS and renamed in part the Bureau of Ocean Energy Management, Regulation and Enforcement (BOEM). The bill would codify the administrative reorganization announced by Secretary Salazar, including the separation of the safety and environmental protection functions of the former MMS from its revenue and royalty collection functions. It would effect substantive changes in the law governing offshore development by increasing civil and criminal penalties, limiting offshore leasing to companies with solid safety and environmental records, and extending the period of time from 30 to 90 days for the
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The House Transportation Committee also proposed new safety and environmental regulations; a provision that vessels operating in the U.S. Exclusive Economic Zone (EEZ – an area extending 200 miles offshore) be U.S.-flag vessels, owned and operated by U.S. citizens; and that future offshore facilities be U.S.-built. These proposals followed a hearing on the safety and inspection standards applicable to foreign-flag vessels, e.g., drill ships and mobile offshore drilling units, operating in the Gulf. At the hearing, supporters of the longstanding U.S. cabotage provisions of the Jones Act emphasized the benefits to the nation of U.S.-built, owned, and operated vessels in achieving higher safety
Reform of the Minerals Management Service (MMS) and Offshore Drilling
review of offshore exploration plans. On July 14 the House Natural Resources Committee approved the Consolidated Land Energy Aquatic Resources Act, H.R. 3534, proposed by Chairman Nick Rahall (D-WV), which includes similar reforms. The proposal features a “revolving door” prohibition to block the traditional movement of personnel between government and industry. It also extends beyond Deepwater Horizon reform and reflects the Chairman’s longstanding energy reform agenda, including royalties, renewable energy, and other natural resource issues. The next day the House Energy and Commerce Committee approved by a remarkable 48-0 vote the Blowout Prevention Act of 2010, H.R. 5626, proposed by Chairman Henry Waxman (D-CA). The measure would mandate improved blowout preventer standards, third-party certifications, and redundant systems and equipment to avoid failure. Additionally, it increased civil penalties for noncompliance to $150,000 per day and criminal sanctions up to ten years in prison and $10 million in fines.
THE MARITIME EXECUTIVE
Mandating U.S.-Flag for the Exclusive Economic Zone
standards. Senator John McCain (R-AZ) took the opposite tack and introduced legislation to repeal the Jones Act. According to Senator McCain, his Open America’s Waters Act, S.3525, will overturn the Jones Act, which he argues inhibits the ability of America’s farmers to compete globally. Although critics charged that the Obama Administration hampered the oil spill response by not waiving the Jones Act’s U.S.-flag requirements, the Coast Guard quickly rebutted the claim. While Senator McCain’s proposal does not enjoy widespread support, he can be expected to oppose the proposal of the House Transportation Committee to expand the U.S.-flag requirement in the EEZ.
J U LY / A U G U S T 2 0 1 0
victims without the benefit of any legal limitation of liability such as that provided by OPA 90 or state law. Senator Lamar Alexander (R-TN) decried the retroactive nature of the legislation arguing that “We are not a banana republic.” He also warned of unintended consequences, including driving oil drilling out of the Gulf of Mexico and leaving the U.S. more dependent on foreign oil. However, on June 30 the Senate Environment Committee rejected those protests and approved the bill. The next day the House Transportation and Infrastructure Committee approved a companion measure, The Oil Spill Accountability and Environmental Protection Act of 2010, H.R. 5629, that would eliminate the $75 million liability cap under OPA90. The measure also included proposals to increase up to $1.5 billion the proof of financial responsibility required under OPA 90.
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WASHINGTON INSIDER
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deepwater drilling reform and wider-ranging climate change legislation. Given the nation’s stubbornly high unemployment rate and a successful media campaign equating climate change legislation with tax and energy price hikes, they see no need to budge. Going into the fall election season, they have the political wind at their back because they are not the party in power, which history teaches in current circumstances will likely sustain substantial losses.
THE MARITIME EXECUTIVE
14
What Can We Expect?
Against this backdrop it appears likely that Congress will enact legislation in response to the Deepwater Horizon incident before recessing. While its precise contours remain unclear, it will likely expand damages recovery, remove liability limits on major energy companies, and strengthen safety, environmental protection, and government oversight. It appears unlikely that reform will reach as far as climate change, but supporters will surely seize this opportunity to extend and expand measures promoting alternative energy development while relying on the Environmental Protection Agency to regulate greenhouse gases starting in January 2011. Most importantly, no serious legislative proposal has surfaced to restore the former offshore drilling moratorium that blocked drilling along most of America’s coasts for decades. Instead, there appears to be a tacit recognition that offshore drilling remains a critically important component of our national energy strategy and a growing conviction that such drilling can be accomplished without presenting undue risks to the workers and the environment if proper safety and environmental protection measures are established and enforced. Mar Ex
Larry Kiern is a partner at Winston & Strawn LLP, an international law firm of 900 lawyers. His practice concentrates on maritime issues, including legislative, regulatory, and litigation matters. Before joining Winston & Strawn, he was a Captain and law specialist in the U.S. Coast Guard who served as the Legislative Counsel and Deputy Chief of the Coast Guard’s Congressional Affairs Office.
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OPED ECONOMIDES
THE MARITIME EXECUTIVE
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MarEx OP-ED:
The BP Oil Spill and Its Impact
By Michael J. Economides
Beyond the environmental damage lurks an even greater danger.
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FAR BEYOND THE ACTUAL DAMAGES, which are considerable, the BP oil spill has brought into the open pent-up emotions, latent motives and hidden agendas that are hard to disguise. In the process, there is a very real danger of throwing out the baby with the bathwater and, worse yet, causing irreparable damage far greater than that caused by the spill itself. At the time of this writing, almost three months after the April 20 blowout, BP has capped the well and stopped oil from “gushing” into the Gulf. This is clearly progress even if some problems may still arise. The final solution will come when one of two relief wells reaches its destination at the end of July, but the repercussions will last a lot longer. An event that started with the death of 11 people kicked media alarmism into overdrive. There is little to enjoy when news anchors like CNN’s Anderson Cooper, night after night, fake righteous indignation at BP, the spill and all things oil. Not once
7/23/10 9:14 PM
OPED ECONOMIDES
First, the leak was “thousands, millions of gallons per day.” Using gallons makes it a lot larger number than barrels, since there are 42 gallons to a barrel. Then it became the “largest spill ever” on July 1 when news organizations declared it had surpassed the “140.6-million-gallon (3.35-million-barrel) mark, more than the previous record-setting, 140-million-gallon Ixtoc I spill off Mexico’s coast from 1979 to 1980.” Those were government estimates and the lower end was 71.7 million gallons (1.7 million barrels). It was never really clear how much oil was actually going into the Gulf and how much was collected by the cap and pipe that BP had installed. Precious few knowledgeable people added any sense of perspective to the accident. I have to confess personally that I have not had much love lost for BP for a couple of decades, but this was too much even for them – unjustifiably arrogant characters – let alone the industry. To begin with, nobody really knows what precipitated the accident, which has a lot in common with an airliner crash, an equally rare occurrence. It usually involves a combination of physical causes and human error. Sometimes we
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The Obama Administration, sensitive to accusations of its own Katrina and already ideologically averse to fossil fuels, seized the opportunity to declare a moratorium on all deep-water drilling while “studying” the safety procedures. Both a district court and an appeals court rejected the legality of the moratorium, and then Interior Secretary Ken Salazar announced a new moratorium to get around the objections. But that was not all.
17
THE MARITIME EXECUTIVE
Let’s Do the Math
Moratoriums and a Commission: More Harm Than Good?
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has there been any balance as to what the spill would really mean in the long term. For TV journalists, any oil on the coast, no matter how small an amount (even oil that had nothing to do with the BP spill, like that found on a Galveston beach) was a bona fide catastrophe. For environmentalists and many in the media, even one part per million of oil anywhere is unacceptable.
never really know. The ultimate shutting-in of the well by injecting cement from a relief well will literally and figuratively bury the problem. Other than speculation and throwing rocks at BP, there may never be an exact technical interpretation of the event, which is too bad for the industry, assuming it will continue drilling in deep water. The public outcry split the petroleum industry. Some attacked BP as a reckless bunch of risk-taking ignoramuses. Others just kept quiet. I am somewhere in the middle but I would like to remind many of my friends in the industry to be careful in throwing BP to the wolves. You may be next. The furor is also reflective of a public and journalists who stopped math education in grade school and are unable to understand the real magnitude of a problem other than what they get from TV images and reportorial sensationalism. The stricken well is more than 40 miles from shore at a depth of 5,000 feet. The volume of a water cylinder 40 miles in radius and, let’s say, an average of 2,000 feet in depth is (using the formula πr2h and remembering that a mile has 5,280 feet) 280 trillion cubic feet. Dividing by 5.615 to convert to barrels translates to over 50 trillion barrels of water. If an outrageous and non-credible four million barrels of oil ultimately leak, even if none of it disintegrates naturally, the average dilution is less than one-tenth of one part per million, a practically impossible-to-detect trace even with the most sophisticated instruments and clearly way below danger levels to animal or human health. I am not trying to downplay the fact that the spill has been an unmitigated disaster and, because of wind and sea currents, oil has to be skimmed, oil-soaked birds have to be cleansed, and beaches have to be purified. The press, Gulf coast politicians, and all sorts of people from fishermen to tourists want action, any action, and damages paid – Exxon Valdez all over again.
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OPED ECONOMIDES
THE MARITIME EXECUTIVE
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Toward the end of June, more than two months after the incident, President Obama announced his decision to name Richard Lazarus Executive Director of the National Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling. Given the highly technical nature of the assignment, one would assume that Lazarus comes from a background steeped in technical knowhow, knowledge of offshore processes, and an unbiased perspective on the critical issue of energy development. Unfortunately, Lazarus’ background is far from technical and – perhaps more ominously – far from unbiased. Lazarus is an environmental lawyer who has, in fact, argued 30 cases in front of the Supreme Court on behalf of environmental interests. Quite simply, Lazarus is an incredibly accomplished and talented opponent of offshore drilling. The problems with the President’s new commission do not stop with its new head. As noted by the Wall Street Journal’s editorial board, it’s devoid of a single expert on oil production or offshore development. The lone member with a background in any type of engineering specializes in physics and optics – far from an oil and gas expert. The group is, however, well-stocked with anti-drilling activists and high-ranking officers of environmental groups. Given the fact that a large combination of physical and human factors may have contributed to the BP spill, a very advanced technical expertise is absolutely warranted to understand what went wrong. Otherwise, any conclusions from the Obama commission become political grandstanding.
Oil Disruptions and Job Losses – Connected?
On the surface there is nothing wrong with being prudent in averting a future disaster by announcing a drilling moratorium. But playing with the supply of oil from the Gulf of Mexico is not a playing matter because of another, far more important, and lurking danger. In 2001 Ron Oligney and I published a graph where we showed unambiguously that for the previous 35 years all negative job growth periods correlated directly to oil supply disruptions. I am reproducing and updating that graph here, showing the rate of growth of U.S. jobs from 1967 to today (data from the Bureau of Labor Statistics). When the U.S. economy is healthy it generates almost four million jobs per year. When global oil supplies are disrupted by more than two million barrels per day, a recession and negative jobs growth follow. This is true of the first Arab-Israeli War in 1967, the 1973 Arab oil embargo, the Iranian Revolution in 1978 combined with the Iran-Iraq War that ended in the early 1980s, the Iraqi invasion of Kuwait in 1990, and the natural gas shortage in 2000 (in terms of oil equivalent). Jobs lost were never regained. The trends of interrupted job growth show that clearly. One could also argue that the oil price that went to almost $150 per barrel in July 2008 created a phantom shortage that precipitated the brutal jobs contraction since then. Here is the stark reality: Total U.S. offshore oil production is 1.7 million barrels per day, almost all of it from the Gulf of Mexico, eerily close to the two million barrels per day of the historic
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Dr. Michael J. Economides is a Professor at the Cullen College of Engineering, University of Houston, and Editor-in-Chief of the Energy Tribune.
