Erik.Ranheim@intertanko.comManager Research and Projects

Main issues facing the tanker industryChina Logistics 19 October 2005

Spokesman/representative

Service/advice

Meeting place

INTERTANKOThe International Association of Independent Tanker Owners

For Safe Transport, Cleaner Seas and Free Competition

Representation

IMO, International Chamber of Shipping

UNCTAD, Oil Companies International Marine Forum

IACS, International Assoc. of Classification Societies

OECD/IEA of P&I Clubs Brussels.

Washington ……..

255 Members

2,380 tankers

192 million dwt

40 countries

70% of independent fleet

280 Associate Members

INTERTANKO Membership

Main issues facing the global tanker industry

Safety performance

Current maritime regulatory environment

Players in the tanker industry

Challenges ahead

Environmental concerns

Zero tolerance

Tanker incidents down

Reported tanker incidents 1978 - 2005

0

200

400

600

800

1000

78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04P05

War

Hull & Machinery

Fire/Expl

Grounded

Coll/Contact

Misc

Reported tanker incidents 9 ms 2005 - total 104

Hull&Machinery (18 engine, 2 hull)dwt range Total

Below 10,000 45

10-29,999 20

30-99,999 26

100,000+ 13

Total 104

   

Age Total

Built 1970s 17

Built 1980s 35

Built 1990s 31

Built 2000s 21

Total 104

3%

33%

13%

38%13%

Collision Groundings

Misc.

F&E

Tanker pollution down

Accidental pollution from tankers oil spilt per tonne mile 1990 - 2005

0

10

20

30

40

50

60

70 73 76 79 82 85 88 91 94 97 00 03

Accidental oil spills from tankers

Major structural accidents - 000 tonnes

Source: INTERTANKO/ITOPF

0

50

100

150

200

250

300

350

400

450

88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05

Katina P

Erika

2003Balu sunk

sulphuric acid

Kirki

Haven

Prestige

March 2001Castor

deck crack no pollutionFebruary

2001Kristial sunk

Chemical spill

Thanassiss A

ESP

ABT Summer

Nakhodka

20032 Fire&Exp

Barge Bouchard8,400

not includedVictoriya1,000 tsincluded

Tanker accidental oil spillsdown 80%

Source: ITOPF

ts spilt

99.9999% of the oilarrived safely

‘000 bn tonne-miles

0

300

600

900

1,200

1989-96 1997-04

0

18,000

36,000

54,000

72,000

90,000

m ts spilt

bn tonne-miles

Oil pollution into the seaMaritime sources

Source: GESAMP

4%

67%

4%

2%

3%

2%0%

18%Shipping general

Accidents tankers+barges

Tank washing/VOC

Exploration and Production

Coastal Refineries

War related accidents

Leisure Craft

Natural seeps/others

Tanker/barges: 5%Shippping:9% of which tanker/barge accidents 2.8%

Total losses down

Tanker total losses by size

Source: Clarkson Shipyard Monitor/INTERTANKO

No

1988 – 1996: 29 CTLs 1996 – 2005: 14 CTLs

60% below 60,000dwt

0

1

2

3

4

5

6

7

8

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

8 m

s05

Products

Panamaxes

Aframaxes

Suezmaxes

VLCC

Tanker and bulker total losses

Source: Clarkson Shipyard Monitor/INTERTANKO

%

0

2

4

6

8

10

12

14

16

18

1989

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

Tankers: 43

Bulkers. 135

Explosions

Large tankers explosion before IGS requirements 1983/1985

Tanker Size dwt Year• Seatiger, 123,692 1979, 2 fatalities• Atlantic Empress 292,666 1979, 29 “• Energy Determination 321,186 1979 , 1 “• Albahaa B 239,410 1980, 6 “• Mycene 238,889 1980, 6 “

Recent tankers explosion

Tanker Size GT Year• Bow Mariner 22,587 2004, 21 fatalities• Vicuna 23,197 2004, 2 “• NCC Mekka 6,499 2004 , 2 “ • Panam Serana 6,499 2004 , 2 “• Sun Venus 4,356 2004, 2 “• Sunnny Jewel 4,386 2004, 3 “• Isola Azura 9,383 2005, 2 “

Tanker Explosion 2001-2005

Source: Informa/INTERTANKO

Type/cause F&E

dwt range

TotalBelow 10,000 10-29999 30-99,999

Above 100,000

During repairs 3   3 4 10

Tank related 2 1 2 1 6

Engine room fire 4   1 5

Cleaning 3       3

Load/Discharge 3       3

Various/Unknown 13 0 7 3 15

Total 20 2 10 8 40

% 50% 5% 25% 20% 100%

25/20%

15/7%

13/24%

8/3%

8/3%

Average age down

Tanker incidents and age development

Source:LMIS/Informa/INTERTANKO

%

0

220

440

660

880

1100

78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04P05

0.0

3.2

6.4

9.6

12.8

16.0

Incidents

Age

Tanker pollution and age development

Source:LMIS/Informa/INTERTANKO

000 ts Years

0

130

260

390

520

650

78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04P05

0.0

3.2

6.4

9.6

12.8

16.0

Pollution

Age

Tanker fleet double-hull development

Source: Fearnleys/INTERTANKO

%

622

51 59 67 70 73 76 84

9478

4941 33 30 27 24 16

0

20

40

60

80

100

1991 1997 End02

End03

End04

End05

End06

End07

End10*

DH SH/DB/DS

% dwt share*:

* Assumes phase out according to regulations (rounded upwards, 25 years after 2010.

