Tanker Shipping & Trade February/March 2018 by rivieramaritimemedia

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February/March 2018

contents

Regulars

Tankers & Markets Editor: Craig Jallal t: +44 20 8370 1717 e: craig.jallal@rivieramm.com

volume 12 issue 1

3 COMMENT 4 CONTRACTS & COMPLETIONS 11 ANALYSIS 24 LEGAL BRIEFING 40 LAST WORD

Tanker finance

6 The market outlook is positive and the temptation to contract tankers is strong

Singapore

12 A purge of older bunker barges is boosting the average age of the Singapore tanker fleet 16 Singapore’s Union Marine Management Services opens a full-service office in Oslo 16 MTM Ship Management rejects fleet size with its “owner-first” policy 18 Commercial management of chemical tanker pools will drive growth for Womar Logistics 19 Tanker naval architect Focal Marine & Offshore has designs on the gas sector

Editor: Edwin Lampert t: +44 20 8370 7017 e: edwin.lampert@rivieramm.com Brand Manager – Sales: Paul Dowling t: +44 20 8370 7014 e: paul.dowling@rivieramm.com Sales Manager: Chris Tims t: +44 20 8370 7015 e: chris.tims@rivieramm.com Head of Sales – Asia: Kym Tan t: +65 6809 3098 e: kym.tan@rivieramm.com Production Manager: Ram Mahbubani t: +44 20 8370 7010 e: ram.mahbubani@rivieramm.com

Ship description

Subscriptions: Sally Church t: +44 20 8370 7018 e: sally.church@rivieramm.com

Green tanker

Korean Representative: Chang Hwa Park Far East Marketing Inc t: +82 2730 1234 e: chpark@unitel.co.kr

20 Innovation is the byword with this Suezmax design

26 Teekay’s shuttle tankers reduce auxiliary engine fuel costs by using gas from the crude oil cargo

Cargo pumps

28 Wärtsilä enhanced pump control system could eliminate the pump room; increasing cargo capacity 29 Framo to supply ten Maersk LR2 tankers with in-tank pump technology

Gas technology

30 The use of ultrasonic technology to detect leaking fire-fighting systems in-situ

Tank cleaning

32 Taking an integrated approach to specifying tank equipment 37 Incorporating revised tank cleaning standards into shipmanagement and operations

Japanese Representative: Kazuhiko Tanaka Shinano Co., Ltd. t: +81 335 894 667 e: kazujt@bunkoh.com Chairman: John Labdon Managing Director: Steve Labdon Finance Director: Cathy Labdon Operations Director: Graham Harman Head of Content: Edwin Lampert Executive Editor: Paul Gunton Head of Production: Hamish Dickie Business Development Manager: Steve Edwards Published by: Riviera Maritime Media Ltd Mitre House 66 Abbey Road Enfield EN1 2QN UK

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Tanker Shipping & Trade | February/March 2018

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COMMENT | 3

FINDING TANKER FINANCE IN A DIFFICULT FUNDING ENVIRONMENT

T Craig Jallal, Tankers & Markets Editor

www.tankershipping.com

he eagle-eyed reader will have noticed that the picture alongside the story is that of a different person, or that Edwin Lampert has suddenly aged! Don’t worry, Edwin is still very much part of Riviera Maritime, and he is now head of content. My name is Craig Jallal, and I am the new tanker and markets editor. I will be working closely with Edwin and the team, providing commentary on the markets. My background is mainly shipping analysis, starting as a staff writer (later editor) on Lloyd’s Shipping Economist, before joining Dr Martin Stopford’s team at Clarksons Research Services. I have also worked in ship finance and in the PR sector. I look forward to engaging with you all, as we try to understand how and why our markets behave as they do. And what of the market? The forward orderbook is diminishing and the major tankerbuilding shipyards have newbuilding slots open in 2019/2020, analysts reported. As a consequence, newbuildings are becoming more attractive. Finding funding is the issue. Under new banking rules, the European banks have to maintain a much higher level of capital and shipping performs poorly in the internal race for capital. In addition, the internal structure of shipping departments is more expensive. One banker stated that half his staff members were engaged in meeting KYC, FACA, tax, ethics and compliance regulations. So banks favour corporate finance and ongoing fees and margins from the cross-selling of services, and look to scale up through organising consolidation and mergers of clients. This favours the larger US$250M-plus capitalised client base, at the expense of the smaller clients. Banks still provide the majority of finance in shipping, but it is much harder to find. Chinese leasing companies such as ICBC Leasing have stepped into the void left by the departing shipping banks. Naturally, they are financing vessels under construction in Chinese shipyards, but not exclusively, and the ship leasing side of the business is growing rapidly. ICBC Leasing head of shipping Yang Changkun revealed that the portfolio is now US$7.1Bn, which

is approximately the same size as that of Fortis Bank’s shipping book in 2008. Mr Yang's pitch was that ICBC Leasing is looking for more co-leasing partners – a partner runs the ship while ICBC Leasing enjoys the stability of earnings. But what about small to medium enterprises (US$20-200M capitalisation), which comprise the bulk of shipping companies? Who will finance them? Alternative finance arrangers have stepped in to fill the gap left by the effective closure of the KS market and the retreat of the banks. The alternative finance providers combine layers of finance from different sources. Tapping the US market can be one source. US capital markets are at an all-time high, but not the shipping sector, which some investors see as an indication that there is latent value in investing in shipping funds. Another source of funds for the alternative finance provider are pension funds looking to invest a tiny proportion of their funds in high-risk alternative investments, for which shipping fits the profile. Other sources include high-net-worth individuals in traditional maritime nations like Norway and Denmark who understand the shipping cycle and wish to invest indirectly via funds created by the alternative finance provider. The alternative finance providers maintain a wide-ranging network of investors to assemble the required level of funding. This is a complex process, and not cheap. Alternative finance is project-led, and mainly geared toward the five- to 10-year-old secondhand purchase. Newbuildings can be entertained, but as one alternative finance provider stated, anyone who has pursued a newbuilding strategy in the last 20 years has not made the expected returns, and such projects cannot be justified to investors. Investors are looking for exposure to earnings, which requires operators with a good track record. It is expensive ship days that kill these sorts of projects, noted one participant. Finally, the exit strategy must also be clearly defined at the start. Exit strategies include liquidation through the sale of the asset, sale and leaseback of the asset, or even an IPO, although that is seen as an unlikely event in the current climate. TST

Tanker Shipping & Trade | February/March 2018

4 | CONTRACTS & COMPLETIONS

2018 – A YEAR OF CONSOLIDATION EXPECT MORE MARKET RATIONALISATION, BUT DON’T WORRY, THE GOOD TIMES ARE NOT OVER by Barry Luthwaite

ollowing a two-year bullish market there is a consensus of opinion that 2018 will be a year of consolidation of gains – but the good times are not over. Global trade is growing and giving rise to optimism. The year got off to a good start with reasonable charter rates for tankers, and oil majors offering longer charters.

The price of oil has risen to US$70 a barrel, its highest level for three years. The price could inch higher after more cutbacks in output by OPEC members. Tanker owners have reasons to be encouraged that another good year is underway. That said, bunker charges will increase due to the rising price of oil. Contrary to expectations

shipyards still have a healthy intake of business. Owners are buoyed by the fact that with tougher emission controls and other environmental measures legally enforceable from the start of 2020, non-compliant owners will be caught out. With tier III engine newbuildings facing rises of US$1-3M, owners will welcome a more level playing field.

The consensus is that there will be a large volume of recycling by owners of older tonnage as their vessels become more uncompetitive. Charterers are at last getting the message that modern vessels with legislative compliance are key to global trading. The market is identifying several fleet replacement programmes: a two-year run from now is ideal for ships to begin trading when older vessels face disposal in early 2020. Another factor is that we are approaching a maximum 15-year lifespan for tankers, which was unheard of just a few years ago. The climate is changing fast and much for the better. Tankers were the saviour of many shipyards in the wake of the bulk carrier drought, but now normal order intakes have resumed for the latter, giving builders a much-needed boost. Debts are being reduced. With bankruptcies and mergers having dominated the headlines in 2017, a settling-down period has begun. There are now much more rigorous checks on validity

TANKERS ON ORDER BY VESSEL TYPE AND VESSEL COUNT GRAND TOTAL

948

VLCC

117

SUEZMAX SMALL TANKER

95 19

SMALL PRODUCTS

SMALL CHEMICAL

PANAMAX LR1 MEDIUM TANKER MEDIUM PRODUCTS

36 5 14

MEDIUM CHEMICAL

HANDYSIZE MR1

52 116

HANDYSIZE HANDYMAX MR2

192 141

AFRAMAX LR2 AFRAMAX CRUDE

The wheel of fortune is now spinning in favour of both owner and shipbuilder, with an order backlog of 948 tankers

Tanker Shipping & Trade | February/March 2018

www.tankershipping.com

CONTRACTS & COMPLETIONS | 5

TANKERS ON ORDER AFRAMAX CRUDE

AFRAMAX LR2

HANDYMAX MR2

HANDYSIZE MR1

MEDIUM CHEMICAL

MEDIUM PRODUCTS

10 vessels

141 vessels

192 vessels

116 vessels

52 vessels

33 vessels

1,142,000 dwt

15,394,515 dwt

9,401,181dwt

3,123,934 dwt

829,497 dwt

730,150 dwt

MEDIUM TANKER

PANAMAX CRUDE

PANAMAX LR1

SMALL CHEMICAL SMALL PRODUCTS

SMALL TANKER

14 vessels

5 vessels

36 vessels

44 vessels

74 vessels

19 vessels

220,217 dwt

336,800 dwt

2,641,948 dwt 315,789 dwt

468,584 dwt

88,400 dwt

SUEZMAX

VLCC

95 vessels

117 vessels

14,862,751 dwt

35,955,697 dwt

of construction, for the sake of the health of the shipyard. The number of cancellations in 2016 and 2017 were the highest since the years immediately following the financial crash nearly a decade ago. All segments of the wet trades are doing alright, though it is very difficult for small owners to survive in the wet trades. Newbuilding investment, especially by Greece and China, still continues apace. Prices are beginning to move up, but only slowly. Banks have suddenly taken an interest in owner financing, but loyalty may be in short supply if a recession hits again. There is evidence that some owners are eyeing opportunities for asset play in the future. Orders placed at today’s prices will inevitably appreciate between now and 2020, which could prove an interesting year indeed. Some argue that there is too much interference from legislators, but if it means more vigorous environmental protection this can only be a good thing. Tanker supremacy in overall terms is underlined by the fact that the 13-month period from the start of 2017 to the end of January 2018 saw the delivery of 444 vessels aggregating 41,735,374 dwt (as opposed to 392 totalling 33,072,162 dwt in the whole of calendar 2016). The plethora of deliveries is

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TOTAL 948 vessels

having its own impact alongside new newbuilding contracts. In the same period 340 new ships were ordered, but the gap is at its highest since the financial crash and will widen further in the months ahead. This statistic alone is evidence in support of the tanker revival. It is interesting to note that 33 vessels have already been delivered in 2018. This expansion pace would mean around 396 additions by the end of 2018, so the momentum should prevail. Consolidation of shipyard performance is still very much in evidence. STX Offshore and Sungdong Shipbuilding, two builders in trouble, are in the ‘last chance saloon,’ and state-owned export credit agency Export-Import Bank of Korea (Eximbank) is calling for more mergers or capacity sales. Eximbank controls Sungdong, while STX is still under the supervision control of Korea Development Bank. Both builders have suffered serious financial problems, with STX having entered receivership for a second time in 2016. Noted for their tanker construction, both builders were ordered by creditors to conduct due diligence examinations. This resulted in many tanker cancellations, with owners given enforced cancellation ultimatums. Only vessels already

started were saved. In some cases more money was sought if the contracts were loss making. Sungdong’s orderbook emptied and today the Tonyeong site only holds five Aframax tankers for Kyklades Maritime. Deliveries will run from September 2018 to May 2019. These are the only vessels on the books, but if stability holds the Greek owner will be rewarded with early deliveries. With presumed creditor guarantees this could be a worthwhile gamble, and marks a return to crude transport for the first time in seven years by the owner. STX Offshore has received the go-ahead to accept orders again at higher prices, and cashed in on the ordering frenzy last year. Fifteen product and chemical tankers are committed for delivery between February 2018 and June 2019. For owners there is the bonus of early deliveries due to the slimmed-down orderbook. This is scant consolation to those owners, including BP, that were told to cull their ships. Hidden within the current orderbook, though, are recurring delays due to liquidation problems. There is evidence of more orders being placed in smaller sizes for crude transport only. Chinese coastal traffic requirements are accounting for several, while others for

