TAKEROperatorc0182999.cdn1.cloudfiles.rackspacecloud.com/TOJanFeb2011web.pdf · Chemical/Product...

JANUARY/FEBRUARY 2011 www.tankeroperator.com

Features:� Denmark- pools or no pools� EEDI will not work� Tanker stability policed� eDocs comes of age� Gas powered VLCCs?� ECDIS unwrapped

TA�KEROperator

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January/February 2011 � TANKEROperator 01

ContentsMarkets VLCCs – where next?

Denmark Report � Tankers play increasing role� Pools still popular� BIMCO upgrades forms� ‘Green Ship of the Future’

OperationsWill EEDI work?

Ship Registries� MLC tops flag state agenda� PSC concentrates on tankers� Performance table update

DocumentationShred the paper

Piracy ‘Mother’ ships cause problems

Chemical/Product tankers Leading operator speaks out

04

23

Front cover photo Bunkering a tanker. Could we soon sea L�Ggoing up the hoses into tankers (see page 29)?Yes, if D�V’s predictions prove to be correct. Theclass society said that it would not take much tomodify a bunker barge to carry natural gas anddistribution points could be installed near themain L�G export and import terminals withouttoo much trouble. Photo credit- �ORDE�.

29

21

Technology29 The dawn of Triality� Fact or fiction� Ballast free design� An operating profile� Cost-effective?

36 ECDIS Revisited39 �ew winch bollards41 Tank Coatings� Cargo absorption challenges� Ballast treatment systems

44 Tank Servicing� Pump technology expanded� Large cargo control order� Class looks at corrosion

07

14

18

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World energy growth over the next 20 years isexpected to be dominated by emerging economies,such as China, India, Russia and Brazil.Improvements in energy efficiency measures are also set to accelerate.This is according to BP's latest projection of energy trends, the BPEnergy Outlook 2030.

BP's 'base case' - or most likely projection - points to primary energyuse growing by nearly 40% over the next 20 years, with 93% of thegrowth coming from non-OECD countries. These countries are seen torapidly increase their share of overall energy demand from just overhalf currently to two-thirds.

Over the same period, energy intensity, a key measure of energyuse per unit of economic output, is set to improve globally led byrapid efficiency gains in the same non-OECD economies, under these projections.

According to the BP Energy Outlook, diversification of energysources increases and non-fossil fuels (nuclear, hydro and renewables)are together expected to be the biggest source of growth for the firsttime. Between 2010 and 2030, the contribution to energy growth ofrenewables is seen to increase from 5% to 18%.

Natural gas is projected to be the fastest growing fossil fuel, and coaland oil are likely to lose market share as all fossil fuels experiencelower growth rates. Fossil fuels' contribution to primary energy growthis projected to fall from 83% to 64%. OECD oil demand peaked in2005 and in 2030 is projected to be roughly back at its level in 1990.Biofuels will account for 9% of global transport fuels.

BP's 'base case' projections are that world primary energy demandgrowth averages 1.7% per year from 2010 to 2030 although growthdecelerates slightly beyond 2020. Non-OECD energy consumption willbe 68% higher by 2030 averaging 2.6% per year growth, and accountsfor 93% of global energy growth. In contrast, OECD growth averages0.3% per year to 2030; and from 2020 OECD energy consumption percapita is on a declining trend of -0.2% per year.

Transport growth is seen to slow because of a decline in the OECD. OPEC's share of global oil production is set to increase to 46%, a

position not seen since 1977. At the same time, oil - and gas - importdependency in the US is likely to fall to levels not seen since the1990s, because of improved fuel efficiency and the increased share ofbiofuels. Global consumption growth is also impacted by higher oilprices in recent years and a gradual reduction of subsidies in oil-importing countries.

The fuel mix changes over time, reflecting long asset lifetimes. Oil,excluding bio-fuels, will grow relatively slowly at 0.6% per year;natural gas is the fastest growing fossil fuel with more than threetimes the projected growth rate of oil at 2.1% per year. Coal willincrease by 1.2% per year and by 2030 it is likely to provide virtuallyas much energy as oil, excluding biofuels. The strong carbon policydrive in OECD countries risks being more than offset by growth inemerging economies.

Global liquids demand is forecast to reach 102.4 mill barrels per dayin 2030. The net growth of 16.5 mmbpd over the next 20 years comesexclusively from the emerging economies of the non-OECD. "Non-OECD Asia will account for nearly two-thirds of non-OECDconsumption growth over the next 20 years and more than three-quarters of the net global increase, rising by nearly 13 mill barrels aday," BP said.

The largest increments of new supply will come from OPEC -conventional crude in Saudi Arabia and Iraq, as well as OPEC naturalgas liquids (NGLs) which are not subject to OPEC quotas.

According to the Energy Outlook's projections, oil continues to suffera long run decline in market share, while gas steadily gains share. Coal'srecent gains in market share, on the back of rapid industrialisation inChina and India in particular, are reversed by 2030, with all three fossilfuels converging on market shares around 27%.

The diversifying fuel mix can be seen most clearly in terms of sharesof growth. Over the period 1990-2010 fossil fuels contributed 83% ofthe growth in energy; over the next 20 years fossil fuels are likely tocontribute 64% of the growth.

"The diversifying fuel mix is being driven largely by developmentsin the power sector. Energy used to generate power remains the fastestgrowing sector, accounting for 53% of the growth in primary energyconsumption 1990-2010 and projected to account for 57% of thegrowth to 2030. In terms of end use, industry drives the growth offinal energy consumption.

“The role of transport is weakening; over the past 20 years transportsector energy demand grew at about the same rate as total energydemand, but over the next 20 years it grows much less rapidly thantotal energy.

"OECD oil demand declines are concentrated primarily outside thetransport sector, where it is relatively easier to displace oil by gas andrenewables; post-2015, OECD transport demand is also expected to fallas technology and policy drive improved engine efficiency," BP said.

