Tanker Shipping & Trade June/July 2018 by rivieramaritimemedia

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contents 3 COMMENT

June/July 2018 volume 12 issue 3

4 CONTRACTS AND COMPLETIONS

Tankers & Markets Editor: Craig Jallal

Regulars 6 ANALYSIS 7 LEGAL BRIEFING 40 LAST WORD

Sustainability and CSR 8 Corporate social responsibility and sustainability can bolster corporate reputation

Green Tanker Tech 12 How to achieve IMO’s framework of reducing shipping emissions

Ballast Water 16 Two opinions cast doubt on the reliability of BWMS 17 What should shipowners do if they encounter problems treating ballast water? 18 USCG tightens its rules on ballast management 21 How to retrofit a BWMS

Ship Description 24 The LNG-fuelled Thun Eos is the first in a series of new coastal tankers

Tank Coatings 31 Who is paying for increased raw material costs? 31 Are tank coatings meeting IMO's PSPC standard?

Fleet profile: Denmark and Sweden 36 How are the region’s players reacting to market trends? 39 Interesting projects are helping grow the nations’ maritime sectors

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Tanker Shipping & Trade | June/July 2018

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COMMENT | 3

2020: only one industry will benefit and it’s not who you think

O Craig Jallal, Tankers & Markets Editor

“If you have fitted scrubbers you are now a price taker [and] “ships fitted with scrubbers are going to be price gouged”

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ver the last few months I have attended many industry events. Now I sit among the great and the good of the tanker industry at the Intertanko annual Tanker Event in Rome and it seems an apt opportunity to refine (pun intended) the feedback from owners and operators on what, in my opinion, will happen on 1 January 2020, when the IMO sulphur cap comes into force. The first bit of feedback to consider is that from the bunker sector. Those bunker suppliers who have arranged access to low sulphur fuel will start stockpiling product sometime in late 2019. This means that the shore-side tanks are going to be drained of high sulphur fuel during the middle of 2019, in preparation for the new low sulphur stock. Depending on the fuel turnover in the port, this could have a tapered effect, with some bunker barges delivering a last cargo of high sulphur fuel and then being flushed and cleaned for low sulphur fuel delivery only. The good news is that there may be a discount on high sulphur fuel to shift stock and avoid having to find alternative storage. The bad news is that the rundown of high sulphur fuel is going to start earlier in those ports where the turnover of bunkers is relatively low. From an operational perspective, tankers may need to divert to take on bunkers, as low and high fuels cannot be mixed. According to one product tanker owner at this year’s Intertanko meeting, his clients – the oil refineries – regard the 2020 sulphur cap as a shipping issue. Now, somewhat belatedly, the refining industry is looking to increase supply of low sulphur fuel and the refineries that are capable of producing low sulphur fuel are those new operations in the Middle East and India. The

practical outcome is that low sulphur fuel will be shipped on product tankers to the main bunker ports. Who will be to blame if no low sulphur fuel is available? My discussions at Intertanko also illuminated the pricing aspect. As one owner said, fitting scrubbers is a tax on the shipowner (and we all know how owners feel about tax). Advocates of scrubbers point to the expected price spread between hard to find low sulphur and cheap surplus high sulphur fuel. But another tanker owner pointed out that the refiners and oil majors supplying high sulphur fuel are not going to sell it at a huge discount. If you have fitted scrubbers you are now a price taker and in the words of one owner “ships fitted with scrubbers are going to be price gouged”. The expected US$400/tonne differential is going to disappear in storage, marketing costs and other items, to produce a price differential of only around US$50/tonne and a nice fat margin for the producer. No doubt fingers will be pointed and lawsuits will start flying. In Rome, the notion of LNG as an alternative fuel has also been widely discounted and there is genuine concern over the impact of the long-term effect of blended fuels on main engines. Fuels are blended to a standard, but the compositions will be different and there are doubts over how stable blended fuels will be over time. Besides, blended fuels will only be available for testing in Q3 2018, leaving just six months to test and gather data in real time before committing to long-term usage, as there can be no mixing of fuels. Who will take the blame for engine failures? At this point in time, the 2020 sulphur cap is likely to produce mainly chaos, and the key beneficiaries are likely to be the lawyers. TST

Tanker Shipping & Trade | June/July 2018

4 | CONTRACTS & COMPLETIONS

Small tankers; big expectations The small clean tanker fleet is an often-neglected sector, but sale and purchase activity has been firm since the start of the year

Hanover Trader: Sold so owners could concentrate on container shipping fleet

between the age of zero and four years old have ‘eco’ engines, according to data held by VesselsValue. The proportion of those on order with eco engines is substantially higher at 70%. Interestingly, there are seven small clean tankers between the age of 10 and 14-years old that are equipped with eco engines. These are vessels equipped with dual-fuel propulsion units, such as the Rolls-Royce C2633LAG Gas eco engine.

China challenges Japan

he small chemical tanker fleet can be defined as those in the 1,000 dwt to 29,499 dwt range. Currently, this fleet consists of 4,800 vessels with an average size of 6,500 dwt and an average age of 17 years. This is three years older than the average age of the crude oil, products and chemical tanker fleet. Currently, there are 223 small clean tankers on order, representing just under 5% of the live fleet. The orderbook stretches out until 2020. Newbuilding contracts placed in 2018 reveal a wide range of shipyards engaged in this sector. The 14 contracts placed so far in 2018 represent 12 shipyards, including seven different shipyards in Japan. Not all the signatories behind the contracts are known, but most appear to be Japanese owners placing contracts in Japanese yards.

Avoiding the eco-engine

To date in 2018, 32 small clean tankers have been delivered, with another 173 due for delivery by the end of the year. As has been the case in other tanker sectors, there were a considerable number of small clean tanker newbuildings whose ‘statutory’ contract date was shortly before 1 January 2016, allowing them to slip under the Tier III engine rules. Only 20% of the newbuildings and newly delivered small clean tankers

Tanker Shipping & Trade | June/July 2018

The orderbook is evidence that in this sector, China is a real challenger to the established Japanese yards. Avic Dingheng shipyard in China has the largest quantity of small clean tankers on order and/or recently launched. This includes a 16,300 dwt clean products tanker currently under construction at Avic Dingheng (hull number 29), which is for the account of Furetank of Sweden. The vessel is reported to have 14 epoxy-coated tanks served by eight pumps controlled from a separate cargo pump room. The main engine is a Wärtsilä 9L34DF 4 dual-fuel (LNG and fuel oil) eco unit. The as yet unnamed tanker is one of two Furetank vessels on order at Avic Dingheng. Earlier this year, Furetank took delivery of the 18,000 dwt Fure Vinga from the same yard. Fure Vinga is the lead vessel in a separate series of six FKAB-designed LNG-fuelled sisterships that the shipbuilder is constructing for operation within the Gothia Tanker Alliance (GTA) pool. Besides Furetank, other Swedish shipowner GTA members include Thun Tankers and Älvtank, which will contribute Avic Dingheng newbuildings to the pool. All six dual-fuel tankers, which are designed to the Finnish/Swedish ice-class 1A standard, will operate in the North and Baltic Sea emission control areas, under the commercial management of Furetank Chartering. As at May 2018, 17 small clean tankers had been sold for scrap. One striking feature of the small tanker fleet is the relatively high average scrapping age. The oldest unit sold for scrap so far in 2018 was the 1967-built, 1,900 dwt Sotira, which was sold for an undisclosed price. Discounting this somewhat extraordinary age, the remaining vessels sold for scrap had an average age of 31 years. This is considerably older than the rest of the tanker fleet. In reality, 30 years was the designed working life of most vessels at the time they were built. The reduction in the age of scrapping in general is more to do with market forces and the weak earnings environment. In the chart overleaf, the average scrap age is applied to the older vessels, which have Special Surveys due in 2018. At this point, owners will be conducting a cost benefit analysis regarding the capex of dry docking and steel renewal and deciding if the

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CONTRACTS & COMPLETIONS | 5

SMALL CLEAN TANKER FLEET

less than 5-0 years

0-4 years

5-9 years

10-14 years

15-19 years

20-24 years

25-29 years No. 30-34 years

Eco Engine

35-39 years

Scrap Candidates

200

400

time is right to scrap. An important factor in this decision is the prices being achieved on the scrap market. Of recorded sales with prices attached, the current range appears to be US$250/ldt for 18,000 dwt tankers built in the early 1990s, to US$340/ldt for tankers in the 2,000 to 3,000 dwt size range, which is relatively healthy compared to historical prices.

Sale and purchase activity

On the sell side, the most prolific disinvestor of tonnage in the sector has been Team Tankers of the USA and Lomar Shipping in the UK. Team Tankers sold the 2008-built, 13,200 dwt Team Houston, and the similar age and size Team Oslo in January 2018. Although the vessels were both built at Jinse in South Korea, it is not known if these are sisterships. What is clear is that both vessels were due for Special Surveys, which may have been a key point in deciding to sell them. Lomar Shipping of London sold the 2006-built, 13,200 dwt Bremen Trader for a US$8M, and the 2007-built sistership Hanover Trader for a reported US$8.6M. Explaining the sale of the tankers, Lomar Shipping head of communications David Wilson said: “…our greater focus has increasingly been on growing a market-leading fleet of container ships, where we are confident that market conditions will continue to improve strongly over the coming years.” On the buying side, Coastal Shipping of Canada was the most active buyer in the first five months of 2018, scooping up three vessels. Two 20,000 dwt Icdas shipyard sisterships, Icdas 09 and Icdas 11 were purchased en bloc by Icdas Celik for a reported

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600

800

1000

US$14.5M each. The features of the sale strongly suggest an offthe-blocks resale of vessels built by the shipyard on a speculative basis. It is expected that the new tankers will serve in Coastal Shipping’s fuel supply service in the Canadian Arctic and support the company’s expansion into the global market. Coastal also purchased the 2012-built San Pietro 7,500 dwt clean tanker for US$8.5M, while divesting itself of the 1993-built, 9,200 dwt Nanny for an unreported sum.

Fleet growth

As mentioned above, the small clean fleet has a relatively small orderbook of just 4.8% of the current fleet by number of vessels, and 6.4% of the current fleet by size. However, this is one sector of the total tanker fleet that tows in its wake a convoy of aged vessels. According to VesselsValue, the oldest tanker that appears to be in regular operation is the 1944–built Marinoil 2, which is in service in Mexico as a bunkering tanker. The highest number of deliveries of small clean tankers took place during the pre-2008 boom years and so many vessels were ordered that deliveries continued at a high rate until 2010. Since that time, the rate of deliveries has tailed away to around 70 units per year. Therefore, it is highly unlikely that all 173 of the small clean tankers currently scheduled for delivery in 2018 will actually enter the fleet. The current rate of delivery is around six vessels per month, which suggests approximately 72 vessels delivered for the whole year. Therefore, it is likely that a large number of these vessels will be delayed or even cancelled. TST

Tanker Shipping & Trade | June/July 2018

6 | ANALYSIS

JOINING UP THE DOTS OF DEMURRAGE A

lmost everyone I speak to has a backlog of demurrage claims. This is because claims locked up in a trading chain always proceed at the pace of the slowest participant. Owners will always say they are not being paid quickly enough and sometimes with justification. There is an attitude that pervades the business of shrugging and saying “Well, it’s only three months old!” What informs this attitude? Many companies are under resourced in the claims departments and some companies simply don’t want to pay demurrage - or will put off payment until the cash from their counterparties has arrived. It is also the case that negotiations are often prolonged and during the life of a claim, staff may change, further hampering resolution. Dusting off an elderly claim to read the background on often contentious items takes time and experience. New staff are motivated by results, which often means working the newer, more straightforward claims. What can we do about this industry malaise? It needs real determination on all sides owners, brokers and charterers - to bring about change. Merely accepting the backlog of claims slows down the business and is a drag on morale for the teams assigned to look after these claims. There is a real risk that the longer a claim is outstanding, it is either time barred, or the counterparty goes

HubSE marketing director of demurrage Phil Stalley challenges those in the demurrage claim chain to throw off the culture of slow payments and embrace technological change

Phil Stalley (HubSE): Concerning technological change "there is a reluctance of companies to be leaders"

“There is an attitude that pervades the business...“Well, it’s only three months old!”