86,511,463 dwt

overseas owners fill a void in the Panamax and Aframax sizes to serve smaller ports where there is sufficient demand for regular crude imports. Numbers will remain small as owners of these types prefer the option of coated tanks for versatility of clean and dirty products trading. Greek-domiciled owners remain the top contractors, with 147 vessels on order aggregating 21,410,772 dwt. Most striking is the advance of Japan, which is the thirdlargest investor, accounting for 102 vessels aggregating 9,497,197 dwt. The smaller dwt figure is explained by its core trading areas of products and chemicals. Japan has rebounded strongly to regain its former supremacy in the products sector after being forced to cull fleets following the financial crash. Moves are underway to replenish VLCC and Suezmax fleets as COAs from the major utility companies come up for renewal. The wheel of fortune is now spinning in favour of both owner and shipbuilder, with an order backlog of 948 tankers aggregating 86,511,463 dwt underlining understandable optimism for a continuing smooth road ahead. TST Source for all figures in these tables: BRL Shipping Consultants. Data as at 2 February 2018

Tanker Shipping & Trade | February/March 2018

6 | ANALYSIS

INVEST IN NEW TANKERS OR PRESERVE CASH? LEADING OWNERS, ANALYSTS AND FINANCIERS SHARE THEIR VIEWS ON TRADING PROSPECTS FOR THE YEAR AHEAD

BELOW: Nikolai Kolesnikov (Sovcomflot): looking to raise capital from the public markets

Tanker Shipping & Trade | February/March 2018

his year the theme of the Annual Marine Money London Ship Finance Forum held at the Dorchester Hotel was ‘Optimism and Opportunity,’ on the basis that 10 years after the financial crash of 2008, global economic growth is at long last looking positive, and a recovery in the shipping markets is likely in 2018 Shipbroker Braemar ACM global head of research Henry Curra led a discussion titled ‘The Tanker Market: Preparing for the future with new investments or preserving cash for caution.’ The panellists represented a broad spectrum of players in the tanker industry. The giant Russian tanker company Sovcomflot makes no secret

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ANALYSIS | 7

of its desire to go public, and for that Nikolay Kolesnikov, a vicepresident, needs an exciting growth story for the IPO. On the other side of the equation is Torm, the Danish product tanker specialist that through cautious financial planning has become one of the biggest players in the sector. Torm was represented by chief financial officer Christian Søgaard-Christensen. Pool operator Heidmar spans all tanker sectors, and its chief financial officer Mrs Kathleen Haines is not averse to sparring with owners and charterers. Representing the new entrants in the tanker business was the chief financial officer of Ridgebury Tankers, Mr Hew Crooks.

WHAT HAPPENED TO THE Q4 SPIKE?

The first item discussed was the state of the tanker market. Is the optimism misplaced, given that the traditional Q4 spike in the crude oil market failed to materialise in 2017? Mr Kolesnikov of Sovcomflot admitted the crude tanker market was taken aback by the failure of rates to spike as normal, blaming excess inventory. Following the drawdown of inventory, he expects the crude oil tanker side of the business to grow in 2018. Mrs Haines noted that in Q4 there was some degree of cannibalising across all sectors (VLCCs poaching Suezmax cargoes, and so on). Mr SøgaardChristensen suggested that tanker analysts failed to spot that the underlying fundamentals for a Q4 spike were not in place.

Jan William Denstad (Sole Shipping AS): withdrawal of traditional banks is an opportunity for niche lenders

SULPHUR SHOCK

Will the new fuel and ballast water regulations force a wave of scrapping? asked Mr Curra. Mr Søgaard-Christensen said that in the sectors in which Torm operated, scrapping would only have a marginal impact because a mere 6% of the fleet was over 20 years old. Although the crude oil tanker fleet was generally older, Mr Kolesnikov said that lenders held a significant portion of the large crude oil tanker fleet as collateral, hindering the removal of vessels from the fleet. Mr Crooks made the interesting point that the crude oil tanker market is very different to the offshore market, where oldergeneration rigs faced rapid equipment obsolescence. In the tanker sectors, there is rarely any change in sizes and a 10-year-old 2M barrel tanker is very similar in specification to a modern ship. There may only be a difference of a few percentage points in operating cost, but a newer vessel might have US$8,000 in daily interest payments. As few banks are willing to refinance ships these days, a small increase in the scrap price may be enough to see not-so-old, financially expensive tankers being sold for recycling. On the sulphur issue, there is a difference of opinion on how to meet the regulations, with Torm specifying its newbuildings to be scrubber-ready, and Sovcomflot placing an order for LNG-powered Aframax tankers. Apart from these specific examples, the panel agreed that, as usual, shipping was taking the wait-and-see approach when it comes to enforced changes. Mr Crooks pointed out that residual fuel will still exist post2020, as it is a “natural” part of the refining process. Refiners have always relied on shipping to absorb the residue. If there is a sudden drop in demand, residual fuel could become very cheap, opening new trading opportunities in regions where it can be burnt. Alternatively, refiners will have to meet the challenge and find a residual fuel formulation that meets the new standards.

NEWBUILDS

Mr Curra noted there is a significant number of open newbuilding slots available for 2019/2020, and at tempting prices. Mr SøgaardChristensen agreed and had placed orders to meet its own demand. The other panellists were speaking to shipyards, directly or indirectly

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Tanker Shipping & Trade | February/March 2018

8 | ANALYSIS

through shipbrokers, but felt that any newbuilding investment should be on a specific-need basis. Even if the finance were available (later in the day banks spoke of the difficulty of gaining funding), none of the panellists felt that speculative ordering of newbuildings was an attractive option.

currently financing new vessel orders – and terms have changed. Mr Crooks said that today it is about having face-to-face conversations with lenders about a partnership focused on corporate finance and a strong and visible cash flow. The audience heard that corporate finance-based lending is a driver in mergers and acquisitions (M&A). Increasing the scale of clients through sponsored M&A deals not only earns fees, but also the cross-sell for the bank’s treasury and forex services.

THE FUTURE OF FINANCE

By now in a normal shipping cycle, the newbuildings ordered in the boom era that ended in 2008 would have been refinanced at five years old, and possibly again at 10 years old. At each stage, the repayments and amortisation of the loans would have freed up the lenders’ portfolios, and banks would be able to issue new loans. But since 2008 banks have been subject to new regulations, especially in Europe. The need to increase capital, and the high number of provisions and defaults in the loan book, means that today shipping fares poorly when it comes to the internal competition for capital. Furthermore, from the estimated 65 banks involved in shipping finance in the boom era, only five or six mainstream banks are

PUBLIC MARKETS

Sovcomflot may still be waiting for the right moment to launch a big-ticket IPO, but there are investors with an appetite for shipping if you have a good story for the right market. It was Torm’s time to shine three days before the forum with a US$150M private placement attracting mainly Danish and Norwegian investors. Mr Søgaard-Christensen said the book opened at 5pm and was fully subscribed by 8pm. He felt the success of the placing was due to the high demand from investors looking to diversify their portfolios. TST

LNG

Container Bulker

LPG Carrier PCTC Chemical Tanker MPP

OSVs

Crude and Product Tanker

RoRo

WHERE ON THE EARNINGS CYCLE ARE WE?

An illustration of where the different shipping sectors lie on the earning cycle

Tanker Shipping & Trade | February/March 2018

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ANALYSIS | 11

Chemical tanker market hopes of recovery in 2018 fading fast

hile the shipping cycle in other sectors is moving towards the foothills of recovery, the chemical tanker trade remained firmly mired in the trough stage. The main cause is the curse of over-supply, which can be traced back to the last significant bout of ordering that took place two years ago. These vessels are now entering a chemical-capable fleet already swollen with vessels ordered during the last boom cycle. As a result, the chemical-capable tanker fleet is still relatively young at just 10.8-years of age. It is not just the increase in numbers of vessels that is putting downward pressure on freight rates, the average size of the chemical-capable tanker has grown. According to Hu Qing, Drewry’s lead analyst for chemical shipping, the fleet trading in chemicals has expanded more than demand (see graph), supply is expected to grow by 2.8% in 2018 while tonne-mile demand is estimated to grow by 1.6%. Apart from the fact that deliveries of new ships will outpace scrapping, it is also the case that the average size of the new vessels scheduled for delivery are larger than the vessels they are replacing, the average vessel size of deliveries trading chemical is increasing from 16,900

CHANGES IN CHEMICAL TANKER SUPPLY & DEMAND (% CHANGE YEAR-ON-YEAR 21%

Supply

Demand

18% 15% 12% 9% 6% 3% 0% −3% −6% 2012

2014

2016

2018

2020

Supply based on fleet trading in chemicals/veg oils. Demand based on tonne-miles

www.tankershipping.com

dwt in 2018 to 23,800 dwt in 2019, while the average size of scrapping tonnages is decreasing from 15,800 dwt to 13,700 dwt. The combination of factors maintains the over-supply of tonnage and has weakened the freight market, which was considerably softer in 2017 compared to the Hu Qing (Drewry): the supply year before. The market outlook is looking week was not helped by short-term events such as Hurricane Harvey. According to StoltNielsen, the company was forced to send 17 vessels out to sea when the Houston Ship Canal was closed, leading to 54,000 tonnes of cargo being delayed or cancelled. During the quarter, Stolt-Nielsen’s deepsea revenue declined by 5.4%, and total volume shipped declined by 3.1%. Looking ahead, the supply outlook is looking weak. "We expected around 3M dwt of chemical capable tankers to enter the fleet in 2018", said Ms Qing. The increase in supply is coupled with low expectations of scrapping. The new ballast water regulation is only likely to impact the older section of the fleet. As noted above, older vessels are generally smaller (less than 10,000 dwt), and their deletion from fleet supply will only have a marginal impact on the overall supply of chemical capable tankers. On the demand side, the ramping up of the production of palm oil in southeast Asia is pushing up the volumes of palm oil flowing to India, China, Europe and the USA, but at the expense of weaker prices and lower freight rates. Palm oil prices and freight rates are likely to remain low in 2018. In other trades, there is an increasing availability of feedstock from US shale gas and oil production, and refineries in the Middle East and India. China has been the main driver, pulling in feedstock. Ms Qing of Drewry warns that China is expanding its domestic production capacities, which may lead to a decline in the long-haul trades. Increasing self-sufficiency in base chemicals in Asian countries is a definite threat to long-haul trade. Drewry expects freight rates to remain stable in 2018 on major regional routes, but they will be depressed on traditional long-haul routes because of oversupply of large vessels. TST