COMMENT

The Gospel according to BP

TO

TANKEROperator � January/February 201102

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INDUSTRY - MARKETS

According to Gibson Research, atpresent the age profile of theVLCC market is extremelyunbalanced. Last year saw 56VLCC deliveries, while only 30vessels exited the fleet throughscrapping and conversions. As exciting as the phase out of single hullfleet might have been, it has not changed theugly fact that VLCC tonnage is growing toofast in an already oversupplied market. Thistrend is about to get worse, due to the youngage profile of the existing double hull VLCCs,as out of 507 vessels currently trading, morethan two thirds are under 10 years old.

The chances of younger VLCCs ending upon a beach are very low, because even in atough market the asset value of a 10-year oldVLCC will be significantly higher thanrevenue generated from a demolition sale.Only 40 (8%) vessels are in the ‘vulnerable’age of 15-20 years old. In contrast, there are187 VLCCs on the orderbook, with around 60expected to be delivered this year. Hence, thedouble hull VLCC fleet is likely to grow byanother 10% in 2011 alone.

The painful question now is will the newlydelivered VLCCs have enough cargoes tofully break even? The answer for this year isprobably not. The total expenses, includingcapital and fixed operating costs of running abrand new VLCC is about $50,000 per day.Current TCE earnings on the benchmarkVLCC route TD3 (ME Gulf – Japan) are justabove $17,000 per day at the beginning ofJanuary, Gibson Research calculated.

Considering that the tanker fleet is growingfaster than world oil demand, a long-term jumpin rates in the next 12 months is very unlikely.Moreover, due to continuing oversupply oftonnage, the rivalry for available cargoes couldintensify, putting additional downward pressureon spot rates. Hence, any hopes of getting a fullreturn on investment on a newbuilding VLCCwill probably not occur in 2011.

However, the long-term outlook seems to bemuch brighter. There are strong projections foroil demand growth in the next four years. Thiswill be coupled with a higher demand for long

The relief in the Nigerian energy sector camefollowing the amnesty deal arranged withmilitants in the second half of 2009. Crudeproduction bounced back to around 2.15 millbarrels per day in the third quarter of 2010, upby 0.47 mill barrels per day compared to July2009. This generated extra crude export demandout of the country equal to roughly one Suezmaxevery two days, or one VLCC every four days.

However, at present there are renewedconcerns about stability in the region, with anumber of attacks by a dissident factionwithin the Movement for the Emancipation ofthe Niger Delta (Mend) and other groups. Sofar disruptions have been fairly limited.However, the Mend faction has recentlywarned that it will soon start “an all-out attackon oil installations across the Niger Delta,”Gibson said.

On this basis, there is a significant risk ofrenewed disruptions to the oil infrastructure. Ifthis is the case, then it will once again reduceexports of light Nigerian crude to US andEuropean customers and so create downwardpressure on the local market for crude tankers.

Yet on a global scale, the impact on thetanker market is more difficult to measure, aswe are in a world of rising oil demand andthese ‘lost’ barrels will have to be deliveredfrom somewhere else. As most of the world’sspare capacity is located in the Middle East,the region is a good candidate for the extrabarrels needed. And although the heavyMiddle East crude is not a like-for-likesubstitute for light Nigerian blends, the lackof spare capacity outside OPEC means thatthe decline in Nigerian exports wouldeventually lead to a more longer haul MiddleEast crude trade.

A few thoughts on the large tanker market

haul crude transportation, due to forecastedincrease in OPEC production.

These positive developments mayeventually soak up the expanded VLCC fleet.Until then some of the new VLCCs may try toenjoy their ‘student’ life, being unemployedbut with good prospects, Gibson said.

Nigeria – what next?Turning to the situation in Nigeria, Gibsonsuggests that the oil exporter could either be athreat, or an opportunity, as for years theNigerian energy sector has been hampered byviolence and attacks on its oil infrastructure.

The country’s crude production wasseverely affected, with output falling to a lowof 1.68 mill barrels per day in July 2009,some 0.79 mill barrels per day below thehighest level since 2000.

As Nigerian crude is predominantly destinedfor the US and Europe - 66% going to the USand 30% to Europe - such a sizeable drop inNigerian production drastically limited thecountry’s exports to these regions. Yet, it wentunnoticed by the global energy markets, as at thetime the world economy was in severe recession.

For the tanker markets, on the contrary, thiswas a big blow, as vessels trading in the regionhad to deal not only with the weak charteringdemand but also rising tanker supply.

TO

The painful question now is will the newlydelivered VLCCs have enough cargoes

to fully break even? The answer for this year is probably not.

“

”

Produced by Gibson Consultancy & Research


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INDUSTRY - NEWS


AET – one of the world’s largesttanker owner/operators – tookdelivery of its 59th Aframax at anaming ceremony held on 19thJanuary. The new vessel, Eagle Kinabalu, wasformally delivered by Tsuneishi ShipbuildingCompany and is the fifth in a series of eightAframaxes currently being built for AET bythe Japanese yard.

Presiding over the naming ceremony wasAET president & CEO, Hor Weng Yew, whosaid: “The delivery of this new vesselrepresents our continued commitment togrowth in the tanker sector. Today, our tankerfleet is one of the largest in the world andincludes VLCCs, Suezmax, Aframax andproduct tankers, serving more than 80customers in every corner of the globe. Thisremarkable achievement has been madepossible by the support of some very important,long-term customers and Petronas is one of ourmost long-standing and valued relationships.”