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correlation. The Obama Administration is in a conundrum. Surely somebody there must be aware that shutting down offshore drilling – a space-age, technologically demanding exercise – for an extended period of time cannot be restarted by just a wave of the hand. Operators and contractors will move on internationally. Coming back in a hostile business environment will be slow and painful, if ever, and the type of reservoirs under deep water, while enormously prolific, decline very fast. The effect of a moratorium will be felt a lot quicker than people think. Of course ideologues often do not want to be bothered with facts, and Washington has plenty of those. Some may think what
a great opportunity the moratorium presents to move on to the post-oil era. The President himself on March 6 talked about replacing the “energy resources of the last century” with something else, usually nebulous and never clearly defined, other than the thoroughly-discredited-without-massivegovernment-subsidies corn-based ethanol which the President, a few weeks earlier, called a “boost to rural America.” No matter what one’s position is on alternatives and the long-term viability or desirability of fossil fuels, any transition will take decades and have no effect on an oil supply disruption from the U.S. offshore. As history shows, oil supply disruptions have a direct impact on jobs growth in the entire economy, not just the oil industry, and the current jobs trough not only will not come to an end but is likely to worsen yet. Mar Ex
19
MarEx does not necessarily endorse the opinions herein. THE MARITIME EXECUTIVE
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JACKO’CONNELL JACKO’CONNELL
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THE MARITIME EXECUTIVE
20
The SEA Escape and Other Adventures in Maritime Investing THE MIDPOINT OF THE YEAR is a good time to sit back and take stock of where we are. Ideally, you should do this on a beach somewhere – as long as it’s not along the Gulf Coast, although I hear rooms are cheap these days. Failing that, you can ponder the current state of your investments in the quiet of your office as everyone else relaxes on the beach. Here’s some food for thought: The markets roared ahead in the first few months of the year and have now reversed course and are losing ground. What should the savvy investor do? Hang on and hope for the best, or take refuge in cash and gold?
“Sell in May and Go Away”
The old Wall Street saw, “Sell in May and go away,” was never more true. 2010 started out like a house afire, building on 2009’s gains, and then, beginning in mid-April, the fire went out. By the end of June the markets had given up all their first-quarter gains and were in the red for the year. Fears centered around the possibility of a “double dip” recession triggered by Europe’s debt problems and
the falling euro and around Falling Off a Cliff: the Baltic Dry Index the sudden reversal in both consumer confidence and spending in the U.S. The spill in the Gulf didn’t help any either. With each passing day the live images of oil gushing from the ocean floor wore on people’s nerves Courtesy: Capital Link and depressed their spirits. The spreading slick of an environmental disaster and ing turnaround and roared ahead, nearly the loss of livelihoods and jobs coincided doubling before running out of steam this almost exactly with the start of the market spring. decline. What’s With the Dry? For the record, the Dow was down 10 percent in the April/June quarter with Not to be outdone, the maritime indices the Nasdaq and S&P 500 off 12 percent. fell as well, led by the Baltic Dry, that It was the worst quarter since the first bellwether of economic change. As I write quarter of 2009, and you remember that this, the Dry has fallen 50 percent since one, don’t you? That’s when the Dow was mid-May, proving once again the validity trading below 7,000 and threatening to of the “Sell in May” strategy. The index, fall all the way to 5,000. That’s when a lot which measures freight rates on 40 of the of people threw in the towel and got out of world’s most heavily trafficked shipping the market entirely – never to return. And lanes, has been down for eight consecutive that’s when the market began its amazweeks, its longest decline in five years, and
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JACKO’CONNELL SEA: June/July 2010
quarter as China’s inventories run low and it starts to restock. Roche further noted that emerging economies in Latin America and Asia will help pick up the slack, citing the growing volume of coal shipments from Colombia to Asia and the increase in backhauls of mainly steel products from Asia to Latin America. So if you can hang on for awhile – perhaps take that long-delayed vacation after all – things should begin to change for the better.
The SEA Escape
Courtesy: Barron’s
Readers of this column will recall that back in January I discussed an ETF that provided an easy way to track the global shipping market without having to go through the hassle of choosing individual stocks. It was called the Claymore/Delta Global Shipping Index ETF, and it traded under the convenient symbol of SEA. Designed to track the companies in the Delta Index, it launched in August of 2008 and had a 25 percent gain in 2009. Well, lo and behold, in late April it suddenly disap-
peared and was no longer being quoted! Turns out the parent company of the fund had been sold and the new owners failed to get the required shareholder approval from SEA’s holders of a new advisory agreement. One of those legal technicalities that can do you in. So the fund had to be liquidated. It was the first time this had ever happened to an ETF, and it was mainly because many of SEA’s investors were non-U.S. citizens or “street-name holders” who couldn’t be located for one reason or another. During its 20-month lifetime, the ETF traded between 25 and 10 and liquidated at 15.71. The liquida-
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stands where it was last April. At one point it had declined for 35 consecutive days. What gives? Are the fears of a double-dip recession being confirmed by the Dry’s downward path? Not so fast. The consensus among those who should know is that the usual midsummer lull in vessel traffic has arrived and China, the biggest gorilla of them all, has suddenly “hit the brakes” on iron ore imports because its inventories are temporarily full. It’s amazing to think that, between them, China and India import more than half of all the iron ore and coal shipped worldwide. There’s another problem plaguing the drybulk market: too many ships. The overbuilding and overordering of the last great boom is a constant drag on the market. Yet not to worry, says Joe Roche, CEO of TBS International (Nasdaq: TBSI), a big player in Latin America. Roche and a panel of his peers at a late-July Capital Link Webinar said the drybulk market will likely continue its downward trend for the next two months and then have a strong fourth
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JACKO’CONNELL
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ANW: January/July 2010
THE MARITIME EXECUTIVE
22
tion couldn’t have come at a better time – SEA was up 22 percent for the year and the market indexes were at their peak. But it wasn’t long before SEA sailed again. Relaunched in early June at a newly elevated price of 26 dollars and change, the renamed – but really the same old – Claymore Shipping ETF has traded since then within a narrow range of 28 on the high side and 24 on the low. Among its principal holdings are Seaspan (NYSE: SSW), Teekay Shipping (TK) and General Maritime (NYSE: GMR). About 20 percent of its holdings are in Greek companies, so those of you who have the willies about Greece need not apply.
Bunkers for Dollars?
Another fun stock to watch is Aegean Marine Petroleum (NYSE: ANW), which is part of the Georgiopoulos empire and makes its living by selling bunker fuel to ships in most of the major ports of the world, including the three biggest for bunkers – Singapore, Fujairah and Rotterdam. It’s a fast-growing player with
a modern, double-hull fleet in a niche industry and has been gobbling up small mom-and-pop operations at an impressive rate. Unfortunately, Aegean (the stock) has performed miserably this year, possibly mirroring investor sentiment more than anything else, despite results that have been good but not stellar. It started the year in the mid-30s and is currently trading around 20. Kevin Sterling of BB&T Capital Markets has been a consistent champion of the stock. He cites the growing number of hulls on the water and is not bothered by the drop in the Baltic Dry, which – as he points out – measures rates, not volumes. Sterling believes Aegean follows the Warren Buffett school of investing and is a company that is easy to understand and that makes acquisitions when everyone else is selling. He has a Buy rating on the stock and a 12-month target of 40. So there are opportunities out there for the savvy MarEx investor, despite the gloomy state of the markets. At a recent Marine Money conference in New
Courtesy: Barron’s
York, in fact, the mood was anything but downbeat, and deals and dealmaking were in the air – a good sign. Perhaps the best thing to do is get out from behind the desk, pack your bags and head off to the MarEx beach for a couple of weeks.
Jack O’Connell, the senior editor of this
magazine and a former maritime executive, is a private investor who may own shares in some of the companies mentioned in his columns. The views expressed in this column are his and his alone and are not in any way to be construed as investment advice.
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SPECIAL FEATURE SIMMONS
THE MARITIME EXECUTIVE
24
S P E C I A L
F E A T U R E :
A Conversation With Matt Simmons By Nichole Williamson, Assistant Editor
MarEx: What was the offshore oil industry like 40 years ago when you first started? Simmons: The growth of the oil industry in the U.S. has been incredible since I first
started raising venture capital back in the spring of 1969. Anything beyond 80 feet of water was considered not safe. But a small group of divers in the Santa Barbara Channel were trying to perfect mixed gas diving tables because many of them were on the edge of losing their lives at deeper levels. I remember when General Offshore Divers finally broke the stranglehold of Associated Divers and got a contract to weld wellheads for Phillips Petroleum. Ken Elmes, one of the top 10 divers for General, had to be put in the hyperbaric chamber. Then Whitey Stefons, who was considered the best diver in the world, put on a bad canister of gas with only 79 percent oxygen as opposed to 82. As he approached 150 feet, he had a grand mal seizure. My friend, Lad Handelman, had to put a tank on his back and get Whitey up to the hyperbaric chamber so he wouldn’t die. That was 1969.
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Within three years, hyperbaric diving chambers were onboard offshore rigs in the North Sea. Meanwhile, in the Gulf of Mexico, where the shallow shelf goes out about 40 miles before dropping off sharply, they began drilling wells at 300 feet, then 1,000 feet and 2,000 feet, and finally 5,000 to 10,000 feet. For over 41 years, the offshore oil industry never had an accident – and obviously got giddy with success. Over the years I spoke at numerous conferences and always said how proud I was of the offshore industry. But what would happen if something went wrong at 500 feet? We simply forgot to develop the fire truck and didn’t have the tools to manage a huge spill even at that level of drilling. So then the industry began
7/23/10 9:15 PM
SPECIAL FEATURE SIMMONS
The famed investment adviser and author of Twilight in the Desert shares his views on the oil spill in the Gulf of Mexico, peak oil, and his newest passion, renewable energy.
MarEx: Judging from the BP spill, it
MarEx: It has been said BP has one of the worst safety records in the industry. What’s your view? Simmons: BP made every mistake it could to save $1 million. It had been recommended that 21 O-rings be used to stabilize the casing so it could be properly cemented. But BP, in order to save time and $1 million a day, only used six. Furthermore, BP didn’t want Halliburton’s hard cement job because they’d have to wait for it to settle. Another huge mistake was taking the mud out and replacing it with seawater so later, when they wanted to
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MarEx: Are you saying there may be criminal implications from BP’s actions? Simmons: Absolutely! First they rounded up all 12 ROVs in the Gulf, which is the only way anyone can see underwater. Then they began sending out misinformation about there only being two or three cracks in the drilling riser, which was creating the spill. It was all lies. The drilling riser is 22½ inches in circumference and two-thirds of it is elastomeric, so it’s a mile-long, tightly packed column of condensate. BP said the oil was coming out of the riser and stationed the ROVs on the leak. The ROVs only have one eye that looks straight ahead with a limit of about 25 feet or so of strobe, and it’s icy black down there. Now remember the riser is only 22½ inches in diameter and there was a threeto-four-foot plume of condensate, and this surely couldn’t have caused that massive fire on the rig. When the government began sending a few university-operated research vessels with unmanned submarines to the area, they discovered plumes of oil. Meanwhile, BP said adamantly there were no plumes and keep these vessels away because “they’re distracting us from fixing the leak.” MarEx: What about the workers on the vessels and beaches? There is so much oil out there – what might be the long-term
Mexican Ixtoc oil spill that went on for six months? Simmons: The Mexico spill was like a spit compared to the Macondo spill. I spoke with a couple of oceanographers on the research vessel Thomas Jefferson and was told that in all probability around 40 percent of the Gulf is now oxygen-depleted. No one really knows how long or if the oxygen will ever come back. We never had an oil spill of this magnitude before.
MarEx: Where does the industry go from
25
here?