Tanker Shipping & Trade | February/March 2018

12 | SINGAPORE

SINGAPORE-CHINESE TANKER AXIS IS STRENGTHENING TANKER TRADING: SINGAPORE OWNERS TOP 10 SHIPOWNERS

DWT

OCEAN TANKERS

7,805,825

NAVIG8

4,284,509

AET INC

9,321,294

BW GROUP

3,507,947

RAFFLES SHIPMANAGEMENT SERVICES

1,134,840

HONG LAM MARINE PTE LTD

323,207

EASTERN PACIFIC SHIPPING PTE

3,546,723

MTM SHIP MGT

484,298

WORLD TANKERS MGT

849,956

STELLAR SHIPMANAGEMENT

78,968

OTHERS

368

11,726,292

GRAND TOTAL

804

43,063,859

10 O GT

Tanker Shipping & Trade | February/March 2018

RENEWAL OF THE BUNKER TANKER FLEET, HARNESSING DIGITALISATION AND THE RETURN OF SMALLER TANKER COMPANIES MARK THE SINGAPORE TANKER SCENE

by Barry Luthwaite

or Singapore, 2017 was a bullish year for fleet strengthening and newbuilding investment in direct ownership and associated infrastructure. Directly owned tanker tonnage is at its highest since the financial crash almost a decade ago. Year-on-year performance in newbuildings confirms an order backlog of 100 vessels aggregating 6,991,812 dwt, an increase over the previous year of 91 vessels totalling 5,112,983 dwt. Since the tanker revival began three years ago, each year has yielded an increase in fleet asset strength. Today the directly owned Singapore tanker trading fleet stands at 797 units aggregating 43,063,859 dwt, up slightly from 804 vessels a year ago but slightly down in capacity terms from 43,178, 055 dwt. A total of 44 vessels were contracted in 2017, with an additional 10 already firmed this year. Owners are keeping a careful watch on asset play for short-term gain in the run up to 2020, which is expected to be a crucial year for recycling disposals due to mandatory legislation covering emissioncontrol limits. Older vessels will fall foul of compliance or

be uncompetitive as charterers finally realise the merits of securing modern tonnage. By the end of 2020, the tanker fleet could be one of the youngest ever, and Singaporerelated tonnage will be at the forefront. In addition to the Singapore directly owned fleet, a further 722 tankers totalling 40,079,831 dwt are registered in Singapore. Offices of overseas owners are domiciled in the busy hub port of Singapore because so much management and charter fixing is carried out there. Forays into the secondhand market are still rare for Singapore owners – unless a bargain distress sale is on offer and asset play beckons. The location is one of the leading countries for arrests of vessels owned by financially troubled overseas owners. A focus of attention at the moment is a major overhaul of the bunkering fleet, which comprises a big complement to comply with demand in the world’s largest bunkering port. Singapore prides itself as a free-trade nation and has allowed some foreign owners to station themselves on bunkering duties. Strict conditions must be met,

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SINGAPORE | 13

TANKERS ON ORDER: COUNTRY OF SHIPOWNER SINGAPORE VESSEL TYPE

TANKERS ON ORDER: COUNTRY OF SHIPOWNER SINGAPORE

DWT

Aframax LR2

2,399,712

Handymax MR2

491,446

Indonesia

Handysize MR1

480,588

Medium chemical

313,197

Medium products

36,000

Philippines

230,000

Medium tanker

17,000

Grand total

100

6,991,812

Panamax

147,600

Small chemical

39,995

Small products

35,000

Suezmax

475,274

VLCC

2,556,000

100

6,991,812

Grand total

TANKERS ON ORDER: COUNTRY OF SHIPOWNER SINGAPORE SHIPOWNER

Ocean Tankers

SHIPBUILDER COUNTRY China

DWT

1,546,907

13,000

Japan

538,441

South Korea

4,663,464

TANKERS DELIVERED 2017 (SINGAPORE OWNERS) SHIPBUILDER COUNTRY

DWT

Aframax LR2

663,795

Handymax MR2

172,539

Handysize MR1

298,871

Medium chemical

53,449

DWT

Medium tanker

11,999

Panamax LR1

295,978 41,145

262,000

Small products

AET Inc

1,017,274

Small tanker

19,663

BW Marine Pte Ltd

1,359,995

Suezmax

315,553

BW Pacific

837,600

VLCC

Navig8

618,302

Grand total

Raffles Shipmanagement

118,200

Sentek Marine

648,000

Consort Tankers Pte

39,995

Eastern Pacific Shipping Pte

350,600

IMC/CSSC Shipping

220,000

MTM Ship Mgt

113,846

Nova Shipping & Logistics

BW Tankers

Pacific Carriers

Peninsular International

617,363

2,490,355

COUNTRY OF DOMICILE SINGAPORE TRADING FLEET TANKERS

DWT

138,000

Aframax LR2

122

12,087,889

636,000

Handymax MR2

148

6,665,366

36,000

Handysize MR1

2,289,373

34,000

Medium chemical

292,283

Prestige Marine Services

13,000

Medium products

131,784

Singapore owner

8,000

Medium tanker

815,897

Western Shipping Pte Ltd

224,000

Panamax LR1

1,881,562

Cara Shipping

110,000

Small chemical

19,221

Heng Tong Fuels & Shipping

24,000

Small products

243,668

Safargo Shipping Pte

17,000

Small tanker

Sinanju Tankers Pte Ltd

6,000

Yangzijiang Shipping Pte Ltd

160,000

Grand total

100

6,991,812

though, and the scene is rapidly changing since Singapore became the first country to impose mandatory adoption of mass flow meter (MFM) delivery of fuel oil to ships. This reduces the typical bunkering operation time from eight to four hours, depending on vessel size. Idle time costs

money, so the reduction in port time is very welcome. Singapore embraces the digital revolution as the way forward in maritime infrastructure. The mandatory reduction of sulphur oil content to 0.5% by the start of 2020 is forcing a major reorganisation of facilities. More overseas

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Suezmax VLCC

204

990,139

3,130,513

14,437,278

Grand total

797

43,063,859

vessels are being forced out as they will not adopt MFM given the extra costs involved. The industry was surprised by the withdrawal of Greek owner Aegean Bunkering Pte Ltd, which ended its Singapore operations at the end of January after all commitments to customers were fulfilled.

Aegean cited a squeeze on Singapore margins due to increased competition in a battle for market share. In 2016 the Greek owner was the 20th largest bunker fuel supplier by volume in Singapore, with four 6,000 dwt vessels (plus additional barge charters). Also, several licenses have

Tanker Shipping & Trade | February/March 2018

14 | SINGAPORE

been refused renewal, so the scene will rapidly change in the coming months. Around 55 licensed bunker suppliers remain, after three more were expunged in 2017. This puts pressure on the port to meet commitments with an upturn in global trade and so many more vessels calling. The result is an increase in ordering of bunkering tankers by Singapore owners, and new applications from overseas owners. Those owners refused licenses in the port crackdown are not necessarily operating older vessels. The 2014-built UE Star, which was one of Singaporeâ&#x20AC;&#x2122;s largest bunker suppliers, was recently auctioned, having previously been operated by Universal Energy. A due-diligence check by the Maritime and Port Authority of Singapore, along with a mortgage covenant

default, contributed to the liquidation of the company. In a thriving market larger vessels will have no trouble securing buyers within Singapore. Increasing co-operation with China continues with Sinochem already establishing a base in Singapore for its rapidly expanding chemical tanker fleet. Newbuilding investment continues in a strong vein against the background of a bullish wet sector. Flagship owner Ocean Tankers is rapidly increasing its fleet for maximum penetration in the small and medium size products and chemical trades. The owner currently has only four IMO II chemical tankers in its fleet, but has placed a contract with Fujian Mawei, China, for six plus optional four 11,000 dwt units. These will deliver in 2020 and 2021. This was further enhanced by an order at the

SINGAPORE FLAG REGISTRY OVERSEAS OWNERS VESSEL TYPE

DWT

Aframax LR2

104

10,518,178

Handymax MR2

161

7,355,776

Handysize MR1

1,836,563

Medium chemical

201,182

Medium products

184,517

Medium tanker

714,082

Panamax LR1

1,529,062

Small chemical

91,177

Small products

211,310

Small tanker Suezmax VLCC

173

958,534

2,459,337

14,020,113

Grand total

722

40,079,831

same yard for six plus optional four 23,500 dwt handysize MR1 product carriers, again with deliveries in 2020 and 2021. Options were exercised in December for two more 11,000 dwt medium chemical tankers

in a six-ship series from Samjjin Shipbuilding Industries. Ocean Goby was recently delivered as the prototype. The remaining vessels will deliver this year and in 2020. The 17 ships on order will bring the fleet

SINGAPORE | 15

complement to 99 vessels. This increases by a further 26 if nine bunker barges and 17 lube/ diesel barges are included. After a year of negotiations, IMC Industrial Logistics entered into an equal 50/50 partnership with China State Shipbuilding Corp to build and own four plus optional four 55,000 dwt MR2 product/ chemical carriers for delivery in 2020 and 2021. The vessels will be operated by IMC’s Malaysian subsidiary Aurora Tankers, and mark the first part of an expansion policy by IMC. The high technical grade vessels will meet IMO III classification for emission controls, and will incorporate 22 tanks to cater for parcel trades. The firm quartet will be built by CSSC Offshore & Marine Engineering, and are the first newbuilding tankers by IMC group in four years. Aurora operates its 14-vessel chemical/products fleet out of Singapore, and is no stranger to joint ventures in China. Per unit cost is put at US$36.9M apiece, with the options likely to be exercised at a later date. Some of the bigger owners prefer to employ third-party management, which is a fast-growing business at the current time. In the tanker business a company can ill afford not to have some presence in Singapore. Thome Ship Management and AngloEastern Univan are two prominent exponents. BW Group recently outsourced 15 tankers to third-party management despite having its own BW Fleet Management unit. A number of management decisions centre on new trading areas, where greater experience and expertise is required for smooth running of operations. Bernhard Schulte is hoping to increase its presence in Singapore, especially for chemical and products business.

During the recession some smaller players exited wet business. Some are now returning. One significant move was by Pacific Carriers, more noted for its bulk carrier fleet. The company sold its last medium range product carrier at the end of 2016, but a strengthening market has

prompted a cautious return. The company is actively studying a plan for more MR acquisitions at the right price, which will mean exploiting the secondhand market. Re-entry occurred in August last year when US$19.2M was paid for a 51,000 dwt MR2. Eight 16-17,000 dwt

clean petroleum product traders occupy the tanker fleet presence, with two having been added in 2017 as newbuildings. TST Sources for all tables on this page: BRL Shipping Consultants Data as at 5 February 2018

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16 | SINGAPORE

UMMS SETS FOOT IN EUROPE

ingapore-headquartered Union Marine Management Services (UMMS) established a presence in Europe with the opening of its office in Oslo, Norway, in March. This move set the stage for the company’s planned expansion of its managed fleet. UMMS managing director Vinay Gupta has noted a “vacuum” in the western market as international shipmanagement companies have all started to look to the Far East for business and growth. “Norway has a long history in shipping and there are a lot of shipowners there, but there is a lack of shipmanagers in Oslo and the wider Scandinavian region. While some shipmanagers do have a representative office there, there are no technical services to really look after the interests of the owners,” Mr Gupta told Singapore Solutions. The new UMMS Norway office, located in downtown Oslo, started with a team of five people comprising

technical and operations staff. For a start, UMMS has moved eight vessels from Singapore to be managed from Oslo. The boutique shipmanagement firm has a portfolio of 39 ships with 36 on full technical management and three on crew management, serving seven shipowners located around the world. The fleet has grown consistently since inception. UMMS added 11 ships to its portfolio in 2016, and seven ships in 2017. The UMMS managed fleet is mainly bulk carriers plus a handful of container vessels and car carriers. While there are no tankers in the UMMS fleet yet, Mr Gupta said the company has every intention of entering the tanker market whenever the opportunity arises. For 2018, UMMS is already committed to five more vessels, while a few older vessels may be sold. By 2020, the company plans to take on three larger container vessels and intends to further increase the container fleet. At present, UMMS has

MTM focuses on efficiency MTM Ship Management will focus on efficiency rather than expanding its fleet portfolio amid the prolonged downturn of the shipping industry. Managing director Vijay Rangroo said he is sticking to his belief in an ‘owner-first’ strategy, with services revolving around how best to benefit owners. “We are not interested in looking at the number of ships in our portfolio as a way to gauge our growth,” Mr Rangroo told Tanker Shipping & Trade. “Efficiency is the key. Even with the hype surrounding all that digitalisation or modernisation of your operations, they seem to be only for ‘look good’ purposes. Our principle has always been how to benefit the owners,” he said. The shipmanagement company manages a fleet of 64 vessels comprising 14 owned dry bulk carriers, eight thirdparty managed bulker carriers and container vessels, and 42 tankers. The company has four newbuild 30,000 dwt chemical