Tanker Shipping & Trade | June/July 2018

out of business. Digitisation and blockchain may seem like the answer, but is the industry ready for this? As a software provider, HubSE knows there are already many solutions available that could speed up data flow and transactions. But there is a reluctance of companies to be leaders and step into this space. Shipping is a conservative industry and companies would rather wait for others to kick off the process. HubSE can help resolve the backlog through its Hub Exchange software. This product will speed up the negotiation of claims and remove a lot of uncertainty around time bars and other hazards that can foul up the claims process. The idea is relatively simple - as a member of the Hub Exchange service you can exchange your claims electronically. But, you say, we already do this by email! That may be true, but when you send your claim by email are you: • Blocked by the email gateway for sending attachments that are too large? • Prevented from sending

claims because your counterparty’s email inbox is full? • Sending the claim to the correct email address? • Receiving acknowledgment of receipt of your claim from your counterparty? In the management of a claim there will come a point when all the documents must be in one place, together with the entire history of the negotiations. With Hub Exchange, there is no need to trawl through shared folders or personal emails; everything you need is on the Hub. The system is cloudbased and accessed through a browser and those HubSE customers already using the Claims Management System have the hub already built in. HubSE will provide application programming interfaces to connect individual claims management systems to the Hub. Negotiations take place through an instant messenger-type system. HubSE recognises that speeding up communications and having instant access to all necessary documents in one place is not going to clear the backlog of claims overnight. There will always be counterparties who regard opaqueness and delayed payments as proof that they are experts at playing the system. But embracing the cloud will save you time, which you can use to focus on those malcontent counterparties. TST

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LEGAL BRIEFING | 7

OWNERS BEWARE: ATTEMPTED SMUGGLING IS NOT A “MALICIOUS ACT”

n an unexpected turn of events, on 22 May 2018, the Supreme Court considered the scope of the “malicious acts” peril in detail and ruled that it did not cover the present circumstances of attempted drug smuggling, which had been accepted as common ground between the parties in the case. The decision will be of particular interest to owners and operators whose vessels trade to areas where the risk of judicial detention is higher than normal. The B Atlantic was insured on the standard war risks terms contained in the Institute War and Strikes Clauses HullsTime (1/10/83) with additional perils. When it was preparing to leave Venezuela, a large amount of cocaine was discovered strapped to the vessel’s hull. The vessel was detained by the Venezuelan authorities and ultimately confiscated. The owner abandoned the vessel and claimed for a constructive total loss on its war risks insurance. In total, the owner’s

Tanker owners need to be aware that a war risk insurance claim may not cover attempted drug smuggling, comments Tatham Macinnes partner Stephen Askins claim exceeded US$20M. The owner was not aware of the attempted drug smuggling, which was ostensibly carried out by persons unconnected to the ship or the assureds, and the owner sought to rely on the terms of its war risks insurance, which covered losses arising from “any person acting maliciously”. The insurers denied cover and sought to rely on the exclusion of losses arising from “detainment by reason of

UK Supreme Court: Smuggling is not a malicious act

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infringement of customs regulations”. The insurers argued that confiscation arising from the lawful acts of a sovereign government is not a peril that the war risks insurance was intended to cover. Counsel for the owner argued that the exclusion, which refers specifically to the peril of “detainment” but not malicious acts, must be subject to an implied limitation that it would not undermine or cut back the cover afforded for malicious acts of third parties. They also argued that the peril of detainment in these circumstances was no more than the mere manifestation of the malicious act of attempted drug smuggling and did not therefore operate as a concurrent cause of the loss. During the hearing, some members of the Supreme Court expressed the view that maliciousness required something more than recklessness by the perpetrator. The Court asked the parties for written submissions on this point. In the Court’s opinion, the attempted drug smuggling was not malicious, because the smugglers did not intend any harm to come to the vessel. In fact, the opposite was true: the smugglers no doubt wanted the vessel to sail from Venezuela and reach its destination safely and without delay. This was an unexpected turn of events, given that both parties had proceeded to the Supreme Court on the basis that it was agreed that the drug smuggling was a malicious act. The Court went on to consider the position based on the parties’ argued cases, assuming that there was a malicious act. The Court found that if, hypothetically, the loss was caused proximately by the malicious act of the drug smugglers, it was also caused by the detainment of the vessel arising from an infringement of Venezuelan customs regulations – the detainment was not only a mere manifestation of the attempted smuggling. Accordingly, the owner’s claim failed. TST

Tanker Shipping & Trade | June/July 2018

8 | SUSTAINABILITY AND CSR

SUSTAINABILITY AND CORPORATE SOCIAL RESPONSIBILITY Corporate social responsibility and sustainability policy is about building and maintaining a corporate reputation. Craig Jallal examines how best to achieve this

orporate Social Responsibility (CSR) is the term used to describe policies that ensure companies conduct their business in a way that is ethical. This means taking account of the social, economic and environmental impact of the company’s actions, and consideration of human rights. In shipping, this can be extended to cover environmental protection, support of marine life, antibribery and corruption, antipiracy, cyber security and prevention of terrorism. The visible corporate face of CSR can involve a range of activities, such as: • Working in partnership with local communities • Socially responsible investment (SRI) • Developing relationships with employees and customers • Environmental protection and sustainability

THE VISIBLE CORPORATE FACE OF CSR

Working in partnership with local communities Sustainability is the related issue of minimising wastage and trying, where possible, to produce goods and services in a way that does not directly or indirectly harm the environment. As shipping is concerned, there is no legal or IMO regulation requiring shipping companies to have a CSR or sustainability policy. As Hill Dickinson global head of shipping for maritime legal specialist Julian Clark explains: “While it is true that one cannot point to a single legal document or regulation imposing compliance with the concepts of CSR, one does not have to look very far to find a vast range of obligations which can be addressed and protected against by an efficient CSR policy. It is no doubt partly for this reason that all of the world’s major shipping corporations, particularly

Tanker Shipping & Trade | June/July 2018

Socially responsible investment (SRI)

Developing relationships with employees and customers

Environmental protection and sustainability

those in the tanker sector, actively support CSR, often by creating posts with specific CSR responsibility and departments that can develop and implement appropriate procedures.” Indeed, all the oil majors and the largest tanker companies have a CSR and sustainability policy and take this role very seriously. Shell produces an annual report, in the 2017 version of which the company outlined its approach to sustainability and covered the company’s social, safety and environmental performance. It establishes how Shell is playing a role in energy transition and details Shell’s contribution to society, which includes providing people with access to energy products. The report points out the company also contributes through paying taxes (although this is of course a legal requirement), procuring local goods and services, hiring locally and supporting social investment programmes. Shell chief executive Ben van Beurden said: “Sustainability is essential to the way we do business. Our Sustainability Report is an account of our progress in this area as we continue to deliver [the] energy products society needs in the transition to a low-carbon world.” Shell also goes one step further and produces an annual report on its payments

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SUSTAINABILITY AND CSR | 9

Ben van Beurden joined Shell in 1983, and became chief executive with effect from 1 January 2014

Ben van Beurden (Shell): Shell details its payments to foreign governments

to foreign governments. This is one way of covering the aforementioned antibribery and corruption. This report details payments in 29 countries where Shell has upstream operations and is prepared in accordance with the UK’s Reports on Payments to Governments Regulations 2014. Tanker operator Teekay takes a slightly different approach, which highlights the different interpretations of CSR and sustainability. In the latest available Teekay sustainability report, the emphasis is on safety. President and chief executive Kenneth Hvid said that sustainability is about focussing on safety: “We put safety first. No compromises. We look after each other and make sure everyone gets home safely. We consider people, planet and profit in all of our decisions and actions.” Teekay undertakes a number of CSR events each year. These include the White Ribbon Campaign (preventing violence against women) and the Annual Kiltwalk Event (where staff from the Glasgow office walk 26 miles in traditional tartan kilts), among other events. MISC/AET take a different approach to this issue again. The MISC/AET

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Julian Clark (Hill Dickinson): The world’s major shipping corporations support CSR

annual sustainability report defines the concept as six pillars of business awareness encompassing customers, shareholders, governance & business ethics, employees, environment and community. The report is prepared in line with the Global Reporting Initiative (GRI) G4 Guidelines for sustainability reporting, and lists 477 development initiatives undertaken by the company, including a reduction of 91% of non-shipping scheduled waste recycled annually and a 19% reduction in freshwater consumption on the company’s ships.

Global sustainability

“There is no single law or regulation imposing compliance with the concepts of CSR”

The UN is one of the global platforms driving sustainability. The UN's Sustainable Development Goals (SGDs), agreed at an historic summit at the United Nations in New York, came into force in 2015. It saw the creation of the 2030 Agenda for Sustainable Development, which contains the 17 agreed SGDs encompassing issues such as poverty, gender equality, sustainable communities and clean energy. SDG 12 focuses on 'sustainable consumption and production patterns' and

states that there "should be a systematic approach and cooperation among actors operating in the supply chain, from producer to final consumer." Implementing SDG 12 requires radical steps. US supply chain management company, CNH Industrial, has initiated an assessment of potential suppliers’ sustainability credentials. The company monitors its existing suppliers through a specific assessment process based on self-evaluations and audits. This activity is performed annually, involving a group of chosen suppliers with the aim of gradually increasing the number of participating companies year-on-year. The supplier’s risk classification, deriving from previous assessments, is the trigger for eventual follow-up sustainability audits. Potential improvements and implementation activities are identified in the form of specific action plans which are developed together with suppliers. Supply chain managers CNH Industrial feels that Supplier Sustainability SelfAssessment (SSSA) is not only a tool for monitoring performance, but is also a way of promoting continuous improvement and encouraging good sustainability practices. According to CNH Industrial, in 2017, 75 audits were carried out and 28 suppliers were involved in nearly 210 action plans for improvement. The audits focused on four key areas: environment, labour practices, human rights and impact on society. In June, Lloyd’s Register (LR) become a founding member of the UN Group for Sustainable Ocean Business. The United Nations Global Compact Action Platform for Sustainable Ocean Business was launched on 8 June, World Oceans Day, at the UN Headquarters in New York. The Action Platform

Tanker Shipping & Trade | June/July 2018

10 | SUSTAINABILITY AND CSR

recognises that long-term ocean well-being is critical to ensuring societal wellbeing and a common resource with a significant potential to create more sustainable food, energy, transport and minerals for a growing world. The three-year, intensive programme convenes leaders in ocean industry along with the UN, world governments, academia and civil society to work towards the sustainable use of the oceans. Lloyd’s Register chief executive Alastair Marsh said “LR will use our influence to encourage leading businesses and organisations to take action now with regards to our ocean’s health. Ocean sustainability challenges have inherent commercial risks, as well as large opportunities. It is in all of our interests to help stabilise its health. In addition, we strongly support the 17 UN Sustainable Development Goals (SDGs) and believe that this platform will help get us further to creating the future that we want.” One might think that the level of examination required, as exhibited by CNH Industrial, would be a deterrent in shipping, but Capital Maritime & Trading was the first shipping company

worldwide in 2014 to receive independent verification and certification by LR of shipping for its business strategy, in accordance with the "IMO Strategic Concept of a Sustainable Shipping Industry". Capital Maritime & Trading incorporates key imperatives and goals, as defined by IMO, in the company's management systems across its operations. Capital has established a task force to implement specific actions, plans, processes, and to develop systems addressing sustainability. Priority has been given to the promotion of a safety culture and environmental stewardship, as well as to the education, training and support of seafarers. Additionally, the strategy encompasses a drive to reduce the energy required to operate and explore and evaluate the potential of alternative marine fuels, particularly LNG. Capital Maritime & Trading chairman Evangelos Marinakis said: "Capital Ship Management strongly believes that the benefits of lower SOx, NOx and, potentially, reduced greenhouse gas emissions makes LNG as a marine fuel an attractive option. We think that competitive LNG pricing

