Tanker Shipping & Trade December/January 2017/18 by rivieramaritimemedia

December/January 2017/18 www.tankershipping.com

â&#x20AC;&#x153;These days everybody talks about big data and digitalisation. I think many people do not understand what they are talking about.â&#x20AC;? Kishore Rajvanshy, managing director, Fleet Management Ltd, see page 36

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December/January 2017/18 volume 11 issue 6 Regulars 3 COMMENT 4 CONTRACTS & COMPLETIONS 7 ANALYSIS 24 LEGAL BRIEFING 38 BEST OF THE WEB 40 LAST WORD

Middle East

contents 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

8 Something is stirring in the region’s largest economy and tanker shipping will benefit 10 Tasneef expands beyond the UAE

Head of Sales – Asia: Kym Tan t: +65 6809 3098 e: kym.tan@rivieramm.com

Ship-to-ship transfers

Production Manager: Sasha Tan t: +44 20 8370 1718 e: sasha.tan@rivieramm.com

13 Clyde & Co partner Stephen Mackin’s pick of the legal issues arising from STS transfers

Coatings 16 How Euronav turned drag into data 17 Important reference for bio-repellent coating 18 How to avoid yard’s overcharging at drydocking 22 A significant evolutionary change for the industry

Ice operations 24 Rules are one thing. Implementation another 26 Why polar code operations need a second line of defence

Shuttle tankers 28 Russia holds the key to shuttle tanker trades

Conference review 32 Analysts see hazy future in tanker market crystal ball 33 BP experiences 1,200 phishing emails/minute 34 Industry excellence and achievement recognised 35 Seen and heard… 36 What’s in the DNA of a lifetime achiever?

Subscriptions: Sally Church t: +44 20 8370 7018 e: sally.church@rivieramm.com Korean Representative: Chang Hwa Park Far East Marketing Inc t: +82 2730 1234 e: chpark@unitel.co.kr 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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Disclaimer: Although every effort has been made to ensure that the information in this publication is correct, the Author and Publisher accept no liability to any party for any inaccuracies that may occur. Any third party material included with the publication is supplied in good faith and the Publisher accepts no liability in respect of content. All rights reserved. No part of this publication may be reproduced, reprinted or stored in any electronic medium or transmitted in any form or by any means without prior written permission of the copyright owner.

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Tanker Shipping & Trade | December/January 2017/18

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COMMENT | 3

WHAT OUR MOST SHARED STORIES TELL US ABOUT 2017

useful barometer of what has been preoccupying the tanker market's mind in 2017 is to analyse which articles from the Tanker Shipping & Trade Website were shared most widely across social media platforms in 2017. The most popular story was Shell Marine algorithm underpins marine lubricant payment scheme. That this story went viral speaks of two market preoccupations. First, that the market is fixated on operational costs. Freight rates are challenged, margins are under renewed pressure and any opportunity to lower and/or spread out payments is of interest. Second there is interest in how the brave new world of digitalisation is impacting and influencing the market and driving new efficiencies and economies. Historically our industry has been driven by personal relationships, but new entrants and new technologies are steadily but assuredly revolutionising old ways of doing things, especially in the field of procurement. For an interesting commentary on this topic see my recent interview with Columbia Marlow’s Mark O’Neil at November’s Tanker Shipping & Trade Conference The second most shared story was OceanSaver files for bankruptcy. Tanker owners and operators are reconciled to the fact that new and existing tonnage will need ballast water treatment systems onboard. However sizeable and significant questions remain which make selection of the appropriate plant problematic. OceanSaver filing for bankruptcy was a massive shock to the market, not least because the company had secured US Coast Guard Type approval, positioning it as a front runner in a crowded market. The departure of such a significant industry interest only adds to the confusion for tanker owners and makes an already complicated

www.tankershipping.com

investment decision more fraught. If an established and approved system supplier has to file for bankruptcy how confident can owners and operators be that the company they nominate for their order will be around to service and support my fleet? Elements of the third most popular story chime with our most popular story: To succeed in maritime you need big data and a tanker trader mentality. This speaks directly to the brave new world of big data, voyage analytics and machine learning and the mindset required to prosper in the year ahead. Patently there is profound industry interest in these developments, although in some cases that will be driven by fear and in others a clear sense of the opportunity. Our fourth most shared story was Video animation shows ULCC on the move after two years. The appeal of this story is obvious. In a challenged crude carrier market, any intelligence that sheds light on a market movement after two years is a powerful

inducement to read on and share. Readers will also have been keen to learn of the article’s insights into what has driven this shift and also whether the market movement is a one-off or denotes a major change in direction. Our fifth most shared article was Higher profits can be achieved in today's chemical tanker market. The chemical tanker segment – especially in the smaller sizes – has been under acute pressure so there is a distinct industry appetite for information around which trade routes and which cargos might offer enhanced returns. So what conclusions can be drawn? The sector’s reading habits indicate that it’s attention is split between the traditional matters of technical and operational concern and regulatory compliance on the one hand and awareness that the industry is changing, and digitalisation, big data and smart shipping are now part of the landscape. Expect the latter to feature more prominently in the year ahead. TST

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Tanker Shipping & Trade | December/January 2017/18

4 | CONTRACTS & COMPLETIONS

THE TANKER ORDERING FRENZY IS OVER Will a slowing down in new tanker orders signal the death knell for some Far Eastern yards? by Barry Luthwaite

ot unexpectedly, tanker contracting is definitely slowing down. Most owners see this as a blessing to sustain profitable rates. While rates have fallen from peaks of a year ago, there are still enough pickings for healthy trading by all. The dilemma is whether to wait two years for a newbuilding or buy modern secondhand tonnage with prompt delivery at only slightly below current going rates for newbuildings. So secondhand deals present a win-win situation for seller and buyer. The trading revival has made enforced sales a rarity. The negative aspect is the downturn in thoughts of newbuildings. The overall order backlog is almost unchanged in both deadweight and unit terms. In the two-month period from the end of September to the end of November, the respective figures for all tankers registered are 1,058 vessels aggregating 95,274,649 dwt to 1,059 units totalling 96,159,664 dwt, reflecting the tiniest of increases. The figure would have been lower but for a clutch of tankers for Chinese ownership. This statistic underlines the slower pace of business. The salvation for shipbuilders is the growing plethora of business for bulk carriers, where a revival is firmly underway. With deliveries steadily gathering pace, there are some fears of too

many tankers entering the market, as demolition price levels do not induce recycling. Some owners are already returning to pooling, and the larger owners are setting up new pools to attract more business through the power of strength. So far as purchasing power is concerned, this still lies with the owners. We now see fierce competition between South Korea and China, with the former losing out in tanker business over a 5-7% differential in price. Two years ago the ambitious Chinese started a VLCC new construction programme for domestic ownership, in order to be less dependent on foreign charters for imports. Some 50 VLCCs were firmed, but now it is going far beyond this. The reason is the huge mergers that have taken place in recent months, with COSCO at the helm. Contracting of larger tankers is grabbing the headlines, and in other cases overseas owners are taking advantage of Chinese capital though leasing schemes with purchase options. Rivals South Korea and Japan see this as “unfair” competition, but such inducements always occupy centre stage to attract business. Chinese ambition is relentless, and is giving the home shipbuilding industry a huge boost. Few shipyards are left as private entities after the spate of mergers under the state umbrella. The one consoling thought is that China does appear to mean business in terms of improving the financial state of its industry. The only private yards left are New Times Shipyard and Jiangsu New Yangzijiang, with the latter having the country’s biggest orderbook. So we can expect a run of orders for Chinese tankers in the coming months. Orders were recently sealed for Cosco-related orders, which will eventually total US$1 billion. Dalian Shipbuilding Industry has been allocated four VLCCs and three Suezmaxes under the auspices of Cosco Shipping Energy Transportation (CSET) to kick off the billion-dollar programme. Orders to follow from CSET will cover three crude Aframaxes and three Aframax LR2 product carriers to be built at Guangzhou, plus two

TANKERS ON ORDER BY VESSEL TYPE AND VESSEL COUNT

Tanker Shipping & Trade | December/January 2017/18

1,059

GRAND TOTAL

130

VLCC

106

SUEZMAX

SMALL TANKER

SMALL PRODUCTS

SMALL CHEMICAL

PANAMAX LR1

MEDIUM TANKER

MEDIUM PRODUCTS

MEDIUM CHEMICAL

HANDYSIZE MR1

113

HANDYSIZE

211

HANDYMAX MR2

172

AFRAMAX LR2

www.tankershipping.com

â&#x20AC;&#x153;The dilemma is whether to wait two years for a newbuilding or buy modern secondhand tonnageâ&#x20AC;?

VLCCs that will commit at Nantong Cosco KHI. Chinaâ&#x20AC;&#x2122;s export business will still conclude at a steady pace in the foreseeable future. Appetites are not yet satisfied, particularly with respect to MR2 50,000 dwt product carriers. There is still evidence of many vessels being contracted with tier II engines, thus saving US$1-3 million of expenditure to meet new emission regulations. There are growing concerns about looming overcapacity in the MR2 sector. Up to the end of November 2017, 382 tankers of all types have been commissioned, adding 36,096,197 dwt to the global fleet. Numbers are rising on the back of so many orders placed in the last 30 months, when berth space was plentiful amid the bulk sector collapse. This figure may be contrasted with new orders in the same period this year, which so far total 297 units aggregating 33,630,972 dwt. This reflects, in a two-month period, an increase in order intake of 43 vessels, dominated by Chinese owners. In the last two months, deliveries rose by 63 from 319 vessels aggregating 32,040,646 dwt to 382 tankers totalling 36,096,197 dwt. An increase of 63 vessels underlines the bullish stance of owners, and the gap between new orders and new deliveries will widen still further in the months ahead. There is confidence that the shipbuilding crisis is now over. This is certainly the case in terms of volume, but a handful of builders still teeter on the edge of bankruptcy. Pricing is still relatively low in real terms. But there have been huge cutbacks in shipyard capacity and labour, in return for more state loans. Japan is finding it tough to get export business because pricing is higher, although owners do receive quality ships delivered on time. For South Korea, there is evidence of China gaining more business through a price differential of 5-7%. In the case of Japan, the gap is wider. Within China, one of the great success stories has been the procurement of stainless steel tankers, which is steadily filling up medium-sized shipyards. Many experts claim this could lead to trouble later, with delivery

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delays due to the lack of professional construction expertise required. China runs a careful due diligence exercise on specialist construction it should undertake, so the market will have to hold off judgement until recently secured business begins construction. Among the larger crude oil tonnage, a steady accumulation prevails. Despite the advance of renewables and LNG as alternative energy sources, most owners know that fossil fuels will endure for at least 50 years yet, driving more orders for VLCCs and Suezmaxes. A slowdown is evident, though, with just eight and four respectively of each type contracted in the last two months. VLCCs are still popular, with 130 on order. Kyklades, Greece, after an absence of 12 years in this sector, selected Hyundai for two plus optional two VLCCs following conclusion of charter employment. The cost was around US$81.5 million apiece, underlining what a bargain such acquisitions still are. Sinokor followed up with two more valued more expensively at US$8384 million, also from Hyundai. Deliveries of the firm four will be in 2019/2020. The price differential between the two is tier II over tier III engines. In spite of the huge Chinese investment, Greece still remains by far the biggest investor in new tonnage with a commitment to 169 tankers aggregating 24,524,946 dwt. This is followed by China with 133 (17,972,406 dwt), Japan 109 (10,287,719 dwt), and Singapore 98 (6,928,611 dwt). In the case of Japan, domestic owners have been stacking up orders for products and chemical tonnage, lifting the country back to a premier status in the sector that it enjoyed before the 2008 financial crisis. Singapore is also investing a lot of money in smaller tonnage for intra-Asian trades and bunkering tankers, in particular for low sulphur fuel delivery in Singapore and its hinterland. TST Source for all figures in these tables: BRL Shipping Consultants. Data as at 5 December 2017