Tanker Shipping & Trade | February/March 2018

Vinay Gupta (UMMS): Move towards digitalisation means greater transparency and lower operating costs

only two feeder containers on its fleet trading between China and Japan. “Our intention is to grow to a fleet of 50-60 Singaporemanaged ships, beyond which we believe the control on operation becomes a bit weak. We hope we are able to continue sustained growth

in the coming year, and come closer to our target figure,” Mr Gupta said. In a digitalisation move, Mr Gupta said the company has gained significant growth mileage since the commercialisation of its inhouse cloud-based shipmanagement Enterprise Resource Planning (ERP) system in mid-2017. One of the features of the ERP system is 24/7 robotics software that helps to automate some of the processes to increase productivity, improve efficiency and avoid human errors. “We are also in the midst of marketing this inhouse system to third parties and other shipowners,” Mr Gupta said. “Part of our success story has been because our system is able to demonstrate transparency and achieve 100% compliance. The software is also a strong value-add service to strengthen our core shipmanagement business,” he said.

tankers under construction, which are scheduled for delivery in phases over 2018. There are no plans for now to look for more vessels to manage. But MTM Ship Management will pounce on opportunities in any vessel segment because the ship type “makes no difference to its operations” due to the company’s experience in handling different ships. The company was founded in Singapore in 1988. Mr Rangroo said the city-state continues to be the ideal location for MTM Ship Management, which employs about 60 staff in its Singapore office, mainly taking care of shipmanagement and vetting services. It also has around 60 staff in Mumbai, India, as well as crewing and training offices in Manila, the Philippines, and Yangon, Myanmar. “Singapore has always been preferred due to the country’s sound infrastructure, reliable banking system, good education structure and availability of local talent,” Mr Rangroo said. But he noted that the cost of doing business in Singapore has been on the rise in recent years, putting pressure on margins in an already difficult market. TST

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18 | SINGAPORE

Womar’s staying focused on chemical tankers BW’s 50% owned Womar Logistics has firm plans to expand its pool of chemical tankers in view of rising global demand and more active trade flows

omar Logistics is expanding its fleet of commercially managed chemical tankers in view of expected growth in cargo demand and rise in global trade flows. The company currently manages a fleet of 37 chemical tankers consisting of 10 coated (phenolic epoxy/marineline) chemical tankers of 12,800-13,100 dwt under Marida Tankers Inc, and another 27 stainless steel chemical tankers of around 20,000 dwt under Stainless Tankers Inc, including five newbuilds added so far this year. Womar Logistics chief executive Hans Van der Zijde expects the stainless steel chemical tanker fleet to grow to at least 30 this year, bringing the entire chemical tanker fleet to 40. “The chemical tanker shipping market has been improving as there are more and more cargo flows around the world,” Mr Van der Zijde told Tanker Shipping & Trade. He added that while the outlook leans more toward the positive, the sector still needs to “fight against excess tonnage,” which is the “usual game” for the shipping market in general. “But on the demand side there is a growing need for chemicals to fuel the global economy, and next to chemicals we have food product such as vegetable oil, demand for which is also rising,” Mr Van der Zijde said. Analyst reports mentioned that the IMO III cargo type accounted for the largest volume share in 2017 due to high shipment of vegetable oils and fats, and other non-volatile chemicals. Organic chemicals such as acetic acid, alcohols, propene, benzene, salt, benzyl acetate, methanol, formic acid, and phenol are some of the vital substances shipped in chemical tankers across the world. A recent report by Grand View Research valued the chemical tanker shipping market at US$2.5Trn by 2025, compared with a value of US$2.07Trn in 2016. The boom is set against the backdrop of a growing chemical trade from increasing manufacturing activities across the globe. The US, China, Germany and Russia are some of the major exporters of chemicals, and are expected to foster the global chemical long-haul trades over the coming years. The US will probably grow at a high rate on account of an

Tanker Shipping & Trade | February/March 2018

Hans Van der Zijde (left) and Manish Jain of Womar are focused on chemical tankers

increasing number of fleet owners, shipbuilders and charterers, availability of raw material, and capital inflow from multinational companies. The expanding market of Asia Pacific is one of the most significant areas for growth due to the presence of a large number of small manufacturers in the region. Womar Logistics director Captain Manish Jain said the Womar Tanker Pools vessels constantly achieved a utilisation rate of around 95%, and that they are never short of cargoes. “We pride ourselves as having specialised, newer and quality tonnage, and we position ourselves to be involved in the different layers of the market based on our performance and track record,” Captain Jain said. Captain Jain added that the Womar Tanker Pools partnership has never seen a partner leave to join another pool, highlighting the trust and close collaboration among the partners established over the years. Womar Logistics was founded in 2009 in Singapore when investors formed a joint venture with Heidmar to operate Marida Tankers. In 2014 Singapore-based shipowner BW Group took over the shares of Heidmar and added two existing and 11 newbuilding 20,000 dwt stainless steel chemical tankers to the Stainless Tankers pool. Womar Logistics is now 50% owned by BW Group. Womar Logistics carries out commercial management of the pools. It does not carry out technical management, which is the responsibility of the individual vessel owners. Some do this inhouse, while others contract third-party technical managers such as Thome Ship Management, Fleet Ship Management, AngloEastern and others. The company also has a partnership with Singapore Management University in the Maritime Economics Track programme to nurture a pipeline of young talent for the maritime sector. TST

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SINGAPORE | 19

Focal Marine keeps an eye on LNG

hip designer Focal Marine & Offshore (Focal) is continuing with efforts to break into the LNG market and maintaining its focus on the tanker shipping segment, while steering away from the lacklustre offshore market. 2004-established Focal has offices in Singapore and Shanghai. It had been involved mainly in the tanker shipping segment before it moved into offshore during the market boom of 2009-2014. The crash of the offshore market saw Focal return to the more positive tanker shipping market from 2015. The company has made new headway in tanker vessel designs, rolling out the WACBAS design for 51,000 dwt chemical/ product tankers. A global drive toward cleaner modes of transportation has put LNG shipping under the spotlight, prompting Focal to venture into this clean gas segment. Focal general manager Shu Jun told Tanker Shipping & Trade: “We are constantly making efforts to get into the LNG shipping market, and there is huge potential in the smallscale LNG market of Indonesia.” He added that the company is targeting the smaller 10,000 m³ LNG carriers. Focal’s interest in the tanker segment ranges from small to medium-sized chemical/ product tankers to the larger Aframax crude tankers. The WACBAS hull (WAve Cutter Bow & Asymmetrical Stern) design reaps 3-5% better propulsion efficiency and reduces bow slamming. The design can optimise cargo capacity, and allow the option of LNG as fuel and the stainless steel cargo-only tank option.

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Steering away from the sluggish OSV market, Focal Marine is picking up pace in the tanker shipping market and bunker tanker sector

“We need something unique to win business in a competitive market. The important consideration is to put zero extra cost on owners, but allow them to benefit from hull effectiveness for long-term savings,” Mr Shu said. Focal is also looking for deals in the bunker tanker segment. Singapore, the world’s largest bunkering port, is a big market to tap into. The trend of bunker tankers getting bigger to match larger capacity ships, and of them becoming more ocean-going vessels than being confined to port waters, means that incorporating energy-efficient design for bunker tankers is increasingly important.

“There is a need to provide better systems solutions on bunker tankers,” Mr Shu said. These systems can include cargo monitoring, fuel management, custody transfer and tank level gauging. The gradual heightening of interest in LNG bunker tankers is another area in which ship designers like Focal Marine see potential. Singaporean authorities are making a big push for the port to become an LNG bunker-ready port, and that means there is huge potential to bring in more LNG bunker tankers. As for the offshore market, which is still in a recessionary state, Mr Shu shared that he has seen a slight increase

in enquiries. “We do see enquiries about conversion jobs such as from PSVs to ROV support vessels, fishing boats or windfarm vessels. They are not big contracts, but they still help in terms of revenue contribution,” he said. The company’s portfolio includes two chemical carriers, three Aframax tankers and two product tankers, all completed since 2008, as well as OSVs including PSVs, AHTS, OCVs, ERVs and accommodation barges. Some of the company’s designs include the Focal 523 featuring diesel-electric DP3 with Voith propulsion. There is also the Focal 530 featuring diesel-electric DP3 with azimuth propulsion, two offshore cranes, one walk-to-work active heave compensated gangway, and accommodation for 300 persons. Some other designs include the Focal 552 DP2 ERRV, the Focal 528 dieselelectric PSV, and the Focal 539 DP3 that includes ROV operation. TST

Focal's portfolio includes two chemical carriers

Tanker Shipping & Trade | February/March 2018

20 | NEW DELIVERIES Eagle San Francisco and Eagle San Jose

CHARTERER’S TERMINAL REQUIREMENTS SUITS NEW SUEZMAXES

he entry into service of the 157,512 dwt AET-owned Suezmax twins Eagle San Francisco and Eagle San Jose marks the first time AET has had two Suezmax vessels on long term charter. The landmark can be explained both as a natural blossoming of the company’s long term working relationship with Spanish charterer Repsol and eight highly changeable months in 2017. Back in January 2017, Repsol signed a five-year time charter with a Greek owner for delivery of two Suezmax vessels in August 2017. However, as Repsol trading’s chartering director Alberto Hernández Bilbao explained to me when Tanker Shipping & Trade attended the launch of Eagle San Francisco and Eagle San Jose in January, things then went awry. “At the point the vessels were due to deliver, the Greek owner sold his company to another Greek owner. The new owners were unable to take delivery of the vessels, so the vessels were then sold on to another Greek owner, Polemis. “Polemis, famously, operates on the spot market so had no interest in entering into a long-term charter with us. In eight short months we went from having two vessels lined up to being without a vessel.” Polemis, famously, operates on the spot market, so had no interest in entering into a long-term charter with us. In eight short months we went from having two vessels lined up to being without a vessel.” At this point AET entered the frame. The two parties had worked together over the years, mostly on contracts of affreightment. “AET showed me the plans for Eagle San Francisco and we entered into a 4 + 1 year charter agreement on that vessel,” explained Mr Bilbao. “During the negotiations, and after running all sorts of numbers, we confirmed our interest in the

Tanker Shipping & Trade | February/March 2018

HOW AET SECURED TWO LONG-TERM CHARTERS WITH REPSOL

Captain Rajalingam Subramaniam, (AET): “To keep one step ahead we need to have a young fleet”

sister vessel, Eagle San Jose.” Subjects on Eagle San Jose were closed three days after Mr Bilbao had returned to Spain following the delivery of both vessels. The central appeal of these two vessels was that as Suezmaxes they are a natural fit with the company’s present trading patterns. Repsol has five refineries in Spain and one in Peru. The refinery in Peru cannot accommodate VLCCs. The five refineries in Spain are served by four terminals. Three of the terminals can accommodate all vessel sizes. But the fourth, in A Coruña, can handle vessels up to Suezmax size. “Because of this, and because of our refinery system, we want to have flexibility – and for now this means mainly chartering Suezmaxes or Aframaxes,” explained Mr Bilbao. This policy may change in “three or four years’ time” when a new terminal comes on stream in A Coruña that can accommodate VLCCs. “At this point,” said Mr Bilbao, “we will probably start fixing VLCCs more frequently.” So what of the vessel designs themselves? Though both are of standard design, Eagle San Francisco and Eagle San Jose reflect a number of modifications designed to improve operational, and especially environmental, performance. As AET president and chief executive Captain Rajalingam Subramaniam told Tanker Shipping & Trade at the naming ceremony, what guided this approach was a strategic decision that the company took in 2015 to future-proof its fleet for the trading and regulatory requirements of the mid21st century. “In the second half of 2015 we reviewed our portfolio and concluded that to keep one step ahead we had to ensure that we had a young fleet, so set about a programme of fleet rejuvenation.” Certainly, the approach appears to be working. According to figures provided by industry analysts VesselsValue on 23 February