He added: “Looking forward to the early daysof this new ship, I can’t pretend that this is going

to be an easy time for ship operators such asourselves. The outlook for tanker freight ratesremains bleak, with some degree of upturn notexpected in the immediate future. But sometimesdifficult periods present opportunities and we areusing this time to focus on improvements to ouroperational efficiencies, to drive out cost savingswhere that makes sense and to structure thebusiness for the future. We will also continue toinvest in new vessels, and I am proud to saythat AET will take delivery of a further 17 crudeand clean tankers over the next three years.”

Eagle Kinabalu was the 83rd vessel to jointhe AET fleet, which comprises 13 VLCCs, 59Aframaxes, one Suezmax, one Panamax andnine clean tankers. AET has a further 17vessels on order.

The company is headquartered in KualaLumpur, with commercial centres inSingapore, London, Houston and Gurgaon(India), together with a specialist offshorelightering unit in Galveston, Texas. AET is awholly-owned subsidiary of Malaysian energylogistics group, MISC Berhad.

AET accepts 59th Aframax

TO

Eagle Kinabulu entered the market at a difficult time.

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Make record keeping your NewYear's Resolution said Videotel.The company urged shipping companies to

use its updated online records managementtool, which it claimed simplified trainingrecords between ship and shore.

At the start of 2011, Videotel said thatmore than 52,000 crew and 1,600 ships wereusing its webFTA (Fleet TrainingAdministrator) system, which offers an on-line, custom-made solution for keeping trackof all training records.

Stephen Bond, Videotel deputy chairman,said: "In today's litigious climate withseafarers so easily criminalised forperceived infractions, it is even moreimportant to ensure that crew receive themost relevant and necessary training fortheir roles and for companies to havecomprehensive records to demonstrate thatappropriate training and qualifications havebeen achieved.

“Our webFTA system simplifies theprocess of monitoring individual employees'training to help crew and ship managers tobe certain that their staff are up to the job,"he concluded.

WebFTA, is the latest in recordsmanagement systems, offering an onlinesolution, which enables access to seafarer'sresults and performance from anywhere thereis internet access. It allows access to alltraining records across the fleet and offers avariety of data assessments tools to make life

easier. It provides an effective way to schedulerank-specific, statutory and non-statutorytraining, create reports, upload certificates andon-shore data, Videotel said.

With Videotel's webFTA system trainingadministrators and managers can:� Track training on board.� View a crew member's individual training

record to see what training is missing.� Receive alerts when training has not been

received.� Add certificates and on-shore data.� Set rank-related pass rates.� Schedule frequency of rank-specific

training and export to ships.� Schedule statutory and non-statutory

on-board task.� Create more than 20 styles of reports.� Export reports for further analysis within

other software packages.� Works in harmony with its partner program Onboard Training Manager Plus (OTM+).The software works from a centraliseddatabase. This simple-to-use system not onlysaves time tracking crew training andprocesses audits quickly but also helps showadherence to the ISM Code. WebFTA alsoallows onshore training managers to view allships and see what training is being doneand, importantly, what is not being done, thecompany said.


INDUSTRY – NEWS

The shipping sector faces achallenging 2011, with freightrates under pressure, crew costscontinuing to rise and the banksclosely monitoring the futureviability of poor performers.Writing in the latest issue of Moore StephensBottom Line shipping newsletter, JulianWilkinson, head of the shipping industrygroup, said, “Last year should have been theyear that future generations would use tofrighten their children into believing that,unless they ate their greens, they wouldsuffer the privations that were visited uponshipping. The truth was somewhat different.

“The shipping markets continued to bechallenging in 2010 because, despite positivesigns on the demand side, surplus tonnage, alack of funding, a continuing glut ofnewbuildings and fierce competition led todownward pressure on freight rates. Butconfidence levels in the first half of the year

still reached 18-month highs, not bad for anindustry that was supposed to be ailing.Owners started to think about newinvestments, and about finance costs comingdown. Confidence suffered a minor wobbletowards the end of the year, but 2010 stillclosed on talk of IPOs, strategic acquisitions,joint ventures and major investments.

“That confidence should be sustained thisyear, building on the general forbearanceshown by the banks in 2010 when assessingnon-performing shipping loans. But we canexpect to see the banks commission moreindependent business reviews to assess thefuture viability of poor performers.”

Wilkinson added, “Crew costs willcontinue to rise. They were the onlyoperating costs going up in 2009, will havedone likewise in 2010 and will continue todo so in 2011. An executive at a leadingshipping line recently welcomed a strongincrease in revenue for the first nine

months of last year and urged his crews tocelebrate by eating cream cake. This didn’tgo down well with the unions, who claimedthat the results had been achieved throughjob cutbacks. You can’t eat your cake andhave it.

“The emphasis this year will be on keepingthe cash flowing. The banks know thatshipping operations with strong leadership,governance and risk management that havesurvived the downturn deserve continuingsupport. They will listen to those with robustinvestment plans, who in turn will beencouraged by low interest rates.

“Despite continuing concern over the levelof newbuildings, it has been suggested thatshipping could be back to strength in anothertwo years. By then, there should be morebread to go round, and no need to eat cake.Prudent owners will keep their bankers sweetand their financial advisers close at hand,”he concluded.

Shipping is facing up to a challenging year

TO

Make 2011 a record year

Videotel’s Stephen Bond.

TO

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INDUSTRY – DENMARK REPORT


Danish shipping companies’ totalforeign currency earningscontinue to increase and willprobably reach DKK170-180 billfor 2010, reportedly said Danish Shipowners’Association (DSA) chairman, Lars VangChristensen of Herning Shipping, in a NewYear’s statement.

Figures produced by the DSA showed thatby the end of 2009, the fleet had reached arecord 13.5 mill dwt, representing more than550 vessels. At the end of that year, shippingcompanies’ investment programmes totalledmore than DKK60 bill amounting to around275 vessels of 11 mill dwt. However, virtuallyno orders were placed in 2009, or have beensince, except for smaller domestic vessels.