Simmons: The oil industry simply got
too casual about offshore drilling. More importantly, the regulators need to distance themselves and enforce stricter safety policies. Offshore assets are getting old and rusty and a whole new generation of equipment needs to be built to replace the current stuff. Rebuilding will create prosperity and hasn’t been done since the 1970s. There also needs to be better emergency response planning if we are going to continue operating at those depths.
THE MARITIME EXECUTIVE
seems obvious that the industry wasn’t prepared. Simmons: Right, and in particular this company that rebranded itself from British Petroleum to “Beyond Petroleum” and has, over the past 10 years, adopted the most unbelievable addiction to cost-cutting and a basic hatred of its vendors, who were supposedly “taking their money.” The Macondo well was probably the trickiest that’s ever been tried. Then you have this BP executive with no operational experience telling the drilling contractor and Halliburton how to do their jobs because it’s costing BP $1 million a day to have them out there. Consequently, BP made every mistake that could be made. Then at the congressional hearings this BP man pleads the Fifth Amendment. He should have been hauled off to jail immediately for being responsible for this ecological disaster.
start production, they could get to it faster. But once the blowout occurred BP became devious and tried to say it was no big deal because it was only a rig fire. Then on April 21 I said, “This rig is melting and they’re calling it a rig fire? There’s only 700 gallons of diesel on that rig.” Then they began saying it’s only a 1,000-barrel a day leak coming from the riser. I knew immediately it was a coverup with lots of misinformation.
MarEx: How does this compare to the
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moving out to ultra-deep depths, where it would encounter extremely high reservoir pressures and temperatures. Drilling at those depths is the equivalent of putting lunar modules on the dark side of the moon where you couldn’t see and was simply no way to get people home safely.
effect on these people? Simmons: Unfortunately, many already are getting sick and they will continue to get sick because it’s benzene and butadiene, which is mustard gas. What the government really needs to do is order gas masks for the workers.
MarEx: In the past you have said that oil
should be $300 to $600 per barrel. Are we just kidding ourselves about the true cost? Simmons: $600 a barrel is 89 cents a cup, and a cup will drive a car two miles. We have been kidding ourselves with politically induced cheap oil, and the reality of the cost of oil would turn the economy upside down.
MarEx: With peak oil in mind and as the
largest consumer of oil, the U.S. is in a race with China and India to get sufficient supplies. Will Brazil be our saving grace? Simmons: No, but programs like our proposed wind farm off the coast of Maine will be our saving grace, and that is the reason I founded the Ocean Energy Institute in 2007. Developing meaningful renewable energy from our oceans and the winds is the future. Recently I met with Senator Susan Collins of Maine and the
7/23/10 9:15 PM
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SPECIAL FEATURE SIMMONS
THE MARITIME EXECUTIVE
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Energy Secretary, Dr. Steven Chu, at the University of Maine to visit the Advanced Composites Center and the new Deepwater Technology Center. Sixteen of us had lunch, including Governor Baldacci, Senator Collins, two congressmen, Dr. Chu and his assistant, and the President of the University of Maine. Remember, Dr. Chu is a Nobel Prize winner. He told us that, as a scientist, he knew the need for alternative energy but got discouraged about its flaws. But learning about liquid ammonia energy from the ocean was truly exciting, and he planned to share this with Washington.
MarEx: Would you please elaborate on
the liquid ammonia energy concept? Simmons: Ammonia energy has been a known fuel source for decades. It’s three parts hydrogen and one part nitrogen, which you get from air separation. The nitrogen dummies down the hydrogen and at room temperature it turns to liquid ammonia. It is similar to propane except it can be smelled, and it’s about a 30 percent cleaner burn than gasoline. The reason ammonia has never been seriously considered as a fuel is because hydrogen is a tiny byproduct of the refineries and could never be scaled. Our concept is to go into deep enough water where there is unimpeded wind. By redesigning the wind turbines using the advanced oil fill platform design technology, we can get into about 600-foot depths and maybe more. Then the wind turbine is mounted on the small platform where it can generate around 50 megawatts. The blades are made from advanced composites and can be the length of a 90-story building. It is our intention to have 50 megawatt power plants every five miles down the
Gulf of Maine, and we’re not going to use the power for electricity per se. We’re going to combine electricity and ocean water through forward osmosis to create distilled sea water. We’ll use part of that seawater as a new process of the old electrolysis to combine electricity and water to create hydrogen. Then through an air separation unit we’ll create nitrogen and what you’ll have is NH3, and we’ll also have distilled water.
MarEx: This will be for the people of Maine, right?
Simmons: Well, you have to look at
the Gulf of Maine as a laboratory. Once it’s been proven, there can be systems installed all over the world.
MarEx: These turbines would work well
in the deepwater Gulf of Mexico, where the winds really howl. Simmons: Yes, a perfect place. And I was at the Rio Offshore Technology Conference and met with the leadership of Petrobras and they were very interested in the program due to Brazil’s huge coastline. China could use this too and it would solve their water problem as well.
MarEx: So your group will be building these systems around the world. When will you begin? Simmons: We are pushing for a billiondollar public offering soon. While that is a small amount in the capital markets, it will fund these projects for a decade. So for now we’re committed to the Gulf of Maine, and I hope to have a project approval for Hong Kong and northern Madagascar. MarEx: Could your forward osmosis system help clean up the BP oil spill?
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Simmons: Yes, we could figure out a way to use forward osmosis and start cleaning up the Gulf of Mexico. We might even find a way to create oxygen. Imagine if we could have a 50-megawatt power plant on 100 platforms out there! We might even be able to save the Gulf of Mexico.
MarEx: How long would it take to build these systems in the Gulf?
Simmons: I keep using the Pearl Harbor metaphor because within a month after Pearl Harbor Henry Kaiser created a system of building one victory ship per day. These systems are so much simpler to build.
MarEx: When is the IPO going to take
place?
Simmons: I have always been an opti-
mist. So I am hopeful it will be this fall as I am opposed to saying five years from now. You know, unfortunately, this is the only silver lining of the world’s greatest catastrophe.
MarEx: Thank you for an illuminating conversation and good luck. MarEx
Matt Simmons is a prominent oil-industry insider, former energy advisor to President Bush, and one of the world's leading experts on peak oil. He holds an M.B.A. with Distinction from Harvard Business School and is a past President of the Harvard Business School Alumni Association. He announced his retirement recently from Simmons & Company International to devote his full attention to the Ocean Energy Institute, a think-tank and venture capital fund addressing the challenges of U.S. offshore renewable energy, which he founded in 2007.
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MarExCase Study:
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Germanischer L THE MARITIME EXECUTIVE
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ermanischer Lloyd (GL) is known as one of the foremost classification societies in the world, but today’s company is far more diverse and complex than that. Over its 143 years, GL has witnessed huge swings in its tonnage under class due to upheavals in its native land, and while it has had to rebuild itself twice in the last century, the modern organization is vibrant and thriving and strategically positioned for the future.
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germanischerlloyd
r Lloyd:
In a Class of Its Own
By Tony Munoz
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THE MARITIME EXECUTIVE
came together in the Great Hall of the Hamburg Stock Exchange for the founding meeting of Germanischer Lloyd and the signing of the articles of incorporation by August Behn. Prior to GL’s incorporation, owners and traders had no reliable and comprehensive source of information on the condition of ships. While there was a federation of marine underwriters in major ports, they would not divulge their findings to third parties. Similarly, the classification societies of Great Britain and France, which were active in the German market, kept their information in-house. Consequently, there was clearly a need for a German classification society. When the German steamer Elbe collided in 1895 with an English steamship, killing 336 people, the public demanded that the German government put stricter controls on shipping. Two key developments followed: Watertight bulkheads on passenger ships were strengthened based on the technical expertise published by GL, and load-line rules were introduced and finally ratified in 1908, also based on GL recommendations. However, there was no greater stimulus to ship safety than the sinking of the Titanic in 1912. The subsequent Titanic Conference in 1914, in which the director of GL participated as emissary of the German government, led to the birth of the first SOLAS (Safety of Life at Sea) agreement. But its ratification was prevented by World War I. At the time the war broke out, GL classed 10 percent of the world’s merchant fleet. But partners quickly became enemies; ships changed class, and many German ships were seized, sunk or trapped in ports of neutral countries.
Ups and Downs
GL’s global reach encompasses 80 countries, 250 offices and 7,000 employees. Its 2009 mergers with offshore oil and gas giant Noble Denton and renewable energy leader Garrad Hassan have placed it at the forefront of the global search for sustainable sources of energy. Additionally, the company is a leader in nextgeneration technology and software for ship design and operation, as evidenced by – for one – its FutureShip program, which analyzes fuel consumption and emissions aboard ships. Today, GL Maritime Services is led by Dr. Hermann Klein, who has fostered a stimulating environment of innovative leadership and disciplined expertise.
A Beginning of Great Promise
On a spring afternoon in March of 1867, a group of 600 people
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When the war ended, GL struggled as German-classed tonnage shrunk to 650,000 gross tons (GT) due to war losses. However, by 1926 certified tonnage rose to 3.8 million GT under class and GL’s international partnerships resumed. Eventually, GL participated in the major international conferences of the time: the 1929 SOLAS Conference, the International Load Line Conference in 1930, and the first conference of classification societies in 1939. By the time World War II broke out, GL had 4.7 million GT under class, which was equal to about seven percent of the world’s tonnage. Once again the company lost international partnerships; foreign ships changed class, and ships were lost due to hostilities. At war’s end GL found itself facing new challenges as little was left of its network of branches and surveyors, which had previously spanned the world. Its headquarters in Berlin had been destroyed and its Hamburg offices were in ruins, but the company got a provisional license and resumed operations in 1945. Although the Allies wanted to dismantle GL, the company eventually got its permanent license in 1948 and by 1950 had registered its first vessel after the war. By 1960, GL’s registered tonnage had already
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germanischerlloyd
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exceeded its 1939 mark and hit a new record of 4.9 million GT. During the sixties GL’s tonnage almost doubled as a new phenomenon – computers – became an extremely important tool for ship design. Using computer technology, GL began hull-modeling and conducting extensive research on torsion strength. Over time, GL’s rules gained worldwide acceptance, and much of its work became the standard for ship construction. GL continued its computer research and focused on ship collision simulation. In 1984, it became the first class society to introduce the COLL notation, which measured the collision resistance of a ship’s hull. The ability to conduct research on computers had a profound impact on the way ships were being built, and GL continued performing research and modeling on all kinds of marine structures. By the late seventies, it began classing offshore platforms and wind energy systems as well. A year after the Berlin Wall came down, it merged with the East German classification society DSRK, giving it more than 1,000 employees. By the millennium, GL had a total of 33.2 million GT under class, including nearly 50 percent of the world’s container ships. In 2007, as GL celebrated its 140th anniversary, it was apparent the organization’s success was attributable to its commitment to technical expertise, quality, and service. These three core principles remain the foundation for future success.