Tanker Shipping & Trade | December/January 2017/18

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ANALYSIS | 7

TANKER DELIVERIES GETTING

PUSHED BACK A

t the start of the year, tanker deliveries were scheduled to reach 43 million deadweight. However, we now estimate that full year deliveries will not exceed 40 million deadweight. One of the main factors behind this downward adjustment has been the depressed state of tanker earnings, which has encouraged owners to push back the delivery dates for newbuildings into 2018. The chart below looks at how the phenomenon – of owners adjusting delivery schedules for vessels already on order depending on short term market conditions – has played out over the last 15 years. This investigation is distinct from an analysis of the timing of placing orders, which is theoretically dependent on longer term considerations. It should also be noted that other factors such as delays caused by yard over ordering also impact on vessel building schedules. The chart focuses on the VLCC sector, although the findings apply across the

tanker market. The green bars show the average annual time interval in months between ordering and delivering a VLCC over the period 2002-17. The shortest average time period recorded was in 2002 at 24 months, which is close to the quickest time generally considered possible to build a vessel of this size. For smaller vessels, a similar analysis found that 20 months was the shortest average annual time period recorded. The longest average time interval for VLCCs was 45 months in 2011. The orange line shows average VLCC AG-East spot earnings. Between 2007 and 2009, delivery volumes started to ramp up, reaching a peak in 2009. The surge in the number of vessels being built may have been a factor behind an increase in the time interval between ordering and delivering to around 40 months. By 2009, tanker earnings had started to contract sharply, and this was a factor behind a further increase in the time interval to 45 months. Yards can’t tolerate extreme delays for long but also as markets decline, ordering

activity for new buildings declines, prices weaken and yard space has to be filled. Gradually the interval between ordering and delivery started to come down from 2011. This process was encouraged by a gradual revival in earnings that peaked in 2015. By 2017, tanker rates were again scraping along the bottom and the time interval has started to rise again. With the outlook for tanker earnings tempered by the ongoing OPEC led agreement to cut production and an ongoing period of rapid fleet growth, it may well be that the interval between ordering and delivering will continue to widen, at least through 2018. TST The above is an extract from the latest quarterly medium term outlook for the tanker market from Richardson Lawrie Associates Ltd (RLA), a firm of international maritime economists and business consultants. More information can be found at www.richardsonlawrie.com

120,000

100,000

80,000

60,000

40,000

20,000

20 02

average interval

www.tankershipping.com

VLCC spot, AG-East

Tanker Shipping & Trade | December/January 2017/18

US$ per day

months

VLCC: AVERAGE TIME INTERVAL BETWEEN ORDERING AND DELIVERING 2002-2017

8 | MIDDLE EAST

Saudi Arabia’s sleeping giant

Vision 2030 will invest in non-oil interests to create jobs for Saudis. Photo credit: Maher Najm

SOMETHING IS STIRRING IN THE MIDDLE EAST’S LARGEST ECONOMY AND SHIPPING WILL BENEFIT

s the world’s largest petrochemical producer, Saudi Arabia's economic prospects are intermeshed with those of global oil production and exports. In the run-up to the OPEC summit in Vienna in November, economists were expecting the kingdom to press members to extend existing production cuts into Q1 2018, to boost international oil prices. OPEC’s decisions on output will have far-reaching repercussions for oil and gas prices, for the oil- and gas-producing states of the MENA region, and for the maritime sector. That helps to explain the deep changes underway in the Arab world’s richest, perhaps least-known economy, as it seeks to maximise its earnings while developing new industries. Vision 2030 aims to end the kingdom’s dependence on oil. Crown Prince Mohammed bin Salman, the kingdom’s vigorous new heir apparent, is credited with setting the country on the path to reform. Saudi Arabia is caught between the need to tackle unemployment and to adjust to economic stagnation, as low oil prices erode its earnings. Petroleum generates three-quarters of the country’s export earnings. The country produces around 12M b/d. But Energy Information Administration (EIA) data shows how low prices eroded Saudi Arabia’s net oil export revenues, falling from US$159Bn in

Tanker Shipping & Trade | December/January 2017/18

2015 to US$133Bn in 2016. Saudi Arabia needs to create jobs, especially given that a third of its population is aged under 18. It aims to cut unemployment from 11.6% to 9% by 2020. Deciding the pace of change has proved tricky. The kingdom is now extending its planned economic reforms, the so-called National Transformation Plan, beyond its original 2020 deadline. This plan will privatise a swathe of state-owned non-oil enterprises, to create 1.2 million private-sector jobs. The kingdom wants more time to achieve its goals, so has pushed back the deadline to 2030. There is no doubting Saudi Arabia’s geopolitical clout and oil wealth. In terms of its status in shipping, however, Saudi Arabia is a sleeping giant. Investing in ports and maritime infrastructure is high on the kingdom’s wishlist as it seeks to cut its dependence on oil and diversify its economy. Central to Vision 2030 is the kingdom’s planned Saudi Aramco IPO. The world’s largest oil producer controls more than 3M barrels a day of refining capacity and is a powerful shipowner with a live fleet of 21 vessels, and a 20% stake in Bahri, which commands a fleet of 51 vessels (45 oil tankers, including 38 VLCCs, and six specialist cargo ships). Saudi Aramco has a claimed value of some US$2 trillion. It plans to list up to 5% of its shares on Tadawul, the Saudi stock

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MIDDLE EAST | 9

exchange, and on one or more international markets in the second half of 2018. Toward year-end 2017, some analysts were expecting the listing to be delayed until early 2019. The IPO will bankroll Vision 2030, freeing funds to invest in nonoil interests, and accelerating Saudi investment in infrastructure and transport projects. SHIPBUILDING Meanwhile, Saudi Aramco is pressing ahead with its joint venture with Bahri, London-listed fabrication firm Lamprell and South Korean shipbuilder Hyundai Heavy Industries (HHI). The joint venture is developing a US$5.2Bn shipyard at Ras Al Khair, north of Jubail in the Eastern Province. Billed as the largest shipyard in the Arabian Gulf, King Salman Shiprepair and Shipbuilding Complex (KSSSC) will build ships and rigs. It will be able to repair more than 40 ships a year, including VLCCs, starting in 2019 and reaching full capacity in 2022. Saudi Aramco Development Co, which holds a 51% stake, will invest up to US$351M in the project. Lamprell will take 20% and invest up to US$139.3M. Bahri will take 19.9%, investing some US$139M. HHI is leading on technology transfer, taking a 10% stake and investing up to US$70M. The Saudi Industrial Development Fund has agreed a US$1Bn debt facility. KSSSC is a flagship project for Saudi Inc. Saudi Aramco has a master offtake agreement to order 20 jack-up rigs – two a year for 10 years – as well as offshore support vessels, MRO services for jack-up drilling rigs and service vessels from the joint venture. Bahri has agreed to contract the joint venture to fulfil no less than 75% of its commercial vessel needs over a 10-year period – at least 52 commercial vessels, including “a significant number” of VLCCs.

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KSSSC is just one of Saudi Aramco’s ambitious investment plans. The energy giant is to invest US$300Bn in upstream oil and gas over the next 10 years. Industry sources expect offshore fields to account for more than half that investment, expanding the Marjan, Berri and Zuluf oil fields. So far, Saudi Aramco has committed US$20Bn to proposed and planned upstream projects. These investments in shipbuilding, shiprepair, offshore, services and infrastructure create opportunities for international consultants, suppliers and design firms. The winning engineering contractors so far are McDermott, Saipem, a partnership between Larsen & Toubro of India and Emas of Singapore, Dynamic Industries and National Petroleum Construction Co of the UAE. These five contracting entities have landed a total of US$5Bn worth of contracts. But there is more to come. Saudi Aramco will need plenty of additional contractors to deliver offshore projects on this scale. Reports were circulating in the Gulf late in 2017 that the company had invited Lamprell’s UAE office, Aker Solutions, Subsea 7 and Technip to submit additional pre-qualifying bids. Saudi Aramco has separate plans to increase gas production to deliver feedstock to its refineries, and to switch to cleaner-burning power generation. Saudi Arabia has the world’s fourth-largest gas reserves, at some 303Trn ft3. But the kingdom has no plans to liquefy its gas to export as LNG. Rather, it plans to increase its production solely to meet domestic demand. It is more likely to invest in international LNG-export projects – and perhaps even to import LNG. In October, Saudi ruler Salman bin Abdulaziz led a trade delegation to Moscow, where he discussed prospects for investment in Arctic LNG projects. Riyadh wants to increase the contribution of gas to its energy mix from 50% to 70%, which could lead Saudi Aramco to import LNG. Other Saudi Aramco-led investments include funding for maritime and offshore research and development and for training (creating an institute for maritime studies). Creating jobs lies at the heart of the Vision 2030 strategy. CONNECTED Saudi Arabia’s Public Investment Fund is to invest US$500Bn in a cross-border business and industrial zone, spilling over into neighbouring Jordan and Egypt. Neom covers a 26,500 km2 site on a headland overlooking the Straits of Tiran, at the mouth of the Gulf of Aqaba. Its location south of the Suez Canal gives it access to one of the world’s busiest deepsea shipping lanes. Phase one is due to be completed in 2025. Billed as a sci-fi city in the desert, Neom will be built around artificial intelligence and source its power from wind and solar energy. Target industries include energy, bio-technology, food and hi-tech manufacturing. The King Salman Bridge will create a new landbridge to Egypt. Smaller investments are underway, too. In Jeddah, DP World has pledged to upgrade South Container Terminal (SCT) to support Riyadh’s Vision 2030 goals. The priorities include new handling solutions, automation and investing in skills. The state-owned Saudi Ports Authority has launched a US$720M plan to upgrade some of the country’s smaller ports. These include two new quays under construction at Ras Al Khair port, new port buildings and support services at Duba on the Red Sea, and marine works at Alfarasan in the southeast. Historically, then, Saudi Arabia owes its wealth to oil. But it is pinning its hopes for the future on a diversified mix of industries, including ports and shipping. TST

Tanker Shipping & Trade | December/January 2017/18

10 | MIDDLE EAST

TASNEEF EXPANDS BEYOND THE UAE UAE

Bahrain

Oman

Saudi Arabia

Tasneef is expanding beyond its home market out into the region

asneef launched in the United Arab Emirates (UAE) in 2014. Now the classification society is expanding into neighbouring Oman, according to general manager and chief operating officer Waleed Al Tamimi. Next, Tasneef intends to extend operations to Bahrain and Saudi Arabia, Mr Al Tamimi revealed in an exclusive interview with MENA Maritime Business. Abu Dhabi-headquartered Tasneef is the only organisation that can authorise vessels under the Gulf Cooperation Council (GCC) Code. By October 2017, this UAE government initiative had authorised 1,200 vessels. At the time of writing Tasneef has 120 ships in class. The classification society carries out technical surveys and issues certificates stipulated by the GCC Code to insure vessel compliance. “We are a one-stop shop in the UAE, as we can approve designs, survey ships for class approval, witness testing and sea trials, and provide value-adding services,” Mr Al Tamimi said. “We implement the GCC Code for vessels below 500 gt and we are applying the code in Oman,” he added. Tasneef has added impetus to expand into neighbouring states, to alleviate the impact of low oil prices on the UAE market. “The UAE is facing difficulties

MARTYN WINGROVE REPORTS FROM DUBAI ON THE EMERGENT TASNEEF

Tanker Shipping & Trade | December/January 2017/18

as the government is doing fewer large development projects and there are price pressures on oil companies and suppliers,” he said Tasneef’s revenues also reflect a downturn in chartering. “Our clients are spending less on surveys as vessels are laid up,” Mr Al Tamimi said. “We see a bit of growth is coming, as after 2018 as there should be an improvement in the offshore industry.” In the meantime, Tasneef is extending its digital capabilities. It co-operates on software with Rina Services, the Italian classification society. “We are sharing software development and are looking at electronic certification,” said Mr Al Tamimi. Electronic certification will be introduced in 2018, he said. Tasneef estimates that it holds an 8% share of the GCC classification market, comprising some 7,000 ships. Tasneef’s share is 1,200 ships a year in the UAE, not including vessels under construction or those of Bahrain, Oman, Saudi Arabia, Jordan and the wider Arab world. It plans to establish overseas branches to support its regional expansion plans, having started with Bahrain and Oman, and is on course to open its first office in Saudi Arabia by year-end 2017. Tasneef will supplement its ship classification work, moving into ports, security, governance, healthcare and infrastructure. TST

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The “Voyage Repair” Specialists

viewpoint SHIP-TO-SHIP TRANSFERS | 13

The legal issues that arise when STS goes wrong Clyde & Co partner Stephen Mackin offers a perspective on the merits of different chartering agreements*

come at this issue from a slightly jaundiced perspective because no one ever phones me up with queries unless something has gone horribly wrong.