Many Danish tanker owners are by andlarge supporters of the pool concept withseveral companies participating in mainlyproduct and chemical carrier pools, whichprovides domestic owners with largeroperating volumes, which in turn leads tolarger commercial shoreside operations.

Since the beginning of the crisis at the end

of 2008, the Danish fleet has increased by 46vessels or 1.4 mill gt. The first nine months of2010 accounted for 28 new vessels of 500,000gt. The largest vessel types delivered weretankers, in which Denmark plays anincreasing role, including Danish owned andflagged and chartered in vessels.

By October last year, Denmark’s ownedfleet equalled 1.2% of the world fleet, makingit the 17th largest. Taking into considerationthose controlled by Danish concerns flyingforeign flags, this brings the total up to 23mill gt and 9th in the world ranking. Addingthe chartered in tonnage to the total, Danishowners control more than 1,500 vessels of 41mill gt, transporting about 10% of the world’sseaborne trade.

Despite the number of new orders almost

drying up, as of 1st October, Danish ownersstill had 243 vessels totalling 6.2 mill gt onorder. Of these 22 vessels were contracted lastyear. However, the later contracts were mainlyfor local vessels, such as ferries.

As for tankers, the Danish portion in thissector stood at nearly 4 mill gt last October,which was 35% of the total – the highesttonnage level since records began in 1992.

The DSA is also responsible for theprovision of funds for a common recruitmentcampaign under the ‘Blue Denmark’ banner,which has been ongoing since 2006. It wasrealised from the outset that the number ofqualified applicants for on board trainingpositions needed to be increased and despitethe recent cutbacks, the campaign is stillongoing. Targets set by parties involved in‘Blue Denmark’ for enrolment ontraining/educational programmes wereachieved in 2009, the association claimed.

At the beginning of October, 2010, Danishshipping companies employed around 25,000of the 100,000 employed in the Danishmaritime cluster.

Despite the downturn,

shipping remains the largest

Danish export market and

continues to grow.

Tankers play an everincreasing role in

Danish controlled fleet

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Among the more prominent DSA tankermembers are AP Moller-Maersk, TORM,NORDEN, Erria, J Lauritzen, OW Tankers,Uni-Tankers, Nordic Tankers and HerningShipping. Associate members in the tankersector include Clipper, Camillo Eitzen,Dannebrog and DIFKO.

Market-based instrumentsFor several years, the Danes have championedthe establishment of a global market basedinstrument for regulating CO2 emissions frominternational shipping.

At the 2010 AGM, Christensen, the newlyelected DSA chairman said: “Danishshipowners expect to reduce CO2 emissionsby technical measures with 15% by 2020 onaverage compared to 2007. However, Danishshipowners are also truly committed to takeresponsibility to further lower global CO2emissions and we realise that it cannot bedone by technical measures only; therefore theDSA finds it necessary to commit to aninternational market based regulation.

“The basic approaches of establishing anemission trading scheme or some kind ofgreenhouse gas contribution fund have beenstudied carefully. These approaches havemany fundamental and practical elements incommon. To ensure environmentaleffectiveness and to avoid distortion

of competition it is essential that theinstrument applies globally to all shipsregardless of flag. It appears that the currentDanish proposal on a greenhouse gascontribution fund will be the mosttransparent and easier to understand andadminister, it will provide certainty on cost tothe shipping industry and it will without anydoubt influence environmental behaviourpositively,” said Christensen.

At the time, the DSA said that it stronglysupported the ongoing deliberations at theIMO and would welcome an earlyinternational agreement on the more market-based CO2 reduction systems in order tosecure the best possible result from December2009’s COP-15 in Copenhagen in relation tothe future IMO work.

In his 2011 speech, Christensen alsotouched on other major challenges, whichinclude the reduction of the sulphur emissionsin the North Sea and the Baltic Sea, where theDSA in a partnership with the Danishenvironmental authorities tries to maintain thatall interested parties keep active, so as tosecure a sustainable 90% reduction in currentsulphur emissions.

Shipping also has other challenges,especially the increasing pirate activity offSomalia, which is a growing problem. Theinternational society has to make a further

effort so as to prevent criminal activitiescausing instability in the entire Indian Oceanand for all the East African countries.

The shipping fraternity has for a long timepointed out that the UN should establish alocal coast guard, which could protect thevessels servicing Africa’s foreign trade.

To counteract the threat of piracy, for thefirst time, the Danish Ministry of Justicerecently approved the use of armed guards onboard a Danish vessel.

According to Danish press reports, thevessel in question, the TORM-owned 47,000dwt MR Torm Kansas, was attacked bypirates near Mombasa in November lastyear. After the attack, owner TORM felt itunsafe to let the crew and the vessel sail inpirate infested waters, so the company askedthe navy for help.

The Danish navy, whose units participate inthe international anti-piracy fleet, opted not toescort the vessel. As a result, TORM asked forapproval to sail with armed guards, which was granted.

However, the DSA had reservations aboutthis trend. “This is a new creation and it issomething which is only to be used inextraordinary situations, where we cannot gethelp from the navy, or from another source,”Jan Fritz Hansen, DSA executive vicepresident reportedly said. TO

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Danish shipowners are [also] truly committed to take responsibility

to further lower global CO2 emissions and we realise that it cannot be

done by technical measures only; therefore the DSA finds it necessary

to commit to an international market based regulation.

“

”

p2-28:p2-7.qxd 21/01/2011 17:21 Page 8

To pool, or not to poolDenmark has been and still is home to various tanker pools, which have expanded down

the years, as the concept of tonnage sharing became ever more popular.



Maersk, NORDEN and TORMled the way by forming largetanker pools with variouspartners. However, TORM hasrecently announced that it is withdrawingfrom its pooling arrangements, but said itsdecision was not based on the fact that it lostseveral pool partners to a rival last year.