The Next Generation and Beyond
THE MARITIME EXECUTIVE
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GL’s current orderbook is filled until the end of 2012. Its flagship Maritime Services division is steadily expanding, and the Oil and Gas and Renewables sectors are seeing high demand for their services as well. Maritime Services has focused much of its attention on the “eco” approach to efficiencies through hull modeling, fuel consumption optimization and emissions reduction. In energy, GL’s leadership in offshore Oil and Gas and Renewables has opened a wide range of
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germanischerlloyd analysis for shipbuilders, naval architects and shipowners. It’s also a great tool for reducing maintenance costs and minimizing unscheduled structural repairs. The GL Shipload and ShipModel softwares deal with load analysis and vessel behavior with regard to vibration and structural strength. GL’s AENEAS software provides essential evacuation analyses to ensure a passenger ship’s design is in compliance with IMO regulations. Ultimately, GL’s maritime software is designed to integrate organizational efficiencies, meet regulatory requirements and increase capital asset functionality, all of which helps streamline operations and enhance profitability. GL is a leader in maritime training as well. GL Academy offers employee training in all facets of the industry. GL’s education and certification programs for companies and their employees provide advanced training by highly specialized and knowledgeable instructors on a global platform. “In region Americas,” said Coyne, “GL has opened a Technical Expertise Center for newbuilding plan reviews. This center, along with Shanghai and the Hamburg headquarters, allows for 24/7 operations for plan reviews, which offers a quicker response to our customers.” Today, GL undertakes a broad range of activities under strict quality standards to ensure the protection of life, property and the environment. GL’s maritime services vision has always been to be a trusted partner by providing reliable, quality services and technical expertise throughout its global network. >> Offshore Oil and Gas and Renewables Offshore oil and gas production is one of the leading sources
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opportunities as fossil fuels decline and new sources of energy are brought to market. >> Maritime Services The FutureShip program is the culmination of years of modeling and data analysis to determine a vessel’s optimal fuel consumption. Years earlier GL began raising awareness in the industry regarding the nexus between speed and fuel efficiency. The resulting four-step “eco” program begins with ECO-Patterns, which uses voyage data to analyze fuel consumption. ECO-Practices, the second step, addresses fuel consumption through systems feedback and crew input, which might lead to different operational behaviors on the ship. ECO-Chances evaluates a ship’s engineering and structure, including hull lines for hydrodynamic assessment as well as propeller and rudder interaction. The fourth step, ECO-Solutions, reviews engines and machinery and proposes potential improvements for added fuel efficiency. “GL’s ECO Assistant program is an analysis which can give companies an immediate payback within months,” said Captain Kevin Coyne, GL’s Executive Vice President for the Americas. “Additionally, FutureShip has begun a new environmental consultancy and vetting program dedicated to working in the U.S. market.” GL’s maritime software solutions have been developed over decades of continuous effort in research and development. Its Friendship Framework software allows for numerical modeling of ships and components while integrating Computer Aided Design and Computational Fluid Dynamics to optimize the ship-design process. Its POSEIDON software provides structural design and
31
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Renewable energy is an exciting field for GL,” Coyne noted. “Having both Helimax and Garrad Hassan within the GL network provides us with unparalleled expertise and strength in this fast-growing sector.
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of energy for the fast-paced global economy, and GL is at the forefront of offshore energy risk analysis and engineering consultancy. “With an eye toward the future and a vision for a more complete solution for GL’s customers now and in the years ahead,” offered Coyne, “GL purchased both Noble Denton and Garrad Hassan to provide customers with solutions that no other classification society can match.” GL Noble Denton provides verification and certification services from design and construction to operation, including identifying safety-critical aspects of offshore production assets. It has a long record of helping operators preserve their structural assets through data gathering, condition evaluation, and inspection strategy development and implementation. GL’s computerized asset modeling, together with close interaction between the client and GL asset teams, provides offshore operators with the assurance and confidence required to work in harsh environments. In terms of risk managment, the cost of unplanned interventions can be several times greater than the activity itself. Therefore there is great value in an effective integrity and risk management program working in harmony with an offshore shutdown plan.
GL’s 2009 purchase of Garrad Hassan made it the largest independent technical adviser in the renewable energy field with about 600 engineers on staff. Along with solar and wind, ocean energy is fast becoming a leading source of renewable power. In terms of tidal and hydroelectric power, countries like Spain, Great Britain and Norway draw about half their electricity from the seas. If wind, solar and hydro energy can be combined intelligently, great strides can be made to assure future electricity supplies. “Renewable energy is an exciting field for GL,” Coyne noted. “Having both Helimax (a renewables company acquired in 2007) and Garrad Hassan within the GL network provides us with unparalleled expertise and strength in this fast-growing sector.”
In a Class of Its Own
Over the 143 years of its existence, GL has been a leader in ship technologies and their applications. It has always had strong competition, but its innovative culture and persevering character have enabled it to rise like a phoenix from the ashes – not once, but twice – to a position of renewed leadership. As the commercial shipping industry struggles with all sorts of conflicting regulations and operators search for unimagined efficiencies, GL has been a trusted adviser and partner along the way. GL’s talented management, technical expertise, global reach, and vast array of services bode well for the future and truly put the organization in a class MarEx of its own.
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HERMANN KLEIN
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Executive Interview:
THE MARITIME EXECUTIVE
34
Dr. Hermann J.
Klein
Member of the Executive Board, Germanischer Lloyd
Germanischer Lloyd’s transformation into a multifaceted classification and services organization has been largely led by one man. Listen in as he describes the company as it is today and where he sees it going in the future.
By Tony Munoz
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HERMANN KLEIN
primary responsibility is the Maritime Services segment, which includes classification and non-classification-related services such as consulting, certification, software and training. As a mechanical engineer and naval architect, research scientist and private lecturer with various previous postings at German shipyards, I am convinced that GL has to continue to promote innovative solutions and support its clients in all operational and technical respects. It is our goal to offer the highest quality consulting services to enable our clients to order and operate competitive vessels. MarEx: GL is first and foremost a classification society. Are all classification societies the same in terms of classing commercial vessels? Klein: GL is a classification society but at the same time it is a technical advisor and trusted partner for a range of The Executive Board of GL consists of three members. My primary industries with a special focus responsibility is the Maritime Services segment, which includes clason the maritime and energy sification and non-classification-related services such as consulting, sectors. Due to its in-depth industry knowledge and role certification, software and training. As a mechanical engineer and as an independent partner, naval architect, research scientist and private lecturer with various GL facilitates a great number previous postings at German shipyards, I am convinced that GL has to of standards and joint industry and research projects each continue to promote innovative solutions and support its clients in all year. It develops new tools, operational and technical respects. methodologies, standards and recommended practices to solve technical questions while reinforcing high safety and quality standards. Therefore GL is not just like other clastation is one of the issues which – like shipping – will continue to sification societies but has differentiated its portfolio in respect to shape global trade patterns. GL has expanded its business segmaritime and industrial clients. ments in accordance with our expertise and in order to offer our clients a comprehensive set of services along the lifecycle of an MarEx: The EU has established harmonization of design stanasset, whether it is a wind turbine, an offshore rig or a vessel. The dards and certification procedures for classification societies decision to diversify GL’s portfolio has proven farsighted. in Europe. Will the standardization put European shipbuilding MarEx: In the last few years GL has made numerous acquiin a leadership role for ship-integrity issues? sitions of large companies like Noble Denton and Garrad Klein: The European Commission wants to obtain mutual recognition of maritime equipment certificates issued by individual Hassan. How do you successfully manage the integration EU Recognized Organizations (classification societies) based process? on the “most demanding and rigorous standard as reference.” Klein: GL has acquired eleven companies in the last three years and, with each acquisition, we were able to implement a conThis could, on the one hand, produce efficiency gains for marine structive and well-organized transition. We take great care in equipment manufacturers since a single certification would be improving the post-merger integration process (PMI) and have sufficient. On the other hand, the role of classification to certify the whole ship will be impaired. The suitability of components established a department which deals exclusively with all mergerrelated questions. The process is continuously updated by incorfor mutual recognition has to be based on their relevance in porating the lessons from the most recent project. Each project is safety-critical systems. Otherwise this could lead to a piecemeal managed jointly with the management of the acquired company certification process in a complex asset like a modern vessel, to ensure that the needs of all employees, from both companies, which could undermine the common goal of ensuring safety at are taken into account. Our approach is market-driven as we sea. Whether the mutual recognition of certificates would put Eustrive to create a more attractive suite of services for our customropean shipbuilding in a leadership role for ship-integrity issues is ers by focusing on the strengths of both companies. an open question. MarEx: As a Member of GL’s Executive Board, what are your MarEx: The IMO has put forth the Energy Efficiency Design Inresponsibilities and how has your background as an academic dex (EEDI) for new ships to reduce greenhouse gas emissions. helped in this endeavor? Is it possible to meet these new standards and still remain Klein: The Executive Board of GL consists of three members. My profitable?
MarEx: Germanischer Lloyd (GL) is one of the top classification societies in the world. How big is the company? Klein: We are one of the top five classification societies. GL employs 7,000 engineers, naval architects and experts in various disciplines in 250 offices in 80 countries. Our staff is truly international with 100 different nationalities. We are authorized by 131 flag states to conduct statutory surveys. MarEx: GL has expanded beyond traditional class society disciplines into areas like offshore and renewable energy. What is driving GL into these peripheral fields? Klein: Safe, clean and efficient energy exploration and transpor-
J U LY / A U G U S T 2 0 1 0 THE MARITIME EXECUTIVE
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FutureShip’s ECO-Patterns…analyzes voyage data and provides a clear picture of the ship’s overall fuel consumption patterns. ECO-Practices analyzes systems data, energy efficiency data, and crew and management input to identify measures with the greatest fuel-saving potential.
Klein: The recent IMO working group on energy efficiency clarified many aspects of the EEDI and has made detailed proposals for future EEDI reduction rates and target years. GL believes it is reasonable to assume that moderate improvements in energy efficiency can be implemented at no additional cost for shipping because most measures would also save fuel. More significant enhancements, which will be required in the long-term to meet emission targets currently under discussion, require more investment, and some of the more futuristic measures require more research. However, we expect these future measures to become cost-effective when a price on emitting CO2 is established and fuel prices have gone up. At the end of June, GL conducted the first-ever EEDI certification for a large container vessel owned and operated by Hapag-Lloyd. The EEDI certificate was issued in accordance with the voluntary EEDI guidelines. MarEx: GL’s FutureShip program takes a pure “eco” approach to a vessel’s environmental impact by analyzing fuel usage, emissions, crew behavior, hydrodynamics and onboard systems. Tell us more about this program. Klein: Energy efficiency is the buzzword in all areas of shipping. Faced with tighter environmental restrictions and rising fuel costs, ship operators have no choice but to optimize ship operations, onboard systems and hull designs. In 2006, long before the financial and economic crisis, GL raised awareness among shipping lines about speed and energy efficiency. Today, slow steaming is state of the art and the majority of ship owners have reduced the average speed of their vessels in order to cut fuel costs. Our approach is basically a four-step exercise which allows the operator to achieve the maximum savings within a reasonable payback time. FutureShip’s ECO-Patterns service is the first step towards improving fuel efficiency. It analyzes voyage data and provides a clear picture of the ship’s overall fuel consumption patterns. ECO-Practices analyzes systems data, energy efficiency data, and crew and management input to identify measures with the greatest fuel-saving potential. The analysis results in suggestions for improved crew behaviors that can be implemented immediately as well as technical updates that may require additional investment. The next step is ECO-Chances, a holistic pre-check
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HERMANN KLEIN
also certified insofar as they fall under the class rules. It needs to be emphasized that not every part, e.g., every single screw, needs to be certified, and for some components random or spot checks are sufficient to meet the class rules. Therefore it is important to carry out a root cause investigation if a component has failed. At GL we have established a task force under the Chief Surveyor which, together with our Damage and Repair Department, investigates material or component failures. One of the first steps in such an investigation is to determine whether the ship has valid certificates and all surveys have been carried out in due course so that the class status was maintained. In general, a classification society could only be held responsible in cases where the surveyor in charge has overlooked damages or matters which were obvious during his attendance. If the investigation shows that the root cause was hidden at the time of the survey, a classification society could not be held responsible. In any case, we take the damage investigation very seriously at GL and we are acting proactively by giving our surveyors both initial and further training in our Training Center at GL’s head office to minimize our risk and ultimately the risks of our clients. MarEx: “Maritime solutions” is the new catch phrase in the industry. What is GL’s approach to optimizing vessel performance? Klein: The worldwide recession hit the maritime industry hard. In a timely response to the new, challenging business environment, Germanischer Lloyd restructured its Maritime Solutions
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evaluating the ship’s efficiency potential. Utilizing advanced software, such as flow simulation/optimization tools and powerful parametric modeling tools, FutureShip’s experts evaluate hull lines and bulbous bow, identify hull resistance reduction potential, and assess appendages, the propulsion system, and hull surface roughness. The main engine and machinery system are also analyzed including heat energy utilization. The fourth step is ECOSolutions, a consultancy service that improves the ship’s energy consumption efficiency. FutureShip experts analyze and optimize three focus areas as identified in the ECO-Chances service or as directly specified by the owner. MarEx: GL provides a variety of software to its customers. What training is provided for the end-user? Klein: We provide tailor-made training to our software clients. In “train-the-trainer” sessions we qualify key users to train other staff. We set up laboratories to train onboard and onshore staff for software implementation or updates. We cover the use of the software and its various applications, including how to do a good hull inspection or design a hull-inspection program. MarEx: Ship construction is supervised by class surveyors and utilizes certified materials and components. At what level should societies be held responsible when a ship’s integrity fails at sea? Klein: Vessels are generally built under the supervision of a classification society whereby the materials and components used are
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HERMANN KLEIN
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…we regularly warrant the capability of a drilling rig to operate at a certain location not only by evaluating its capability on paper but also by inspecting the rig on site to confirm that it is set up in accordance with recommendations we would have made.