The usual questions I get include: ‘Do I have to perform this ship-to-ship transfer with this proposed vessel in this location from an owner?’; ‘My ship has been damaged during

the STS operation, so who is responsible?’; ‘Do I have to sign a bill of lading for a cargo in which we have found water, and whose measurements are wrong?’; and ‘What do I put on the bill of lading? And who is responsible for that?’ From a promotional chartering point of view, the cargo-related issues are perhaps the most important. I was asked to look through the expert reports on the Asian Progress II and the Byzantio by a colleague preparing for mediation to resolve the dispute. Asian Progress II was a

300,000 dwt well operated, well run, and well put together modern VLCC. The Byzantio was described in the press as being the next Prestige. The vessel had been hounded around Europe by Greenpeace, had moved to the Far East, and was engaged by the charterer to undertake a shipto-ship transfer off the Asian Progress II. I have no idea why. Perhaps someone was cutting corners or saving costs. Perhaps it was the only available vessel. Vetting and quality assurance were

Ship-to-ship transfers are a mix of science and art

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Tanker Shipping & Trade | December/January 2017/18

14 | SHIP-TO-SHIP TRANSFERS viewpoint

non-existent. There were poor pretransfer communications between the two vessels. That said, the vessels were brought together without incident and tied up. But the planning of the cargo operation was extremely poor. There was miscommunication around the rate at which the Byzantio could receive cargo. Discharge started, albeit too quickly for the Byzantio. The PV valves on deck started to vent cargo in addition to the gas coming out of the mast riser. The chief officer asked the Asian Progress II to slow down the discharge operation. Asian Progress II said it did slow down, although this was a matter of dispute. The chief officer, who was inexperienced, decided it would be a good idea to initially just open the PV valves, then went one step further and opened the tank hatch lids to allow

the vapour to escape from the cargo that was being loaded into his ship. He then opened up additional cargo tanks – when he already had several almost full – which resulted in a vacuum in some of his cargo tanks. Air was drawn into these tanks so that the vapour space became explosive as opposed to inert. For some reason a spark occurred. Maybe someone was chipping or painting. There was an explosion: two crew members died and both vessels were damaged. The issues involved all three parties: the charterer (had he exercised due diligence, and was he responsible under the charter-party for any of this?), the officers and the crew, and the owners of both vessels. The owners made insurance claims against each another, and lawyers got involved to unravel the problems. At the heart of this is understanding charter-party

terms and who is responsible for what. I have picked on Shellvoy 6, but BPvoy is more or less the same. It gives the charterers the option to undertake lighterage operations by ship-to-ship transfer. Both contracts define port and/or berth as being a location at sea including a location at sea where ship-toship transfer can take place. Both charter-parties limit the charterer’s liability for safe ports and the nomination of a safe berth or safe port to one of the exercise of due diligence. So if you fix your ship on a Shellvoy or a BPvoy charter-party, the charterer’s responsibility when choosing the port is only to exercise due diligence. Provided he can show that he has exercised due diligence, the charterer can hold up his hands and say it is not his fault, contractually, if a vessel gets damaged at

Different clauses will place differing emphasis on the owners' responsibilities

that port. Now that extends to ship-to-ship transfer operations because that falls within the definition of port and safe port. So here on the Shell or BPvoy due diligence means diligence in the choice of transhipping vessel (the vessel being brought alongside) and due diligence in the context of the engagement of whichever service provider is chosen to act as the intervening party. There is a requirement that ship-to-ship operations are undertaken in accordance with the ICS-OCIMF ship-toship transfer guide, but these operations are still subject to the due diligence. Safe port is defined in law (ref: the case of The Eastern City) as basically one that a ship can get to use and depart from without exceptional navigational demands. Providing the Master acts reasonably and undertakes the operation, then the port is defined as safe. Typically, when there is an incident as a result of an STS operation you look at the actions of both vessels. How were they brought together? I have seen arguments from lawyers that the collision regulations should apply. I have always felt that to be nonsensical. You are quite deliberately bringing the vessels together. Intertanko has produced an STS clause that is very wide-ranging and places all the liability on the charterer, almost to the point that it indemnifies the shipowner for undertaking the chartering operation. This is in marked contrast to what you have from BPvoy or Shellvoy. TST *This article is based on a fuller presentation made by Stephen Mackin at Dynamarine’s September 2017 International Forum of STS titled Legal issues arising from STS operations

Tanker Shipping & Trade | December/January 2017/18

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16 | COATINGS

How Euronav turned drag into data ISO 19030 is ultimately all about the bottom line and thatâ&#x20AC;&#x2122;s good news for tanker operators as recent Euronav experience shows*

hen taking a look at the current tanker orderbook worldwide, two particular pieces of data stand out. First, almost 800 new vessels are shortly to be delivered. Second, approximately 100 of these will be ultra large crude carriers (ULCCs) or very large crude carriers (VLCCs). With these kinds of figures, it is clear there is some considerable extra capacity on the way. With such abundant supply of tonnage coming into the market, the global tanker shipping economy is under greater pressure than ever to be as efficient as possible. A key measure of an operationâ&#x20AC;&#x2122;s overall efficiency is vessel performance. The two key components to appreciate when understanding vessel performance are power increase and speed loss. Having to yield to these components costs either time or fuel. In an industry where both these commodities are scarce, stakeholders from different corners of shipping are challenged to find appropriate solutions. To aid in this process the International Organization for Standardization, in collaboration with industry experts such as Hempel, has developed a new standard: ISO 19030. This aims to enhance environmental performance and vessel efficiency, in addition to making the vessel negotiation and shipping process a more transparent practice. ISO 19030 defines the methods for determining changes in hull and propeller performance in addition to calculating a set of basic indicators to essentially provide an industry standard measure for propeller efficiency. The relevance of ISO 19030 to operators is that it allows them to start analysing, with better accuracy and clarity, what needs to be rectified on any particular vessel in order to maximise efficiency and minimise fuel consumption. ISO 19030 is ultimately all about the bottom line: it gives shipowners the figures necessary to implement change initiatives if they need to.

Tanker Shipping & Trade | December/January 2017/18

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The standard further aids in facilitating better relationships between business owners and operators, allowing them to negotiate their business with greater transparency when engaging in conversations regarding such things as charter-party contracts, or anything that is related to speed and consumption. The greater efficiency that ISO 19030 hopes to achieve supports Hempel’s goal to provide products that better suit customers’ needs. We understand that inefficiency can have a huge impact on a business and aim to innovate new technologies that add greater efficiency to our clients’ operations. In the context of ISO 19030, one way we achieve this is through the right choice in coatings, in combination with our performancemonitoring service. Coatings help maintain a clean hull, so that vessels can maintain their required speed without consuming additional fuel. We are now able to determine accurate performance data and return on investment of a hull coating. What is more, by ascertaining exactly how fuel savings are being achieved, it is possible to make adjustments if performance drops. Our fouling defence coating, Hempaguard X7, is testament to this. Hempaguard X7 delivers a significant 6% fuel-saving advantage over the entire docking interval compared with the next best-in-class antifouling solution, achieving outstanding resistance to fouling, even during idle periods of up to 120 days. The secret to Hempaguard’s success is the technology driving it, our innovative Actiguard solution. It is the only hull coating to combine the low surface friction of silicone with efficient foulingpreventing biocides in a single coat. Unrivalled flexibility in fleet utilisation is also achieved, as Hempaguard retains its effectiveness when switching between slow and normal steaming. Euronav, a global leader in the shipping of crude oil, has been using our silicone coatings to improve efficiency since 2007, and with good results. Keen to look deeper and have a complete insight into improving its long-term efficiency, Euronav decided to delve into the data following the excellent performance of Hempaguard X7 on its VLCC Famenne. We began monitoring three of Euronav’s vessels in 2015, six months before they switched to Hempaguard X7. Months after application, the data clearly showed an increase in propulsion efficiency, of which a significant portion was directly attributable to Hempaguard. Product-side solutions such as Hempaguard X7 have a clear role to play in fulfilling greater vessel efficiency, but this must be set alongside an industry move to better understand the importance of performance data. Taken together, these two tools can have a marked effect on vessel efficiency. In an over-tonnaged market, that is a significant advantage for any tanker owner. TST *This piece was authored by Andreas Glud group segment manager for marine and drydock at Hempel A/S

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SELEKTOPE ANTIFOULING TECHNOLOGY ADOPTED IN NEW OUTFITTING COATING A new outfitting coating utilising the unique antifouling ingredient Selektope has been brought to market by Hempel. This latest coating product launch further confirms the industry’s acceptance of the technology whose powerful bio-repellent action prohibits barnacle fouling. Selektope is included in Hempel’s GLOBIC 9500S product as part of a ‘Smart Biocide Package’. The new antifouling was specifically formulated with Selektope to deliver boosted static performance against hard fouling for idle ships during the outfitting process at shipyards. The accumulation of biofouling on the ship hull is becoming an increasingly dominant issue for shipyards, particularly those located in warmer waters. Newbuilds that lay idle in warming waters during the outfitting process can suffer the effects of intense fouling which can impact both the newly applied coating and the vessel’s performance after leaving the shipyard. This has resulted in growing demand for antifouling solutions that can ensure static

performance during outfitting. Selektope is an organic, nonmetal compound that repels barnacle settlement on ships’ hulls by temporarily stimulating the barnacle larvae’s swimming behavior. It is characterised by high efficacy at extremely low concentrations, ultra-low leaching and flexibility to boost copperbased paint formulations or replace copper completely. I-Tech AB, the company behind the bio-repellent antifouling, is urging end-users to check whether or not the organic substance is offered within all marine coatings portfolios. The first publicly disclosed commercial application of Selektope was recorded on 1 November 2015 at Sembcorp in Singapore. Selektope was included in a new copper-free product from Chugoku Marine Paints (CMP), planned to perform as a five-year antifouling coating. The new CMP coating was applied to the side-walls of the vessel Calypso for Swedish operator Laurin Maritime. No special provisions were required beyond normal preparation work.