The existing pool players have since beenjoined by newcomers Hafnia and NordicWomar – the latter being a joint venturebetween Nordic Tankers and Womar Logistics.

The idea of the pools is to specialise intankers of the same type, from LR2s to smallchemical carriers and have enough vessels tooffer charterers flexibility of vesselavailability, while operating the vessels in acommercially cost effective way. There is awealth of tanker commercial, as well astechnical expertise in Denmark, especially inthe Copenhagen area. Some of the seniormanagement have broken away from the largeshipowners to form their own enterprises.

Maersk operates some of the largest poolswith three distinct brands – an LR2 pool, the100% managed Handysize and MRs in the100% managed Handytankers pool andIntermediate tankers, which were enhancedthrough the acquisition of Broström in 2009.

The Maersk LR2 pool is claimed to be theworld’s largest commercial operator of coatedAframaxes and is large enough to cater forcontracts of affreightments (COAs), accordingto Maersk Tankers. Handytankers is a largerpool of more than 125 vessels ranging from27,000 dwt to 51,000 dwt. Its membersinclude Maersk Tankers, Seaarland, Motia,Chemikalien Seetransport, MarwaveShipmanagement and d’Amico, plus therecently acquired Broström vessels falling intothat size range.

The smaller Broström units have joined theIntermediate tanker operation, which catersfor vessels ranging from around 7,000 dwt to17,000 dwt and was set up by the acquisitionof Broström, who know manages theoperation from Gothenburg and Singapore.

As for Nordic Tankers, this is a Danishshipping company listed on the OMX NordicExchange and headquartered in Copenhagen.A major boost to the company occurred inJanuary 2010, when Clipper became its

largest shareholder. This relative newcomer owns, wholly or in

part, 15 tankers and operates about 55chemical tankers. The chemical tankers are inthe range of 3,500-25,000 dwt and NordicTankers handles commercial operations, plus amajor part of the technical management, thecompany said.

The product tankers are in the LR1 and thehandysize sectors and are operated in twopools, which also include vessels from othershipping companies. The two pools are

commercially managed by HafniaManagement and Maersk Tankers.

Nordic Womar formedIn January of this year, it was announced thatNordic Tankers and Womar Logistics were toestablish a jointly owned independent poolmanagement company going by the name ofNordic Womar, starting operations on 1stFebruary.

Nordic Womar will initially manage two poolsof coated chemical tankers totalling about 40

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vessels in the 10,000 dwt to 25,000 dwt sector. This new arrangement is a continuation of

the joint marketing agreement that commenced1st June 2010, under which Nordic Tankersand Womar started to market each others'coated chemical tankers of between 10,000dwt and 17,000 dwt in their individual areas ofprimary commercial strength. For example, theagreement combined Nordic Tankers’ strengthin the West with Womar's strength in the East,the companies said.

This enabled the operators to offer anintegrated global service for their customers withincreased efficiency and utilisation of ships undermanagement, Nordic Tankers said at the time.

Based on constructive co-operation in thisinitial phase, the entering into a joint poolmanagement arrangement was a natural nextstep. Both parties agreed to increase the rangeof vessels on offer up to 25,000 dwt.

With the establishment of the jointly-ownedpool, Nordic Tankers will operate a total of about100 vessels in the chemical tanker segment,combining the fleet already under operationalmanagement with the fleet of Nordic Womar.

“This agreement is in line with our strategyof prudent and profitable growth with a target ofoperating more than 150 vessels in 2013. Apartfrom further combining the strengths of NordicTankers and WOMAR and creating criticalmass, it is a significant and concrete result ofour growth efforts and a perfect match to thepart of our strategy concerning theestablishment and operation of pools” explainedNordic Tankers CEO Tommy Thomsen.

“Nordic Tankers' well known presence inWestern markets and this joint pool companywill further enhance our services to ourcustomers providing efficient access to theglobal markets,” explained Womar CEO Hansvan der Zijde

Thomsen has taken on the role of NordicWomar’s chairman, while van der Zijde is the new CEO. The company is managed outof Singapore.

Nordic Tankers has offices in Copenhagen(headquarters), Stamford (Conn), Houston(Texas), Bogota (Colombia) and Riga (Latvia)and has about 130 employees. As for Womar, thisis a privately owned company with its headoffice in Singapore. The company currentlyoperates three commercial pool's - Marida,Yamuna and Ganges - with a fleet of about 40chemical and product tankers below 20,000 dwt.

Womar also has offices in Mumbai (India)and London (UK) with about 37 employees intotal. Two of these pools are now managed byNordic Womar, whereas the pool with tonnageoutside the scope of the co-operationagreement will continue to be managed byWomar, the company said.

Two newcomersLast year saw the establishment of two tankerscompanies in Copenhagen – Hafnia Managementand Tankers Inc, both of which were started byformer TORM senior management.

Hafnia Management was established byLars Mossberg’s Marinvest tanker concern.Today it operates as a commercialmanagement company with seven partnersoperating two pools.

The MR pool consists of IMO II/III producttankers controlled by Rederi AB Gotland, JLauritzen Tankers, LGR di Navigazione and KirkCapital, some of which are ice strengthened. TheLR1 pool’s members include Marinvest,Rederi AB Gotland and Nordic Tankers.

Led by CEO Anders Engholm, Hafniacurrently employs 16 persons having morethan 250 years shipping experience. Thecompany uses the name Hafnia Tankers in itsday-to-day commercial operations.

Engholm told Tanker Operator that the goalwas to build up the pools into 30 plus vesselseach to give Hafnia more purchasing power tonegotiate discounts on an economy of scalebasis. Indeed eight more newbuilding MRs arestill to come. He described the poolingarrangements as “…a true partnership modelwhere the owners help each other to achieve atrue cost consolidation.”