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General arrangement: 158,000 dwt Class Crude Oil Carrier

B– DECK

E/R 2ND DECK

E/C B – DECK

NAV – DECK

A– DECK

E/R 3RD – DECK

E/C A – DECK

C– E/C C – DECK DECK PROFILE

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MIDSHIP SECTION

22 | NEW DELIVERIES Eagle San Francisco and Eagle San Jose

2018, AET’s fleet stands at 71, including newbuilding contracts. The total value of AET’s live fleet, says VesselsValue, stands at US$2.03Bn, with a further five vessels valued at US$331M left to be delivered. This gives a total fleet value of US$2.36Bn. Four of the newbuildings are Aframax tankers, two of which will have an LNG dual-fuel option. A key pillar in this approach is long-term collaboration with preferred yards. In Korea, AET works with Samsung Heavy Industries, Hyundai Heavy Industries and DSME. The week before Eagle San Francisco and Eagle San Jose were delivered, Captain Rajalingam had been at Samsung Heavy Industries’ Geoje yard, taking delivery of the 113,400 dwt Aframax tankers Eagle Barcelona and Eagle Brisbane. Renewing the fleet would also allow AET to draw on what Captain Rajalingham referred to as the company’s rich operating experience to drive up safety and efficiency on its vessels. Here he emphasised the additional requirements AET specified around personnel transfer as one of the ways the company enhanced Eagle San Francisco and Eagle San Jose’s basic design. “We also asked for the engineroom layout to be rearranged to

support more user-friendly maintenance. No more clutter!” Crew training and especially crew familiarisation and re-familiarisation with technology is emphasised. “As well as long-term partnerships with yards, we enter into long-term partnerships with vendors and service providers. There is rigorous training before the crew board the vessels, and refresher training for those who already have experience. We of course have our preferred equipment and preferred suppliers. And one of the benefits of having deep and collaborative relationships with yards is that it is possible to negotiate changes to their preferred suppliers’ list,” Captain Rajalingham explained. Of immediate interest, of course, is the choice of ballast water treatment plant on board. “We went for the Hyundai HiBallast,” explained Eaglestar director of technical services Sothiraj Jayaraj. “This system has already been certified as an alternative management system, and the expectation is that full United States Coast Guard Approval will be granted in the second quarter of this year.” The fact that it is an electrolysis-based system also won favour because its power requirement is lower in comparison with other systems on the market. An ozone-based system made

the shortlist, but it was felt that it would have had too large a footprint. Chemicalbased systems were seen as a non-starter. “While they are legally acceptable, we weren’t comfortable with putting chemicals into the sea.” Both vessels’ environmental credentials are underscored by the installation of a BMT ship-performance monitoring system and a Kongsberg engine-monitoring system that allow the back office to monitor vessel performance over the internet. Having toured both vessels as a guest of AET at the naming ceremony, Tanker Shipping & Trade can report first-hand on their features, fixtures and fittings. The vessels are 277.23 m long, have a 48 m breadth and a design draught of 16 m. Each has a total cargo tank capacity of 171,000 m3 and ballast tanks of 39,498 m3. Eagle San Francisco and Eagle San Jose have integrated Kongsberg bridge systems that allow access to all essential navigation information from centralised workstations. System components include three radars, two ECDIS, conning display, two gyro compass, autopilot, two DGPS, Navtex, speed log, AIS and echo sounder. The deck area is neatly laid out. For mooring equipment, the company opted

The naming ceremony was attended by MISC president/group CEO, Mr Yee Yang Chien, his wife, Mrs Belinda Yee, who also participated as Lady Sponsor to both ships. They were joined by representatives from Repsol, DNV GL, as well as financiers and the manning sector. Also present was Tanker Shipping & Trade, represented by Riviera head of content, Edwin Lampert

Tanker Shipping & Trade | February/March 2018

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Eagle San Francisco and Eagle San Jose NEW DELIVERIES | 25

for Flutek Kawasaki windlasses mooring winches. The (Ram type) steering gear is from the same supplier, and the provision and hose-handling cranes were supplied by DMC. The hose-handling cranes are configured for US operations and are certified for personnel transfer. On deck, lifesaving equipment includes two Hyundai Lifeboat Co motor-propelled, totally enclosed FRP-type davit-launched lifeboats and Viking inflatable liferafts. High-expansion foam fire protection is supplied by NK-Korea, as is the deck foam fire-fighting system. The water-based local fire extinguishing system has been supplied by Tanktech. Other modifications to the standard design include the ability to burn ultra low sulphur fuel (there are no plans to fit a scrubber) installation of an engineroomintegrated bilge treatment system, improved cargo-handling equipment, provision for a grey water handling unit, and onboard water disposal systems. The cargo tank arrangement utilises a single longitudinal bulkhead together with transverse bulkheads, creating six pairs of cargo oil tanks and one pair of slop tanks. Water ballast tanks complete the wing and double-bottom tank arrangement. A bulbous bow has been included in the hull construction, with the design optimised for both fully loaded and ballast draft conditions. The vessel is equipped with Shinko cargo pumps. The majority of the vessels in the AET fleet use these pumps. AET has found them flexible across a range of densities, especially when carrying higher-density product. What is more, using Shinko pumps across the fleet makes getting spare parts and exchanging them much easier. An Emerson Marine cargo-tank level gauge (radar-beam type) monitors the tank levels. To inert the spaces, Alfa Laval plant has been installed. Both vessels are equipped with Scanjet machines for tank cleaning. Residue tank cleaning is housed in a dedicated 300 m3 ‘cargo-less’ fuel tank. Ordinarily they would be deposited in the slop tanks, but given their size this was not felt to be their best use. In the engineroom, a Hyundai-Wartsila 6 x 72 engine drives a Hyundai propeller. The vessel runs on medium heavy fuel oil, marine diesel oil and marine gasoil. The engine meets all IMO NOx Tier II requirements, having been specified ahead of the IMO Tier III deadline. Engineroom machinery includes a steam-generating plant consisting of Alfa Laval marine auxiliary boilers and an

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The vessels have entered into long term charters with Repsol. Size restrictions at some of the charterer’s terminals mean that Repsol prefers either Aframax or Suezmax vessels to preserve operational flexibility

exhaust gas economiser from the same manufacturer that has been specified with increased capacity. This is in order to improve efficiency and minimise starts/ stops of the Aux Boilers during sailing. The incinerator is an IMO-approved HyundaiAtlas unit. Hyundai Himsen generator engines have been specified, along with a GPC-

EAGLE SAN FRANCISO/ EAGLE SAN JOSE IMO Number

9795127

Owner

AET

Builder

HHI Ulsan Shipyard

Length, oa

277.23 m

Length, bp

267 m

Breadth Depth Draft, design Service speed Main engine

Cargo heating Cargo coating

48 m 23.1m 16 m 14.5kts Hyundai-Wartsila 6 x72 (NOx Tier II) developing 14,200 kW x 69.8 rpm (Low Speed Electronically Controlled ECO) Yes No

Class

DNV GL

Flag

Malta

P&I Club

Gard

Doosan Emergency Generator. A Kashiwa high-expansion foam system protects the engineroom, and the cargo area is protected by an NK Fire foam system. An Alfa Laval composite boiler provides all the tanker’s heating requirements, and also reduces the amount of oil needed to heat the accommodation. The hull and cargo tank coatings have been supplied by International Paint. Other auxiliary machinery installed includes Hi-Air (Korea) air conditioning, and a Samgong-Mitsubishi purifier. The accommodation areas are spacious and well equipped. Each vessel has a large fully equipped gym. There are segregated working areas for senior onboard management, and internet facilities were installed on board for the complement of 30. Later this year the AET fleet will see the addition of two of the world's first LNG dual-fuel Aframax tankers. Two DP2 shuttle tankers will follow in 2019/202. The company has been working on a green sustainability agenda to control the emission of particulate matter, sulphur oxides, nitrogen oxides and carbon dioxide. AET is confident that these LNG dualfuel ships are the sustainable solution, both in the mid and long term. The two DP2 shuttle tankers scheduled to join AET in 2019 will also be LNG dual-fuelled. When in operation from 2019, these two ships are expected to be the world’s first LNG dualfuel dynamic positioning shuttle tankers and the most energy efficient. TST

Tanker Shipping & Trade | February/March 2018

26 | GREEN TANKER

Ecological developments in green tanker technology In December it was announced that Teekay Tankers had placed a contract with the Samsung Heavy Industries (SHI) yard in South Korea for four new shuttle tankers designed to provide a higher level of ecological and economic operation by Brian Warshaw

The new shuttle tanker concept brings economic and environmental benefits to owners

huttle tankers operate in a different way to seagoing tankers. They load crude oil from offshore platforms working under dynamic positioning conditions, transport oil relatively short distances to land-based terminals, discharge the cargo and return to the platform under ballast. Each of these operations has its own requirements, resulting in the equipment installed on board not being used efficiently in the various operational functions. Finland’s Wärtsilä Corp will supply key parts of the Teekay shuttle tanker project. Power systems will operate on a combination of liquefied natural gas (LNG), as a primary fuel, and volatile organic compounds (VOC), as a secondary fuel. The Wärtsilä VOC recovery plant uses compression and cooling phases to liquefy the heavier hydrocarbons to liquid VOC (LVOC) that is stored in a tank on the deck of the vessel. The LNG and LVOC will be used in combination as the main power source for the engines. Methane gas emerging from the crude oil cargo during loading or transit, referred to as surplus VOC, is burnt in a gas

Tanker Shipping & Trade | February/March 2018

turbine for electricity generation. Compared with the current standard of shuttle tankers, the new design will improve fuel economy by 22%. The use of LVOC as a fuel results in reduced bunkering needs. The elimination of VOC emissions to the atmosphere will eliminate 84% of NOx from the engine exhaust, practically eliminate SOx emissions, and reduce particles to less than 4%. For general shipping, including tankers, Wärtsilä has a range of dual-fuel (DF) engines designed to seamlessly operate using natural gas, marine diesel oil, heavy fuel oil and biofuels, thereby providing maximum flexibility in fuel choice based on location and bunker prices. Ecologically, a medium-speed DF engine running on natural gas reduces CO2 emissions by approximately 30%, NOx by 85%, while SOx and particulates are almost entirely eliminated compared with operating in gasoil mode. By the expedient of changing from gasoil to LNG, operating costs will be reduced and the problems of noxious atmospheric emissions will be eliminated in a way that cannot be falsified.