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business, streamlining processes, reinforcing its global presence, and leveraging synergies wherever possible. The segment now comprises the entire range of services to the industry with the exception of classification. It has four departments: FutureShip, Systems Certification, GL Maritime Software and GL Academy. The guiding principle behind the restructuring was to deliver enhanced benefits to clients, enabling them to emerge from the crisis stronger than they were before. MarEx: The BP spill in the Gulf of Mexico has been the focus of the oil and gas industry in 2010. What must the industry do to gain back the confidence that it can manage safety and emergency response? Klein: As a starting point, it might be a good idea to look at commercial shipping and how the environmental impact of shipping has been reduced over the last several decades by stringent international regulations. Classification of offshore installations could be a good second step. It would generate a level of safety which is today dependent on the philosophy of the individual operator. In addition, the way tankers are vetted could be applied to offshore installations. Certification, verification and inspection could be applied to drilling. Environmental planning, remediation and surveys would add to the safety level as would well-design verification. Marine warranty would play an important role in providing appropriate risk assessments of offshore operations. MarEx: Considering the unlimited financial liability for spills and accidents, what services does GL Noble Denton offer operators to identify risks and minimize exposure? Klein: GL Noble Denton has specialists in most disciplines relevant to offshore oil and gas exploration, and we are recognized as a major player in loss prevention not only by regulators but also by insurers. The services we provide, such as well-equipment inspections, safety and risk assessments, warranty and asset integrity, are designed to ensure operational safety. For example, we regularly warrant the capability of a drilling rig to operate at a certain location not only by evaluating its capability on paper but also by inspecting the rig on site to confirm that it is set up in accordance with recommendations we would have made. We can readily move that model to assist in evaluating the integrity of well construction and well-control equipment on site. MarEx: Renewable energy, especially wind, is at the top of many national agendas, and GL’s merger last year with Garrad
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Hassan gave it a strong presence in this market. What are some of the projects being worked on? Klein: GL Garrad Hassan has been very active in the international offshore wind farm market. The business segment has undertaken numerous scoping and energy assessments for a number of projects, and we are assisting developers on both demonstration and full-scale projects. The scope of support has ranged from developing contract strategies to front-end engineering work, preparing bid packages for major supply contracts and undertaking project management services. The certification body of GL is also in discussions with a number of developers on various projects. MarEx: How can GL Noble Denton help operators comply with carbon capture programs? Klein: Due to our world-class expertise in gas processing and transportation, we have been advising on many aspects of carbon capture. GL Noble Denton offers a broad range of services focused on the capture-and-transport part of the carbon train, including process, safety, integrity and corrosion studies, pipeline and network modeling, and commercial systems support. We also carry out large-scale testing at our site in Cumbria, United Kingdom. MarEx: Where do you envision the growth of the organization going forward? Klein: In continuation of our expansion strategy, growth is envisioned through further penetration of current markets as well as expansion into related industries and services, with offshore vessels and offshore wind being good examples of synergistic growth. MarEx: Will class remain GL’s core business or will energy consultancy overtake it? Klein: Class has been the fundamental core of GL business in the past and will remain a fundamental core of GL business in the future. Our classification business, which consists of a fleet in service of more than 7,000 vessels and an orderbook of 1,000 new-buildings, has been reinforced by a consulting branch which provides in-depth recommendations to increase energy efficiency, thus reducing emissions and operating costs and further improving the competitiveness of our clients. Given the three business segments – Maritime Services, Oil and Gas, and Renewables – GL is in a unique position to offer comprehensive technical services and consultancy on the interfaces of the maritime and offshore energy industries on a global scale. MarEx MarEx: Thank you for your time and insights.
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EDUCATION & TRAINING
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Maritime Education
By Robert C. Spicer, CPT
Rises to the Challenge TODAY’S MARINERS ARE INFLUENCED FAR MORE BY rapid changes in regulations and the rise of instant communications than they are by the force of the sea upon which they sail. New environmental laws, changing technology, management of diverse cultures, computer program competency, and human resource compliance are some of the many challenges that demand levels of knowledge and skill greater than previously required. The modern mariner must be technically skilled and a competent business manager to boot. Captain Robert J. Becker, Academic Business Development Manager at the Maritime Institute for Technology and Graduate Studies (MITAGS) in Linthicum, Maryland, observed that today’s mariner is “technology savvy” and reliant upon computer-based technology but also believes we have an opportunity to refresh basic leadership and seamanship skills just in case technology should fail. He is developing a course to do just that.
Current State of the Industry
So what is the current state of education and training in the marine industry? The answer varies from one sector to another. According to Tina L. Woehling, Program Manager at the Global Maritime and Transportation School (GMATS) in Kings Point, New York, the economic situation for many companies and individuals is strained: “Mariners know that jobs are scarce and they must stay on top of the latest training and credentials while
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companies are scrutinizing their budgets and looking for ways to improve the bottom line.” There are a number of schools around the world which prepare workers for a maritime career. In the U.S., two well-known institutions are the U.S. Merchant Marine Academy at Kings Point and the State University of New York Maritime College (SUNY) at Fort Schuyler, New York. Graduates serve their country by pursuing careers in the armed services or the maritime industry. In Asia, Nanyang Technological University in Singapore launched its Bachelor of Science program in Maritime Studies in 2004 to meet the needs of that region. The curriculum focuses on maritime science and technology with the goal of establishing Singapore as a center of excellence for all things maritime. Dr. Nilanjan Sen, Director of Nanyang Executive Education, said, “The University is recognized for its research excellence and industry relevance and is Singapore’s first business school to achieve both AACSB International and EQUIS accreditations.” The executive program couples strong industry links with personal development opportunities. The Berkeley-Nanyang Advanced Management Program, a joint venture with the Haas School of Business at the University of California, provides exposure to western markets and Asia’s prominent role in them. The ultimate value of learning goes beyond the intrinsic satisfaction enjoyed by the individual: It improves worker performance and helps organizations achieve higher levels of productivity.
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EDUCATION & TRAINING
A combination of online learning and in-class training keeps mariners current in an increasingly complex and technological world.
Industry Sectors and Current Projects
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Captain Becker of MITAGS has routinely observed that when students apply new learning with practice in MITAG simulators, higher levels of skills are developed. Of course, the value of education has always been important to business leaders. Captain Michalis Hatzimanolis, Marketing Manager for Ulysses Hellas in Greece, posits that better education may actually yield 10 percent more productivity. Moreover, in an industry surrounded by risks, we need more education, says GMATS’ Woehling: “The value of education in the marine marketplace is of paramount importance. People’s lives, livelihoods, the environment and cargo are at stake. The risks are high and prevention or risk mitigation can be accomplished by proper education and training.” On the other side of
To properly serve all sectors of the industry, Videotel provides maritime training through a network of over 300 videos, courses and software solutions. Captain Amy Beavers of Maritime Professional Training (MPT) said her group is currently researching how to better meet the needs of its students through online training as well as numerous upgrades to its Fort Lauderdale campus so that MPT can “offer new programs and revise existing courses as regulations change.” Rick Ferraro, Client Training Manager for Lloyd’s Register Americas, has a primary focus on training middle management: “Our focus is on practical approaches to solving problems and addressing current needs.” Mr. Ferraro’s projects include training in the application of and conformance to evolving quality standards. He believes that “Training has the potential to give those in the industry the means to work smarter, improve productivity, and apply best practices.” Bridget Hogan, Director of Publishing and Marketing at The Nautical Institute in London, emphasizes the importance of soft skills as her team works on projects regarding the human element, operational best practices, and continuous professional development. In the coming decade she believes the industry will put
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the coin, Captain Milind Karkhanis, Vice President of Videotel Training Services in London, has a perspective that may be unique to only a few industries: “In many sectors, education is the foundation to build a career, but it may not be necessary in the marine industry. This is because the nature of the industry is so specific.” His point is well-taken: Training and practical experience have always been fundamental elements of the maritime experience.
We provide the tools and innovative solutions for your company’s training needs, with excellence in customer service.
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EDUCATION & TRAINING
Industry Trends
In some instances equipment manufacturers have taken a more active role in training. For example, ABB Azipod offers ship operators training to effectively use podded propulsion systems. Eric W. Schreiber, Senior Manager of ABB Marine Solutions, said that the use of ABB training simulators has reduced the time it takes to maneuver ships with podded propulsion by up to 30 minutes. The results can be seen in fuel savings for owners and thrust optimiza-
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greater emphasis on the application of best practices that are less prescriptive and more interpretive, and that the skills to apply such best practices will demand greater education. GMATS’ Woehling is working with American Military University/American Public University System (APUS) to develop various courses for students and is partnering with Old Dominion University in Virginia on a strategic partnership to expand educational opportunities with innovative projects like the Engineering Crew and the Crew Advancement programs for mariners. Irvin Varkonyi, Marketing Manager and Adjunct Professor of Transportation and Logistics at APUS, said that the trend toward cooperation between various educational institutions is likely to continue as online education grows in the marketplace. APUS has various partnerships with maritime schools like GMATS and currently offers a degree program in Transportation and Logistics that can be taken online.
tion on the pods. The course has been developed in cooperation with Aboa Mare Maritime Institute and simulator manufacturer Transas to improve azipod vessel simulation modeling. Another trend is the use of existing equipment in innovative ways. MITAGS’ Becker and his team have used their simulators for operational research projects and established simulation scenarios for six LNG terminals. MITAGS invites the pilots from those areas to use the simulators and then creates operational procedures for their clients: The program has exceeded expectations. Currently, there is a trend toward online training and education versus the traditional classroom setting when possible.
GL Academy Where experts learn more Your partner for further training in the maritime field. • Maritime Basics • Maritime Regulations • Ship Types • Ship Technology • Marine Environmental Protection • Management of Risks & Emergencies • Marine Safety Management Systems
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EDUCATION & TRAINING
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For courses that can be delivered online to self-directed learners, significant benefits are available: flexible scheduling, elimination of travel costs, and the optimization of vacation time. Maritime administrators are now more open to the concept of online training than they had been previously, and the growth of Web-based learning has been an important driver toward improved mariner education. A blended approach may be the optimal learning model, and the best system will be one that is approached from an individual perspective. In coming years, the focus will be on a combination of competency-knowledge and training, which will form equal parts of a continuous professional
development system. “We will also see alternative ways to transmit knowledge to learners,” said Lloyd’s Register’s Ferraro, who was recently introduced to a concept utilizing an application that delivered bursts of training on hand-held devices such as smart phones and PDAs. “The concept allows the student to review a small snippet of training and digest it whenever and wherever the individual happens to be,” he said. Against the backdrop of broadening regulatory requirements, companies are looking for best practices that they can use to cope with their evolving challenges. Smart phones and PDAs may be one answer. The technologically savvy mariner will rely more and more on software devices and programs to aid in decisionmaking. The use of performance support software also results in the most cost-effective solution, Captain Hatzimanolis added that a new book addressing the topic will soon be published by Dimitri Lyras, advisor to the Ulysses Hellas board, Roger Schank, and Elliot Solloway of the University of Michigan, an authority on mobile devices and learning systems. Thus the educated mariner will continue to be supported by the latest technical tools and the training to go with them. MarEx
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Robert Spicer, who holds a Chief Engineer’s license, is studying for his Doctor of Education degree in organizational learning.