Alistair Marsh (Lloyds Register): Mr Marsh has been ceo of LR since 2015 and oversees strategic direction, governance, safety and financial performance

“Ocean sustainability challenges have inherent commercial risks, as well as large opportunities”

and an adequate global LNG bunkering infrastructure could be a reality within five to 10 years. We want to be ready and we welcome the broad support that our partners LR and DSME can provide in helping us develop more sustainable shipping solutions." Given these examples, and the wide ranging facet of CSR and sustainability, should there be a legal requirement on shipping companies? “I for one would strongly caution against imposing yet more regulation on an industry drowning in the range of legal obligations placed upon [it],” said Hill Dickinson’s Mr Clark. “Does CSR have an important legal role to play in minimising risk and protecting against legal infringement? Absolutely yes. The future of shipping, the inevitability of automated vessels and the changes that this will bring in relation to manning and operation, combined with the growing threat of cybercrime and international terrorism in the shipping sector mean that those tasked with developing effective CSR procedures are the gatekeepers for the continued development and advancement of one of the world’s most essential and safe transportation systems.” TST

David Furnival of BSM: The practical application of CSR BSM has four key focus areas that are governed by formal company policies: safeguarding diversity and equal opportunities in our employment practices; maintaining ethical procedures in our relationships with customers, competitors, suppliers and local communities; providing a safe and healthy working environment; and ensuring that we do all we can to sustain a thriving natural environment for future generations. We understand the effect sea transport can have on the environment and are committed to environmental protection and pollution prevention in all our activities, ashore and at sea. Our objectives are directed where possible towards the reduction of identified environmental impacts on the marine environment as well as the atmosphere. We also recognise the importance of spreading environmental awareness to employees, incorporating environmental issues

Tanker Shipping & Trade | June/July 2018

into everyday business decisions and activities and monitoring appropriate technology and management practices for the enhancement of our environmental performance. BSM carries out periodical reviews to determine objectives, targets and corresponding policies and initiatives. Adherence to company policies is governed by our quality system, based on the requirements of ISO9001:2015 and provides mechanisms for detecting shortfalls and stimulating process improvements. Two of our core values, honesty and transparency, help promote open reporting that enhances the system’s effectiveness. Our approach is underpinned by practical commitment and contributions to non-governmental organisations which drive standards on safety and environmental protection, crew welfare and anti-corruption, such as SIGTTO, the Seafarers Trust and the Maritime Anti-Corruption Network respectively.

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12 | GREEN TANKER TECHNOLOGY

EMISSIONS: IS THE WAY FORWARD ANY CLEARER? April saw IMO set a milestone framework to reduce total annual global shipping emissions. But how best to achieve this, asks Ed Martin?

“Can I get charters if I cost an extra US$3.5M to US$7M a year for fuel?”

f the 173 member states,171 supported the adoption of an initial strategy on greenhouse gas (GHG) emissions reductions from shipping on the final day of IMO’s Marine Environment Protection Committee's (MEPC) 72nd session in London on 13 April. With much public attention focused on IMO and the potential for an emissions cap, more than 70 delegations took the opportunity to convey their official views on the agreement. Brazil, Russia, India and Iran were among those countries that expressed concerns or reserved their positions on the section of the document that sets out GHG emissions caps. But several other voices thought the document could and should do more. Among those calling for higher levels of reduction included some EU member states as well as Pacific Island nations, which are especially at risk from rising sea levels. International shipping bodies with consultative status at IMO, including BIMCO and International Chamber of Shipping, reacted positively to the decision, with BIMCO deputy secretary general Lars Robert Pedersen saying “IMO has done something no one has done before: set an absolute target for emissions reductions for an entire industry. “It is a landmark achievement in the effort to reduce emissions, and something that every other industry should look to for inspiration.” In his prepared remarks, ICS secretary general Peter Hinchliffe referenced the landmark 2015 Paris Agreement to which the IMO GHG framework is tied. “This is a ground-breaking agreement – a Paris Agreement for shipping – that sets a very high level of ambition for the future reduction of CO2 emissions,” he said. He added: “We are confident this will give the shipping industry the clear signal it needs to get on with the job of developing zero CO2 fuels, so that the entire sector will be in a position to decarbonise completely, consistent with the 1.5°C climate change goal.” The strategy, as adopted, includes the guiding principle of “common but differentiated responsibilities and respective capabilities” (CBDR—RC), a UN principle contained within the Paris Agreement that mitigates the

Tanker Shipping & Trade | June/July 2018

responsibilities of developing countries of fighting climate change, placing more responsibility on developed countries. Several states, notably Canada, have expressed concern over the inclusion of the CBDR—RC principle, while others lauded its inclusion and that of related instruments to promote increased financial flows, technology transfer and capacity building between developed countries and the UN-termed Least Developed Countries (LDC) and Small Island Developing States (SIDS), notably the Philippines and Indonesia. The agreement also includes IMO’s “no more favourable treatment” principle, to ensure regulation is applied equally to all vessels. The MEPC will continue to convene and review the terms of the agreement over the next five years, before a long-term strategy is developed in 2023. IMO will undertake a data collection project on GHG emissions from vessels between 2019 and 2021 to provide a statistical foundation for reaching consensus on decarbonisation goals. In the meantime, Tanker Shipping and Trade will take a closer look at two approaches shipowners may take to reduce emissions to meet the 2050 goals and determine if there is a clearer path to a low-emission future.

Slow steaming

Slow steaming, the practice of deliberately limiting the speed of a vessel to reduce fuel consumption, is perhaps most commonly known as a means of cutting costs during the days of high oil prices. But some argue it has its place as a method of reducing emissions and thereby meeting the requirements of the 2020 sulphur cap, as well. It may seem particularly appealing since it requires little or no capital investment, compared to the costs incurred by fitting and running scrubbers. The logic behind slow steaming is that the faster a vessel moves through water, the more drag it encounters and therefore more energy is required to make progress; conversely, at lower speeds less energy is required. “Speed control or slow steaming is a way

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GREEN TANKER TECHNOLOGY | 13

to reduce our environmental footprint and we should look into it,” said Intertanko chairman Nikolas Tsakos at the 9thAnnual Greek Shipping Forum in February, where European Communities’ Shipowners’ associations chairman Panos Laskaridis also called for consideration of slow steaming. Mr Tsakos expanded on this at the 12thAnnual Capital link International Shipping Forum in New York in March, when he said “by reducing by 20% our top speed, we can meet the level.” There is perceived to be a cubic relationship between a ship’s speed and power. According to consultancy Delft CE, a vessel reducing speed by 10% reduces its power demand by 27%. As a slower vessel travels less distance in the same amount of time, energy per unit of distance is reduced by 19%, the consultancy said. Delft CE released a report in October 2017 titled Regulating speed: a short-term measure to reduce maritime GHG emissions, which highlighted the benefits of slow steaming, at least as a short-term measure for emissions reduction in anticipation of IMO’s decision this year, focusing on three potential speed-reduction regimes, of 10%, 20% and 30%. The report looks at container vessels, dry bulkers and crude and product tankers, noting that of the three types, crude and product tankers have the lowest emission-reduction potential, of 10% based on a 10% speed reduction, 19% based on a 20% speed reduction, and 25% based on a

30% speed reduction. “This can be explained by the combination of a relative high auxiliary/boiler consumption and a relative[ly] high number of days in port,” the report notes. To achieve these reductions while meeting demand, CE Delft said the tanker fleet would need to grow by 5%-8% under the 10% regime, 11%-17% under 20%, and 18%-29% under 30%, though this does not factor in laid-up and idle vessels returning to service. According to CE Delft’s report, for some oil tanker size categories the return to service of laidup and idle vessels could enable a 10% or even 20% speed reduction regime without any new vessels required. Slow steaming may also be a good option where space is limited. Speaking to sister publication Marine Propulsion in May, Pyxis Tankers chief executive Valentios “Eddie” Valentis said the engineroom on an MR2 tanker, which comprise his company’s fleet, would be too small for a scrubber to be fitted and that most owners and charterers would switch to slow steaming to lower consumption until refineries are able to provide a low-cost, 2020-compliant fuel. However, it is worth noting that Mr Valentis’ view is not shared by all – in the same article AG Shipping & Energy head Mangish Kakodkar said his company was looking to retrofit scrubbers on an existing MR vessel. Another benefit of slow steaming comes

Nioklas Tsakos (Intertanko): A speed reduction of 20% would be sufficient to meet sulphur cap requirements

Scrubbed exhaust to atmosphere

Sea water

Exhaust gas cleaning unit

Exhaust from engine

Washwater treatment

Separated residue

“The costs of installing a scrubber could be covered in a year to a year and a half, due to the extra costs incurred by lowsulphur fuel”

Whether closed or open, the basic principle of a scrubber system is the same (Credit: EGCS)

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Tanker Shipping & Trade | June/July 2018

14 | GREEN TANKER TECHNOLOGY

from an economic, rather than environmental, standpoint;assuming widespread adoption of slow steaming, Marine Propulsion’s Paul Fanning noted in February that the reduction in shipping’s capacity could result in higher charter rates.

Scrubbers - initial outlay leads to long-term savings

Tanker Shipping & Trade | June/July 2018

“It’s a business assessment, and the assessment has got to say ‘can I get charters if I cost an extra US$3.5M to US$7M a year for fuel?” said Mr Gregory. Some shipowners have already made their decision, with Trafigura telling Reuters in March that its 32 newbuild tankers, the bulk of which are to be delivered in 2019, will all be equipped with scrubbers in advance of the 2020 sulphur cap. In May, Gunvor, Oceangold Tankers and Maas Capital announced a new joint venture, Clear Ocean Tankers, with six contracted newbuild vessels – four MR2 product tankers and two LR2 product tankers – to be delivered “scrubber-ready” in the first-half of 2019. And in the chemicals sector, Inventor Chemical tankers AS recently opted to have seven of its vessels fitted with Clean Marine’s CleanSOx Compact scrubbers, which have an ‘All stream’ ability, allowing one scrubber to treat exhausts from all sources onboard vessels. Concerns about the costs of fitting scrubbers may also be somewhat ameliorated by financing being made available. Goldman Sachs told S&P Global Platts in May that it will make available up to 25% of the initial capital outlay for tanker owners seeking to fit scrubbers, as well as providing assistance securing additional funding. The bank is also looking to work with a partner to ensure supply of high sulphur fuel oil (HSFO) at ports for customers taking advantage of this option. Goldman would seek to make its money back in one to two years from savings shipowners would make by sticking with HFSO, rather than more costly low-sulphur fuel. TST

ABOVE: Clean Marine's CleanSOx Compact scrubbers can treat exhausts from all sources on a vessel

TANKER FLEET POTENTIAL AVERAGE ANNUAL EMISSION REDUCTIONS 2018-2030 30

10%

20%

30%

Reduction in CO2 emissions (million tons)

While Intertanko’s leadership may be backing slow steaming, its members have not yet thrown their collective weight behind this solution, with members such as Almi, Maran and Neda Maritime all having opted to install scrubbers on VLCCs. Scrubbers, also known as marine exhaust gas cleaning systems, remove sulphur oxides from engine and boiler exhaust gases and come in two main varieties. In an 'open' scrubber, seawater is taken in and used in the scrubbing process – exhaust gas in the scrubber is sprayed with seawater and the SOx reacts to form sulphuric acid - before being treated and discharged, with its natural alkalinity removing the need for caustic soda to neutralise the acid. A 'closed' scrubber works on the same principle of the exhaust gas being converted to sulphuric acid and neutralised, but in this case freshwater with added caustic soda is used that is continuously circulated. A small amount is bled off and treated before either being discharged directly to the sea, or to a holding tank if zerodischarge mode is required. There is a third variety, of 'hybrid' scrubbers, which can operate on either an 'open' or 'closed' basis, depending on the operator’s requirements;for example, a 'closed' system may be favoured in lower-alkalinity waters. While slow-steaming does not require any initial capital expenditure, Exhaust Gas Cleaning Systems Association (EGCSA) director Don Gregory pointed out that if the alternative is using low-sulphur fuels, which cost more than heavy fuel oil, the cost of fitting a scrubber could be covered by the amount saved on fuel costs, even with slow steaming. Taking the example of a 350,000 ton VLCC running at 10 knots, using 40 tons of fuel a day for 280 days of the year with a fuel price difference of US$300, Mr Gregory said the costs of installing a scrubber could be covered in a year to a year and a half, due to the extra costs incurred by low-sulphur fuel, which could range from US$3.3M at 10 knots to nearly US$7M at 14 knots. He also noted that the money saved by installing a scrubber could also be used to cover carbon emissions taxes, rather than this being an additional cost as could be the case if low-sulphur fuel were used.