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GREEN TANKER | 27

REWARDS FOR INNOVATIVE SHIPOWNERS The Teekay shuttle tankers are evidence of owners’ and operators’ continuing interest in vessels that demonstrate innovative environmental developments. Partly this is the pull of regulation, partly the economic gains that follow, and partly a growing realisation of environmental needs. At October 2017’s Fathom Fleet Transformation Event in London, IACS chairman Knut Ørbeck-Nilssen said that an effective regulation should reward early adopters. “At the moment, it can be argued that those who adopt last get the best financial return. IACS is working to adapt regulations to new needs and remove regulatory barriers that are hindering new technical advances. Also, IACS aims to ensure that an appropriate balance is struck between environmental and safety regulation. It has to be avoided that regulations are developed in isolation of one another,” he stated. Regulation through IMO was the precursor to reduction in exhaust emissions, and it is encouraging to observe that Intertanko, the main shipowners’ organisation, submitted a proposal to the IMO Sub-Committee on Pollution Prevention and Response to ban the carriage of non-compliant fuels for propulsion unless an approved alternative compliance method is used. FREE FLOW OF BALLAST WATER THROUGH THE VESSEL The second major environmental advance driven by regulations is the IMO Ballast Water Management (BWM) Convention, which for new ships entered into force on 8 September 2017. Existing ships must comply at the first International Oil Pollution Prevention Certificate inspection after 8 September 2019. The regulations that seek to control the spread of invasive aquatic species through ships’ ballast water require seagoing vessels to manage their ballast by exchanging ballast water throughout the voyage, or by treating it using an approved ballast water management system. The BWM Convention also allows for undefined ‘Alternatives,’ whereby a ship may be designed so that it does not carry ballast water beyond a bioregion. The IMO’s Marine Environment Protection Committee (MEPC) guidelines to address the issue were adopted in 1991. Thirteen years later, Saudi Arabia put forward a paper relating to a patent held by Vela International Marine Limited1 as a particular solution for VLCCs. Vela argued that the current technologies were too expensive, would cost in excess of US$1M to retrofit on a VLCC-sized ship, have an OPEX of approximately US$100,000 per passage and would add a week to the discharge time of every VLCC. In comparison, Vela asserted that its own automatic ballast flow (AUBAFLOW2) technology was an alternative concept that simply attached to the existing ballast system. Its cost would be approximately US$500,000 to retrofit in a VLCC, with minimal extra costs to train the crew members to operate, maintain and achieve the control requirements demanded by the IMO’s BWM regulations. AUBAFLOW enables water to flow through the double bottom of the ship as it moves through the water. The technology effectively ‘ballasts’ down the vessel to the Marpol draft by reducing buoyancy rather than adding weight into the ballast tanks. With the bottom of the ship open, the seawater will rise inside the ballast tanks to a height equal to the ship’s draught. When the ship moves forward, the pressure created by the movement causes the seawater to flow into the wing walls and flow through sluice gates on deck or at the sheer strake before being returned to the sea. On arrival at the port berth, the AUBAFLOW system is closed and the ship reverts to its normal mode in order to deballast. The

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ballast water on the ship will have been collected from a maximum distance of 800 km, thereby meeting the relevant regulations. With a 600 mm AUBAFLOW entry, a ship making 14 knots will fully exchange three volumes every 800 km. This will mean that on crossing most bioregions, all ballast will have been completely exchanged before the ship crosses into an adjacent bioregion, maintaining compliance with the regulations. At its meeting held in May 2007, the MEPC received a presentation by Saudi Arabia and India proposing the AUBAFLOW design as an alternative ballast water management system. Nothing further has been published about this project, but it remains a viable proposal, especially with container ships now frequently being built to exceed 20,000 TEU, for Bahri Oil or another company to take forward. At the end of last year, a team of students from the University of Michigan’s school of Naval Architecture & Marine Engineering won first prize at the Society for Naval Architects and Marine Engineers Annual Meeting with its design for a ballast-free LNG carrier vessel. In a concept similar to the one used by AUBAFLOW, the students’ design, based on an advanced double-hull structure, enables a constant flow of water to pass through the bottom of the ship. The student team claims it would reduce the environmental impact of transoceanic trade, while improving the overall efficiency of the vessel. But like AUBAFLOW, and Nikša Fafandjel3 , the team has yet to prove its claims. TST • In June 2012 Saudi Aramco agreed to sell Vela to Saudi National Shipping Company, which merged with Bahri Oil in 2014 • Scott, Thomas J., “AUBAFLOW – Automatic Ballast Flow,” Saudi Aramco Journal of Technology, Summer 2005, pp. 2-8 • Fafandjel N., et al, An Approach to Ship Water Ballast Management by Continuous Flow-through Method, 2011, https://hrcak.srce.hr/file/113023

Emission values [%]

−30%

100 90 80 70 60 50

−85%

40 30

CO2

−99%

NOX

−95%

SOX Particulates

Medium-speed dual-fuel engine in gas mode

Diesel engine

Example of emission reductions obtained by switching to gas (Illustration: Wärtsilä)

Tanker Shipping & Trade | February/March 2018

28 | CARGO PUMPS

GETTING THE MOST OUT OF THE CARGO PUMP CONTROLS Drawing on the expertise of different parts of the group, Wärtsilä has developed an enhanced system that enhances efficiency by integrated cargo pump, bow thruster and shaft generator controls

inland’s Wärtsilä has created a new cargo-pump control arrangement designed to optimise operations for shipowners and reduce the initial purchasing price of onboard equipment. The latest-generation controller includes a frequency converter package within the cargo-pump system that creates an opportunity to integrate its capabilities with other equipment on board. Wärtsilä Marine Solutions sales manager for pumps and valves Morten Brandborg explained “The frequency converter package is normally only utilised when the cargopumping system is in use, which is mainly during port stays – so for only a very limited time in the vessel’s overall operations. To derive more benefit from this technology we have made it possible to utilise the frequency

converter package for other applications on board.” For example, the company’s latest-generation cargo-pump control technology allows the frequency converter to be used in conjunction with the bow thruster. Mr Brandborg said that “Normally the bow thruster would either be of a fixed-pitch type, with its own separate frequency converter, or it would be of a controllable-pitch type, which would represent a more expensive initial investment, with higher maintenance costs. Either way, with our new system, the owner can benefit from improved operational efficiency and a reduction in costs.” Wärtsilä estimates that for a fixed-pitch bow thruster arrangement, the saving would be over €85,000 (US$105,000) per vessel. Moreover, the company points out, the bow thruster would have the same functionalities and no additional operational restrictions.

Another example of the extended use of the cargo-pump control system enabled by Wärtsilä’s latest system relates to shaft-generator control. Mr Brandborg explained “It is often a classification society requirement that vessels should have an alternative form of propulsion to be used as a ‘takeme-home’ function in case of a main engine breakdown. We have now made it possible to use the control system from the cargo-pump arrangement for this purpose, using the frequency converter to start and run the shaft generator.” Up to now this could only be achieved either by having a separate frequency converter for the shaft generator, which is expensive and requires additional space on board, or by adopting a pony motor solution, which presents the risk of damaging the clutch on the main shaft line.

An integrated system where the cargo pump system can be utilised also for running the shaft generator and bow thruster

Tanker Shipping & Trade | February/March 2018

Wärtsilä believes its approach is lower cost and more reliable, and that it also creates an opportunity to introduce a booster mode. “This is especially useful when sailing in ice conditions, as we can now offer a solution where the shaft line can be boosted with additional power through the shaft generator,” said Mr Brandborg. The new integrated cargo-pump control option is considered particularly beneficial for smaller and medium-sized chemical and product tankers. A number of vessels of this type were equipped with the newgeneration system in the past year, and several similar projects are now underway. Wärtsilä sees a growing demand for electric cargo-pump solutions and is developing some interesting new solutions focused on using its digital and electric technology. The company recently announced a new shuttle tanker concept, developed in partnership with Teekay, which will feature Wärtsilä cargo and ballast pumps. For offloading operations, Wärtsilä can supply this new shuttle tanker design with either electric-driven pumps for pump-room installation, or with electric-driven deepwell cargo and ballast pumps that eliminate the need for a separate pump room and interconnecting pipelines in the cargo holds. The company points out that the space gained from eliminating the pump room can be used either to increase cargo capacity or to shorten the engineroom. The latter permits a reduced hull length, cutting building costs and allowing for better DP capability due to a leaner side profile. TST

www.tankershipping.com

CARGO PUMPS | 29

Framo to supply LR2 product tanker series Significant recent contract shows larger tanker types can also benefit from its in-tank pump technology, argues Norwegian supplier

Framo is supplying a total of 12 submerged cargo pumps to the new LR2 series under construction in China for Maersk Tankers

ergen-based pump manufacturer Framo has achieved a breakthrough contract to supply a submerged cargo-pumping system to a 10-vessel series of 115,000 dwt LR2 product tankers being built in China for Maersk Tankers. The contract calls for Framo to supply to each vessel a 12 cargo pumps, two slop pumps, two submerged ballast pumps and 12 deck-mounted cargo heaters. The decision by Maersk Tankers to opt for the Framo submerged pump system represents a major advance in the larger tanker sector for the Norwegian company, which has over the years achieved considerable success in supplying smaller chemical and

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product tankers. The majority of larger product tankers today have a conventional pumproom arrangement. But Framo believes this recent contract reflects growing recognition in the tanker industry that the advantages of the submerged in-tank pump arrangement can apply to larger product tankers as well. Framo area manager for marine pumping systems Thomas Eide explained that “Using the Framo concept on these coated LR2 product tankers will deliver a number of benefits to the owner. The improved cargo-handling performance will mean quicker turnaround times in ports, allowing the ships to transport more tonne-miles

of cargo every year and make fewer voyages in ballast. The ships will also be able to more efficiently alternate between different grades of petroleum products, as well as between dirty and clean cargoes. This, in turn, will increase the ships’ availability to take on new cargoes in triangular trades, instead of having to sail on long ballast voyages, generating substantial additional income.” Framo believes there will be significant gains in fuel economy, with 70% less fuel required for each discharge compared with the conventional pump-room arrangement. This equates, the company contends, to a saving of more than 40 tonnes of fuel for each discharge operation,

saving up to 800 tonnes of fuel a year (depending on the number of discharges made). There will also be environmental benefits as a result of the reduction in fuel consumption, with lower emissions in port. For this new series of LR2 tankers, the first of which are due for delivery in 2019, all the cargo pumps will be submerged inside the tanks, and the ballast pumps located inside the double-sided ballast tank. This allowed the ship’s designers to dispense with the need for a pump room, creating over 1,000 m3 of extra cargo space, boosting capacity by around 1.5% compared with a conventional arrangement. The Framo cargo pumps feature a built-in stripping system, so there is no need for separate stripping arrangements. Furthermore, the amount of cargo piping and valves will be reduced by around 60% compared with what would have been required for a conventional pump-room system. As there will be no cargo pipes penetrating the bulkheads, and all pipes and valves will be on deck, a much simpler and less cluttered tank arrangement is permitted. With just one cargo pump per tank, the flush tank top will be easier to clean and to drain, Framo suggests. By installing cargo heaters on deck, the use of heating coils inside the tank can also be dispensed with, again helping to facilitate more efficient tank cleaning. Mr Eide concluded “The system we are delivering for these new-generation LR2 tankers will offer improved vessel utilisation, increased cargo volumes, better fuel economy, improved safety and environmental performance, and the benefits of an easyto-clean segregated system with a reduced risk of cargo contamination. Applying the same core principles for which we are well known (from supplying MR and LR1 type tankers) will bring big benefits to the LR2 product tanker sector.” TST

Tanker Shipping & Trade | February/March 2018

30 | GAS DETECTION

MORE REGULAR FIRE-FIGHTING CHECKS VITAL FOR SAFETY Tanker operators are being urged to verify the contents of CO2 fire-fighting systems between annual certification checks by testing cylinders in situ without disturbing them

Coltracoâ&#x20AC;&#x2122;s ultrasonic testing systems allow the contents of cylinders to be tested in situ without the need to move them

Tanker Shipping & Trade | February/March 2018

ne relatively overlooked area of marine gas detection relates to the leaking of CO2 and other gases used in onboard fire-fighting systems. UK-based Coltraco Ultrasonics believes that methods currently being used to ensure the integrity of the contents of such systems on board tankers, and the air and watertight seals on the compartments and enginerooms where they are contained, are deficient in a number of respects. Consequently, Coltraco argued that greater use should be made of ultrasonic measuring technology to ensure the safety of vessels and their crews. The company suggested that the potential risks posed to crew by the escape of pressurised gases used to fight fires on tankers are not fully understood. Moreover, the leaking of gas can impair the ability to fight a fire should one occur because the concentration required to extinguish the fire is dependent on there being a sufficient quantity of the extinguishing agent, as well as the ability of the engineroom or compartment to contain the agent once it is actuated. Coltraco chief executive Carl Stephen Patrick Hunter explained â&#x20AC;&#x153;IMO SOLAS FSS

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GAS DETECTION | 31

Chapter 5 regulations impose a duty on the operator to monitor onboard fire-fighting pressurised gases for content. We are deeply concerned that many companies are now relying on an annual certification check to fulfil this. In recent times there have been a number of incidents of fires on board vessels that suggest at the point of the fire breaking out, gas was not there in sufficient quantities to extinguish it. So something is clearly going wrong.” Rather than rely on an annual ‘MOT’-type assessment, Coltraco believes that operators need to ensure that the content of pressurised gases in firefighting systems on tankers is more regularly and accurately checked by crew while the ship is at sea. Mr Hunter said that the technology is already available “to allow crews to check in situ without disturbing the system or having to move around large, heavy containers. Ultrasonic sensors can safely, quickly and accurately measure gas content and detect any leakage, and in a way that is more easily manageable for tanker crews (taking on average only 30 seconds a cylinder).” The company suggests its latest-generation portable liquid-level indicator, Portalevel Max Marine, is particularly well suited for this checking operation. Ultrasonic systems such as Coltraco’s Portascanner technology can be used to assess the room integrity of the spaces where the firefighting systems are located. Mr Hunter added “Testing the liquified gaseous extinguishing systems and the integrity of the room in which they are situated creates a holistic approach to solving the problem of managing what is, in many respects, an ungoverned space at sea.”