Tanker Shipping & Trade | December/January 2017/18

18 | COATINGS

HOW TO AVOID YARDS OVERCHARGING AT DRYDOCKING

TANKER OWNERS REGULARLY OVERSPEND EVEN ON SIMPLE DRYDOCK COATING SCOPES BY 10-25%*

tudies by coating and corrosion consultancy Safinah have shown that owners typically overspend by 10-25% on drydock coating costs. Given the prevailing market conditions, what opportunities are there to save money on drydock bills without compromising performance? This case study reinforces the need for careful thought about the scope of coating works at drydock. Safinah was contacted by a shipowner concerning two sister vessels, one of which, Ship 1, was already at the shipyard. The second, Ship 2, was scheduled to drydock the following month. The work scope and price had been agreed by the owner and shipyard prior to Ship 1’s arrival. The vessels were about 20 years old, and the owner anticipated disposing of them in the next three years.

Tanker Shipping & Trade | December/January 2017/18

Based on this, the owner’s repair objectives at this drydocking were agreed to be: • Tanks to be suitable for the carriage of a range of cargoes including veg oils • Tank lining to give a minimum three years of protection • Costs to be fixed within the repair budget/minimised The budget price was based on a generic specification (referred to as the ‘estimated’ cost and paint specification throughout this piece) issued by the owner to the shipyard, as follows: • HPFW washing all cargo tanks (14,989 m2) • Spot blasting Sa2.5 • Estimated area 8,100 m2

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COATINGS | 19

Ship 1 cost savings (all figures in US$ thousands) Activity

Ship 2 cost savings versus Ship 1 (all figures in US$ thousands) Ship 1

Yard original estimate based on spot blasting and sweeping

1024

Yard revised quotation after Safinah survey (the actual cost)

738

Man power downtime Paint cost on original specification Paint cost on revised specification (actual paint cost)

Activity

Ship 1

Ship 2

Saving

738

225

-513

Man power downtime

-40

Paint cost on revised specification (actual paint cost)

-46

Total cost with support (the actual cost)

869

270

-599

Safinah cost

869

Costs

848

233

-615

Yard revised quotation after Safinah survey (the actual cost)

40 289 91

Total cost without support

1353

Total cost with support (the actual cost)

869

Actual savings

484

Safinah cost

Net savings

463

Table 1 above shows the cost savings on Ship 1 following Safinah’s mobilisation to be US$463,000 net.

Table 2 above shows the cost saving on Ship 2 versus Ship 1 to be US$615,000.

• Total estimate: US$642,000 • Scaffolding estimated at US$55,500 • Apply 3 x T/U (touch up) coats of phenolic epoxy plus 2 x S/C (stripe coats) Total estimated cost: US$697,000

At this point, Safinah was instructed by the owner to assist with the cargo tank refurbishment of Ship 1.

Ship 1 On Ship 1’s arrival at the yard: • 1P (port) and 1S (starboard) tanks were staged • These two tanks were surveyed and a painting specification for all cargo tanks had been agreed (this is referred to as the ‘original’ paint specification throughout this piece): – HPFW wash – Spot blast to Sa2.5 areas of heavy corrosion – Grit sweep areas of lighter corrosion – Apply 3 x T/U coats of phenolic epoxy plus 2 x S/C Note: – Areas were not marked up and agreed with the yard. – The contractor/grit blaster effectively decided which areas were blasted, swept and left untreated. Cargo tank 1P proceeded and the final cost to complete the surface preparation was US$43,000, which was 48% above the estimated cost. The total cost to the owner for all tanks, based on the 50% cost overrun in No 1P, would have been over budget by US$326,000. Costs were most definitely not under control.

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On arrival at the yard, Safinah’s first action was to stop all work until: • The owner’s requirements were fully understood • The original coating specification (surface preparation and paint) was reviewed and a revised specification agreed (this is referred to as the ‘revised’ paint specification throughout this piece). • All tanks were surveyed and repair areas agreed based on the revised specification. • The yard provided a fixed quotation for all cargo-tank work based on the revised specification and marked up areas accordingly. Coating specification review: • The original specification was review and comments: – The surface preparation standard is technically incorrect. – Spot blasting and sweep blasting is technically unsuitable for cargo tanks and will only give limited protection in this environment (6-12 months is typical). – There is a high risk of detachment/loose paint in sweep-blasted areas. – Spot-blast edges were not required to be feathered back to a firm edge. – High paint consumption as the full system has to be applied to all grit-blasted and grit-swept areas. – In summary, the original specification would not result in cargo tanks that would meet the owner’s requirements and

Tanker Shipping & Trade | December/January 2017/18

20 | COATINGS

there would be significant budget overrun. • The revised specification: – The surface preparation standard was amended to: – Full blasting to Sa2.5 areas of heavier corrosion, which were to be squared off and marked up (not patch spot blasting). – No grit sweeping; areas with minor corrosion spots were not repaired. – All blasting edges to be feathered back to a firm edge. Survey: • All tanks were surveyed and marked up in accordance with the revised specification • The yard and contractor were present and agreed the new scope. Fixed costs: • The yard quoted fixed lump sums for each tank. • The new fixed quote based on the revised specification was US$738,000 • There was only one variable: edge feathering, which was charged at US$13 per linear metre In summary: • Costs fixed at US$738,000 – Versus the initial yard estimate of US$697,000 (within 6%) • Tank performance will meet the owner’s requirement

• Tanks will be suitable for carriage of a range of cargoes including veg oils; the coatings will not detach and contaminate the cargo. • Paint costs reduced from US$289,000 to US$91,000. • In addition, on Ship, there were additional manpower costs: – As areas were not predetermined, there was insufficient paint at the site. This resulted in a charge of US$40,000 for non-utilised labour. • Safinah fees for this contract were US$22,400. • In addition, Safinah was able to assist with the water ballast tank survey, specification and repairs to achieve the required standard. Lessons learnt on Ship 1 Although costs were (eventually) controlled on Ship 1, it was agreed in discussions with the owner that the process and savings could be improved for Ship 2. • Confirm the owner’s performance expectations and budget for the cargo tanks (as Ship 1). • Undertake a pre-drydock survey (PDS) of the cargo tanks to prepare a detailed diagrammatic tank plan of areas to be prepared and painted on which yard(s) can accurately quote for: • Surface preparation and painting costs • Scaffolding costs • Prepare an accurate paint estimation based on the tank plan areas to avoid downtime waiting for paint to be delivered and over-ordering.

COATINGS | 21

The result: the total costs and time at the yard is known prior to the actual drydock and is accurately budgeted. Ship 2 Ship 2 was surveyed and subsequently went to the yard one month later for cargo tank repair and drydocking. As a result of implementing the lessons learnt on Ship 1 and the improved preparation and planning for Ship 2, the following cost and productivity achievements were realised at the yard: • Cargo tanks were quickly marked up based on the tank plan diagrams from the PDS. • The yard reconfirmed its quotation, i.e. no increases from the estimated offer (unlike Ship 1, which increased 50%). • The scaffolding costs were reduced to US$19,000 • The areas marked up for blasting to Sa2.5 and painting was agreed at 2,600 m2 • The total blasting and painting costs were fixed at US$206,000 • Overall total costs including scaffolding were US$225,000 • The total paint cost was US$46,000 • There was no man power down time • Safinah’s fees for this contract were US$37,000, which included the pre-drydock survey, yard attendance and expenses.

are marked up in accordance with the tank plan and the yard reconfirms the quotation. The cost of a coating expert, such as Safinah, is not significant compared with: • Cost overruns through poor control • Paint consumption • Incorrect specifications leading to premature coating failures and/or rejection for certain cargoes

While this may be considered by some as an extreme case, it is the experience of Safinah that owners regularly overspend even on simple drydock coating scopes by 10-25%. Once more complex coating requirements are needed the potential cost overruns can be significantly higher, as in this case. TST *This article was authored by Alan Walker, Safinah's marine market sector manager

SHIPOWNER VIEWPOINT

Tryggve Möller, Managing Director, Terntank Ship Management AB, says

has SUPERIOR TECHNOLOGY

This is a result of implementing the lessons learnt from Ship 1, i.e. • Mobilising Safinah early in the project to carry out a pre-drydock survey • Sending an accurate request for quotation to the yard based on the survey and not an estimate • Ensuring the specifications met the owner’s requirements Conclusion and rules 1. Employ a coating expert at the beginning of the project to maximise savings. 2. Understand the cargo-tank performance requirements and the owner’s expectations. 3. Work within the repair budget. 4. Carry out a pre-drydock survey of all cargo tanks. 5. Identify the work scope for each tank to match the performance expectations and the budget, no more and no less. 6. Prepare diagrammatic tank plans for each tank detailing the areas to be repaired in each tank. 7. Use the tank plan to obtain an accurate estimate/quotation from the yard(s). 8. Do not start work at the yard until the tanks

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22 | COATINGS

Big data

utilised to control fouling The use of big data to predict requirements for fouling control and its impact on ship performance is a “significant evolutionary change” for the industry, according to AkzoNobel’s technology leader Dr Chen Haoliang by Hong Liang Lee

peaking at November’s Asian Marine Engineering Conference held in Singapore AkzoNobel lead coating specialist Dr Haoliang Chen highlighted the company’s digital tools including Intertrac Vision and Intertrac Perform, which are part of a suite of web-based tools drawing upon AIS data to track vessel movement and compliant with ISO 19030 standard. “We embarked on our digital journey back in 2011 when we introduced Intertrac and we have since gradually improved the system and built in more functions to enable vessel tracking and predictive tools, as well as underwater hull condition monitoring and onboard maintenance,” Dr Chen said. The Intertrac systems draw on AIS data and information on vessel routes and the sea conditions to understand coating performance and fouling risks. Stena Germanica was cited as an example of a ropax utilising the digital tools. “What we focused on was the coating performance. It is also important to understand where the vessel is going and what is the ocean condition – the salinity, temperature, seasonal changes and vessel activity,” Dr Chen said. The length of the idling time of a vessel is another important information to take note. If a vessel is at anchorage for a long time there is a higher chance for fouling to occur and this has to be taken into consideration so as to help with coating selection. Dr Chen said AkzoNobel is hearing requests from its customers to improve the interface of the systems to make it more user-friendly and to include more information. These improvements have been completed in end-November 2017. The marine coating supplier is also upgrading its server to allow for faster data transmission. “There is a need to understand various operational scenarios and use predictive analytics to help our customers make informed decisions on choosing the appropriate product to suit a specific operation,” Dr Chen said. The predictions are bespoke to specific vessels, dependent on vessel type, trading route, speed, activity, operating conditions and profile, as these differences will generate different performance indicators. Consultants of Intertrac Vision can also advise operators on multiple coating and application scenarios to aid in making better decisions on maintenance and future profitability of their assets. Data has been pulled together from AIS as well as the collection of coating conditions of vessels under drydock and construction at shipyards. “We use big data to calculate and separate seaborne