Speed reduction

A speed reduction of 30% could reduce the tanker fleet's average emissions by 25 million tons

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Tanker Shipping & Trade Conference I Awards I Exhibition 20-21 November 2018, London

SAVE THE DATE Preparing for the perfect storm

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Tanker owners are facing a perfect storm of regulation; unprecedented charterer and port state scrutiny and tight markets. Success is all about having the right voyage plan. Across two days in November, Riviera’s Tanker Shipping & Trade Conference & Awards, will address these challenges across nine sessions and how to chart the perfect storm ahead. There will be plenty of networking opportunities, our dinner and awards will again provide an excellent social setting for meeting, renewing and making new industry contacts and our exhibition is the ideal forum to market products and services to the industry’s decision makers.

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We will also celebrate industry success when we present our Tanker Shipping & Trade Awards at our Tanker Shipping & Trade Dinner at the end of day one.

Key topics for 2018

Silver sponsors

• Where the market is heading in 2019. • How tanker owners will balance regulatory and commercial pressures over the next 12 months. • Keynotes on the latest vetting requirements and practices. • Tanker training in an age of reduced crews and increased automation/digitalisation. • What charterers are looking for from owners. What owners can expect from charterers. • How far are we away from a fully digitalised tanker industry – and what are the implications. • Technology: Balancing compliance, efficiency and economics.

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• Resolving market confusion over the implications, cost, longevity and legal effectiveness of the ballast water and 2020 fuel choices available. Organised by

Keep up to date at www.tankershippingconference.com

16 | BALLAST WATER

Managers find problems with BWMS performance Ballast water management systems (BWMSs) are not as reliable in practice as manufacturers promise, according to two shipping company executives, writes Paul Gunton

Zhou Jian Feng (Wah Kwong): “Crews have lost confidence in operating the systems” (Credit: SICC)

ddressing the International BWM Technology and Standardization Forum, organised by the Shipbuilding Information Center of China (SICC) and BIMCO, Hong Kong-based Wah Kwong chief operating officer Zhou Jian Feng, told delegates about unsatisfactory BWMS performance, based on experience with systems fitted on 36% of the company’s fleet. When he made that presentation, Wah Kwong listed 22 ships on its website, suggesting that it had then equipped eight ships with BWMSs. As of the time of writing in early May, it names 21 ships on its site, including six tankers – two VLCCs and four Aframaxes. Capt Zhou listed four problem areas, with filter

Tanker Shipping & Trade | June/July 2018

clogging as his first concern. He cited one newbuilding on which the filter failed when the crew first operated it and while its manufacturer’s representative was still on board. He also mentioned total residual oxidant (TRO) sensors – saying that their readings are unstable and can seem illogical – and flow rate meters, which can indicate incorrect rates, he said. As a result of the problems, “crews have lost confidence in operating the systems,” he said. They also cause delays to ship operations and “bring extra commercial risks to shipowners”. Capt Zhou was also critical of the after-sales service available, describing it as inadequate. “Both the quantity and quality of the service engineers are below expectations,” he said. One system was inoperable for nine months awaiting repair, he added. He recommended that companies develop contingency plans “for all foreseeable situations” in case their systems fail and include details in their ballast water management plans. “In the meantime, we hope that manufacturers can continuously improve [the] design and stability of their BWMS and provide sufficient and effective after-sales service and support,” he said. Capt Zhou’s comments were echoed by Wallem Shipmanagement group technical director Ioannis Stefanou, who is also based

in Hong Kong. The manager does not publish a fleet list, but it is thought to number about 190 ships, including a significant number of tankers. Ships under Wallem’s management use systems from nine manufacturers across five technologies, Mr Stefanou said. “When they are sold, we are told they are very easy to operate – just press one button – but in reality it’s not like this,” he said. When he compiled a ‘snapshot’ of the situation for his paper, 46% of the systems on ships the company then managed were not fully operational. He listed five main areas where equipment creates problems: TRO sensors;systems valves;control units;filters; and flow meters – but noted that those were just a few from “a huge list”. “It’s worrying,” Mr Stefanou said, pointing out that each of these technologies is used in other areas of industry, but “in the marine environment they don’t last as long as we would like them to”. Unlike Capt Zhou, he paid tribute to suppliers for their “superb response and assistance” to rectify issues, but said that some “are not familiar with their own systems” because few have been installed and operated. Nonetheless, Mr Stefanou said, “manufacturers have been very helpful [in] resolving any issues,” although some are hampered by their limited service network. TST

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BALLAST WATER | 17

TANKER OPERATORS WANT CERTAINTY Confusion over what shipowners should do if they encounter problems treating ballast water has prompted the tanker owners’ organisation Intertanko to publish its own guide. Tanker operators need certainty over the contingency measure they can use when treating ballast water, Intertanko environment director Tim Wilkins told Tanker Shipping and Trade. Although IMO’s Marine Environment Protection Committee issued a circular after its 71st meeting (MEPC 71) in July 2017 describing contingency measures, it allowed port states to set their own preferences. As a result, operators cannot be certain of the options available to them, or what information port states will ask for, when deciding what a ship should do if it cannot treat its ballast, Mr Wilkins said. “If you speak to anybody

who has installed systems, they will tell you that it is a struggle to ensure that they are all operating 100% correctly, 100% of the time,” he said. But because different states take different approaches, they face “a huge bureaucratic and administrative nightmare” in dealing with contingency planning. “If there were a standardised way of reporting the failure and filing an application to undertake a contingency measure, it would make life more straightforward and process orientated,” Mr Wilkins said. In an effort to provide guidance to its members, in March Intertanko published a 19-page guide, Ballast Water Contingency Measures for Tankers. It includes some model reporting forms that Mr Wilkins has developed from documents used by some Intertanko members.

Reaction to the guide had been favourable, he told TST, two weeks after its publication. Some flag-state administrations had asked for copies and other shipping organisations had also seen it, he added. Since his interview with TST, it has been made publicly available on Intertanko’s website, via http:// bit.ly/TST-IntGuide. Intertanko distributed some copies of the guide during MEPC 72 in April this year and will submit it to MEPC 73 in October as an information document. It will request that IMO member states note its initiative, but will not request any action to be taken. A draft copy had earlier been passed to the US Coast Guard for its review; it did not raise any objections Mr Wilkins said. Even the USA has no consistent approach, he said, because each ‘captain of the port’ region can set its own contingency requirements.

Tim Wilkins (Intertanko): Shipowners face “a huge bureaucratic and administrative nightmare” over contingency planning (Credit: Intertanko)

TANKER OPERATORS REVEAL BWMS COSTS It is not easy to come by accurate costings for ballast water management systems (BWMS), so recent data released by two tanker operators makes for interesting reading Accurate figures of the cost of ballast water management systems (BWMSs) are not generally made public, but two tanker operators published figures in 2017 that provide some perspective on the cash involved. Tanker Shipping and Trade is not aware of more recent data in the public domain. In July 2017, tanker operator Euronav presented figures that included an estimate of US$1.8M per ship to fit a system (Euronav company presentation July 2017, page 25). A month earlier, the Kuwait Oil Tanker Co (KOTC) put figures on its website (http://bit.ly/TST-KOTC) that made public the precise results of an invitation to tender for ballast water treatment systems (see table). KOTC did not spell out its criteria for awarding the contract, although Alfa Laval’s was the lowest quote. Nor did KOTC say how many ships or systems this tender was for. But Alfa Laval had earlier issued a statement saying it was going to supply 45 of its PureBallast treatment systems to a “Middle East-based tanker operator,” and Alfa Laval’s vice president responsible for

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its PureBallast project Anders Lindmark confirmed to TST that the KOTC tender was the contract its release referred to. So that gives a figure of US$348,552.20 per treatment system. There will be multiple systems in each of the 22 ships, making the average price US$712,947.67 per ship. That price includes commissioning the equipment, which does not include installation but does cover crew training. Once installation costs are factored in, KOTC’s costs can be estimated to be around US$1M per ship. TST

NO.

BIDDERS

PRICE (US$)

Alfa Laval Middle East, Dubai

15,684,848.78

Panasia, Korea

15,950,000

Calgon Carbon Corp, USA

17,571,500

Wärtsilä Water Systems, UK

23,854,929

Desmi Danmark, Denmark

Did not purchase tender documents

Source: KOTC

Tanker Shipping & Trade | June/July 2018

18 | BALLAST WATER

USCG tightens rules on ballast management A circular and a series of online posts reveal a new approach to implementing ballast rules

n March, the US Coast Guard (USCG) issued a revised Navigation and Vessel Inspection Circular, NVIC 01-18,that fundamentally changed how it views requests for extensions to compliance dates under its ballast water management requirements. The circular replaced an earlier version issued in 2004. The new circular was “long-awaited, according to Choice Ballast Systems senior compliance engineer Debra DiCianna, writing on a LinkedIn forum at the time. She told TST that one of the circular’s main implications is that compliance extensions for ballast water management systems (BWMSs) now require additional documentation. A follow-up posting on the USCG’s online blog Maritime Commons, dated 7 March, addressed those extension periods and said that no extensions will be granted to a vessel “with an installed alternate management system (AMS) and no extensions will be granted to install an AMS.” However, the USCG will consider granting extensions to vessels “that intend to install a BWMS that is expected to receive [USCG] type-approval in the near future”, it said. These requests should include “specific documentation clearly indicating that the system is expected to receive Coast Guard type-approval within 12 months of the vessel’s current compliance date. Documentation should include proof from the manufacturer or an independent lab that shows they have applied for Coast Guard type-approval, proof of acquisition of the BWMS, and proof of arrangements for installation on a specific date not to exceed 12 months from the vessel’s current compliance date.” Another significant topic addressed

Tanker Shipping & Trade | June/July 2018

in the 35-page NVIC relates to ships with inoperable BWMS. It includes a section covering the situation when a BWMS “stops operating properly or the BWM method is unexpectedly unavailable” and advises, among other things, that a ballast water management method “that was unavailable on a previous voyage and remains unavailable is not considered ‘unexpectedly unavailable’”. Ms DiCianna commented that the USCG expects quick repairs on BWMS but said that “many manufacturers do not have well-developed service networks and thus shipowners are struggling with complying with the USCG requirements”. Some observers have been critical of the NVIC’s contents. US law firm Blank Rome partner Jeanne Grasso and associate Sean Pribyl wrote in its newsletter Mainbrace in March that, although the new NVIC discusses how the USCG will review extension requests, “it falls short of providing an applicant with clear standards for what is required in terms of receiving an extension”.