Once a ‘critical mass’ of tonnage wasestablished, Hafnia would then look to secureCOAs, possibly this year Engholm explained.He also said the company operated on a netcommission basis rather than the more normalgross commission. This results in Hafniataking a tight control over its own costs. “Werun the entire operation as smooth aspossible, the lower the cost the better for the

customers and partners,” Engholm explained. At the end of January, Hafnia took over the

commercial management of two Prime MarineManagement LR2s, which were previously onbareboat charter to OSG. They are beingmarketed separately from the two pools.

In January, it was announced thatLauritzen’s 53,540 dwt MR Freja Scandia hadbeen sold to Kirk Capital for $40 mill andrenamed Christina Kirk.

Financial backingOne company that will not be getting intopooling arrangements is Tankers Inc.

Tankers Inc was formed around August lastyear to focus on the ownership and charteringof tonnage in the product tanker segment. Itsremit will include timecharters, newbuildingsand secondhand purchases and will build itsbusiness on the back of an ultimate investmentportfolio of $400 mill.

In addition, the team will evaluateopportunities to buy existing companies andfleets, plus other strategic initiatives within itscore segment, which will deliver an appropriatereturn on capital for its shareholders.

CEO Mikael Skov said last year when thecompany was founded: “The product tankerindustry is looking very interesting because ofour long-term view of positive developmentsin the global supply and demand environment.In light of the recent financial climate, thetiming to invest in the segment is ideal andthere are attractive opportunities for assetacquisition and timecharters.

“I am very excited to be able to use my 25years of experience in the industry to build asuccessful, global product tanker business,” he said.

Tankers Inc is backed with a ‘line of equity’from Barclays Natural Resource Investments, adivision of Barclays Capital, the investmentbanking division of Barclays Bank Plc, as wellas private investors and last year was finalisingterms with industrial investors.

Skov told Tanker Operator in January: “Weare up and running and have now fullyestablished the internal infrastructure, whichis always a bit more time consuming than one expects.

“We have not bought, or chartered any vesselsyet as we have felt the prices were too highcompared to the underlying freight earnings. Wewill be focusing on the product tanker segment,primarily MR and LR1 vessels and expect tosee more reasonable pricing on assets andtimecharters during the course of 2011.”

“We do not expect to establish any poolsetc. so will not be in competition with neitherTORM nor Hafnia,” he explained. TO

TORM has reportedly withdrawn its vesselsfrom pooling agreements.

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Leading shippingorganisation sets

the agenda

Well known for its contractualdocumentation, BIMCOregularly updates its charterand sales forms as theshipping industry continues to evolve.

One of the latest revisions concerns theSaleform 1993. Following industryconsultation, during the summer of 2010,BIMCO and the Norwegian Shipbrokers’Association (NSA) decided to revise theindustry’s standard international contract forthe sale and purchase of vessels, SALEFORM1993.

While the general view of the industry wasthat this contract works very well – it wasacknowledged that some provisions are oftensubject to amendment. The objective of therevision will be to address these issues whilemaintaining the fundamental principles of theSALEFORM.

Both BIMCO and the NSA have formedsub-committees composed of internationalexperts with commercial and legal expertise inship sale and purchase with the aim ofcompleting a revision of the form by theautumn 2011.

According to BIMCO deputy secretarygeneral, Soren Larsen; “SALEFORM 1993 isthe universally accepted standard form for thesale and purchase of secondhand vessels. Thetwo strong messages we received from ourglobal consultation process was that weshould preserve the general concept ofSALEFORM but that a modest update wasrequired.” He added: “We are confident thatwe can make this well-used form even better.”

Knut Frode Eriksen, NSA director said.“We are very pleased that this importantproject is underway in a good co-operationwith BIMCO and aim to publish the revisedSALEFORM 2011 next year. The strongexperience and expertise of the sub-committees involved should ensure a revisionthat can be embraced by all parts of theindustry. I am very encouraged with thededication and enthusiasm going into thisproject by the sub-committees.”

BIMCO has also supported ‘The Guide’,which is claimed to be the first comprehensiveguide to ship efficiency and technologymeasures. The Guide will be launched inFebruary 2011 and is also supported byLloyds Register.

It was developed by Fathom, a provider ofmarket intelligence products and services forthe marine and energy industries. The Guidefeatures over 60 eco-efficiency technologiesand measures, that are currently commerciallyavailable, as well as information on the 130companies behind them. It provides in-depthanalysis of the current market for eco-efficiency technologies, a critique of whichtechnologies are the most advanced, whetherthey can be retrofitted or not, their fuel savingpayback and vessel type applicability.

Amid rising crude and bunker prices, The

Guide has been developed to meet theincreasing thirst for knowledge of fuel savingefficiency technologies and measures, asshipping faces increasing commercial andregulatory pressure to reduce fuel costs andemissions, respectively, Fathom said.

A BIMCO spokesperson commented:“BIMCO welcomes The Fathom Guide toShip Efficiency Technologies and Measures asa new tool for shipowners, operators anddesigners who are searching for informationon reduction of air emissions from ships. Fuelcosts represent in general the largest operatingcost for ships. The shipping industry and itssuppliers are increasingly innovative indiscovering means to reduce fuels costs andemissions and ‘The Guide’ provides acomprehensive listing of the options availablefor the shipowners and shipbuilders.”

Mandatory reportingIn another move, which will affect the Danishshipping community, at last year’s IMO’sMSC 88 meeting, a Danish-Swedish proposalfor a mandatory ship reporting system in theSound was adopted. This system is to replace

One of the most important

international organisations

headquartered in Denmark

is BIMCO.



BIMCO deputy secretary general Soren Larsen.

p2-28:p2-7.qxd 21/01/2011 17:21 Page 11

the current voluntary reporting system. Nowthe basis has been created for making thetemporary traffic monitoring system in theSound mandatory, thereby enhancing thenavigational safety of the dense vessel trafficin the Sound.