Tanker Shipping & Trade | December/January 2017/18

DR HAOLIANG CHEN (AkzoNobel): “We are speeding up our inhouse analysis”

trades into nine generic routes, with considerations for different products applying to different environmental conditions,” he said. For the Intertrac Perform service, AkzoNobel is looking to provide shipowners with a means to review changes in hull and propeller performance of their vessels. Some key features of the service include compliant with ISO 19030 standard and bespoke dashboard. The Inertrac Perform tool has been developed in conjunction with the University of College London, mainly in the area of laboratory testing, according to Dr Chen. “We are integrating all lab data, CFD [computational fluid dynamics] modelling and in-service data collection to build up an Intertrac Vision predictive tool. Coating performance is just one aspect. You need to understand trading routes and vessel parameters if you want to do prediction and to see the costs and benefits,” Dr Chen said. The bespoke dashboard is currently under development and a commercially ready version will be available by the end of this year. The frequency of data delivery will be agreed with the owner and the bespoke dashboard of KPI’s will be set up for each vessel or fleet. “We need customer data in order to improve our prediction,” Dr Chen said. But he pointed out that the company signs nondisclosure agreements with its customers on the collection of data, and the data gathered is stored in inhouse servers managed by the company’s own IT department to prevent any leak of information. “Intertrac Perform follows the ISO standard such as drydocking KPI and maintenance KPI. The analytical tool will calculate and indicate fuel consumption and costs, power increase or speed loss,” he said, adding that extended lay-up or static periods can be tagged and the effects visualised. The result is the provision of in-service data, control of operational costs, optimisation of vessel performance, visualisation of hull and propeller performance trends, and even control of carbon dioxide emissions. “We are also speeding up our inhouse analysis so that we can swiftly offer our assessments to our customers,” Dr Chen said. Apart from Intertrac Vision and Intertrac Perform, the AkzoNobel suite of digital tools include Intertrac OBM for recording, visualising and analysing sea stores purchasing patterns by vessel and fleet, and International Marine Coatings app to access technical datasheets and news updates on marine coatings. TST

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24 | LEGAL BRIEFING

RULES ARE ONE THING. IMPLEMENTATION ANOTHER Michael Kingston* on how the Arctic Shipping Best Practices Information Forum will assist in the harmonised implementation of The Polar Code

MICHAEL KINGSTON: “The reality at the moment is a lack of understanding”

Tanker Shipping & Trade | December/January 2017/18

he Polar Code applied to newbuild vessels from January 2017 and applied to existing vessels from January 2018. A historical problem with IMO conventions is that after ‘adoption’ by national delegations they require parliamentary ratification by a certain threshold of countries before they enter into force. Some unratified conventions, even from the 1970s, are still lying on government shelves. To avoid this happening again, the Polar Code, which is aimed at enhancing maritime safety, training and environmental protection in the polar regions, has come into force by way of amendments to the three cornerstone IMO conventions, namely: the International Convention for the Safety of Life at Sea (SOLAS); the International Convention for the Prevention of Pollution (Marpol); and the International Convention on Standards of Training, Certification and Watchkeeping for Seafarers (STCW). These conventions include the ‘tacit acceptance procedure,’ which allows IMO delegates to agree amendments that will automatically become law 12 months after a period of six months from adoption – unless in that six-month period not less than 50% of the gross tonnage of the world's merchant shipping have notified their objections. This has never happened. Initially it was the intention that such significant international regulation would need a standalone convention, but then it was thought that it may take years to ratify, hence the use of the tacit acceptance procedure to the existing conventions. The IMO Secretariat and delegations deserve huge credit for their

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LEGAL BRIEFING | 25

work in adopting this approach. The Polar Code is comprised of two parts that include mandatory and recommendatory sections that take into account the unique risks associated with operating in the polar regions including ice; low temperatures; high latitude; remoteness; severe weather; limited charting; the pristine environment; and lack of training. Part I addresses safe design, construction and operation of vessels. It enters into force under SOLAS. It also describes the enhanced training and certification requirements for crew members working on polar ships, the provisions of which enter into force under STCW. Part II addresses environmental protection with significant requirements for pollution prevention and the way garbage and sewage is dealt with. It enters into force under Marpol. The Code principally applies above 60 degrees north and below 60 degrees south. To operate it is now necessary to have a Polar Ship Certificate and to carry a Polar Waters Operational Manual detailing how the ship and crew will deal with the conditions in accordance with the additional SOLAS, STCW and Marpol requirements. The Polar Code is built on top of these existing IMO conventions, so port state control will be able to leverage existing compliance and enforcement capabilities. It is all very well having rules, but implementation is key. It is of paramount importance that decision-makers have a common understanding of these rules in order to ensure robust application. Operators, flag states, insurers, financial institutions and port state control need to understand the requirements. This includes developing a thorough understanding of the operating environment so that all parties involved have a better understanding of the industry standards and the best information available to ensure best practices are used. The reality at the moment is a lack of understanding, so a major effort is required to help in this process. Under US leadership, the Arctic Council of States (comprised of the US, Canada, Russia, Norway, Sweden, Denmark, Finland and Iceland), a significant international body, endeavored to assist in this process by establishing the ‘Arctic Shipping Best Practices Information Forum’ (the Forum) in 2017, with input from the Antarctic States and IMO. The Forum was declared in Fairbanks, Alaska, on 11 May 2017 and

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A historical problem with IMO conventions is that after ‘adoption’ by national delegations they require parliamentary ratification by a certain threshold of countries before they enter into force

met in London in June 2017. The Forum aims to identify all the best information in existence on a crossjurisdictional basis in hydrography; meteorology; ice data; crew training; search and rescue logistics; communication; recommended industry guidelines; traditional and local knowledge; ecological knowledge; and operational understanding of ship equipment, systems and structure, to assist in properly preparing a Polar Waters Operational Manual so that only then will a Polar Ship Certificate be issued. This information will be hosted on a web portal run by the Arctic Council, which will be launched in 2018 either at the International Conference on Harmonized Implementation of the Polar Code Experiences after One Year’s Enforcement” in Helsinki on 22 February 2018, or at the next Forum in London in May 2018. The Polar Code and the Arctic States’ Forum to assist in its implementation are examples of what we can achieve in international regulation before a significant disaster occurs, demonstrating a pro-active

approach where industry, governments, the research community, indigenous communities, NGOs and international regulators have worked together to make a significant difference. Indeed, IMO cited it as an example for regulatory implementation elsewhere in the world when the Arctic States, under Finnish leadership, presented at the IMO MSC98 in June 2017. Given the effort taken to amend three conventions to implement it, we are very fortunate to have made such progress. It is incumbent on us to use the rules to protect seafarers and the environment, and for all stakeholders to contribute to the Forum to make this happen. It is clear that prevention is better than cure. TST *Michael Kingston, a London-based Irish lawyer, is working with the Arctic Council on the Arctic Shipping Best Practices Information Forum. For further information, please email: michaelkingston@michaelkingston.org

Tanker Shipping & Trade | December/January 2017/18

The dangers of Arctic operations can be subtle or manifest

Why polar code operations need a second line of defence The case for owner/operators, insurers, vetting inspectors, and the industry supply chain to undertake independent risk assessment of polar operations as a compliment to the requirements of The Polar Code*

he opening up of the polar routes offers new commercial possibilities to the maritime industry at large and the oil and gas and passenger vessel sectors in particular. These include dramatically reduced transit times and access to new markets. In parallel with these new opportunities comes increased risk. These risks are magnified by virtue of the Polar Regions unique, diverse and remote geography and the industryâ&#x20AC;&#x2122;s limited operational experience. All aspects of vessel operations â&#x20AC;&#x201C; at sea and ashore â&#x20AC;&#x201C; will need to be recalibrated to anticipate and mitigate the enhanced and novel risks now faced.

Tanker Shipping & Trade | December/January 2017/18

An important step in addressing these risks is of course The International Code for Ships Operating in Polar Waters (Polar Code) which entered into force on 1 January 2017. Vessels that are 500 tonnes and above transiting these regions must now comply with a swathe of new rules that cover everything from vessel design and construction, equipment carried, manning, operations, search and rescue and new training requirements. There are also rules covering the protection of the environment including the use of fuels and lubricants, ballast water and sewage discharge and disposal of chemicals. As with any new piece of legislation there is normally a requirement for consensus. Often this has the effect of diluting

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ICE OPERATIONS | 27

standards to achieve the points where everyone can agree. There is already debate around some of the Code’s wording and calls to strengthen some of its provisions. For example, the structural requirements have been criticised for being too lax. As have the requirements for vessels engaged in single voyages and the lack of a requirement for a physical inspection of an oil tanker on a single voyage on a polar route, even if it is low or not ice classed. The implementation of the Polar Code is likely to highlight ‘grey areas’ too. Application can be expected to vary and policing and enforcement questions will inevitably arise. These issues will only multiply as vessel traffic increases, new routes open and inexperienced vessel operators are drawn in by the commercial opportunities. In short, the industry will need to look at wider methods of evaluating their vessel risk to complete their risk assessments before embarking on a polar voyage. The ability to be able to research and analyse public domain data is critical. Russian and Baltic operators have decades of experience forged across the Baltic’s seven recognised iced zones and Arctic trades. This experience has been boosted by the opening of new terminals in the Baltic Sea and the exploitation of natural gas resources in the Russian Arctic. To put this in perspective: The Russian Arctic is covered in ice 300 days of the year on average. The average Arctic winter ice coverage in recent years has been around the 15 million km2. It is from this pool of European and Russian talent that International Maritime Risk Rating Agency (IMRRA) has recruited its analytics team, alongside technical advisors in Greece, Russia and the UK. IMRRA’s experts are based in Greece, UK and Russia (Saint-Petersburg). IT support and the server are based in The Netherlands and run by Pharox, one of the marine industry’s leading IT companies. The data aggregation team is based in Ukraine (Odessa). The team is specialist in interpreting data, statistical and quantitative analysis, and applying rules-based methods to bring new levels of insight to risk assessment and risk management. This combination of ice class operation experience and data analysis means IMRRA is uniquely placed to support the industry in

mitigating risk as it traverses polar routes. When preparing a vessel for trading in sub-zero temperatures the relevant industry agencies will confirm that the vessel hull meets ice class requirements, the engine has the required power, the lifesaving equipment is of the requisite standard, and the crew have the correct documentation. However, most of these agencies focus on checking and verifying static factors and conditions. They do not consider variables connected to operational, geographical, or human factors. Such considerations fall squarely on the operator to check. In other words: • Elements that magnify in importance when trading in extreme environments. • Elements that ordinarily might be regarded as routine or inconsequential. • Elements that under commercial pressure and tight deadlines, can easily be overlooked. Equipment doesn’t drive ships. People do. This places a special emphasis on crew competence and crew chemistry. Does the operator have the right blend of skills, competence and nationalities to deliver safe and effective operations? Does the operator known enough about the crew’s ability to operate under stress for prolonged periods in extreme environments? Much of the polar waters is unchartered (uncharted for nautical expression?) territory, with unknown currents and unknown depths. TST *This article is an edited version of a long paper submitted by IMRRA to the Riviera Knowledge Bank. IMRRA is an independent not-for-profit business that was founded in July 2013 in response to oil major and wider industry request for an independent impartial risk rating for the hydrocarbon shipping industry. The focus is on increasing the interaction between oil companies, oil terminals, ports, tanker operators and related industry organizations with enhanced decision-making data. The expanding client base includes vessel operators, charterers/traders, vetting organisations, insurance companies and other parties looking to incorporate independent and impartial risk ratings as part of their risk assessment process.

FROM THE IMRRA CASE FILES: On a charterers request, a vessel was assessed by IMRRA to determine its suitability for ice class operations. As part of its risk assessment, IMRRA identified the deck officers’ lack of skills and experience as the biggest vulnerability and one of the two most important factors requiring immediate attention. The vessel’s technical operator ignored the recommendations. Two months later, this very issue incurred the operator significant demurrage charges and a huge vessel repair bill. The loaded vessel, while altering her course from the recommended route by 0.6 nautical miles, struck an unknown object damaging the forepeak and ballast tank, which caused water ingress. • A failure to check that the crew’s personal protection equipment is winterised, risks key operational task(s?) being compromised. Consider the implications for mooring operations, dropping anchor, and vessel maintenance if the crew do not have adequate stores of the right winter clothing

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quantity. Examples include: reflective winter boilersuits, appropriate headgear and the right gloves. • Consider the risks to a vessel that is not stocked with the appropriate winter greasing, winter hydraulic oil or antifreeze. Safe navigation is undermined (hydraulic oil lubricates the radar antenna gear); the anchor windlass is likely to seize (the remote control system requires hydraulic oil); and the inert gas deck seal and pressure/vacuum breaker is liable to stick (systems that are dependent on antifreeze). There are many other examples. Ice varies markedly throughout the polar regions. This presents novel risks that require specific skillsets. • Mooring and loading operations in fast ice presents unique and specific challenges. Are the crew up to the task? • Ice salinity and ice formations are key considerations. The freezing temperature of saltwater is lower than fresh water; ocean temperatures must reach -1.8 degrees Celsius (28.8 degrees Fahrenheit) to freeze.