USCG’s assistant commandant for prevention policy has addressed “challenges with managing ballast water”

The article noted that within 24 hours of the NVIC’s release, the USCG had rejected extension requests, some of which had been pending for months. “Those denials shed light on what the USCG is actually now requiring,” they went on, finding that the requirements “range from impractical to impossible for most shipowners.” TST

Techcross wins approval Techcross has become the first South Korean manufacturer to obtain USCG type-approval for a ballast water management system. Its Electro-Cleen System (ECS) was granted the certificate in June 2018, more than seven months after it submitted its application on 31 October last year. That is the longest interval of any of the seven systems that now have USCG type-approval, and in a statement Techcross director of sales and promotion Jay Lee acknowledged that the approval process “took a little longer than we expected” but suggested that this “might be due to USCG scrutinising the first application tested by KR [Korea Register of Shipping].” Techcross director of sales and customer service Mike Lee told Tanker Shipping and Trade that he expects its type-approval to increase the number of systems it sells. “For newbuild contracts, most shipowners requested Korean shipbuilders to include a BWMS maker with USCG type-approval and we had some difficulties to get listed,” he said.

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29/06/2017 10:56

BALLAST WATER | 21

FROM RETROFIT TO LIFELONG OPERATION The retrofitting of a BWMS is only the first stage in a lifelong relationship with the supplier, where ongoing operational support and maintenance is critical, writes Craig Jallal

Based on previous experience, the location of the Ecochlor BWTS 200 Series generator was changed on the fourth tanker in the retrofit series

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fter retrofitting three sister ships in 2017, this year an Ecochlor Series 200 ballast water management system (BWMS) was fitted to a fourth 115,849 dwt crude oil tanker from the same fleet. “Sisterships are very similar,” said Argo Navis Marine Consulting & Engineering co-founder Andreas Zontanos, integration engineer on the retrofit series. “In our experience, we have rarely faced differences of any significance. The variations are typically those specifically ordered by the ships’ buyers, but they are usually wellknown before we start a retrofit project. I usually recommend that owners do not scan all the sisterships, as long as the technical staff is allowed to carry out basic checks on each vessel to verify locations set aside for the system installation.” Mr Zontanos described the installation of the system on the fourth tanker as a typical engineering solution for an Ecochlor BWMS on a tanker with a conventional pump room:“Filters were arranged on pump room platforms and a new deckhouse was placed on one of the external funnel decks to accommodate the chemical tanks and chlorine dioxide (ClO2) generator. Key considerations that were taken into account included the ease in which the crew can provide maintenance and chemical resupply to the system.”

The fourth tanker in the series benefitted from improvements learned from the retrofits to the first three vessels. Piping was re-routed due to placement difficulties that occurred on the installation of the first sistership retrofit. The location of the Ecochlor generator was moved to improve accessibility and the compressed air lines were upgraded to allow for better water draining prior to use. “Over the past two years we have been the integration engineer for over 30 tanker installations with the Ecochlor BWMS and our experience has allowed us to make improvements from project to project, whether it is a sistership or not,” said Mr Zontanos.

Pre-installation checks At the first meeting with the supervisor at the Tuzla Shipyard in Turkey, the shipyard completion date was given as 22 working days, plus additional time for the commissioning. Prior to drydocking, prefabrications were completed on the piping, the deckhouse foundation and plates, as well as the chemical tanks and their containments. Upon arrival, the Ecochlor installation team inventoried and inspected all the BWMS parts to ensure that everything was in good condition. The vessel was scheduled for drydock on 1 May 2018. Once the ship was in place,

Tanker Shipping & Trade | June/July 2018

22 | BALLAST WATER

the port and starboard filters were lowered onto the ship by crane and placed into position. Scaffolding was built inside the pump room for the filters as well as for the treatment deckhouse on the main deck. The treatment deckhouse support and welding of the bulkheads continued and the tanks and generator were loaded onto the vessel. “Delays can happen,” commented Mr Zontanos. “For example, we recommend that approximately 20% of the pipe spools not be fully prefabricated, since they often need to be adjusted in situ due to minor dimensional variations. Many shipyards select to prefabricate all the piping expecting to save time, but for the most part it adds to our schedule.” During the system commissioning by Ecochlor, delays were incurred due to minor issues with network cabling associated with the system’s control panels, as well as other unforeseen interruptions due to the yard’s ongoing work on the vessel. Due to these delays, the BWMS was not fully commissioned in time for the vessel’s scheduled undocking (10 May 2018). As a result, the vessel went to anchorage where the Ecochlor commissioning team completed its work. “It is very important that the shipowner does not underestimate or shorten the time allowed for commissioning,” said Mr Zontanos. “Whatever is left undone during commissioning and testing may present problems for the ship in the future. In the next few years, when you will have many shipyards vying for retrofit projects, I expect that they will try to compete by decreasing the necessary required time in drydock. I only hope that this will not affect the commissioning time, as it is very important and absolutely required.” TST

Crew training Training of the crew is typically provided at the end of the shipyard period and includes instruction in a classroom setting with an expert technician. The technician explains the operation of the system and reviews safety procedures. Hands-on training is handled during the commissioning and during subsequent ballasting operations. “We make an effort to attend the first full ballasting operation of each vessel following installation of the Ecochlor BWMS. This gives us an opportunity to provide additional crew training, observe further system operation and close any open issues,” commented Ecochlor service manager Max Hasson. “After leaving the shipyard in Turkey, the vessel commissioned in September 2017 was in Houston, Texas, USA, for her first cargo discharge operation. We boarded the vessel, observed a successful operation of the system, worked with the crew to ensure they had a good understanding of the BWMS and performed standard setpoint checks and calibration procedures to verify everything was working properly.” One of the other sister vessels has had

Tanker Shipping & Trade | June/July 2018

two service visits in the last 12 months. “In October we performed a similar first ballasting attendance onboard in Gdansk, Poland. We were able to adjust pressure control valve settings to improve operational performance and [we] made other adjustments that eliminated minor filter cavitation noted during commissioning. A second service call was arranged in April 2018 in Castellon, Spain. Problems had been reported with valve positioner operation. In addition to resolving these issues our technicians updated the system programs, performed standard inspections and made adjustments to improve overall system operation,” said Mr Hasson. According to Ecochlor, shipowners with drydock slots in 2018 will find it is already too late to start the process of planning for a BWMS retrofit. Owners with drydock slots booked in 2019 or 2020 should consider ordering a system and engaging an engineering firm and shipyard. It is important to note that after September 2019, all ships with an IOPP renewal with be obligated to install a ballast water treatment system.

Inside the treatment deckhouse during commissioning

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a BERKSHIRE HATHAWAY Company

The spectacular canal-side launch of the E-class Thun Eos (picture Credit: Simon Marrink)

SPLASHING OUT: NEW LNG-FUELLED COASTAL TANKERS LAUNCHED Erik Thun AB of Sweden has a long history of working with Ferus Smit shipyard in The Netherlands. The LNG-fuelled tanker Thun Eos is the latest product of that relationship, writes Craig Jallal

he launch of the IMO type II chemical tanker Thun Eos on Saturday 16 June 2018 is another milestone in the long history of the Erik Thun group. Erik Thun AB was founded in 1938 by Erik Thun, and upon his death it was taken over by Helge Källsson. Descendants of Helge Källsson control the group today. The current chief executive of the Erik Thun group is Anders Källsson, with Johan Källsson and Henrik Källsson deputy managing directors. Thun Tankers itself is a relatively new entity in the Erik Thun group. Erik Thun AB re-established its tanker

Tanker Shipping & Trade | June/July 2018

division, Thun Tankers, in November 2012 when Broström sold its share in 13 Broström/Erik Thun co-owned tankers to Thun Tankers. The “Bro” prefix on the tankers was changed to “Thun” and today, Thun Tankers operates and commercially manages 13 Erik Thun tankers and two of its close partner Wisby Tankers. At the time of the formation of Thun Tankers, Anders Källsson, chief executive of Erik Thun, said: “It is a natural step for Thun to invest further in the small tanker segment by taking over Broström’s 50% share in the vessels." He added: “Our cooperation with Broström has been very successful and we are determined to continue

running this segment, under the name Thun Tankers, with the highly qualified employees from Broström.” An important feature of Erik Thun, and one of the reasons it emphasises environmentally friendly shipping - as embodied in the development of Thun Eos - is the location of its headquarters, in the picturesque town of Lidköping on Lake Väner. This is the largest lake in Sweden, the third largest in Europe and an important trade route for the industry surrounding the lake and beyond. The lake forms an important link between the Göta Canal, a waterway that crosses Sweden, from Gothenburg on Sweden’s west

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COASTAL TANKERS | 25

“It is a natural step for Thun to invest further in the small tanker segment” Anders Källsson (Erik Thun)

coast to Stockholm on the east coast. Improvements on the Trollhätte Canal means that seagoing vessels are able to enter from the Kattegat (the sea region between the Denmark peninsular and Sweden) to serve Lake Väner ports such as Karlstad, Lidköping, Vänersborg, Kristinehamn, Åmal, Säffle, and Mariestad. These towns have important industries, such as tanneries, ironworks, and paper mills. The Erik Thun group operations are closely related to the lake; it manages a fleet of 14 so-called Väner-max iceclass dry bulk carriers (4,000 to

Joakim Lund is a Master Mariner. He joined the tanker operations department of Broström Tankers and became the head of chartering of Broström’s small tankers. When Broström sold its share in the Broström / Erik Thun co-owned tankers to Erik Thun in November 2012, he was appointed the chief commercial officer of the new company

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6,500 dwt), which were built at Ferus Smit. Two of these are LNG fuelled. “We in Erik Thun have always had a high focus on cost awareness and resource efficiency, that translates into modern environmental care,” said Anders Källsson. “Having built the world’s first dry cargo vessels that use LNG as a fuel is an example of that. We are convinced that these vessels will contribute to provide the best logistical and most environmental friendly transport solutions to our customers.” It is against this background that the new series of small clean/ chemical tankers has been designed. The new Thun Tankers E-class will replace the older units in the fleet, that distribute fuel and oils between refineries and depots around the Swedish coast and the Baltic Sea on longterm contract for oil majors and independents. “The E-class will continue to provide our clients with the dynamics of always having climate-smart high-quality tankers in the right position at the requested time,” said Thun Tankers chief commercial officer Joakim Lund at the time of the launch.