THE MARITIME EXECUTIVE
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SOFTWARE
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New Developments in Maritime Software GLOBAL TRADE IS BASED ON THE CONCEPT of comparative advantage, which means that one country produces a particular product more efficiently than another because it has an advantage in terms of location, resources, skilled labor, transportation or technology. Comparative advantage involves both direct and indirect costs. Direct costs are tied to the manufacture of each individual item. Examples include bricks, nails, lumber, transportation and labor. Indirect costs cannot be tied to individual items and include executive salaries, administrative staff, rent and utilities. Transportation is a direct cost and can be significant. For soft drink companies, shipping costs can elevate the selling price of their product in foreign countries substantially. This spurs direct foreign investment as a means of circumventing the effects of freight charges, since local production is often cheaper. Thus it behooves the maritime industry to manage and control its costs as effectively as possible so it can offer the lowest possible prices to its customers. Fortunately, there is a wide range of software solutions available to help you do just that.
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By Richard Carranza
Copenhagen Shipping Exchange
If a broker needs to transport goods from point A to point B, he must find a vessel. The informatics can be daunting, which is why the Copenhagen Shipping Exchange (CPHSE) is in the process of developing a Web-based application designed to minimize the time required for this logistical necessity. Normally brokers and owners send emails to one another advertising that they are in a position to make a deal. The emails have a standard format. The problem is that brokers and owners get hundreds, even thousands, of emails per day. Sorting through them all is not an insignificant task. Now brokers and owners can send their emails to CPHSE, which has developed a “BOT� that scans the emails and stores the relevant information in a database. The two parties are then automatically connected. They can also go to the CPHSE portal and search for relevant deals. In an instant, a list is produced which matches the search criteria; agents are connected; deals are made. CPHSE forecasts the launch of its portal in November. The online service is free. Brokers and owners may also install the service within their own IT infrastructure. Emails are
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SOFTWARE
In the cutthroat world of global trade, it’s all about comparative advantage and getting a competitive edge. These products show you how.
Veson Nautical’s IMOS6
ABS Nautical’s NS5
When it comes to fleet management, ABS Nautical Systems has the answer with its software suite NS5. Comprised of 15 different modules grouped into four categories, NS5’s Maintenance Management modules are the company’s bestknown and desired products. The software is loaded onto servers and standalone PCs for instant data communication via encrypted exchanges between vessels and the home office. Maintenance is important for the most obvious of reasons: Working ships produce profits. Additionally, there are all kinds of safety regulations to comply with. Ships must be licensed to operate, and this requires having a documented maintenance and certification program in place. Vetting is an important issue since, for instance, oil companies must see that a viable maintenance program is in place before they will allow a ship to carry their cargo.
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Veson Nautical Corporation focuses on integrating all aspects of maritime operations. Its flagship software package, IMOS (Integrated Maritime Operations System), is a highly configurable solution consisting of ten core modules: Chartering, Operations, Financials, Planning, Trading, Demurrage, Bunker Management, Pooling, Data Center and Data Services. The modules are integrated to build complete Marine Enterprise Resource Planning solutions for diverse industries including oil and gas, dry bulk, chemical, energy, commodities, natural resources, mining, metals, barge, offshore and defense. Chartering, for example, offers a range of core analytical tools whereby companies compare different routes, including time and expenses. The program adjusts for seasonal changes. Since all distances, dates and costs are approximated for a voyage, a set shipping price is confidently submitted at the close of a contract. The Operations Module provides a graphical interface that helps companies visualize, monitor and simplify operations. Managers quickly access schedules, view voyage details, evaluate choices, and make informed decisions in a constantly changing environment. The Operations module interfaces with external systems to automate entry of position reports, bunker inquiries
and purchases, disbursements, and other data, thereby eliminating manual entry, improving data quality, and increasing operator productivity. The module is fully integrated with other IMOS modules, including Chartering, Demurrage, Financials, and Trading. CEO John Veson states, “IMOS6 manages commercial marine operations for charterers, vessel operators, and owners. It does everything from voyage estimating (which includes deciding which cargo to take and potential profit realization) to demurrage, to port expenses, all the way through to freight accounting. The software helps users make better decisions because they manage the entire shipping cycle from end-to-end.”
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then structured and sorted for relevance without any information leaving the company. Stefan Avivson, CPHSE co-founder, elaborates, “A year ago we had meetings with several shipping companies – the firms that actually own the ships. We soon found that their biggest problem was the amount of emails they receive on a daily basis. The owners were having great difficulty handling the flood of information, identifying prospective clients, and closing deals. Since my partner, Jonas Bruhn, and I have ample experience in the online industry, we rapidly provided a solution, thus enabling owners to focus more on identifying clients and providing services and less on struggling with the exorbitant informatics inherent in the process.” The company is currently focused on spreading the word about its new service and gathering as many emails from brokers and owners as possible to assist in constructing a robust database.
Are you addressing these risks? The Nautical Institute produces a wide range of publications aimed at identifying and managing risk on an operational basis.
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SOFTWARE
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NS5 aids greatly in this regard. The program stores historical information, projects future needs, and tracks the completion of on-going projects. As equipment is inspected and repaired, it stores the details. The data is easily transferred electronically onto forms that verify the maintenance performed. Should a regulatory authority or classification society inspect the vessel, the crew can quickly provide compliance evidence. NS5 additionally offers a category called Supply Chain Management. If money is spent too far in advance on parts, then an opportunity cost is incurred in terms of the time value of money. This can be substantial for multimillion dollar expenditures. NS5 reduces opportunity costs by tracking and managing a variety of factors. It helps get maintenance parts specified, ordered, purchased, delivered and installed in the most cost-effective and timesensitive manner. ABS Nautical Systems also offers modules in the categories of Workforce Management and Safety Management. Joe Woods, Vice President of Global Sales and Marketing, explains: “Operating an asset without a maintenance system in place poses huge risks. If there is a problem, one of the first questions asked is, ‘Let me see your maintenance records.’ There will be audits to make sure you are maintaining your equipment properly, your crew has all necessary qualifications, and you are following your own internal policies and procedures. NS5 facilitates the audit and validation process. It’s doing the right thing – allowing for safe operations, maximum uptime for your asset and your equipment, and lower overall costs.”
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SpecTec’s AMOS
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SpecTec supplies vessel management software for large vessels and cruise ships. Its AMOS (Asset Management Operating System) software offers solutions in the areas of planned maintenance, procurement, e-business, crewing and staffing, project planning, inventory control, stock management, safety and quality, and condition-based monitoring. SpecTec sees software as central to the industry due to the growing complexity of operations: increased ocean traffic, larger vessels, and higher cruise ship capacities. Maritime safety requires the application of more sophisticated computer technology. Don Roberts, Managing Director, says, “SpecTec is the world’s leading supplier of marine asset and vessel management software for the shipping, cruise, and oil and gas industries. Quality software gives owners an excellent return on investment and better systems’ monitoring and control for the crew, which is absolutely necessary for safety. What we are seeing is that only a fraction of companies use IT solutions optimally. In the IT business, there is the 80/20 rule: 80 percent of software users apply only 20 percent of software functionality. This is certainly true in the maritime industry. The challenge is to train owners and operators to maximize their software utilization rates and thus drive down costs, pump up profits, and establish a higher level of safety.”
MarineCFO
MarineCFO offers a suite of stand-alone software modules that help manage routine operations. The modules run the gamut from onboard vessel operations to financial management, but the company emphasizes that its products seamlessly transfer data between modules and key personnel, thereby reducing redundant data entry.
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SOFTWARE
The maritime industry is learning to take full advantage of the advances in industrial software. Vessels and company headquarters exchange information via satellite and wireless access points using email and direct data linkages. Communications are fast, secure and real-time, facilitating efficient data exchange among charterers, vendors, customers, administration and crew. The industry is moving toward higher software utilization rates to eliminate redundant data entry and data entry error. The net effect is lower transaction costs, lower operating costs, lower direct and indirect MarEx costs, and higher profits.
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Richard Carranza lives in Montgomery, Texas. THE MARITIME EXECUTIVE
Caring For The CREW™
Putting It All Together
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For instance, normally, when a captain completes a job, he must write the event in his log and notify dispatch. Dispatch then notes the event and creates a client vessel report and notifies accounting, where a record of the event is duplicated. Ultimately, accounting generates an invoice and submits this to the client. With MarineCFO, this is all done in one step. The captain logs the information into the Vessel Live Module. Vessel Live electronically transfers the event to the Marine Operations Management Module, where a client vessel report is generated. Simultaneously, the Marine Operations Module forwards the client vessel report to accounting, where an invoice is produced and sent to the client. President Joe Galatas explains, “Where I think we deliver the most value is our fully integrated system. We streamline the process dramatically when it comes to data input. You create more
of a data warehouse where people can use what they need rather than having all these disconnected systems. There is no redundant data entry.” MarineCFO focuses mainly on the workboat and barge sectors of the industry. A unique aspect of its software is that it comes in two versions: Enterprise and Web-based. The Enterprise edition can be completely customized and retrofitted to the needs of the client. The Web-based version cannot be customized although it offers most of the features and services found in the Enterprise edition. MarineCFO also offers other modules for software integration: Personnel Management, Fleet Maintenance, and Financial Management.
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MEDICAL
By Barbara Saunders
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Is There a Corpsman Onboard?
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MEDICAL SUPPORT IS, OF COURSE, A VITAL ELEMENT in the maritime picture, yet it receives scant attention. Discussions of safety tend to focus on how to prevent an injury or accident from happening, and not enough time is spent on emergency planning and the treatment of an injured victim after an accident occurs. Fortunately, a diverse array of maritime medical supply and service concerns has evolved over the years to provide firsthand treatment to injured mariners. From training of onboard medical personnel to suppliers of equipment, personnel, medication, special transport, advisory services and more, it’s all “out there” to provide for the medical needs of seafarers.
MITAGS
The Maritime Institute of Technology and Graduate Studies (MITAGS) in Linthicum, Maryland is among the organizations that provide medical training for mariners. To meet the qualifications for a Medical Person in Charge (MPIC) certification, its course spans 70 hours over two weeks. Qualifying for what MITAGS terms “Med Pro” (Medical Care Provider) takes one week. Every licensed deck and engineering officer is required to have the Med Pro certification. “It’s not really the hours but the competencies covered,” said James Clements, head of MITAGS’s Department of Safety, Security and Human Factors. In other words, a mariner does not have to spend a set number of hours in classes but must cover a set agenda. The courses comply with the International Maritime Organization’s (IMO) Standards of Training, Certification
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and Watchkeeping (STCW-95). “IMO provides the guidelines for a model course,” Clements noted. The required coursework need only be completed once in a lifetime as there is no standard requirement for recertification. “However, there are companies that require recertification every five years,” he added.