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28 | SHUTTLE TANKER market overview

RUSSIA IS THE KEY MOVER IN SHUTTLE TANKER TRADES M

ost observers predict that crude oil will be around for 25 years yet, but some go further and suggest it will last twice as long. Russia’s investment is substantial, with no doubt in its mind about the crucial role shuttle tankers will continue to play, especially as a key contributor to its own energy industry. Currently the market is experiencing a bullish stance, with a rush of newbuildings not seen for the past decade. Offshore development is the key, and, with a steady recovery in offshore terminal construction driving production hopes in the years ahead, a confident mood prevails. Other onshore terminals will receive regular shuttle shipments on an export and import business serving surrounding hinterlands. The increased ordering is welcomed by shipbuilders because construction offers high CGT figures, and orders normally include two or more ships. Conversions are not normally a suitable option. The current global shuttle fleet stands at 101 vessels aggregating 11,300,372 dwt. Although a 20-year life span is not unusual, some of the ships will come up for demolition in the next two years. This is one of the reasons for newbuildings, especially given increasingly new technology and tighter emission

Development of the Arctic shuttle tanker fleet is gathering momentum by Barry Luthwaite

regulations. Russia has come in focus in the last year due to development of its Arctic shuttle tanker fleet, which is gathering more momentum. After some years of delay, Zvezda Shipyard in Far East Russia is finally expected to start full construction of new ships. Under a technology co-operation agreement with Hyundai, the builder is now signing agreements with Russian energy suppliers to build shuttle tankers for their fleets. Rosnefteflot is the shipowning wing of Rosneft, and recently signed orders for 10 42,000 dwt Arc7 ice class shuttle units designed for operation in ice of up to 1.8 metres thickness while prevailing against outside temperatures of up to -45°C. Although Rosnefteflot entered into a contract for 10 ships, it is believed five are optional at this stage. Delivery of the

Tanker Shipping & Trade | December/January 2017/18

tankers will not start until 2023, five years after projected commissioning of the Zvezda site in Bolshoy Kamen in the Primorsky Region. The newly ordered shuttle tankers will transport crude from the Paiyakhskoe field, from the mouth of the Enisey River traversing the Northern Sea Route in the Arctic to Russian destinations east and west. The five plus optional five shuttle tankers will be chartered by Taimyrneftegaz under a 20-year agreement with Rosnefteflot, to mainly serve Rosneft oil terminals. Rosneft has signed an initial agreement with Zvezda, which will inaugurate shuttle tanker newbuildings and give it exclusive control over future newbuildings as prime contractor. Russia is pumping huge sums of money into its shipbuilding industry, much of which is

geared to tanker construction. In a separate move, a new agreement of intent has been signed by Rosneft with Zvezda Shipyard for a series of Arc6-Arc7 ice class 70,000 dwt shuttle tankers. Both parties will jointly develop technical designs and select the basic equipment suppliers. Rosneft has teamed up with Rosmorput to put in place construction at Zvezda of one plus optional three icebreakers to create access passages for the shuttle tankers to Russian ports, ensuring a total ‘hands on’ involvement by Rosneft. Numbers of the Panamax shuttle tankers cannot be determined until basic technical characteristics of the ships have been agreed. Concluding the total involvement by Rosneft are two 6,000 grt icebreaking offshore support vessels, which are under construction as the yard’s first vessels for delivery in June and August 2019. In May 2017 Hyundai Samho signed a technical co-operation agreement with Rosneft under which the shipbuilder will provide design support for ship construction projects. The new joint venture is known as Zvezda-Hyundai and will engage in construction of tankers up to Aframax size. It is not known at this stage how many of these icebreaking tankers will actually be classed as shuttle units. All the newbuildings placed at

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market overview SHUTTLE TANKER | 29

SHUTTLE TANKERS TRADING country/shipowner

dwt

2 1

258,621 159,600

2 14

267,800 1,792,347

Greece European Navigation Inc New Shipping Tsakos Shpg. & Tr.

2 1 3

310,010 106,506 467,432

Monaco Int. Andromeda Shpg.

126,646

13 18 3 1 12 5

1,612,393 2,082,983 362,412 103,894 1,478,898 526,075

Russian Federation Gazprom Rosneft Sovcomflot

3 3 8

127,232 92,160 482,348

Singapore AET Inc

453,106

USA American Shipping Corp Chevron Corp Overseas Shipholding

1 3 1

45,760 398,149 46,000

101

11,300,372

the year round exporting crude from the Novoportovskoye oil field in Ob Bay and the Kara and Barents seas. The quartet are built to withstand the harshest weather conditions and incorporate wide beam and shallow draft specifications. The first three vessels in the Sovcomflot

series were the first to comply with LRâ&#x20AC;&#x2122;s stern-first ice class notation when performing operations in ice. Away from Russia, shuttle tanker business continues to be brisk. Despite early success with the Russian Arctic tankers, Samsung has lost out to Hyundai especially

Brazil Petrobras Transpetro Canada Canship Ugland Teekay Shpg. Corp

Norway Knutsen NYK Offshore Knutsen OAS Shipping Stena Ugland Shuttle Tankers Teekay Marine Svcs. AS Teekay Norway AS Viken MOL

Grand Total Zvezda will employ dual-fuel LNG-ready main propulsion. The Zvezda-Hyundai LLC joint venture has awarded a contract to Lazurit Design Bureau to develop the design documentation. Steel cutting on the first of the five 42,000 dwt shuttle tankers was due to start at the end of 2017, with

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delivery in 2020. Samsung completed the third of four Arc7 ice class 42,000 dwt shuttle tankers for Sovcomflot in 2014, but the final unit will only deliver in October 2019 after a requested delay. Classed jointly with LR and the Russian Register, they are purpose built to operate all

Tanker Shipping & Trade | December/January 2017/18

30 | SHUTTLE TANKER market overview

with the Zvezda partnership. But this has been mitigated to a degree by Samsungâ&#x20AC;&#x2122;s success in winning new business from non-Russian owners. Currently there are as many as 12 applicable orders complemented by the remaining Sovcomflot vessel referred to earlier. It is far and away the most successful builder of shuttle tankers. Added to the orderbook in 2017 were four more vessels for Teekay Offshore Partners. Two DP2 Suezmax units were contracted in September

and a further two added as exercised options just two months later. The quartet including equipment are valued at US$265M in total. All will be based on Teekayâ&#x20AC;&#x2122;s new Shuttle Spirit design and incorporate dual-fuel technology. Deliveries are set for 2019 and 2020, and the vessels will serve COAs for North Sea crude loading over at least a 10-year period with optional extensions for the oil majors including Statoil. There are still plenty of North Sea oil reserves of lower

sulphur content. Recently Brent crude rose to its highest level for many months at US$64 a barrel. In another deal AET Inc, a subsidiary of Malaysian International Shipping Corp (MISC), booked two more 125,000 dwt shuttle tankers from Samsung for long-term charter to Statoil, Norway. The high-specification vessels will be built with a maximum life span of 30 years, which is unusual. Statoil will seek to charter them on a rolling basis, starting with 5-7 years

to serve oilfields on the Norwegian Continental Shelf of the North Sea, Norwegian Sea and southern Barents Sea, plus the UK Continental Shelf. Options are attached to fit a VOC recovery system. Dual fuel will apply for both main and auxiliary propulsion. Deliveries are stemmed for 2019 at a combined cost of US$250M. TST Source for all figures in these tables: BRL Shipping Consultants. Data as at 6 December 2017

SHUTTLE TANKER ORDERBOOK country/shipyard

owner

dwt

Rosnefteflot Rosnefteflot Rosnefteflot Rosnefteflot Rosnefteflot

114,000 114,000 114,000 114,000 114,000

AET Inc AET Inc Sovcomflot Teekay Shpg. Corp Teekay Shpg. Corp Teekay Shpg. Corp Teekay Shpg. Corp Teekay Shpg. Corp

125,000 125,000 41,551 155,000 155,000 155,000 155,000 150,000

Transpetro Transpetro Transpetro Transpetro

107,000 107,000 114,700 114,700

US$m

year

Europe Russian Federation Zvezda Shipyard Zvezda Shipyard Zvezda Shipyard Zvezda Shipyard Zvezda Shipyard Option 5 more

2020 2019 2019 2018 2018

Far East Korea (South) Samsung Samsung Samsung Samsung Samsung Samsung Samsung Samsung

125 125 83.5 132.5 132.5 132.5 132.5 121.6

2019 2019 2019 2020 2020 2019 2019 2018

159 159

2020 2020 2018 2018

South America Brazil Atlantico Sul Atlantico Sul Atlantico Sul Atlantico Sul

Tanker Shipping & Trade | December/January 2017/18

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A unique business platform for the global shipping industry 22,000 VISITORS 1,825 EXHIBITING COMPANIES 101 COUNTRIES Welcomed by the owners of a fleet of over 4,000 vessels

4 - 8 June 2018 Metropolitan Expo, Athens Greece

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32 | CONFERENCE REVIEW

Analysts see hazy future in tanker market crystal ball A

panel of experts at the annual Tanker Shipping and Trade Conference in London were divided on their predictions for the future, but some feel the market is on the verge of a shift. Faced with the question of whether the current market is a charterers or a shipowners market, DNV-GL’s business development manager for Western Europe and Africa Martyn Crawford-Brunt demurred, saying the only certainty was that the future was uncertain. Braemar Shipping Services

president Denis Petropoulos said it the market doesn't particularly favour shipowners or charterers. “This is a normal market. Do we have a spike or a peak coming round the corner? Well, we probably do,” he said. Norton Rose Fulbright’s global head of transport Harry Theochari reframed the question to examine who actually owns the fleet, pointing out there has been a significant drop in financing for the tanker industry – from US$140Bn in 2007 to US$50Bn in 2007 – as well as a substantial shift in financing and debt ownership

from traditional banks to private equity firms. “A huge part of the market is owned by private equity,” Mr Theochari said. “These people see the industry very differently.” “In the past three months, I have done more forward trading of heating oil than ever before [for private equity investors],” he said “These people obviously know something we don’t.” Mr Petropoulos disagreed slightly, confirming the view that private equity investors will want a return on their investment but that they would

stay in the market for the long term in order to ensure the return was realised. While individually the panel varied on specifics, as a whole, they painted a picture that reinforced Mr Crawford-Brunt's sentiment: unpredictability is the future of the market. After an in-depth look at orderbook numbers, director for Richardson Lawrie Associates Charles Lawrie saw some signs of life for the market. “Everything still depends in both sectors on the delivery schedule, but on both counts, I think we’re seeing some revival,” he said. Again, Mr Petropoulos saw things differently. Looking at ways to ensure 2018 would outperform 2017, the shipowner said “We’re not particularly positive for 2018. We think the overtonnage and oversupply is going to hang around,” he said. Mr Petropoulos spoke as part of a panel addressing tanker business, economics and strategy. Other members of the panel included Norton Rose Fulbrigh’s global head of transport Harry Theochari, DNV-GL’s business development manager for Western Europe and Africa Martyn Crawford-Brunt and director for Richardson Lawrie Associates Charles Lawrie.