Leading the way

Thun Eos was launched by Scheepswerf Ferus Smit in The Netherlands in June this year, becoming the lead tanker in Thun Tankers new E-class series. The Erik Thun group’s

SHIP SPECIFICATION Name

Thun Eos

IMO Number

9817157

Flag

The Netherlands

Owner

Thun Tankers

Builder

Scheepswerf Ferus Smit

Length, oa

115 m

Breadth

15.8 m

Draft, design

6.9 m

Main engine

2,999 kW Wärtsilä 6L34DF dual-fuel

Cargo heating

Yes

Cargo coating

Jotun

Class

Lloyd’s Register ice class 1A FS

Capacity

7,999 dwt

Cubic capacity (at 98%)

9,500 m3

Generator sets

3 Scania diesel generators of 280 kW / 328 kVA each

Cargo pumps

1 Framo stainless steel deepwell pump for each cargo tank

Discharge rate

1,500 m3/h (total)

Filling rate

400 m3/h (per tank)

association with Ferus Smit stretches back over 20 years. The yard has built more than 450 vessels in 100 years, and 33 of these vessels have been for the Erik Thun group, including four singledeckers, and two small clean chemical tankers at the now closed Foxhol yard. Ferus Smit has also built 11 vessels (five singledeckers, and six small clean chemical tankers) for Erik Thun at its Hoogezand shipyard. Hull number 443, Thun Eos, is the 11th tanker constructed for Erik Thun at the Ferus Smit facility at Westerbroek and the first of four vessels in the Thun Tankers E-class series. The E-class series has been designed entirely in-house. The close VIP-style relationship with the Dutch yard gives Thun Tankers a great deal of flexibility when it comes to design changes, according to Mr Lund. Thun Eos is the first vessel in a renewal programme of 10 coastal tankers that are to be delivered to Erik Thun by

Ferus Smit over the coming years. The completion of that programme would mark over 30 years of partnership between the shipbuilder and owner. Thun Tankers also has a series of 17,500 dwt IMO II product/chemical tankers at Avic Dingheng Shipbuilding Ltd in China, some of which are also powered by LNG. Thun Eos features a canoe bow, with no bulbous bow. While this design is not uncommon on lake vessels, the absence of a bulbous bow is a recent trend in ship design. Even large tankers like VLCCs are being built without the bulbous bow, something that has been a common feature in commercial shipping for the last 30 years. The canoe bow of Thun Eos is said to produce less speed loss in heavy seas and less resistance. Thun Eos is designed to operate all year round in the Baltic Sea and is classed as ice class 1A FS by Lloyd’s Register. The tanker also features a high efficiency below the waterline hull design, using a

Tanker Shipping & Trade | June/July 2018

26 | COASTAL TANKERS

propeller fitted with a nozzle ring, which is said to reduce noise in the water. Wärtsilä supplied the 3,350 mm diameter controllable pitch propeller, which also features a water lubricated stern tube to reduce the possibility of oil entering the sea. Eefting Energy of Groningen, The Netherlands, was selected to deliver the fuel and energy efficiency monitoring systems for the E-class series of vessels. Besides the fuel gas and fuel oil consumptions of the main engine, the consumptions of the auxiliaries, propeller power, generator power and various navigational data will be monitored. The system will be equipped with the latest fully automatic MRV reporting functionalities. The nine cargo tanks are

equipped with five double valve segregations and coated with Jotun ultra-premium tank coating. According to Jotun global director of tank coatings Marc Giesselink, this coating has built-in flexibility that allows cargo molecules to be absorbed, but more crucially, the cargo molecules are rapidly desorbed without damaging the coating. “Most coatings need 10 days ventilation between aggressive cargoes,” he said, “Tankguard Flexline needs only three days.” This is a significant reduction in the turnaround time between carrying aggressive cargoes like methanol or acetone, and the repeated carriage of such cargoes. The cargo pumps are supplied by Framo and are rated at 350 m3/hour per pump or up to 1,500 m3/hour where the shoreside

facility permits. The loading rate is 900 m3/hour per tank pair. The manifold connections are 8 inch and 10 inch, and there is one heat exchanger per tank pair. Tank ventilation is arranged with each tanker having a high velocity pressure vacuum valve. The purging system is a nitrogen system rated at 400 m3/hour. The vessel will be technically managed by the Erik Thun associated company, MF Shipping Group, which takes care of all Thun Tankers’ quality control, technical management and crewing. The capacity of Thun Eos is 7,999 dwt and 9,540 m3 cubic volume in nine coated cargo tanks, suitable for MARPOL and IMO Type II chemical cargoes. The main dimensions are: overall length 115m; breadth 15.87 m; with a draft of 6.95m.

Johan Källsson (pictured) and his cousin, Henrik, became joint deputy managing directors in 2013

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COASTAL TANKERS | 27

Dual fuel engine

Thun Eos is equipped with a 2,999 kW Wärtsilä 6L34DF dual-fuel main engine, which is based on the Wärtsilä 32 diesel engine introduced in the mid-1990s. According to Wärtsilä, the dual fuel engine can be run on either conventional liquid marine fuels (LSFO, HSFO or liquid bio fuel) or LNG. The switch between fuels can be made seamlessly without loss of power or speed. Such fuel flexibility enables compliance with emission regulations in controlled areas, while giving operators the option of determining the fuel according to cost and availability. When operating in gas mode, the Wärtsilä 34DF engine is compliant with IMO Tier III regulations without any secondary exhaust gas purification systems (scrubbers). Also, when fuelled by gas, the SOx and CO2 emissions are notably reduced and smokeless operation is attained. In liquid fuel oil mode, the dual fuel engine is fully compliant with the IMO Tier II exhaust emissions regulations set out in Annex VI of the MARPOL 73/78 convention. The engine is able to operate efficiently and economically on low sulphur fuels (<0.1% sulphur), making it suitable for operation in emission-controlled areas. The Wärtsilä 34DF has obtained certification of emissions standard compliance from the United States Environmental Protection Agency. The installation of the Wärtsilä 6L34DF includes the latest version of the Wärtsilä LNGPac fuel gas handling system. This includes the bunkering station, LNG tank and related process equipment, as well as the control and monitoring system. This is a space saving system, with the fuel gas handling airlock and control cabinet inside the

tank connection space. The functional components of the gas valve unit are also installed inside the tank connection space. With the latest version of the Wärtsilä LNGPac, the heating media skid is replaced by an intermediate heating media circuit in

the tank connection space. The new circuit requires no pumps and is able to directly utilise the engine’s cooling water. Therefore, fewer interfaces and less installation work is required. The Wärtsilä LNGPac uses two principles for transferring LNG fuel,

namely the pressure build up system and the cryogenic Wärtsilä Svanehøj ECA fuel pumps. The ECA fuel pump provides constant pressure in all weather conditions as all sensitive components, including the electric motor, are placed outside the fuel tank, thereby easing

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maintenance and avoiding the transfer of heat to the LNG. According to Wärtsilä, this has a positive influence on opex and by using a pump to pressure the LNG, the tank design pressure can be lowered, reducing capex. “The fuel efficiency of the Wärtsilä 34DF engine, whether in gas or diesel mode, was a prime consideration in its selection for these ‘next generation’ tankers,” said Wärtsilä Marine Solutions vice president sales Aaron Bresnahan. “Similarly, the successful track record of both the controllable pitch propeller and LNGPac solutions, and the proven efficiencies that they have demonstrated, were convincing arguments in our favour,” he added. Erik Thun AB managing director Anders Källsson added “We have worked closely with Wärtsilä on many projects for more than 45 years, and we recognise their technical expertise and the reliability of their products. We are pleased, therefore, to have Wärtsilä as a partner for this project where efficiency and sustainability are the key essentials.” The switch to LNG fuel is driven in part by access to EU funds and information. Both Erik Thun and Ferus Smit are taking part in the

EU Pilot LNG project. The project aims to establish a pilot LNG supply and transport infrastructure and provide LNG from a bunker vessel to commercial endusers, entering and leaving the Baltic Sea, primarily in the Gothenburg/Skaw area. The infrastructure includes all components required to ship LNG from the gas supplier to the LNG terminal, from the terminal to the bunker vessel, and from the bunker vessel to the LNG-fuelled vessels. According to the shipyard, Thun Eos has enough gas fuel capacity to enable roundtrips of about two weeks. However, not all the vessels in the E-Tankers series may necessarily include the LNG fuelling option. As with any design consideration, this is first and foremost a business decision. In this case, it will be driven by the needs of the customer/charterer. “We always strive to meet our customers’ various demands with sustainable solutions. With this order we intend to further extend that offer by building a series of identical sister ships where some use LNG as a fuel and others do not,” said Erik Thun AB deputy managing director Johan Källsson. TST

Wärtsilä supplied the LNG fuelling system, including the gas valve unit (Credit: Wärtsilä)

Dual fuel development of the Wärtsilä 34DF diesel engine: fuel efficiency was a prime consideration (Credit: Wärtsilä)

Gothia Tanker Alliance Thun Tankers is a member of the Gothia Tanker Alliance, which is a central marketing operation based in Gothenburg for seven partners: Rigel Schiffarhts, Northern Energy Services, UniTankers A/S, Thun Tankers, Furetank, Rederi AB Älvtank, and Wisby Tankers. The alliance commercially operates 34 chemical and product tankers split into two distinct ranges: 5,000 dwt and 10,000 dwt and ships between 10,000 dwt and 40,000 dwt. The clients are the oil majors and independents which require ice-class tankers to distribute oil and oil products around the Baltic Sea all year round. Gothia Tanker Alliance performs more than 2,000 voyages and over 4,000 port calls annually. The Thun Eos is earmarked to operate in the smaller range, as are the three other tankers in the series.

Tanker Shipping & Trade | June/July 2018

The Thun Tankers vessels on order in China, mentioned above, are due to enter the larger range. Speaking about the creation of Gothia Tanker Alliance, Furetank Chartering Sweden chartering manager Stefan Magnusson said: “The network will combine efficient and reliable tanker management with extended optionality to our existing service.” “By providing extended optionality to our clients with a wide range of quality ships in different sizes, we aim to offer increased benefits by having the right sized ship in the right position at the requested time,” said Thun Tankers chief commercial officer Joachim Lund. Thun Tankers undertakes the commercial and chartering activities for the range of smaller tankers in the alliance.

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A balance between cost, performance and ease of maintenance must be achieved when selecting a tank coating (Credit: Graco)

Who bears the brunt of rising tank coating costs?

he rising oil price over the past 12 months has been welcomed by many, but a higher crude price means higher costs for producers of downstream products, and the tank coatings market is no exception. In recent months Norway-based Jotun, US-based PPG and Denmark-based Hempel have posted notices of price increases, all citing continuing raw material costs as a justification. Epoxy resins, titanium and zinc are all being blamed for rising costs, as all have experienced particularly noteworthy price increases. Jotun’s products will increase in price by up to 20%, depending on composition, and the company noted that rises in the prices of titanium, polyester and epoxies in 2017 - combined with further increases in epoxies and pigments in the first quarter of 2018 – have all contributed to its decision to increase prices. PPG cites inflation in the prices of epoxy resins, zinc powders, titanium dioxide and solvents, as well as “a steep increase in freight and logistics costs, primarily due to increasing oil prices” as the reasoning for its price rises. The company said it had previously attempted to bear the increasing costs but, according to senior vice president Ram Vadlamannati: “Unfortunately, our supply chain-related inflation can no longer be offset solely by ongoing productivity improvements and cost-saving initiatives.” Hempel’s price increases have been driven by similar factors; it noted that according to ICIS Pricing and Technon Orbichem, the price of epoxy has risen by 20% in North America and up to 58% in the Middle East and South and East Asia, while the cost of zinc has risen by nearly 15% globally, reaching a 10-year high at the start of 2018, according to the London Metal Exchange. Hempel executive vice president Michael Hansen said: “There are regional differences, but overall global prices are clearly rising. “We have done our best over the past months to absorb these price increases and limit the effect on our customers. We are working closely with our suppliers, our R&D and our manufacturing set up, but increasing prices is a reality and the

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Ed Martin asks who is really paying the price for increased raw material costs trend is clearly continuing.” With coatings potentially representing as much as 10%-15% of the cost of a newbuild VLCC – depending on who you speak to – and these price increases likely to be permanent, one might expect shipbuilders to try and pass their costs on to the end customers, but this does not appear to be happening. VesselsValue.com data, illustrates that newbuild prices for VLCCs are low and forecast to remain so. Any small price increases are consistent across size classes and are not in 10%15% range. This begs the question, who then is bearing the brunt of these cost increases? Maritime Strategies International managing director Adam Kent believes that when additional building costs are incurred, yards will tend to take the hit in the interests of keeping orders coming in: “Historically, even with capex-intensive regulations, e.g. double hulls, common structural rules, ballast water treatment systems, it is difficult to map changes in newbuilding prices to the precise time the regulation has been implemented. “Shipyards, more often than not, appear to absorb these additional headline costs, to the detriment to their bottom line, in an effort to remain competitive and attract new orders.” He added “Over time, this incremental cost of production will naturally erode as the yards and manufacturers develop their production lines and increase their efficiency.” TST

Tanker Shipping & Trade | June/July 2018

32 | TANK COATINGS

Are tank coatings meeting expectations? IMO’s PSPCs for cargo tanks established a service life of at least 15 years. Ed Martin asks is this target being met?