In shipping high standards reflect the quality of the owner not the regulatory regime

Erik Murdoch

Director of Risk Management, The Standard P&I Club

Regulatory Environment

Leading members of our community, politicians, regulators and charterers alike, appear to be digesting the fact that mere legislative or penalising measures are already reaching their limitations as a driver for further improvement. Many have even started to express their concerns that all such externally imposed controlling devises are becoming counterproductive or even harmful.

Emmanuel Vordonis, Executive Director Thenamaris Ships Management,Member of INTERTANKO’s Executive Committee

Poseidon challenge

Regulation vs self regulation

Regulating safety

Source: INTERTANKO

Formal regulations and controls

Self regulation

Unsafe - Chaos

AlienationLack of motivation and flexibilityProcedures purely to meet reg. req.

Compliance cultureBureaucracyCheck list mentality stops initiative

ConfusionLack of global standards

Right balance provide the best safety culture

Chain of ResponsibilityChain of Responsibility

Governments Law, Courts, Insurers

SHIPOWNER

SHIPYARDS

INSURERS

TRAFFICMANAGEMENT

CARGO OWNER

CHARTERER

PORTS & TERMINALS

CLASSSOCIETIES

FLAG STATES

For the system to work, liability has to be shared

Challenges

Challenges to the industrySupremacy of IMO & International Maritime Law versus regional and local legislation

Liability - moves to open up CLC/Fund Convention

Annex VI implementation

Criminalising accidental pollution - Penal sanctions adopted by EU

Common Structural Rules & Goal Based Standards

Ship Recycling

Ballast water management

Security - (ISPS costs to be reflected in Worldscale)

Phase out

MARPOL Annex VI Air emissions - how to ensure compliance

All ships of 400GT and above• Entered into force May 19th, 2005• Existing ships no later than 1st scheduled drydocking or no later that May 2008

• New ships 19 May 2005

Areas to be considered:• SOx/fuel quality• NOx – spare parts and repairs• VOC – vapour return lines & new technologies• Incinerators (type approved )

Bunkering procedures:• Bunker Delivery Note• Sample• Ship’s Note to Flag States – reports on non-compliance• Fuel switch for use of LSF in SECAs

Ratification

Ratified by 22 Governments that have a combined tonnage over 50% of World tonnage:• Azerbaijan, Bahamas, Bangladesh, Barbados, Bulgaria, Cyprus,

Denmark, Finland, Germany, Greece, Japan, Liberia, Marshall Islands, Norway, Panama, St. Kitts and Nevis, Samoa, Singapore,

Spain, Sweden, United Kingdom, Vanuatu.Not ratified by for example:• China, S Korea, France, Netherlands, Middle East Countries, US

Bunkering in a “non party” port followed by a call in a “party” port Potential source of trouble out of ship’s control

CriminalisationTraditionally accidents have been

regarded as quite distinct from deliberate acts

Attitudes have changed (scapegoat mentality) ref. Captain Mangouras, ERIKA, The Karachi Eight TASMAN SPIRIT

EU Directive on Ship-Source Pollution (despite wide industry coalition) Canadian Bill C-15 US approach (whistle blowing, enormous fines and rewards

IACS Common Rules for Tankers as from April 2006

INTERTANKO initiative started more than five years ago

Objectives were to:• eliminate class competition on scantlings• embrace the intentions of goal-based standards• meet the requirements of industry and the shipyards

will apply for double hull tankers of 150 m and above. Ships should be designed with a fatigue life of 25 years

based on N Atlantic winter conditions, with corrosion additions also based on 25 years, at least equivalent to or even in excess of all current Class regulations.