CONFERENCE REVIEW | 33

EURONAV CEO: TANKER MARKET ‘LIKE A DRUNK’ During a wide-ranging panel discussion on how tanker owners can remain competitive at the annual Tanker Shipping and Trade Conference in London, Euronav chief executive Paddy Rodgers was candid about current market troubles and what may be in store for the future. Admitting that he would be speaking solely and “unashamedly” about the crude-carrying VLCC sector, his specialist area of expertise, Mr Rodgers outlined recent market movements. After two or three years of very strong performance, he said, the market dropped. Why? Too many ships. This, Mr Rodgers said, could be traced back to the switchover from single- to double-hulled ships that resulted in younger fleets and, ultimately, resulted in a dearth of vessels owners would consider worthwhile to scrap. In short, he said, the market is unbalanced. “It’s like a drunk. By the time he’s had his 10th pint, his head gets ahead of his feet, then all of a sudden he's running and he crashes.” Mr Rodgers said that the best-case senario for the short-term – from his vantage point – was for the market to become bifurcated. “Negative cashflows drive scrapping,” Mr Rodgers said, and if a scenario arose whereby operators with older tonnage saw negative cashflows, he said there are shipowners with newer fleets who would be perfectly happy with that. The likelihood of that scenario occurring is very slim, according to Mr Rodgers, and he was clear that investing in older tonnage was not a wise move in current or foreseeable market conditions. “The reality is there is going to be pain before we get gain.” Mr Rodgers said there were structural problems within the

tanker market that needed to be fixed. How to do that, he said, was a multi-tiered, but straightforward process. “You need to get big ... so that you can raise money efficiently so that you have capital to invest ... The age of explosive growth is over. I don’t see another massive growth phase like the one we've had in the last 40 years. That means you're going to have to work harder for your money.” The Euronav chief executive spoke as part of a panel asking tanker owners to address how they will maintain their respective competititve advantages in late 2017 and through 2018. Other members of the panel included Braemar Shipping Services president Denis Petropoulos, Concordia Maritime chief executive Kim Ullman and Dania Ship Management chief executive Carsten Ostenfeldt.

BP AND EURONAV REVEAL CYBER ATTACK STATISTICS, DISCUSS HIJACKING THREAT

“Today’s most fast-moving security concern is the cyber challenge,” Mr Mason said. “In 2016, we intercepted 614M phishing emails – 1.7M a day, 70,000 per hour, 1,200 a minute.” Under heavy fire from would-be cyber criminals, Mr Mason said BP was taking the threat very seriously. “We're responding by investing in systems and their advances and in people and their awareness to threats.” Mr Mason said the concern his company felt was most worrying for shipping was that of a navigation system being compromised by ill-meaning attackers. “Being just a little bit paranoid in this space feels the right approach, to us.

Cyber security proved an area of concern for industry representatives at the annual Tanker Shipping and Trade Conference in London, with shipowners and oil majors candidly revealing statistics regarding the cyber attacks their organisations routinely face. With the startling US$300M in estimated losses from June's

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cyber attack on container shipping giant Maersk still fresh in the industry’s collective memory, BP’s chief financial officer Guy Mason revealed the number of email phishing attempts his organisation faces and told attendees that a little bit of paranoia is the ‘right approach’ towards the risk of cyber attack.

Adopting the attitude that there’s always someone out there trying to get you.” From the shipowners side, Euronav chief executive Paddy Rodgers said his organisation faced 50,000 attempts to breach its cyber security every day – and that he was told the figure was fairly common. “You’re constantly under attack, and if you're not careful, you will be breached,” he said. “If it’s not at the top of the risk matrix for every board of directors, it should be.” Dania Ship Management chief executive Carsten Ostenfeldt concurred, saying “I think there is a high risk that there will be a vessel going somewhere it shouldn’t” as a result of a cyber security breach. TST

Tanker Shipping & Trade | December/January 2017/18

34 | CONFERENCE REVIEW

TANKER INDUSTRY AWARDS SHOWCASE INDUSTRYCHANGING TECHNOLOGICAL INNOVATIONS The annual Tanker Shipping & Trade Conference & Awards in London ended its first day with a gala dinner where the tanker industry gathered to show its appreciation to the businesses and individuals who are driving the industry forward. In a crowded field, nominees were shortlisted and an advisory panel of industry directors and CEOs determined winners for operational excellence, technological innovation and environmental awareness awards. Tsakos Energy Navigation CEO Nik Tsakos took home the Industry Leader Award sponsored by Hill Dickinson for work showing consistent leadership and technical inspiration in the field of marine engineering. Mr Tsakos, who is also the chairman of the Intertanko association of tanker owners, dedicated his award to the group and said “Anyone crazy or stupid enough to own tankers in this market deserves an award.” He ended his speech on a more positive note, saying “The world is changing and so are our clients. We need to be at the forefront of those changes. I am sure together we can make tanker rates great again.” The Lifetime Achievement Award sponsored by World Fuel Services went to Fleet Management Ltd. managing director Kishore Rajvanshy for a distinguished career in shipping that includes his founding Fleet Management Ltd. in 1994. Mr. Rajvanshy also sits on the Technical and Regional Committees of a number of major classification societies. Mr Rajvanshy said “It is my priviledge to receive this respect amongst loved ones and industry veterans, and I would like to thank Tanker Shipping and Trade very much for thinking well of my life’s contributions to the shipping industry. The last 45 years has been an incredible journey that has taken this small town Indian to the forefront of international ship management.” Mr Rajvanshy said he came into shipping “accidentally”. He now runs a company that manages 450 ships and is valued at more than US$15Bn. He admonished the industry, saying “The future is not a place for us to reach, but a place for us to create. And this creative process will be fulfilled so long as you remember the purpose of your journey and so long as that purpose is noble and makes people around you happy.”

The team from Fleet Management are joined by Karen Purnell of ITOPF

Columbia Marlow was awarded the TST Operational Excellence Award sponsored by Winterhur Gas & Diesel. Columbia Shipmanagement and Marlow Navigation combined for a joint venture with software group Lufthansa Industry Solutions to produce software programmes for a host of ship-wide applications. Columbia Marlow president Mark O’Neil said “Digitalisation is of existential importance to the shipping industry and the industry's businesses,” warning the industry representatives present that if they were “not at the digital table in five years’ time,” they would be left behind. The Technical Innovation Award sponsored by DNV GL went to the Liberian International Shipping & Corporate Registry and Prevention at Sea for its development of the e-ORB, electronic oil record book. The e-ORB was created to combat the many challenges that are associated with using the traditional oil record book and to save shipowners and operators from facing fines, detentions and revenue loss associated with inaccurate or falsified oil records. Liberian Registry vice president

Tanker Shipping & Trade | December/January 2017/18

Christian Mollitor said “When we started this programme, it was almost four years ago, to develop the electronic oil record book, myself and the CEO ... we didn't ever realise that we’d have so much success as we have so far ... The electronic oil record book is being used onboard vessels of over 130 companies. It's been approved, besides Liberia, by over 10 flags.” A remote-operated vehicle (ROV) took home the Environmental Award sponsored by the International Tanker Owners Pollution Federation Limited (ITOPF). GAC EnvironHull’s HullWiper gives a fouling-free hull which significantly reduces fuel consumption and enhances long-term operating efficiency for vessels, whilst eliminating the necessity for expensive down-time for cleaning operations. HullWiper collects marine fouling removed from hulls, rather than polluting port water and risking the spread of harmful invasive species. Captured residues are pumped into a filter unit and deposited into dedicated drums onshore, which are collected by a locally-approved environmental waste disposal company.

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CONFERENCE REVIEW | 35

Seen and heard… The annual Tanker Shipping and Trade Conference in London revealed strong opinions and sharp divisions on many hot-button industry issues. Below are quotes and paraphrases from the conference's presentations and panel discussions.

digitalisation,” he said. One unexpected downside of digitalisation agreed upon by several owners was the potential loss of profit as ports increased their efficiencies with digital logistics solutions.

ON SCRUBBERS: Asked which technology was likely to win out for reducing sulphur with IMO's 2020 emissions regulations looming, International Registries, Inc (IRI)/Republic of the Marshall Islands Registry chief operating officer, John Ramage said it came down to one factor.

“We believe we will not have any change to the 2020 implementation,” he said.

“I think the biggest single factor is: there's no hard and fast decision whether [low-sulphur fuel] is going to be available.” Liberian Registry vice president Christian Mollitor, however, chose his technology winners by vessel age. He picked LNG as the winner for newbuildings, scrubbers as the technology of choice for younger vessels and low-sulphur fuel oil for older vessels. Euronav chief executive Paddy Rodgers said that in the absence of a big uptake of scrubber technology, the industry would be pushed towards refiners. He said that refiners who had spent on development of hydrocracking and other sulphur-reduction techniques were likely to earn well. ON THE TIMELINE FOR IMO'S 2020 SULPHUR REGULATIONS: Mr Demetriades, speaking in his role as a representative to IMO, said he did not foresee a change to the 1 January 2020 deadline for compliance with new SOx regulations.

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ON OPEC: Concordia Maritime chief executive Kim Ullman predicted that 2018 would see OPEC reopen the taps and raise the agreed limit on oil production. Mr Ullman cited Q2 2018 as the time when OPEC would formally increase production. March 2018, he said, would be when the group “reverses course”, saying OPEC would “open the taps by June”. ON IMO'S BALLAST WATER REGULATIONS: Counsellor (Maritime Affairs) and alternate permanent representative of the Republic of Cyprus to IMO, George A Demetriades said the process of implementing ballast water management regulation had not been a particularly easy one. “Undoubtedly, this is one of the more troublesome conventions adopted in the history of the organisation (IMO).” ON DIGITALISATION: Mr Demetriades also said he believed that digitalising certain processes could result in a reduction of detentions, particularly when it came to vessel's keeping accurate oil record books. “[Electronic oil record books] are one area we believe would benefit from

ON BLOCKCHAIN: GM International Services director and advocate Dr Jean-Pie Gauci-Maistre said his country’s government was engaged in an interesting experiment, to which they were fully committed. “The government of Malta has thrown its full backing to blockchain. They want to become one of the first … EU member nations to implement blockchain. That means smart contracts.” Euronav chief executive Paddy Rodgers was less convinced. “I’m absolutely uncertain about it,” he said. ON CYBER THREATS: Euronav chief executive Paddy Rodgers said his organisation faced 50,000 attempts to breach its cyber security every day – and that he was told the figure was fairly common. “You’re constantly under attack, and if you're not careful, you will be breached,” he said. “If it’s not at the top of the risk matrix for every board of directors, it should be.” Dania Ship Management chief executive Carsten Ostenfeldt concurred, saying “I think there is a high risk that there will be a vessel going somewhere it shouldn’t” as a result of a cyber security breach. On the viability of new, northern sea routes (with climate-change reducing the Arctic icepack): Norton Rose Fulbright's global head of transport Harry Theochari pointed out an unexpected business opportunity that had come from the change in climatic conditions that has been linked to fossil fuels. “Global warming has meant that the Northwest Passage [from the Atlantic to the Pacific Ocean] has opened up. My firm is advising on new ports,” he said. TST

Tanker Shipping & Trade | December/January 2017/18

36 | CONFERENCE REVIEW

DIGITAL SHIPPING IS PART OF OUR DNA Tanker Shipping & Trade’s Lifetime Achievement Winner Kishore Rajvanshy says success has been built on organic growth, a refusal to use middlemen and being many years ahead of the curve on digitalisation

ur philosophy right from day one has been to develop business organically based on customer satisfaction. Initially we got ships from my previous contacts in Norway and The Netherlands, and we developed these areas very well. Two years after the company was set up we started to explore the Japanese market. It was not easy, but we persevered. We visited Japan many, many times. Other companies like to have an agent in Japan. We chose to do it ourselves. None of us could speak any Japanese. Yet we thought it was always better for us to go and have direct contact with the owners, rather than going through a broker. That approach did bring good results. It was initially very difficult to get the clients, but once we got our first one or two clients the rest was easy. We have the same Japanese clients 21 or 22 years down the line. And the same applies for the Norwegian and Dutch principals: we still manage ships for those who initially supported us. The biggest challenge has been managing fast growth. Between January and November 2017 we had a net increase of 50 ships. We added about 70 ships and about 20 ships went out of management because of sales and purchase activity. There is a huge churn. A related challenge is to mobilise the manpower both on the ships and on shore. At every stage of shipmanagement your backbone is the crew. That is what you have to strengthen.