erformance standards for protective coatings (PSPCs) are intended to establish requirements for coatings for ballast tanks, cargo oil tanks and void space in order that they have a useful working life of 15 years, ‘useful’ in this context meaning they are able to resist and delay the onset of structural corrosion. A ballast tank PSPC was put in place based on SOLAS Chapter 2 Part A-1 Regulation 3-2 in December 2006, while the cargo oil tanks PSPC was brought into force in May 2010, based on SOLAS Chapter II Part A-1 Regulation 3-11. Coatings can be intended for application during the build process, or for application during maintenance and repair. They can have a range of chemical compositions, be intended for a specific area of application or for general use, for one application or for application in multiple layers, for application with brush or roller or with conventional air spray, conventional airless spray, and plural component air spray – the degree of granularity is seemingly endless. And in all cases, as ABS states in its tank coating application guidance notes, “a balance between cost, performance and difficulty of maintenance has to be achieved”. With all the different compositions, purposes, areas and methods of application available for cargo tank coatings, rigorously applied expertise is needed from the class societies like ABS, to ensure that correct procedures are being followed during

initial and subsequent applications to maximise effectiveness. Hence, ABS states: “For a perfectly intact coating applied to a perfectly clean surface with good surface preparation, the expected lifetime […] would probably exceed that of the vessel. It is the deviations from perfection that compromise the coating lifetime.” Areas where such “deviations from perfection” can be found include coating thickness (coatings that are too thin are prone to porosity, while coatings that are too thick can crack), surface contamination (the presence of substances such as dirt, moisture and chemicals on the surface to be coated) and surface profile (the term for the rough surface created by abrasive blasting, to which coatings anchor themselves). ABS technical adviser Stein Nilsen said: “Most chemical tankers face little or no corrosion problems inside the coated cargo tanks, as the coating is applied more for cargo care and quality purposes, than a corrosion protection film. Depending on the trade, the type of cargo carried, cleaning procedures and the extent to which operators are following the coating maker’s recommendations, it is not uncommon to find tanks in good condition beyond 15 years.” Addressing potential risks, Mr Nilsen added: “The SOLAS Regulation II-1/3-11 addresses corrosion protection of cargo oil tanks of crude oil tankers. A combination of inert/flue gas (sulphur oxides, nitrogen oxides), dirty cargo and saltwater cleaning increases the risk of steel corrosion. Extended periods of being empty, in a high humidity chloride-rich atmosphere, further speed up the corrosion process, bringing about the need for additional measures to better protect the steel. As the requirement to have the tanks on oil/product tankers coated is quite recent, the effectiveness of protecting the steel is too premature to fully evaluate.” TST

IMO's PSPCs are intended to ensure cargo tanks on vessels can resist corrosion for at least 15 years (Credit: Kees Torn)

Tanker Shipping & Trade | June/July 2018

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TANK COATINGS | 33

Graco offers air-powered and electric “airless” sprayers Minneapolis-based fluid handling systems company Graco has relaunched its King range of airless protective coating sprayers. The company has made a number of improvements to the range, focused on reducing icing potential and improving performance. On the XL3400 and XL6500 models, thermally isolated poppets are insulated and mounted separately from motor castings that can drop below freezing temperatures. New designs for the poppets and external pilot lines “virtually eliminate” pilot valve freezing, Graco said. All internal sealing on the poppets can be visually inspected and passages are larger, resulting in increased reliability and ease of servicing. Graco received customer feedback requesting smoother changeover and no pressure drops, which the company has incorporated into the redesign. The air motor has 50% less parts than the NXT valve but offers 145% higher exhaust capacity, which the company said allows for

easier changeover with less pulsation. The system also makes use of a new manifold that allows the use of up to six guns at once without any noticeable pulsation. The King system is available with XL3400, XL6500 and XL10000 motors. Output per cycle varies between 180 cc and 430 cc, with output at 60 cycles per minute varying between and 11 and 25.5 litres. The maximum working pressure is 500 bar. Graco has also recently introduced the e-Xtreme electric-driven airless sprayer. The company advertise this as an energy-efficient option, with energy consumption reduced by up to 80% compared to airdriven airless units. The e-Xtreme incorporates software that minimises pressure drop during changeover and reduces pulsation transmitted to the painter, making for more comfortable operation. Operators also benefit from the unit’s reduced noise levels; Graco claims it is up to five times quieter than compressed air-powered systems.

There are two variants of the e-Xtreme available: e-Xtreme 35 has a maximum working pressure of 240 bar (3500 psi) and a dynamic spray

pressure at the pump of 220 bar (3200 psi); the e-Xtreme 45 extends those values to 310 bar (4500 psi) and 270 bar (4000 psi), respectively.

Graco claims the e-Xtreme electric-driven sprayer can reduce energy consumption by up to 80% compared to air-driven units

Latest tank coating technology optimises turnaround time A recent presentation by Clarkson Research highlighted that the rate of decline in operating costs (opex) since 2008 is slowing. Using data from shipping accountants Moore Stephens, the research showed a decline in opex in 2017 of just 1%. Jotun global director tank coatings Marc Giesselink said there are marginal gains to be achieved in opex through reduced turnaround times in the product tanker and chemical tanker trades, via the use of ultra-premium tank coatings. According to Jotun, cargoes like methanol could be carried for up to 180 days, compared to the normal maximum of around 90 days. The challenging low molecular weight cargoes, for example methanol, can now be frequently carried by applying a tank coating such as Jotun’s Tankguard Flexline. This coating allows cargo molecules to be absorbed, but more crucially, the cargo molecules are rapidly desorbed without damaging the

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coating, said the company. “Most coatings need 10 days ventilation between aggressive cargoes,” said Mr Giesselink; “Tankguard Flexline needs only three days.” This is a significant reduction in the turnaround time between carrying aggressive cargoes like methanol or acetone, and the repeated carriage of such cargoes. This in part explains why the coating was chosen for Stena’s IMOIIMAX series of 50,000 dwt chemical/product carriers, delivered by China’s Guangzhou Shipyard International shipyard. Referring to the unique design of the IMOIIMAX tanks and coatings at the time of the delivery, Stena Bulk president and chief executive officer Erik Hånell said “the designs will allow us to make daily operational savings of at least US$5,000, meaning we recover this outlay in about a year”. TST

Tanker Shipping & Trade | June/July 2018

34 | TANK COATINGS

UV-LED technology provides biocide-free fouling protection AkzoNobel is developing an anti-fouling technology based around ultraviolet light-emitting diodes (UV-LED) in cooperation with Amsterdam-based Royal Philips. UV-LEDs would be integrated into a protective coating scheme in which UV light would be emitted from the coating surface, providing “total prevention of biofouling accumulation” according to AkzoNobel. “In our Sustainable Fouling Control initiative, we actively explore and develop alternatives to biocidal-based solutions,” said AkzoNobel director of marine and protective coatings Oscar Wezenbeek. “This development is a great proof point of our continuous focus on delivering eco-friendly solutions to our customers.”

AkzoNobel’s integration of UV lighting with a coating surface can totally prevent biofouling accumulation

Hempel marks 1,000th Hempaguard application

PPG launches two new direct-to-metal coatings

Hempaguard, a fouling defence coating produced by Hempel, has now been applied to more than 1,000 vessels, according to the company. The company estimates that the annual bunker bill for the owners of these vessels has been reduced by US$400M, corresponding to a reduction in CO2 emissions of more than 3M tonnes a year. Hempel global product manager Henrik Dyrholm said: “We have proven that Hempaguard delivers up to 6% fuel savings and retains its effectiveness during extended idle periods of up to 120 days.” Hempaguard uses Hempel’s Actiguard technology, which combines a silicon coating with the consistent release of limited biocides through a hydrogel layer. Following five years of development, this technology was released in 2013 to meet tightening environmental regulations and the increasing push to reduce CO2 emissions.

PPG has launched its Kwikspar 600 and Kwikspar 600SG corrosion-resistant direct-to-metal coatings. PPG vice president for protective and marine coatings in the Americas Diane Kappas said: “When Kwikspar coatings are applied to steel in the shop, their ability to cure quickly accelerates production of finished parts. “When applied in the field for maintenance or new construction projects, they have high film build, which enables applicators to achieve a desired finish more quickly.” Kwikspar 600 and Kwikspar 600SG are formulated from 73% solids and can cure up to eight times faster than standard polyurethane coatings in a 4 mm thickness on a lowtemperature substrate, according to PPG. In low-to-moderately corrosive environments, a single coat of either of the new products can be applied in place of two coats of traditional epoxy/urethane systems, while in highly corrosive environments the new treatments can be applied as an overcoat on PPG’s Amercoat 370 or Sigmafast 278 epoxy primers, where previously a three-coat application would be required.

Hempel estimates use of Hempaguard could have reduced CO2 emissions by more than 3M tonnes per year

Nippon Paint brings biocidefree antifouling paint to market A new biocide-free SPC antifouling paint has been introduced to the market by Nippon Paint Marine. Aquaterras was produced by Nippon Paint’s chemists using a micro-domain structure found in medical anti-thrombosis formulations, which have also proven to be very effective against marine fouling. The new coating also has a self-polishing mechanism, which Nippon Paint said ensures effectiveness is maintained over time. TST

Tanker Shipping & Trade | June/July 2018

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IN THE SHADOW OF A GIANT: DENMARK AND SWEDEN FLEET PROFILE The prevalence of Maersk Tankers can steal the limelight from the region’s other big names, but they are all busy innovating to keep up, writes Craig Jallal

he Swedish and Danish tanker scene is dominated in almost every conceivable way - number of tankers, tonnage, asset value - by the goliath that is Maersk Tankers. Although the name is familiar, Maersk Tankers is actually a new entity, only coming into being in September 2017, when AP MøllerMaersk sold its Maersk Tankers division to the AP Møller Holding subsidiary Apmh Invest A/S, in an all-cash restructure totalling US$1.1Bn. In March 2018, the European Commission approved the sale. Under the terms of the deal, Maersk Product Tankers A/S is a joint venture between Apmh Invest A/S of Denmark and Mitsui & Co, Ltd of Japan. In reality, Maersk Tankers comes under the majority control of the relatives of the founder of Maersk and is no longer a division of the larger Moller-Maersk entity. This is not to say that Maersk Tankers will not be floated on the Copenhagen or even one of the New York stock exchanges one day.

Tanker Shipping & Trade | June/July 2018

With an asset value in the region of US$1.3Bn, and notwithstanding the dire NAVs ascribed by investors to publicly listed shipping companies, Maersk Tankers already has a potential market cap larger than any crude oil or product tanker company currently listed in New York. According to VesselsValue, Maersk Tankers has a fleet of 82 product tankers, with 12 on order and two soon to be delivered. Including the vessels operated in pools and on timecharter, Maersk Tankers controls 164 vessels. Nearly all operate in various pools, including the Handytankers Pool, LR2 Pool, and the Maersk Intermediate Pool. The second largest tanker company in the region is Torm, with 84 tankers, including 57 in the MR2 product tanker sector. Torm is listed on the Copenhagen Stock Exchange and in December 2017, the company’s A shares were also listed on NASDAQ in New York. This was followed by a private placement raising US$100M.

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DENMARK AND SWEDEN FLEET PROFILE | 37

Keep it simple

Shipping companies that list on a stock exchange need to have an easy-to-understand story to encourage investors who, on the whole, find the industry confusingly opaque. Torm’s strategy is simple; employ the fleet primarily in the spot market and optimise earnings from voyage to voyage. Longerterm time charter-out contracts are only considered if a customer needs to enter such an arrangement and if the expected returns are attractive. In line with this keep-it-simple approach, Torm performs all its own commercial and shipmanagement services in-house and since 2011, none of its tankers have been committed to pools. Chief executive Jacob Meldgaard states that this policy is justified: “Over the past several quarters, Torm’s commercial performance has consistently been among the best in its peer group, both in terms of total time charter-equivalent earning per day and in terms of return on invested capital.” The third largest tanker company in the region is Hafnia Tankers ApS, with 35 tankers, consisting of 18 MRs, 13 MR1s, and 4 LR1s. However, Hafnia Tankers has a far greater influence than the numbers suggest, due to its involvement in pools. Hafnia Tankers chief executive Mikael Skov described why the company had an emphasis on pools: “The pools are a great way of obtaining scale and market intelligence through consolidation; the alternative would be to invest in order to obtain scale which will be difficult and often lead to bad investment decisions. “In a world of increasing availability of data and analysis, increased scale via pools will give you the ability to optimise on global presence in all sizes of the product tanker sector, as well as provide an optimal solution for our customers,” he said. Maersk is currently the second largest pool operator of local tonnage, but is easily the largest globally. The pool fleet is estimated to be around 100 vessels across five sectors. The Maersk pools have expanded considerably in the last 12 months, following a concerted effort to win owners in Asia. The attraction to Asian product tanker owners is access to markets in Europe, where Maersk already has a strong client base.