Anderson-Kelly Associates
Meanwhile, a host of companies provide shore-side services for ship operators and, where applicable, seafarers. For instance, Anderson-Kelly Associates specializes in substance-abuse testing and medical exams. The exam roster includes three types of fitness-for-duty evaluations: pre-placement, periodic update, and return to work. Among its other offerings are support to Military Sealift Command contractors and medical surveillance programs to reduce occupational injury or illness from exposure to hazardous materials. Functional capability assessments, independent medical evaluations and immunizations are also part of Anderson-Kelly’s portfolio. Based in Mount Olive, New Jersey, the company has a global network of providers so it can service areas where its clients operate. Executive Vice President Mark Kelly said that the company is having “a record year. Business is up 10 percent. I don’t know why.” He later mused: “I think maritime employers are embracing medical services across the board. In the last two or three years, there’s been a shift in philosophy. The pool of employees is shrinking. It’s a highly skilled but aging workforce, and employers are concerned about that.” While Anderson-Kelly tends to
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MEDICAL
Skilled medical personnel can save both lives and money. specialize in the new hire,, the company also provides an advisory service for injured seafarers, where case managers follow up with their onshore medical care.
A Message to Workboat Companies I have walked in your shoes.
MedAire
Meanwhile, New York City-based FutureCare focuses exclusively on providing managed care services for injured or ill mariners – and their employers. “Every minute can count,” said Christina DeSimone, President and CEO. “We assume the role of medical advocate to make sure the crewmember gets quality care but at the right price.” DeSimone also employs RN care managers for a 24/7 Help Line, who find the right affiliated doctors for a given type of advice. For instance, while repairing the blade of a turbine in the engine room, a piece of metal flew into an engineer’s eye. The front-line response was to locate an ophthalmologist quickly, and the advice that resulted probably saved the mariner’s eye. An RN supervises each case from the beginning, discussing with the patient and physicians the proposed course of treatment. The RN is capable of coordinating outpatient or rehabilitative treatment and proposing a plan of recovery or repatriation. The RN care manager determines which procedures are really necessary and negotiates the cost to prevent abuse. “It is extremely difficult to persuade the doctor and the hospital that they have
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operational efficiency and improve financial performance in all operating areas. I was so impressed with the software and the impact it had on the business, I joined the MarineCFO team. Contact me and let me show you how we can help your organization improve efficiencies, lower costs, and better serve your customers.
“
“MarineCFO presents a robust solution that is configurable to our business model and is capable of expanding as we grow our business.”
”
Jim Townsend, CIO Marquette Transportation.
THE MARITIME EXECUTIVE
FutureCare
As a former senior executive for a workboat company I understand the challenges of operating your company. I was challenged to find a software solution that would streamline the business and assist our operation in problem areas. I chose pr MarineCFO, and it proved its value many times over. MarineCFO helped us gain
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Advisory services, a growing subset or the maritime medical support field, vary greatly in scope and scale. MedAire, for instance, is a diversified company that handles remote medical emergencies in both the aviation and marine industries, serving commercial airlines, business jets, yachts and commercial shipping. The Tempe, Arizona-based company provides its own training courses, which conform to STCW-95 standards for commercial ships. MedAire also supplies environment-specific medical kits, automated external defibrillators, and is a wholesaler of pharmaceuticals. MedAire has an established network of Global Emergency Response Centers, which handle calls 24/7. A network of Registered Nurse (RN) care managers field the initial calls and locate affiliated, board-certified physicians to provide medical advice. The teams handle 4,000 calls per month and its database includes some 15,000 hospitals and clinics in 5,000 cities around the world. “The risk of illness and injury is imminent when crews work and live at sea,” said Grant Jeffery, MedAire’s CEO. “Therefore, it’s to the employer’s benefit – and part of his duty of care responsibility – to have an established plan and the onboard medical resources necessary to treat the patient quickly and efficiently so he can be cleared for duty.” To help mitigate the risks, MedAire’s board-certified physicians provide medical care via the airwaves to treat acute emergencies and occupational health matters. “If further medical care is required, we manage the medical oversight, logistics and transportation of getting the patient to credentialed shore-side care and report back to the employer,” he added.
MarineCFO Live! is a web-based, no-hassle software solution for small & medium-sized workboat companies to manage personnel & crew, jobs & billing, maintenance & schedules. All without the need to install servers & software.
MarineCFO Enterprise is a robust software E solution to automate business processes all the way from the boat straight through dispatch, personnel, maintenance and finally financial reporting. It is modular, enterprise-ready, and customizable.
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medical performed unnecessary procedures – at an excessive cost – after the fact, when the seaman has been repatriated,” DeSimone observed. The average cost of a mariner illness is $7,000 and the average cost of a pre-employment medical exam is $250, DeSimone maintained, adding that “Typically, a shipowner will pay 50-80 percent more if there is no medical advocate.”
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EMS Offshore Medical Services
THE MARITIME EXECUTIVE
50
Still another company utilizing telemedicine is EMS Offshore Medical Services, owned by parent company AMR (American Medical Resources). AMR operates ambulance services in 38 states and the District of Columbia. EMS’s core business involves placing paramedics on commercial vessels, oil and gas installations, and other remote sites. As part of that work, it maintains 24-hour instant video and audio access to physicians via state-ofthe art telemedicine links. EMS employees also help with a variety of other functions when not actively attending to ill or injured crewmembers. These include job safety analysis, on-deck observation, on-site employee physical exams, and drug testing. They also promote workforce hygiene, conduct first response/safety training, maintain next-of-kin databases, and assist with routine telecommunications. In addition, they may provide administrative support such as coordinating travel and customs matters and helping maintain vessel logs. “Being part of AMR is a vast advantage for EMS Offshore Medical Services,” said General Manager Ed Powers. “AMR em-
Eric Friend and Don Merkle of MITAGS Provide Instruction in Medical Course.
ploys more than 17,000 EMS professionals and support staff, so we can quickly draw from a huge paramedic workforce. Through other AMR subsidiaries, EMS Offshore Medical Services can also provide worldwide fixed-wing medical transports. In addition, AMR’s sister company, EmCare, is a leading provider of hospital emergency department staffing, and that resource is also available.” With a wide range of services and facilitators to choose from, shipowners and operators have every incentive to provide for any and all medical emergencies. Better yet, they can do so without MarEx breaking the bank.
Barbara Saunders is a writer and editor based in Houston.
See the Possibilities
Veson Nautical gives you a clear view of your shipping operations BOOST EFFICIENCY. RAISE REVENUES. REDUCE RISK.
The latest Integrated Maritime Operations System (IMOS) streamlines critical processes: • Chartering • Operations • Financials
• Veslink — communicate with vessels • Trading — manage and monitor positions • Demurrage — improve control
IMOS is comprehensive, flexible, and intuitive — generating great results for charterers, ship owners, and operators throughout the world. Find out more at www.veson.com
Boston +1.617.723.2727
O
Athens +30.694.854.2780 Rotterdam +31.6.112.88.99.1
PREVE
Singapore +65.6225.4881
Powerful, proven software solutions for the maritime shipping industry
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7/24/10 3:28 PM
Celebrating 20 years as North America’s LARGEST oil spill response training event & exhibition in the energy & maritime industries.
October 19-20, 2010 | Tampa, FL Register at www.cleangulf.org with VIP code: RESPOND4 to receive $100 off registration
Deep Offshore
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Deep Offshore
EPA Region 4 Chemical Emergency Conference
7/23/10 9:18 PM
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SECURITY
THE MARITIME EXECUTIVE
52
Combating Piracy By Edward Stewart
on the High Seas
The best defense is to deter an attack before it can happen. PIRACY IS SAID TO BE THE SECOND oldest profession in the world, and those who make a living by plying the oceans looking for easy prey have once again, in the twenty-first century, reared their ugly heads. Almost every day we read about the phenomenon of modern-day piracy and get reminders of what they might have been like in the old days from Hollywood movies.
Hot Spots
Pirate activity in the Indian Ocean and Gulf of Aden has escalated sufficiently in recent years to reach the world’s press and spawn a number of run-off businesses, both international and domestic. The ransom monies received in Somalia have allowed the mass development of previously desert-like regions, where people now drive luxury cars, own luxury estates and have Western-style conveniences. There have even been reports of “cooperatives” being established where local “investors” can financially support the next hijacking attempt and expect to receive a “dividend” when the ransom is paid. As Somalia has profited from pirate activities, risk and security companies which previously focused on the Middle
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East and West Africa as their main areas of operation have now set up offices in countries like Kenya, Djibouti and Oman, where they run anti-piracy programs for shipping majors worried about their vessels being attacked. For the most part, these companies are established and professional, run by former Special Forces personnel. Their reputations are built upon the successful delivery of security solutions to their clients who choose to operate in dangerous or new markets and want their assets, people, property and reputations protected. At the other end of the scale, there are operations being run from a mobile phone and a laptop in a spare room, where a chance encounter with a shipping company has led to someone providing vessel protection teams to tankers. These “operators” have little or no experience working at sea, rarely have access to properly trained personnel, never have the correct insurance in place and often make up the answers to problems as they are encountered. Perhaps the best example of this was the MV Biscaglia that was hijacked close to Port Aden and notoriously famous for the security team’s jumping overboard after being caught off-guard.
Three Levels of Security
Protecting vessels and offshore assets is not as simple as many shipowners think. The popular notion that anyone can stand onboard a vessel with a rifle and shoot at approaching vessels is one option, but before that situation is allowed to develop there are proven methods for both detecting and deterring interest from those motivated to attack a ship. With professional guidance and training, most commercial shipping crews are able of achieving 75-80 percent security on their vessel. This includes using razor wire or barriers to create a defense, positioning water hoses correctly, ensuring Best Management Practices are being followed, and using crew solely for the purpose of keeping a lookout in the most high-risk areas. Combine this with joining a Coalition Navy-escorted transit through the Gulf of Aden, registering with the UK Maritime Trade Organisation and the Maritime Security Centre-Horn of Africa, and there is a very good chance that the vessel will be one of thousands of ships to sail through the region safely. The next 15-20 percent of security is achieved by hiring the services of a security company that has the skill-set to deliver additional training to the crew, advise on passage planning based on attack information, and provide specialist equipment to detect and deter earlier and faster. Using non-lethal means, i.e., not carrying
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SECURITY sail through the Gulf of Aden, there is a minority who make themselves ideal targets for the pirates’ attention because they do not adopt any appropriate measures nor follow the most basic published guidelines, perhaps bowing to pressure from the shipping company to cut costs and sail faster to the discharge port.
Currently the Indian Ocean is experiencing its annual monsoon conditions that affect the area between the end of June and early August every year. As the seas become rougher and more dangerous, it limits the pirates’ ability to operate so far offshore in their small craft and there is generally a lull in the number of attacks. What does happen, though, and this is evidential, is that pirate groups move north to the area around the Bab el’ Mandeb Straits at the southern end of the Red Sea. This relatively sheltered stretch of water is a natural choke point for ships and provides a good hunting ground for their next hijacking. While pirates have been called many things, they cannot be accused of suffering from a lack of motivation or ability to operate offshore at up to 1,000 nautical miles from their own coastline for sustained periods of time. There have even
Edward Stewart is the Maritime Manager
53
THE MARITIME EXECUTIVE
weapons, is still the most popular choice, not only because of the legality issues but because it is favored by flag states and also considerably cheaper. An unarmed team of security specialists who are able to keep a dedicated lookout every minute of the transit is invaluable, and there is yet to be a hijacking of any vessel with a security team embarked. The final five percent of surety for an owner comes in the form of an armed team of security specialists, who will carry with them a mix of long-range, sniperlike rifles and semi-automatic weapons capable of engaging the pirates at their own game. International law prohibits the free movement of weapons, so logistics and the embarking and disembarking points are limited; but an armed security team provides a guarantee which the other methods don’t. Of all the vessels that
A Moving Target
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Deterrents like razor wire make the vessel more secure.
been instances where fishing trawlers have been hijacked, not for ransom but because they provide a stable platform from which future hijackings can be launched and the pirates can catch fish for sustenance. Public opinion tends to focus upon passenger and cargo ships that are at risk of piracy, but there are in fact a multitude of other marine platforms – including seismic survey and pipe-laying vessels, drilling rigs, and support service installations and vessels – in the offshore exploration industry which are also affected by the threat of attack and hijackings. The East Coast of Africa has been an active area for a multitude of oil and gas companies looking for new discoveries from the previously unexplored subsea reservoirs along the Mozambique, Tanzanian and Kenyan coasts. Protecting these operations is complex, to say the least, and requires significant investment in equipment and assets, including guard boats and the establishment of strong bonds between the national governments and all stakeholders. Working on the principles of deter, detect, delay and deny, robust security plans can be created to ensure that people and property can function safely in these hostile waters without immediate worry of attack from roving and often well-organized bands of pirates. In this situation as in so many others, it pays to be prepared. MarEx
for Drum Cussac Asia.