The MSC committee re-elected Neil Ferrerfrom the Philippines as chairman and deputygeneral-director and Christian Breinholt of theDanish Maritime Authority as vice-chairmanfor 2011.

Denmark has had some success recently inmarketing its flag to disaffected Swedishshipping companies. However, a leadingequipment supplier has gone the other way.

Last December, it was announced that AlfaLaval was to acquire Aalborg Industries forSEK5 bill cash.

Aalborg Industries has some 2,600employees and was expected to generate salesof about SEK3.3 bill in 2010. The company isa leading provider of products, systems andservice solutions, mainly to the marine andoffshore markets. Its portfolio includes boilersystems, thermal fluid systems, waste heatrecovery systems and inert gas systems.

Alfa Laval said that Aalborg complementsand further strengthens its leading globalposition, by adding a strong product offeringthat focuses on energy efficiency. As a result,top and bottom line synergies are expected tobe derived from this acquisition. It canprovide an attractive platform to continueAalborg’s successful development, forinstance in applications, such as exhaust gascleaning, the Swedish company said.

“Aalborg Industries is an excellent fit andI’m very pleased to welcome a strong andwell-run company into Alfa Laval”, said LarsRenström, Alfa Laval group president andCEO. “Aalborg Industries complements ouroffering of energy-efficient and environmentalsolutions. It represents a significant business

opportunity as it not only supports thedevelopment of our offering to the marine andoffshore markets but also means we canintroduce their product offering to newindustrial end markets and customers.”

With the acquisition of Aalborg Industries,Alfa Laval will further strengthen its offer inheat transfer. It will add market-leadingpositions in attractive market segments,including boilers and thermal fluid systems, aswell as inert gas systems, with significantbarriers to entry. These include extensivecertification processes, a strong innovationtrack record and a global service network.

The company claimed that its strongmanufacturing and engineering presence infast-growing markets such as China, Vietnamand Brazil, as well as the after sales marketpotential generated by a large installed base,are highly attractive attributes.

Today, Aalborg Industries is the world'sleading manufacturer and supplier of marineboiler systems, as well as a major provider ofinert gas systems, thermal fluid systems andshell & tube heat exchangers.

Russian contractsAnother successful Danish equipment supplieris Aalborg-based API Marine.

This company recently announced acontract with JSC Volgograd ShipbuildingPlant in Russia for the delivery of fullintegrated cargo control, monitoring and alarmsystem for a series of 10 oil/chemical tankers,ordered by the Istanbul-based Palmali Group.

The new tankers represent the third range ofArmada type vessels, project RST22M, withan overall capacity of 8,090 cu m. They aredesigned for mixed river/sea transportation ofpetroleum products and vegetable oils.

The new vessels will be equipped withadvanced API Marine equipment fromcombined level, pressure and temperature

measurement in cargo tanks, using a uniqueself-calibration multi-functional unit – TGD(Tank Gauging Device), to monitoring andcontrol the ballast tanks, service tanks, fueland lube oil tanks with an integrated system,based on the company’s range of sensors and systems.

API Marine and Palmali have a long historyof successful co-operation, establishedthrough previous supplies of full cargomonitoring and alarm systems for the earlierArmada type tankers built at shipyards inTurkey and Russia.

The new contract further strengthens thisco-operation, adding up to the supply ofequipment to a total of 40 vessels in Palmali’sfleet. “Unique technology for accurate andreliable tank gauging, developed by APIMarine, based on guided acoustic principles,in combination with fast and flexible servicesupport, securing overall reliable operation –has again proven to be the key points for theowner’s and shipyard’s decision”, said SvenEgelund Rasmussen, API Marine managingdirector.

Venezuelan contractElsewhere, Erria Consulting, a subsidiary ofDanish shipping company Erria, recently wona DKK60 mill deal from Venezuelan state oilcompany Petroleos de Venezuela (PDVSA).

Under the terms of the contract, theconsultancy will act as adviser on theconstruction of two 27,000 dwt asphalt tankersuntil 2015. They will be among the largest oftheir type in the world, the company said.

They will be of 188 m in length, 28 m beamand with a draught of 9.5 m. Their loadingcapacity will be 24,000 cu m and the cargo willbe carried at 200 deg C. The main engine willbe MAN B&W types developing 9,960 kW.

Erria Consulting had already securedDKK50 mill deals with the Venezuelans inDecember 2009 on the back of the parentcompany’s partnership with PDVSA.

This related to the building of fourAframaxes of 113,000 dwt each from 2010 fora period of four years. Erria will provide aninspection team at the newbuilding yard in co-operation with PDVSA’s own site manager.

In addition to project co-ordination, theoffice in Copenhagen will work with drawingsapproval and technical support. Managingdirector Henrik Andersen, together withJørgen Thuesen and Vagn Skaarup, has visitedthe yard where the ships will be built. It is thefirst time that the shipyard has tackled atanker. Previously, the yard was involved inconstruction of a small multi-purpose containervessel, but she was never completed.



One of Palmali’s sea/river Armada class tankers fitted with API Marine cargo controlequipment.

TO

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Today, products and results from theinitiative are implemented on morethan 100 vessels. Althoughprimarily a Danish initiative, ‘GreenShip of the Future’ will also welcome foreigncompanies if they are performing a project witha Danish concern, a spokesman said.

Many elements are coming together in theproject: research, development, demonstration,innovation, education, training anddissemination of knowledge. Those involvedinclude: systems for recycling heat energy,optimisation of the hull, propellers andrudders, optimisation of the draft and speedfor a given route and arrival time andmonitoring the fouling of hulls and propellers.Engine technology is an especially essentialfactor for achieving the planned benefits.