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The portable Portalevel Max Marine unit

There is, Coltraco suggests, growing recognition of the benefits of using ultrasonic technology to check firefighting gases. The biggest success to date has been the decision of Carnival Cruises to install the Portalevel Max Marine system on board all its vessels to test the CO2 fire cylinders for leaks in content. The Portalevel Max

Marine system is designed to allow a vessel’s crew to inspect large fire-fighting systems incorporating up to 600 cylinders. Mr Hunter explained that “the ease of operation, in comparison with weighing, increases the ability to carry out more regular and frequent checks, improving fire-safety management on board. Using Portalevel

“TO ALLOW CREWS TO CHECK IN SITU WITHOUT DISTURBING THE SYSTEM OR HAVING TO MOVE AROUND LARGE, HEAVY CONTAINERS”

COLTRACO CHIEF EXECUTIVE CARL HUNTER

allows one person to carry out a check in less than 30 seconds, rather than two people laboriously weighing in around 15 minutes.” Coltraco is continually upgrading the ultrasonic testing systems it offers, and has recently developed the new Portalevel Intrinsically Safe portable liquid-level indicator. This unit is designed for testing pressurised fire-fighting gas cylinders on board gas carriers in Zone 1 areas. The company is the first to gain ISO/IEC 80079-34 standard approval to supply ultrasonic testing systems for monitoring on LNG and LPG carriers at sea, or in Zone 1 areas in terminals ashore. Production of the new unit is expected to start shortly, with the first deliveries anticipated in mid-2018. TST

Tanker Shipping & Trade | February/March 2018

32 | TANK CLEANING

MANUFACTURERS PUSH INTEGRATED SOLUTIONS LEADING EQUIPMENT AND SYSTEM SUPPLIERS ARGUE THAT IMPROVED INTEGRATION OFFERS ENHANCED CONTROL AND MONITORING OF THE TANK CLEANING PROCESS

ooking at tank cleaning machine selection in isolation is a missed opportunity. So argues Gothenburg-based Scanjet, which reports that its Intelligent Tank Management philosophy is increasingly gaining traction in the tanker shipping sector. Scanjet sales director Björn Lundgren explained “Our concept is based on supplying not just tank cleaning machines, but a range of other technology relating to the tanks, including high-velocity P/V valves, tank level overfill alarms, vapour emission control systems and tank level-gauging equipment, for example. We believe that by integrating these systems, shipowners and operators can achieve much greater control over the tank cleaning process.” In the past, shipowners and shipyards tended to specify equipment used in onboard tanks item by item. But now they are increasingly looking to rationalise the number of suppliers used for newbuildings, and so to ask for single companies to supply packages of equipment. Mr Lundgren said “We are definitely seeing this as a trend, and we have been selected as a single supplier for tank-related equipment on a number of notable tanker newbuilding projects in recent times. Owners want one point of contact and one brand of equipment because this makes life easier for them, not just during the building process, but

Tanker Shipping & Trade | February/March 2018

Scanjet’s fixed tank cleaning machine, type SC 30 T

once the vessel is in service as well.” Recently Scanjet was contracted to supply tank cleaning machines, P/V valves and level-gauging equipment for a series of four 125,000 dwt shuttle tankers that have been ordered by Teekay at Samsung Heavy Industries in South Korea. The quartet of tankers, being built to an innovative dualfuel design, are expected to enter service in 2019-20. Scanjet is also working on a programme to supply an integrated package of tank equipment (including tank cleaning, level gauging and P/V valves) to a series of five 50,000 dwt MR tankers for DSD Shipping of Stavanger. The vessels are being constructed at Hyundai Vinashin shipyard in Vietnam. A similarly comprehensive and integrated tank-management system is being

supplied to Hafnia, a Danish owner, for two LR1 tankers being built at the GSI shipyard in China for delivery in early 2019. Mr Lundgren explained “Our Intelligent Tank Management concept will be a feature of these significant newbuilding projects. In both cases the owner wanted to avoid having multiple makes of tank equipment on board. Our comprehensive product range meant we were able to meet that requirement, and offer a number of operational benefits as a result of equipment integration.” Scanjet is working on several other tanker newbuild contracts where it is supplying multiple components, not just tank cleaning plant. “Scanjet is perhaps best known for its tank cleaning systems, but because we have the owner’s trust in this area of technology, companies like Teekay, DSD and Hafnia have also entrusted us with related technology, which opens up much greater scope for integration,” said Mr Lundgren. Scanjet believes that by integrating its systems, shipowners and operators have greater visibility of the tank cleaning process from start to finish, and can better monitor its progress. For example, the level-gauging system can be utilised to automatically log the progress of the tank cleaning operation. This is an alternative to labour-intensive manual logging, which is open to human error. “We have developed software that enables the automation of the tank cleaning logging process through the level-gauging system, and this underlines the benefit of having an integrated approach to tank cleaning,” stated Mr Lundgren. Scanjet is making further advances on its tank cleaning machines in particular. Mr Lundgren explained that conventional tank cleaning machines “are driven largely by the cleaning media, and so machines tend to operate from top to bottom, around 360 degrees, throughout the whole tank. This approach can be quite time consuming, so we have developed a series of fully controllable machines that can be allocated their own sector of the tank to clean. This

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TANK CLEANING | 33

saves time and cleaning media, and provides more effective tank cleaning.” Scanjet has carried out a number of test cleans with its new-generation, fully controllable tank cleaning machines. But it is still awaiting its first order to supply the technology to a newbuild tanker, with cost pressures making it hard to achieve that all-important initial breakthrough. “In the current climate it is difficult to persuade owners to make the extra expenditure, although we believe overall it will save money through the life of the ship. But in time these fully controllable tank cleaning machines will make inroads into the market, I am sure,” Mr Lundgren said. A more integrated approach, which considers tank cleaning to be part of a range of related solutions, is one that also finds favour with Alfa Laval. “We are not cargo specialists, but we do supply what we believe are the most efficient tank cleaning

machines on the market,” said business manager for marine and energy tank equipment Christian Mathiasen. “So we are happy to team up with owners, tank coating and cleaning detergent suppliers, as well as developers of tank cleaning guides, to optimise these processes on board.” Alfa Laval recently introduced a number of improvements to its tank cleaning systems to boost performance and facilitate maintenance. Its i40 single- and dual-nozzle machines for chemical and product tankers are now available with a magnetic coupling (there are also versions with a traditional mechanical shaft). For the enhanced i40 machine, and Alfa Laval’s i270 tank cleaning machine for crude oil tankers, the cleaner heads are now being equipped with stainless steel ball bearings instead of traditional slide bearings. This, the company believes, sets these machines apart from others on the market.

Mr Mathiasen explained “This improvement means that the part of the nozzle inside the tanks is practically maintenance-free, something that means a lot to shipowners. There is a significant direct saving in terms of spare parts, and it can save a lot of time, given that it can take several hours to lift a tank cleaning machine out of the tanks and undertake maintenance on the cleaner head. When you consider that there are typically 20-50 tank cleaning machines on board a vessel, this improvement offers the owner a big saving.” The nozzles have been upgraded to provide a much better tank cleaning performance, Alfa Laval asserted. “They can now clean with a much higher impact over a longer range, with a reduced nozzle size and lower water consumption,” stated Mr Mathiasen. “As tank cleaning is typically undertaken with water in a temperature range of 70-90°C, every cubic metre of

Alfa Laval has enhanced its i40 type tank cleaning machines, vastly reducing the need for maintenance

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Tanker Shipping & Trade | February/March 2018

34 | TANK CLEANING

water that is saved creates a big saving for the owner’s bottom line. It is also good for the environment because less fuel is consumed in the tank cleaning process.” The improvements that have been made to the tank cleaning machines are increasingly being appreciated in the market, the company believes. Alfa Laval recently picked up a major order to supply tank cleaning equipment to a 10-vessel series of 110,000 dwt tankers for a large Scandinavian owner, to be built in China. Mr Mathiasen said the deciding factor was “the reduced water and energy consumption and the maintenance-free cleaner heads.” In December the company won an order for a large FPSO to be built in China. In January it secured contacts for more than 250 i40 dual-nozzle tank cleaning machines for various yards in Japan. One of the keys to integrating tank cleaning and management operations is having the right IT systems. As Leif Elmberg, sales manager for Polarmarine Scandinavia (part of the Kockumation Group), observes, “System integration is getting increasingly important, with owners wanting everything to be connected and ‘smart.’ This is something we feel very excited about, as we believe that this is the way to go in the future. It is a need we are looking to meet through our Washmaster software.” Polarmarine sees rising demand for machines with reduced water consumption. Mr Elmberg explained “We believe that this is achievable by spreading out the washing medium as evenly as possible inside the tank, something that is possible with our PJ ECO machine. Another issue we feel strongly about is over-cleaning, which results in high water consumption. We are trying to educate our customers as much as possible about this.” One area where Polarmarine has been successful in recent times is the FPSO tank cleaning market. It is working to supply a tanker-to-FPSO conversion in Singapore, to a

Christian Mathiasen (Alfa Laval): “nozzle inside the tanks is practically maintenance-free”

very tight time scale. The customer has opted for fixed machines with the ability to set the desired pitch, speed and angle of the nozzle. The tanks on this vessel are quite big, so the required capacity (90 m3/h) and jet length (45 m) have been set at a relatively high level. In addition, the customer has decided to have a number of portable machines in the tanks, with twin nozzles. Mr Elmberg said that “these will act as an effective complement to the fixed machines. Often there are a number of obstructions in the tanks where the fixed machines can’t clean, and the portable machines will handle these areas.” US-based Butterworth reports a healthy orderbook for its machines, with orders to equip newbuildings for both domestic and international owners with tank cleaning machines and associated hoses and other accessories. Business line manager Darryl Kee said that the main trend the company sees is a requirement for lower pricing. For

“Some of the main challenges include handling hazardous chemicals, minimising operational costs and having suppliers that can deliver worldwide to avoid route deviation”