LEFT: Kishore Rajvanshy (FML): “We chose to do it ourselves. None of us could speak any Japanese”

Tanker Shipping & Trade | December/January 2017/18

You have to have training centres and a constant inflow of new blood, both in the office as well as on the ships. These days everybody talks about big data and digitalisation. I think many people do not understand what they are talking about. At Fleet, we realised the importance of IT and computerisation way back in 2002, when we launched the first version of our computer-based reporting system. We called the system PARIS: planning and reporting for the infrastructure of ships. Initially it was a very basic model with very basic information. Over the years we added more and more models. The idea was always to try and create a virtual office, meaning to have on the computer all the available data that any owner or any superintendent would like to see. Today PARIS is very advanced. We have got everything you would want to have on the computer: the data about your crew, all the technical data, positions coming from the ship, speed, consumption, PSA records, certificates and surveys, financial reporting, planned maintenance systems, and inventory control. Everything is there on it, and this is a system that is all developed in-house. We have not bought any offthe-shelf elements. We are very proud of it. Many owners who have got ships for different managers have always told us that our system is head and shoulders above the rest. So when it comes to digitalisation I think we have a competitive advantage formed over the last 15 years. But we have not sat on our record. We recently hired talented people for our IT department, which prior to the hiring round was 20-strong. Among the new recruits is a new CTO, and a data scientist who is going to guide us on how this data should be analysed and what advantages it can offer. We are also in the process of developing a module for measuring fuel and power consumption. It will generate practical inferences that the captain and the ship superintendent can usefully apply to maximise vessel performance. TST

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Asian Tanker Conference 27-28 March 2018, Singapore

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The Asian Tanker Conference will bring together shipowners, charterers, managers, technical experts and suppliers to discuss how the industry is evolving to meet new regulation, optimise operations and fine tune commercial expectations/ targets for 2018/19. The Asian Tanker Conference is a sister event to the highly successful Tanker Shipping & Trade Conference & Awards, which is an annual conference which brings professionals from across the entire tanker shipping and trade value chain to London.

Programme Highlights: • Exclusive breakfast briefing on day one. • Owner, operator and charterer discussion. • Registries and the regulatory agenda. • Interactive discussions and Q & A through your mobile phone. • Inside the tank: best practice in tank coating, cleaning and inspection. • Vendor and owner opinion on new and emerging technology • A clear view on options for 2020. • Digitalisation discussions. What does Smart Shipping mean in practice? • Outstanding networking opportunities including lunches and cocktail receptions. • Industry exhibition with suppliers from across the tanker shipping and trade supply chain.

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For details visit www.asiantankerconference.com

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38 | BEST OF THE WEB

BEST OF THE WEB

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Visit tankershipping.com to keep abreast of the latest sector news. On these pages are excerpts from the most popular stories from the last two months. Never miss a major development by subscribing to our free weekly newsletter at www.tankershipping.com

Dalian, Wärtsilä to design shuttle tanker Dalian Shipbuilding Industry Company (DSIC) and Wärtsilä have signed a joint industry project co-operation agreement to develop a production-level design for a new shuttle tanker. Dalian, a subsidiary of the China Shipbuilding Industry Corporation, has already received approval in principle from DNV GL for its initial design. The initial design includes a twin propulsion system and capacity for a DP2 crane and is in compliance with EEDI Phase 3 regulations. http://bit.ly/TSTDalian

To view more whitepapers visit the Knowledge Bank at www.tankershipping.com To upload a whitepaper to the Knowledge Bank, please email Steve Edwards at steve.edwards@rivieramm.com

www.tankershipping.com/s/knowledgebank

Editor’s comment:

Editor’s selection:

This paper is a candid and compelling record of the development of a ballast water treatment plant

How an Early Failure Can Lead to a Final Success From the initial R&D unit, which was a single way BWTS such as electrolysis to the final certified version, the path was full of surprises. The initial failures obtaining the D2 standards due to the challenging water biology have challenged Erma First scientists and engineers. The focus on the compliance at real and not favourable conditions have led technology upgrade from just electrolysis to a double stage treatment, filtration and electrolysis. This proved to be successful.

http://www.tankershipping.com/s/knowledgebank/download,view_161.htm

Tanker Shipping & Trade | December/January 2017/18

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BEST OF THE WEB | 39

Trafigura profits dip in ‘competitive’, oil rich commodities market

Tanker Shipping and Trade that the system’s biggest innovation was in combining VOCs and LNG to power vessels.

Commodities trader Trafigura’s annual results statement has pointed to oil and refined product markets in reporting diminished profit margins during 2017. A statement covering the yearly figures showed net profits down 9% – to US$887M – from 2016’s US$995M. “A tightening supply-demand balance pushed prices for many products higher,” the statement said. “However, the oil and refined product markets were still characterised for much of the year by oversupply and relatively low volatility, reducing margins and arbitrage trading opportunities.”

http://bit.ly/TSTWartsilaVER

http://bit.ly/TSTTrafiguraresults

Digital platform reduces terminal delays by 35% Oceaneering International has introduced an enhanced digital platform that can be used for optimising liquid terminal operations from vessel movements and ship assistance to tank and pipeline management. It has evidence that this platform can reduce dock delays by up to 35%. Oceaneering has transformed the TerminalSmart system into a logistics hub for an entire oil and gas terminal using the automatic identification system (AIS) for vessel tracking and software for monitoring all terminal operations. http://bit.ly/TSTOceaneering

New Wärtsilä system targets VOCs, tanker efficiency Wärtsilä has unveiled a new system at the Marintec conference in Shanghai aimed at lowering tanker emissions of volatile organic compounds (VOCs) during laden voyages. The group says its Voyage Emissions Reduction (VER) offers two options for shipowners looking to minimise losses through VOC evaporation -- a reabsorption model and a fuel model. The fuel model of the VER is a patentpending design that utilises VOCs as fuel for tanker vessels, and Wärtsilä VOC product line general manager Hans Jakob Buvarp told

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LNG-fuelled tankers ordered for use in North Sea Teekay Offshore Partners has declared options on a contract with Samsung Heavy Industries to build two shuttle tankers with LNG propulsion capabilities. The option for the two Suzemaxsized DP2 tankers was part of an initial agreement for another two identical vessels announced in July 2017. The first of the 154,000 dwt vessels is due for delivery in 2019, with the remaining three vessels scheduled to arrive in 2020. http://bit.ly/TSTTeekay

Opinion: will Clarksons’ clients become cyber attack victims?

Tanker owners need a new approach on sanctions Dr Jean-Pie Gauci-Maistre, director/ advocate, GM International Services argues that industry needs to take a holistic approach to international sanctions. http://bit.ly/TSTGMInternational

IRI’s John Ramage advises tanker owners on Chinese PSC issues Speaking to Tanker Shipping & Trade editor, Edwin Lampert, at this year’s Tanker Shipping & Trade Conference, John Ramage, chief operating officer of International Registries, Inc (IRI)/ Republic of the Marshall Islands Registry said that calls to remove black, white and grey lists are misplaced; differentiates between inexperience and corruption when it comes to Port State Control and recognises the importance of Recognised Organisations. http://bit.ly/TSTChinesePSC

London-listed shipbroker Clarksons is the latest in maritime to be struck by a cyber attack, this one being for ransom. A singleuser account was hacked allowing entry by an unknown person or organisation to obtain confidential information, Clarksons said in a statement. Clients of Clarksons have been warned that this could lead to a release of confidential information as it has refused to pay a ransom. As Clarksons chief executive Andi Case said “I hope our clients understand that we would not be held to ransom by criminals.” http://bit.ly/TSTClarksons

MRs will be the tanker market's bright spot in 2018 Leading analyst Charles Lawrie told Tanker Shipping & Trade editor Edwin Lampert at this year’s Tanker Shipping & Trade Conference that the sheer weight of the current orderbook means he is not bullish on market prospects for 2018, with one exception…. http://bit.ly/TSTCharlesLawrie

Tanker Shipping & Trade

Braemar’s Denis Petropoulos: my formula for tanker market success in 2018

Conference I Awards I Exhibition

Executive director and president of Braemar Shipping Services, Denis Petropoulos looks east and west in his assessment of the tanker markets; discusses the ownercharterer-broker nexus; how owners can profit from port inefficiencies; and where the smart money will be in 2018.

20-21 November 2018 “New London Venue” For more information, contact Chris Tims at chris.tims@rivieramm.com

http://bit.ly/TSTBraemar

Tanker Shipping & Trade | December/January 2017/18

40 | LAST WORD

Digitalise or die counsels Columbia Marlow’s Mark O’Neil Columbia Marlow chief executive officer Mark O’Neil on the stark choice facing tanker operators

rom the start of the merger we realised we had to embrace digitalisation. Digitalisation is what I have described as an existential issue for shipping and shipping’s place in the global trade environment. When you look at the Alibabas and the Amazons, the vertical structures that are going to take place, it is clear that we have to make sure we, our clients and our future clients fit into that future global trade environment. This is an important step. So we have teamed up with Lufthansa as partners to bring aviation, digitalisation and technology into the shipping space. We have in the first 100 days delivered our digital vision, our digital agenda. What does that mean? We are on the road, but there is never an end to that road. You have to appreciate that there is often a fair degree of cynicism and resistance to the whole process. But we are punching through that and we are on the right track. Hopefully within a very short period of time we will be well ahead of our competitors on that

digitalisation track. Digitalisation is about technology: processes and innovation. It is not about the latest software application, though 99.8% of people in the industry wonder ‘Do I have the latest software?’ If you go through the next five year with that frame of mind, you will be out of business because you have to achieve process excellence. You have to go through transformational change, and then you have to digitalise. Software is just one small part of the technology element of the digitilisation process. Those who fail to understand this face an existential threat. There is a lot of talk about

autonomous shipping. There will be degrees of autonomous vessels in the next five to 10 years. I think there will be fully autonomous vessels in our lifetime, though they will make up a very, very small percentage of the world fleet. There will always be a place for the shipmanager because just as drones have not replaced the need for sizeable crews ashore or on land, autonomous vessels will still require a good number of crew to operate them ashore – and of course crew to maintain them when they come into port. So I do not think it is the end of shipmanagers or shipping as we know it. I think

full autonomy will take a very long time. There are a lot of exciting developments. The motto of Columbia Marlow is ‘partnership redefined.’ It is not just about Columbia Marlow getting to that place, it is about a journey we take our clients and our future clients on. There will be a lot of developments, and these will be publicised when the time comes. TST *These comments are based on a fuller interview with Mark O’Neil after he accepted the 2017 Tanker Shipping & Trade Operational Excellence Award sponsored by Winterhur Gas & Diesel

MARK O’NEIL (Columbia Marlow): “You have to go through transformational change, and then you have to digitalise”

Tanker Shipping & Trade | December/January 2017/18

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