Maritime Medical Services • Billing Review And Discounting • Case Management And Review • Global Repatriation Services • Hospitalizations • Medical Case Management • Medical Lockers
• Medical Transportation • Occ Health Services • Ship Board Medical Care • Specialty Referral • Vaccinations • Drug Screening
fax: 877 684 3038 • P.O. Box 2527 • Morgan City, LA 70380
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877-MMS-Gulf
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Directory AMO – STAR Center
American Military University
STAR Center (Simulation, Training, Assessment & Research) is the primary training provider for mariners represented by American Maritime Officers and the top choice of maritime professionals. Located near Fort Lauderdale, Fla., STAR Center is ISO certified and provides state-of-the-art full-mission simulation training, SIGTTO-certified LNG training and a full range of U.S. Coast Guard certified courses.
Broaden your mariner skills by enrolling in online degrees in Transportation & Logistics and over 100 other degrees and certificates at the American Military University. Learn more through http://www.apus.edu/openhouse/ schedule. We accept transfer credit earned in approved courses from maritime academies such as the Global Maritime and Transportation School (GMATS) and accredited institutions of higher learning.
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STAR Center 2 West Dixie Hwy Dania Beach, FL 33004 Toll-Free: +1 800 445 4522 T: +1 954 921 7254 www.star-center.com
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AMU/APU 111 W. Congress Street Charles Town, WV 25414 T: +1 877 755 2787 info@apus.edu www.apus.edu
Castle Shipboard Security Program
GL Academy
After years of study and researching piracy and terror at sea and training in defensive security techniques, Kuhlman Services, LLC joined with the SIG SAUER® Academy to create the Castle Shipboard Security Program, which provides seafarers with the skills necessary to defend themselves effectively against piracy attacks.
For fifteen years GL Academy, GL’s further training institute, has been offering seminars in the field of shipping and management systems. Each of our courses are offered as open or “in-house” seminars across the United States, supported by a global network of over 120 countries. Enhance your knowledge and develop your individual competences-and your scope of work will expand. As you progress, your company will progress with you.
THE MARITIME EXECUTIVE
Castle Shipboard Security Program T: +1 603 686 5604 F: +1 603 773 2113 www.sigsaueracademy.com
GL Academy T: +1 713 543 4356 T: +1 281 513 2325 Gl-academy-Houston@gl-group.com www.gl-group.com/glacademy
Lloyd’s Register North America
maritime professional training
The top quality training offered by Lloyd’s Register North America can keep your people up to date with the latest developments in our constantly moving industry. We deliver tailored, relevant courses that feature real life scenarios – training that’s shaping businesses and the future of the marine industry. With a global community of experts dedicated to quality and safety, we offer a level of choice few can match.
MPT offers students an instructor based teaching philosophy, the convenience of our Fort Lauderdale, Florida location, state of the art facilities, a diverse class selection for all levels and abilities, and so much more. As an approved school offering license training for the past 25 years, we realize that our success depends on your success!
Lloyd’s Register North America 1401 Enclave Parkway Houston, Texas 77077 T: +1 281 646 6214 lramericastraining@lr.org www.lr.org/marine-training
Maritime Professional Training 1915 South Andrews Avenue Fort Lauderdale, FL 33316 T: +1 954 525 1014 info@mptusa.com www.mptusa.com
Mid-Atlantic Maritime Academy
mitags
Deck Courses include: STCW & Entry through Unlimited Master, including Limited Licenses & Full bridge mission simulator interacts with Navigation Lab. Gravity Davit & Lifeboat for unlimited survival craft training. Engineering Courses include: Entry through Chief Engineer offered through sister school, The Maritime University. & Life-sized engine room simulator interacts with bridge. Interactive simulated engine systems. Hands’ on trainers.
The Maritime Institute of Technology and Graduate Studies (MITAGS) exist to enhance the professionalism of mariners through the development of quality maritime advancement, training, education, and safety programs. MITAGS is situated on an 80 acre campus located in Linthicum Heights, Maryland, minutes from major transportation facilities; the Baltimore Washington Airport and the adjacent Amtrak train station.
Mid-Atlantic Maritime Academy 5705 Thurston Avenue Virginia Beach, VA 23455-3336 T: +1 757 464 6008 Info@MamaTrains.com www.MamaTrains.com
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MITAGS 692 Maritime Boulevard Linthicum, Maryland 21090 Toll-Free: +1 866 656 5568 www.mitags.org
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MITA
The Workboat Academy’s 24-Month Workboat Mate Program When Your Company Needs Pre-Screened, Better Trained, More Qualified Mariners in Less Time
MITAGS/PMI’s Workboat Mate Program recruits, trains, and delivers enthusiastic and motivated individuals to the maritime industry.
Finally some good news on the waterfront and a timely solution to Foss’ challenge of our
Benefits to Your Company
continued practice of bringing
n Pre-screened recruitment process
employees up the Hawsepipe
n All candidates will possess their MMD document as well as their TWIC card prior to enrollment
and into the wheelhouse.
n Highly trained graduates
–Norm Manly,
n 100% retention from graduates
Foss Maritime
n Minimal cost (candidate pays for majority of training that your company would typically provide) n Graduates receive Mate 1600 GRT Near Coastal, 500 GRT Ocean, and Mate of Towing
SAUSE BROS MITAGS: 692 Maritime Blvd., Linthicum Heights, MD 21090 PMI: 1729 Alaskan Way South, Seattle, Washington 98134 Toll-Free: 866-656-5569 | www.mitags.org Toll Free: (888) 893-7829 | www.mates.org
www.workboatacademy.com
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United States Coast Guard Approved Courses
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Directory Nanyang Technological University
The Nautical Institute
NTU is recognised for its research excellence & industry relevance. The Nanyang Business School (NBS) is Singapore’s first business school to achieve both AACSB International & EQUIS accreditations. The school’s flagship MBA programme was ranked number 27 in Financial Times’ Global MBA Rankings 2010. This is the highest a Singapore-based business school has ever been ranked, ahead of several world-renowned universities.
The Nautical Institute is the international representative body for maritime professionals and others with an interest in nautical matters. We provide a wide range of services to enhance the professional standing and knowledge of members who are drawn from all sectors of the maritime world.
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Nanyang Tech. University S3-B2A-20, 50 Nanyang Avenue, Singapore 639798 T: +65 6790 4042 execmba@ntu.edu.sg www.execed.ntu.edu.sg
THE MARITIME EXECUTIVE
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The Nautical Institute T: +44 20 7928 1351 pubs@nautinst.org www.nautinst.org
Pacific Maritime Institute
Resolve Maritime Academy
The Pacific Maritime Institute is a nonprofit vocational training center for individuals seeking to enter the maritime profession and for professional mariners seeking to advance their careers.
Resolve Maritime Academy is a Det Norske Veritas Certified Marine Training Center utilizing ISO-9000 guidelines, and approved by the Norwegian Maritime Directorate, United Kingdom Maritime and Coast Guard Agency and U.S. Coast Guard. Expert instructors utilize our shipboard firefighting simulator to train students in safe, effective shipboard emergency response.
We provide quality training using new technologies and teaching techniques –we prepare our students skills to succeed in today’s merchant marine. Pacific Maritime Institute 1729 Alaskan Way South Seattle, WA 98134-1146 Toll-Free: +1 888 893 7829 admin@mates.org www.mates.org
Resolve Maritime Academy T: +1 954 463 9195 train@resolveacademy.com www.resolveacademy.com
Seagull AS
TEEX
Seagull is the world leader in computer based training modules based on statutory regulations and industry requirements. The Onboard Library is “a classroom at your fingertips” for comprehensive onboard maritime training. All courses are self-directed, multi-media computerbased training. Each course has defined learning objectives and is organized into short, accessible chapters. The content is delivered through sound, illustration, animation & informative text.
TEEX’s Certified Safety and Health Official certificate program (CSHO) has proven beneficial to professionals in the fields of human resources, risk management, safety, health and environmental protection. CSHO tracks include general industry and construction safety, with specialty tracks in oil and gas, petrochemical, aviation, emergency response and, now, maritime safety.
Seagull AS Gamleveien 36 • P.Box 1062 N-3194 Horten • Norway T: +47 33 03 09 10 F: +47 33 04 62 79 www.seagull.no
TEEX 301 Tarrow College Station, TX 77840 Toll-Free: +1 (877) 833 9638 T: +1 (979) 458 6800 www.teex.com
Usmma – gmats
Videotel
The Global Maritime and Transportation School (GMATS) at the U.S. Merchant Marine Academy is a World Leader in Professional Maritime and Intermodal Transportation Education and Training. Located in Kings Point, New York, we are an ideal location for training and conferences. We offer more than 140 professional education and training programs.
Videotel provide sophisticated maritime training materials for tankers, container, refrigerated cargo, passenger and RO-RO ships, offshore operations, pilots, surveyors, port operators, and more!
USMMA – GMATS 300 Steamboat Road - SH Kings Point, NY 11024 T: +1 516 726 6100 gmats@usmma.edu gmats.usmma.edu
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Our 35 years experience means we know the industry and how to deliver the best quality training solutions to meet real training needs. Videotel T: +1 631 465 8865 F: +1 631 465 8880 mail@videotelmail.com www.videotel.co.uk
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AMOS is the history of Software at Sea For 25 years, SpecTec has been dedicated to Information Technology solutions for merchant ships, oil rigs and defence vessels. We are proud of this achievement and would like to thank all of our Customers for their trust & loyalty.
specialist
FPSO Opportunities • • • •
FPSO Executive - Global FPSO New Construction - North America FSRU Manager - North America FPSO Operations Manager - North America
• Offshore Instillation Manager - North America • Marine LNG Project Engineer - Houston, Texas • DP Marine Manager - US Gulf, Mexico & Brazil
Contact us now to find out more on 954-467-9611, email offshore@faststream.us or visit www.faststream.us
www.spectec.net-info@spectec.net
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Laurence Levy, Chairman & CEO, Rand Logistics
A Conversation With Matthew Simmons
THE MARITIME EXECUTIVE
July/August 2010
K E V I N P. C O Y N E – H E R M A N N J . K L E I N / G E R M A N I S C H E R L L O Y D
Standard of excellence
Global SaleS and Support
Captain Kevin P.
Coyne
extenSive ranGe of productS and ServiceS onGoinG product development
Executive Vice President Germanischer Lloyd (USA)
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clockwise from top left Joint Support Ship dutch navy damen Stan tuG 1605 damen Stan tuG 2208 damen Stan tuG 2909 damen aSd tuG 2810 damen Stan patrol 4708 - built under licenSe by bollinGer ShipyardS
D A m e N s H i p YA r D s G o r i N c H e m
4202 ms Gorinchem
p.o. Box 1 4200 AA Gorinchem
Dr. Hermann J.
Klein
Member of the Executive Board Germanischer Lloyd AG
The Maritime Executive, 3200 S. Andrews Ave., Suite 100, Ft. Lauderdale, FL 33316
member of the DAmeN sHipYArDs GroUp phone +31 (0)183 63 91 74 fax +31 (0)183 63 77 62
PRSTD STD US POSTAGE PAID CPC
industrieterrein Avelingen west 20
Maritime Education Rises to the Challenge
americas@damen.nl www.damen.nl
the Netherlands
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