Navadan chief executive officer Peter Krogh

Tanker Shipping & Trade | February/March 2018

those owners for which pricing is the main criterion, Butterworth is offering to lease its portable tank cleaning machines to help offset capital costs. Alongside advances in tank cleaning machines, specialist cleaning product suppliers are introducing improvements designed to address industry requirements. Sepcotech is marketing a new powder-based tank cleaning chemical named DG12-T, following extensive customer research. This is a more compact and safe product than earlier generations, and is formulated to facilitate storage and handling, as well as to allow for more cost-effective transportation worldwide. Furthermore, the company pointed out, DG12-T produces no toxic fumes. Sepcotech explained that 500 kg of DG12-T provides an equivalent of 5,000 litres of traditional cleaning chemicals. In addition, DG12-T is suitable for airfreight, as it is classified as non-dangerous goods, and has no expiration date. All products in Sepcotech’s DG12 range will be available through certified distributors around the world to achieve global reach and reduce transportation costs. Navadan Chief executive Peter Krogh stated that “Some of the main challenges that shipowners and operators face with tank cleaning include handling hazardous chemicals, minimising operational costs and having suppliers that can deliver worldwide to avoid route deviation. The main features of DG12-T, namely that it is compact, safe and reliable, address these challenges.” DG12-T is an IMO-approved heavyduty non-solvent-based degreaser that takes advantage of modern wetting technologies. It includes a corrosion inhibitor to protect soft metal surfaces. It is suitable for the removal of a range of cargoes and substances, including fuel and crude oil, carbon residences, vegoil and inert gas soot. The product, which has been engineered with an ability to separate into oil and water phases, is suitable for recirculation and generates less wash-water and slop. Sepcotech spent two years developing the new product. This involved extensive testing on board vessels in real-life scenarios. Mr Krogh said “Customer involvement is a cornerstone of our product development. As a result of working with customers, we have documented DG12-T results achieved on board product tankers and chemical tankers.” TST

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TANK CLEANING | 37

Revising the industry’s approach to tank cleaning Regulatory changes, safety issues and commercially driven operational considerations are combining to encourage industry stakeholders to look afresh at tank cleaning issues for chemical tankers

he impact of relatively new IMO regulations covering chemical tankers is not being fully understood by the industry, some experts suggest. This may require a response by regulators and vessel operators to ensure that unintended consequences do not lead to greater safety risks. The 2016 update of the SOLAS inert gas requirements for chemical carriers over 8,000 dwt constructed after 1 January 2016 is already having significant consequences for tank cleaning and operations on board vessels of this type, believes Axel Kahl of Hamburgbased Chemical Marine. He explained “The industry has been inerting cargo tanks in oil tankers for many years, with considerable success in terms of avoiding fires and explosions. But the implications of using nitrogen, which is known as the ‘silent killer,’ on chemical tankers for the purpose of inerting can be different. For these ships, the drying effect of nitrogen comes more into play, particularly for cargoes that are especially sensitive to drying.” By reducing the humidity in the tanks, inerting with nitrogen can mean that, for some chemical cargoes, tank cleaning will take longer. “This

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Svend Foyn-Bruun (Odfjell): standards are a step forward

Axel Kahl (Chemical Marine): regulators need to wake up

is an issue the industry needs to discuss and address. There are significant commercial pressures to get tanks clean as soon as possible, but this is something that is not being supported by the new regulations,” said Mr Kahl. “What I am particularly concerned about is that crews, under pressure from owners and charterers, might seek to bypass or shortcut the process in order to get tanks cleaned within the required time frame. That could compromise safety. It would be useful to have a list of products for which

the nitrogen drying effect is particularly significant, and perhaps there could be an agreement that the new regulations should not apply, or apply differently to these cargoes.” He suggests that established tank cleaning procedures could be reviewed, and revised accordingly, for the same purpose. There have been some discussions in the industry about using highly flammable tank cleaning chemicals, such as methanol, to speed up the process when the nitrogen drying effect is severe. Mr

Kahl pointed to the dangers “Unlike oil tankers, chemical carriers can have more than 40 cargo tanks and as many different cargoes, not all of which may be inerted. As a result the cargo systems are more complex, and the risk that these are not 100% tight is much higher than on an oil tanker. This makes it more likely that accidents will happen if products like methanol are used.” Other consequences of the new regulations also concern Mr Kahl. “The SOLAS regulations mean it is not required that cargoes be inerted before or after loading, but rather prior to discharge. This means it will usually be carried out while the vessel is en route to the discharge port, which is an additional workload and potential hazard for the crew,” he pointed out. “Due to the fact that various chemicals are toxic, inerting, or purging as it is sometimes called, en route might involve the escape of highly toxic vapours into the atmosphere. Such vapours would cause occupational health and safety issues for the crew, which clearly cannot be a good thing. The regulators at IMO need to wake up to the operational consequences of these new rules, and make adjustments to ensure that purging and gas freeing take place in a safe environment.” Mr Kahl argues that there is a need for greater clarity in the revised SOLAS regulations, which at times are vague and unhelpful, and for updates to industry tank cleaning

Tanker Shipping & Trade | February/March 2018

38 | TANK CLEANING

guidelines. “Cargo loading and tank cleaning are operations that go hand in hand. It is obvious that crews have to fulfil certain requirements, but maybe take more time and care in doing them – which is contrary to the commercial pressures they are under. Shipowners, operators and charterers have to accept this, and individual company tank cleaning procedures, and charterers’ instructions, need to be revised to take into account the effect of these new regulations. Companies have to look at the operational problems relating to tank cleaning that have resulted from the new rules and address them appropriately,” he advised. The lack of clarity is exacerbated by the fact that the updated rules only apply to certain sizes and ages of chemical tankers. All others can carry out operations as before. As Mr Kahl observes, “this will inevitably create confusion because managing conflicting operational procedures within the same fleets will be a challenge for shipowners and operators. Crew training will be more complex as well because it requires telling crew that what they can do on Tanker A in a fleet is not allowed on Tanker B.” Crews can face a further problem when inerting

cargoes that require an oxygen-dependent inhibitor. If this is not performed in the correct way with the right oxygen level the inhibitor can be deactivated, potentially leading to serious safetyrelated consequences. In light of the introduction of the modified inert gas regulations, and also a renewed industry focus on eliminating the need for personnel to enter tanks on chemical carriers (particularly the need for surveyors to conduct in-tank inspections prior to loading), leading tanker owner association Intertanko revised its Tank Cleanliness Standards in late 2017 (it was originally published in 2011). The previous five tank cleanliness standards have been replaced by four ‘easy to understand’ standards: Visually Clean; Water White; High Purity; and Ultra-High Purity. After reviewing recent operational trends, Intertanko came to the conclusion that practices often required tank entry to verify cleanliness, which inevitably meant seafarers and surveyors faced a higher level of risk. Stricter cleanliness standards had, moreover, resulted in excessive tank cleaning, which in turn resulted in increased slops and cargo vapour emissions, as well as increased use of fuel to generate hot water and steam.

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Tanker Shipping & Trade | February/March 2018

Over-cleaning was shortening the lifespan of tank coatings. The increased time required for the cleaning operation led to longer berth occupancy and reduced efficiency levels. Intertanko saw that the situation was unsustainable for all stakeholders, and necessitated a revision of its standards for tank cleanliness. Speaking at November’s Tanker Shipping and Trade conference, Svend Foyn-Bruun, Odfjell vice president for operations and a past chairman of the Intertanko Chemical Tanker committee, said the revised guidelines had three main aims. “Firstly we want to minimise, and if possible eliminate, the need for tank entry for certification purposes. We also want to see that ships are loading low-flash cargoes with their tanks inerted. Finally, we hope the revised standards will support improved efficiencies in port turnaround times,” he stated. The definitions of each of the four tank cleanliness standards are supported by test criteria using traditional wall-wash sampling procedures, and introduce new onboard tests to help the crew verify tank cleanliness standards. These tests are based on ones that are well established in the industry and can be undertaken by crew using readily available

equipment on board. A washwater test has also been introduced as another onboard test method. This is a test of the wash-water pumped out of a tank during a tank cleaning operation. It is based on the premise that when the washwater is clean and largely free from previous cargo residues, the cargo tanks and lines can also be considered clean. Intertanko is now recommending that owners incorporate the revised tank cleanliness standards into their relevant shipmanagement procedures, and that charterers introduce them into the voyage orders that are provided to owners. The association further recommends that owners make clear when discussing cleanliness standards with charterers the commercial and operational implications of choosing a higher standard than is necessary. Failure to differentiate between the particular requirements of different cargoes may lead to the default use of the higher and most rigorous standard, Ultra-High Purity, for all cargoes. Mr Foyn-Bruun explained “The revisions take into account the advances in testing methodologies and technologies, as well as the latest cleaning methods used in the industry. The revised standards have already been taken on board by a number of operators, although we are keen to see them become more commonly used and referenced on charter parties and voyage orders.” Odfjell has incorporated the revised standards into its procedures, and is working with a number of major customers to implement them. Mr Foyn-Bruun concluded “We are seeing a general trend that the majors want to establish alternative verification methods and to avoid in-tank verification tests at load ports, and we are responding positively to that requirement.” TST

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BREAKDOWN, BREAKEVEN, BREAKDANCE

– WHAT’S IN STORE NEXT?

t January’s London Ship Finance Forum*, Dr Adam Kent of Maritime Strategies International (MSI) presented some of the forecasts produced by MSI’s modelling tools. The highest growth is forecast in the LNG sector: over 8% CAGR (2017-2021). Unfortunately, the crude oil tanker sector is forecast to barely grow (1% CAGR, 2017-2021), which is approximately half the MSI forecast for the last four years (20132017). The product tanker sector is more encouraging, with an expected growth of over 2% CAGR (2017-2021). One of the drivers is the changing dynamics of Chinese crude oil imports, which point to an increase in a wider range of supply regions and tonne-mile demand. For instance, in 2008 the Middle East accounted for over 55% of Chinese crude oil imports. MSI calculated that the share has fallen below 50%, and may fall to 45% of crude oil imports by 2021. This is against a backdrop of increasing overall Chinese imports of crude oil. The Middle East will be one of the main beneficiaries of increasing Chinese crude oil imports, but North America, Latin America and Africa will see their volumes increase, too. The MSI expectation is that Latin America to the Indian subcontinent will be the fastest-growing crude oil trade over the next five years. In the product tanker sector, the fastest-growing trade is expected to be that from the Middle East to North Europe.

oversupply and falling freight rates. An interesting aside is our findings when analysing VLCC newbuilding price versus the historical changes in the regulatory environment. Is the cost of new equipment enforced by regulations passed on to the buyer, or absorbed by the shipyard? With new regulations looming regarding the introduction of ballast water management, scrubbers or LNG fuelling, it is tempting to expect a subsequent rise in costs to be passed on in the newbuilding price. An analysis of VLCC pricing versus previous rounds of regulations (double hulls, CSR, Tier III) showed no price increase related to the introduction of new regulations. This analysis suggests that the higher cost of new equipment is absorbed by the shipyards, and that the tanker newbuilding price offered by shipyards is driven by external factors such as demand and global slot availability. TST *This piece is based on a fuller paper presented by Dr Adam Kent at January’s London Ship Finance Forum organised by Marine Money

BREAKDOWN

On the demand side, tanker contracting picked up in 2017. But the orderbook is still plagued by what MSI calls the ‘phantom orderbook’ in China. In 2016, the Chinese orderbook was around 24M cgt, but only around 10M cgt was produced. According to the orderbook, China is due to produce around 16M cgt of all ship types in 2017, and 15M cgt in 2018. It is likely that, as in 2016, only 10M cgt will hit the water. As far as the crude tanker fleet is concerned, fleet growth in 2018 and 2019 could be as low as 2% or 3%. Given the expectations of tonne-mile demand growth rates on the new routes, this could be a boost to the crude oil and product tanker markets.

BREAKEVEN

More good news is offered by breakeven rates. Using MSI’s propriety cashflow-analysis tool, a five-year-old VLCC purchased in 2012 would have a positive cash flow of around US$4,000 a day, while a 10-year-old VLCC purchased in 2017 would have a positive cash flow of over US$8,000 a day. By way of comparison, a fiveyear-old Capesize purchased in 2012 would barely break even.

BREAKDANCE

Despite these positive outlooks for the tanker sector, I must be quick to put the brakes on any runaway enthusiasm to order new tankers. Even a relatively small increase in contracting would be enough to tip the tanker sector into the negative situation of

Tanker Shipping & Trade | February/March 2018

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