Industry Code of Practice (1999)

IMO Guidelines (2003)

ILO & Basel Guidelines

Consideration of Mandatory Elements Market Forces

• Shipping Industry• Green Recycling

International Ship Recycling Convention

Shipping Industry Feedback

• Workable• Practical• Objectives Met

Ship Recycling

Ballast Water Management: Meeting the Treatment Standard – Treatment Technology

Meeting the Treatment Standard• Ballast Water Exchange and/or Treatment Technology

Ships Constructed before 2009 with BW capacity 1500-5000, treatment technology in use after 2014

Phase in for Treatment System Installation (B-3)

Ships Constructed before 2009 with BW capacity less than 1500 and greater than 5000, treatment technology in use after 2016

Ships Constructed on or after 2009 with BW capacity less than 5000, treatment technology in use from 2009

Ships Constructed after 2009 but before 2012 with BW capacity greater than 5000, treatment technology in use after 2016

Ships Constructed at 2012 or after with BW capacity greater than 5000, treatment technology in use after 2012

Ballast Water Management: Meeting the Treatment Standard – Treatment Technology

Case Studies

A) 40,000dwt Product Tanker to be delivered July 2007

Ballast water capacity greater than 5000m3 so will be able to conduct ballast water exchange until 2016, when it will then have to have been retrofitted with a ballast water treatment system.

B) 8,000dwt Chemical Tanker to be delivered July 2007

Ballast capacity of less than 5000m3 but greater than 1500m3, will have to be retrofitted with a ballast water treatment system by 2014.

C) Existing VLCC – delivered 2003

Ballast water exchange until 2016, retrofitted after 2016. BUT, if prototype system installed and test programme approved by IMO, 5 year exemption given, upgrade system in 2021.

Phase out history In the aftermath of Exxon Valdez, 0n 18 August 1990, the US President signed

into law the US Oil Pollution Act of 1990 (OPA 90). This was the first regulation which has mandated double hull design for tankers with a building contract after 30 June 1990 and with a delivery after 31 Dec. 1992

First IMO phase out initiated by the US OPA 90 - ratified by IMO March1992 - enforced as from July 1993

Accelerated IMO phase out initiated by Europe as a result of the ERIKA accident outside France - ratified by IMO April 2000 - enforced as from September 2001

Further acceleration of IMO phase out initiated by Europe as a result of the PRESTIGE accident outside Spain - ratified by IMO December 2003, enforced as from April 2005 - enforced by Europe as from October 2003

The European Union’s Regulation (1726/2003) on single hull tankers took effect on 21st October 2003

Both ERIKA and PRESTIGE carried Heavy Fuel Oils that can pollute up to ten times more than crude oil.  IMO therefore adopted a new regulation – Regulation 13H of Annex I of MARPOL 73/78 – banning the carriage of heavy grade oil as cargo in single hull oil tankers as from 5 April 2005.

Phase out Regulations13G

Category 1 - non PL/SBT (pre-MARPOL) tankers out by 2005

Category 2/3 out by 2010 or 2015 subject to administrations

Double bottom or side tankers until 25 years

13HHeavy grades of oil in double hull tankers

Provisions for some heavy crude oils, double bottom/side tankers and domestic trade

OPA90 schedule/size limit different

Conversion to PL/SBT - DH

Annex II revision not phase out, but will shut SH tankers out of vegoil+ trades as from 2007

Phase out

Special provisions 13 G (5) - double bottom/sides - CAS requirement13 G (7) - SH trading beyond 2010/25 years13 G (8) (b) – entry into ports or offshore terminals (provisions (5), (7)13 H (5) - double bottom/sides - trading beyond 2010/25 years13 H (6) (a) - crude oil having a density at 15ºC higher than 900 kg/m3 but lower than 945 kg/m313H (6) (b) - 600 tons dwt and above but less than 5,000 tons dwt - SH until 25 years13 H (7) - exclusively within an area under its jurisdiction,13 H (8) (b) – entry into ports or offshore terminals (provisions (5), (6)

Flag / Port States13G (5)

13G (7)

13G (8)(b) 13H (5)

13H (6)(a)

13H (6)(b)

13H (7)

13H (8)(b)

Australia Y1 N Y N N N N Y

Bahamas Y Y N/A Y Y Y Y N/A

Barbados Y Y N Y Y Y 7 N

EU Members Y1 N Y N N N N Y

Greece N N N Y Y Y Y N

Hong Kong Y1 Y2 N N N N N Y

India Y Y N Y Y Y Y N

Japan Y1 Y N Y1 N Y3 - N4

Liberia Y Y N/A Y Y Y Y N/A

Marshall Isl. Y Y N/A Y Y Y Y N/A

Mexico Y N Y N N N N Y

Panama Canal - -case by

case - - - -case by

case

Panama Flag Y Y N Y Y Y N N

China Y N Y Y2 N N N Y

Republic of Korea - - - N5 N5 N5 N5 Y

Romania Y N Y N N N N Y

Singapore Y Y N Y Y Y Y N

United States N/A N/A N/A N/A N/A N/A N/A N/A

Source: WWW.INTERTANKO.com

Implementation policies

Conclusion

Strong industry performance, but no complacency Zero tolerance to oil pollution Formal Regulations must provide room for flexibility

and new initiatives Most pending regulations are common industry

regulations Industry challenge to ensure global standards and

regulations Cooperation with all the members in the maritime

responsibility chain will provide the best results

INTERTANKO’s aim

Strong responsible, sustainable and respected industry able to influence its own destiny