Going digital

Maersk Tankers is also developing a digital platform. In August last year, it announced it had entered an equity agreement with CargoMetrics Technologies LLC (CargoMetrics), a Boston-based hedge fund specialising in quantitative trading models derived from shipping data. The agreement establishes a strategic partnership between Maersk Tankers and CargoMetrics, providing Maersk Tankers access and exclusive rights to CargoMetrics' analytical models, algorithms and capabilities. CargoMetrics links satellite signals, historical shipping data and proprietary analytics for trading purposes in its systematic investment platform. Earlier this year, Maersk Tankers became one of the first tanker companies to appoint a chief information officer (CIO), in the form of Torben Ruberg, who previously held that position at Falck A/S. Mr Ruberg also acted as an external expert and advisor for the Danish State in the development of its IT strategy, governance and management. Third-placed local fleet pool operator, Stena Bulk of Sweden, is another IT-oriented pool operator. Since the beginning of 2017, members of the Stena Bulk pools have been able to access details on pool earnings and operations via the Stena Orbit portal. An update of the app will give members time charter earnings for up to two weeks ahead and track competitor vessels, as well as providing port agent-type data, such as terminal information and US Coast Guard updates. The increasing level of digitalisation is said by some pool operators to be worth up to US$3,000/day in efficiency gains, but the main driver of the performance of pool earnings is still the market. So far, 2018 has seen weak earnings for most pools. Stena Bulk reported a sharp correction in earnings, from an average of around US$24,000/day in the first quarter of 2017 to close to USD$13,000/day in the first quarter of 2018. It is reported that Hafnia and the other pool managers have also revised downwards their earnings estimates for 2018. TST

Market outlook

LARGEST TANKER COMPANIES IN THE REGION ACCORDING TO VESSELS VALUE*

MAERSK TANKERS

94 TORM

84 HAFNIA TANKERS APS

35 * owned tankers

The bulk of the Danish and Swedish tanker fleet rests in the product tanker sectors, mainly MR2s and the small clean tanker sectors. The long-term outlook for these sectors is looking better, as the MR sector is likely to benefit most from the requirement to ship middle distillates long haul from the refineries in India and the Far East. There is some irony in the fact that increasing demand to burn middle distillates as an alternative to fuel oil to meet environmental regulations may actually increase the tonne per miles for this sector. The short-term outlook is clouded by poor earnings performance in the crude oil tanker sector, causing some elements of that fleet to swing into the product tanker trades.

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Tanker Shipping & Trade | June/July 2018

38 | DENMARK AND SWEDEN FLEET PROFILE

DANISH AND SWEDISH TANKER FLEET TOP 10+1 TANKER COUNTRIES BY VALUE (US$) Country

No. of Vessels

Total DWT

Total Value

1. Greece

1,512

160,958,000

$34,856

2. China

998

63,971,500

$18,823

3. Japan

1,073

47,785,000

$17,474

505

49,886,000

$15,918

1,004

42,799,600

$15,551

6. Norway

491

28,881,400

$10,611

7. South Korea

513

24,521,500

$7,926

8. Denmark

370

14,956,900

$6,174

9. Russia

589

16,727,100

$4,868

10. Bermuda

122

19,883,600

$3,954

4,877,000

$2,207

4. United States of America 5. Singapore

20. Sweden

159

CLEAN TANKERS STOPPAGES HEATMAP http://vesselsvalue.com/

Fig.1 Clean tankers stoppages heatmap

Source: vesselsvalue.com as of June 2018

DENMARK AND SWEDEN FLEET PROFILE | 39

A GROWING AND ACTIVE MARITIME CLUSTER Denmark and Sweden are pursuing interesting projects to grow their respective maritime sectors

enmark has a large and active maritime cluster numbering more than 100,000 persons, according to the Danish Maritime Industry association. Of these, 40,000 people are directly employed in the industry. Led by the requirements of AP Mollerâ&#x20AC;&#x2122;s shipping divisions for a continuous stream of maritime personnel, other shipping companies are able to tap into a supply of crew and officers trained in the Royal Danish Navy as part of their national service and, in some cases, full-time commissions. The different commercial strands of the maritime hub come together under a not-for-profit organisation, The Danish Maritime Cluster (DKMK). The DKMKâ&#x20AC;&#x2122;s aim is to maintain growth in the sector, to secure maritime jobs at a national and international level. It works with technical colleges and universities, maritime associations, businesses and authorities to support maritime education projects from degree level to PhD funding. Small and medium enterprises (SMEs), which includes the majority of shipping companies in Denmark, are able to utilise into these resources to support a range of business-related projects. The DKMK is supported by the government through the Danish Business Authority, and at a local government level by the Capital Region of Denmark authority. Maritime law projects are organised through the University of Copenhagen and funded in part through the EU European Social Fund, and via the EU European Regional Development Fund. In May 2016, the Danish government established a Maritime Strategy Team, tasked with developing recommendations to support Danish maritime competitiveness through to 2025. The Team presented its recommendations to the Minister for Industry, Business and Growth in April 2017. There were 37 recommendations, among which digitalisation was a priority. The aim is to develop Denmark as a frontrunner in autonomous shipping, cyber security, and a common European port reporting platform. New start-ups and SMEs are to be encouraged in these sectors by building a simple legal and corporate framework to ease the passage from idea, to development and production. A key proposal has been to abolish the registration fee for vessels under the Danish International Register of Shipping (DIS). Additional support for owners involves a proposal for stable and predictable tax rules. To encourage the recruitment of officers it is no longer a requirement that a training placement be agreed prior to start of training for degreelevel professional qualifications. Furthermore, it has been proposed that state-owned ships should be used for career recruitment purposes and for commercial visits from Chinese delegations. These efforts are to be coordinated through a maritime ambassador.

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National service in The Royal Danish Navy provides a stream of well qualified personnel

Zero carbon shipping

Swedenâ&#x20AC;&#x2122;s main efforts on the maritime front in recent years have been to reduce the carbon footprint of the industry. The shipping industry is fully behind a scheme to introduce zero carbon shipping by 2050. These efforts were recognised in a recent OECD International Transport Forum report titled Decarbonising Maritime Transport: The Case of Sweden. The report highlights the efforts of Swedish shipowners operating in the tanker sector. Terntank drew praise for its introduction of LNG-powered tankers, and Furetank for its dual-fuel tankers. Other initiatives include the Gothia Tanker Alliance, which allows for the unloading or loading of tankers closest to relevant transport services. Six different tanker owners form the Gothia Tanker Alliance, pooling 32 tankers. As well as the traditional pool function as a platform for vessel sharing and joint negotiation of port services, the alliance has worked on a standard tanker design. This pooling of resources has allowed for an innovative design that might have been beyond the capabilities of the individual companies. For example, the Terntank vessel, Tarnvag, has a catamiser installed on the main and auxiliary engines. This combined unit recovers waste heat and reduces NOx, and was developed by GESAB of Gothenburg. The alliance is supported by understanding clients, who are willing to enter into slightly higher charter rates on long-term charters for the innovative tankers. Terntank was able to order LNG-powered tankers on the back of 15-year charter agreements with Preem, the largest fuel supplier in Sweden, and the privately-owned Finnish petrol station operator, ST1. TST

Tanker Shipping & Trade | June/July 2018

40 | LAST WORD

Shell Marine’s outlook for the post-2020 world Shell Marine has geared its lubricant portfolio to its expectations of the post-2020 sulphur cap environment, explains Shell Marine global technical manager Sara Lawrence

T Sara Lawrence (Shell Marine): Variable fuel quality will be a challenge post 2020

he choice of cylinder oil is typically determined by three factors: the marine engine itself; the fuel being used; and the vessel’s operating conditions. As such, the IMO’s limitation of 0.5% sulphur content in marine fuel from 2020 will have a significant impact on cylinder oil selection. Shell Marine’s expectation is that 90% or more of the shipping fleet will switch to fuels with a sulphur level of <0.5% in the run up to January 2020. This will be a mixture of very low sulphur fuel oil (VLSFO) and distillate fuels. We believe that fewer than 2,000 ships will be fitted with scrubbers to continue running on high sulphur fuel oil (HSFO) by that date and that, with a high-end estimate of 200 ships running on LNG, combined, no more than 10% of ships will be accounted for by HSFO, LNG or any other alternative. Our expectation is that up to 3M b/d of HSFO demand will be displaced by <0.5% sulphur content fuels. The Shell Marine two-stroke product portfolio is largely in place. However, the post-2020 scenario poses different challenges for slow speed cylinder oils to those original equipment manufacturers (OEMs) have been focusing on over recent years, where BN80-BN100 oils have been needed to defend newer engines against cold corrosion under part-load conditions burning higher sulphur fuels. 0.5% sulphur fuel use will drive demand towards lower BN oils. Shell Marine’s expectation is that significant demand for BN40- and BN70-grade cylinder oils will come into play. Shell Alexia S3 – the BN25 cylinder oil developed for use in Emissions Control Areas – has already proved itself in service as being well suited for lubricants of 0.1% very low sulphur content in the two-stroke application. However, Shell Marine has a new

Tanker Shipping & Trade | June/July 2018

BN40 product under field trial, for launch in 2019 to meet demand. Crankcase oils also need to be examined for use in the post-2020 sulphur cap environment. In this respect, Shell Marine recently upgraded its four-stroke Shell Gadinia and Shell Argina crankcase oils to be ‘2020 ready’. The new oils have been optimised to deal with the faster viscosity increase and BN depletion experienced by oils in modern medium speed engines, which work at pressures between 10-17% higher than their predecessors and oil temperatures approaching 300 degrees at the top crown. Shell Marine does expect LNG to establish a presence in the market in the years ahead. Our Shell Alexia S3 oil offers the solution for twostroke engines, while our Mysella range already provides the answer in the four-stroke sector. We also expect HSFO prices to drop after shipping turns en masse to lower sulphur fuel, which may entice some owners to look afresh at scrubber return on investment. We expect 30% of the market could be using scrubbers by 2025-2030, which is likely to see demand recover for higher BN lubricants, although their use may then drop off if new environmental legislation restricts the use of scrubbers. One challenge arising in the post-2020 world is likely to be variable fuel quality. While not directly a lubricants issue, this will demand scrutiny of lubricant performance, backed by the ship-to-shore connectivity and analytics that has recently become a feature of Shell LubeMonitor. Even owners grappling with the cost of EEDI / MRV / CO2 / 2020 and ballast water management systems will concede that one lesson learned from engine cold corrosion has been that saving on cylinder oil technical services can prove a false economy. TST

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Smart Marine Ecosystem

WÄRTSILÄ CONNECTS THE DOTS TO THE FUTURE

The market is being re-shaped by new ways of collaboration and smart technology. Our strong development in product offering combined with know-how and vast installed base gives us a unique platform to lead the industry’s transformation towards a Smart Marine Ecosystem through the use of high levels of connectivity and digitalisation. We have the vision, a strong legacy and the expertise of our people. We continue to develop products and services together with customers, for the benefit of our customers. By doing so we will be shaping the industry together.