Initially, ‘Green Ship of the Future’consisted of four companies, AalborgIndustries, AP Moller-Maersk, MAN Dieseland Odense Steel Shipyard, who joinedtogether with the primary objective ofdeveloping and demonstrating greentechnologies within shipping and shipbuilding.The focus was on developing solutions basedon what was technical possible instead ofbasing the development solely on the demandsof shipowners and shipyards.

Soon after, more than 15 partners hadjoined. This led to a more formalisedpartnership, and the group of companiesdecided on performing a so-called ‘lowemission’ study on a 8,000 TEU containershipand a 35,000 dwt handysize bulk carrierwhere the results from the individual projectswhere accumulated with respect tointerdependent interference and comparedwith an estimate of the extra cost ofimplementation of the green technologies.

The ‘low emission’ studies of the two vesseltypes showed that it was possible to save up to7.2 % on CO2, 79.1 % on SOx and 98.6% onNOx regarding the 35,000 dwt bulk carrier and

14 % on CO2, 90 % on SOx and 80 % on NOxon the 8,000 TEU container vessel withoutlowering the speed, or changing main parametersof the vessels. So mission accomplished for NOxand Sox, whereas initiatives were still requiredto meet 30% CO2, the organisers said.

Another new initiative is expected to be thelow-emission study of a ropax ferry. The focuswill naturally be on elements withinmachinery and propulsion, but the plan is alsoto look at other areas affecting emissions.

General secretary, Christian Schack, said,“In the ferry study, we are initiating newprojects concerning HVAC, isolation,windows and lighting, but there might also beprojects within looking at how the design ofthe cargo deck can decrease the loading timein port and thereby help decrease the overallship speed at sea and still keep schedule witha reduction of emissions as a result.”

The IMO’s decision to reduce the sulphurlevel in fuel oil to 0.1% by 2015, or clean theexhaust gas to an equivalent level brings aninteresting challenge regarding retrofitting ofships sailing in ECAs.

‘Green Ship of the Future’ has established anew project where a group of companies willwork together on comparing variousabatement technologies to fulfil the ECArequirements, ie the use of scrubbertechnology, the use of LNG as fuel and theuse of low sulphur fuel/distillate.

The objective of the project is to set uppractical solutions, as well as uncovering thefinancial aspects regarding installation,operation and maintenance of the threealternatives. Basis for the retrofit project is anewly built 38,500 dwt tanker from NORDEN(see page 24) and the project partners areexpected to deliver results during 2011.

Another project involves the reduction ofaerodynamic resistance thereby reducing fuelconsumption. In the project, the handysize bulkcarrier Seahorse 35 from Grontmij/Carl Bro is

evaluated with the help of FORCE Technology. This initiative is endorsed by the Danish

Ministry of Economics and more importantly,the SOx abatement study and the two initialstudies were jointly financed by the DanishMaritime Fund and the project partners.

LobbyingDenmark has been heavily involved inlobbying at the IMO on climate change for aninternational greenhouse gas (GHG) fundtogether with Cyprus, Denmark, MarshallIslands, Nigeria and the International ParcelTankers Association (IPTA).

At a GSF conference and workshop heldlast September, Christian Breinholt, deputydirector general of the Danish MaritimeAuthority outlined the Danish viewpoint.

He said that it was necessary to have aglobal agreement taking into account thecharacteristics of international shipping. Hisrationale behind the proposal took intoaccount a vessel’s longevity and the growth ininternational shipping. The contributionswould come from all sectors in offsettingGHG emissions.

Breinholt explained the key elements of thescheme, which included a bunker fuelcontribution thus– 1) Mandatory registration of bunker fuel

suppliers.2) Based on the bunker delivery note as

evidence.3) Collection by registered bunker fuel suppliers. 4) Direct transfer to the international GHG fund.5) All marine fuels for vessels in

international trades. As for the revenues collected, these would beused for –1) Mitigation and adaptation activities.2) R&D projects.3) Technical co-operation with the IMO.4) Administrative expenses for the fund’s

operation.

Green Ship of theFuture expandsproject portfolio

Almost three years after setting sail towards more environmental friendly

and energy-efficient shipping, the Danish maritime industry initiative called

‘Green Ship of the Future’ is still producing results.

TO

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INDUSTRY – OPERATIONS EEDI

EEDI is a calm water, trialmeasurement of the CO2 output ofthe ship at a single power rating(75% mcr) ratioed to a measure ofthe ship’s transport capability. The assumptionis that a 25% reduction in EEDI will result ina 25% reduction in fleet CO2 emissions. Thisclaim was central to the IMO’s recent reportto the Cancun Conference.

And it is just flat wrong.EEDI is based on a static view of the world.

The basic fallacy underlying EEDI is that theship’s steaming speed is fixed. In competitivesectors such as tankers this will happen only ifthe market spot rate is constant.

In fact, in the bulk trades, the spot rateranges from rates so low that the owner isbarely covering fuel bills to rates so high thatthe owner can pay off a ship in as little as 10voyages. Figure 1 shows the VLCC spot ratefor the last 20 years. The basic pattern islongish periods of very low rates, duringwhich, at current and projected bunker fuel oilprices, the ships will be steaming as slow asthey can, interspersed with spikes in which theships will steam as fast they can, almostregardless of bunker price.

The ships will almost never be steaming at75% mcr.

Figure 2 is a histogram of VLCC spot ratesover the last 20 years. The average of thesespot rates, Worldscale 63, is roughly equal to

the rate the VLCC owner would have toaverage in order to just breakeven on theinvestment, including the capital cost, the so-called RFR. However, 90% of the time, ratesare below RFR, usually well below. Less than10% of the time, the rate is in full scale boom,several times RFR.

In order to properly analyse EEDI, or acarbon dumping fee, or mandatory max speedor any other regulation which affects steamingspeed, we must do so over a market cycleadjusting the ship’s speed to the current spotrate. CTX has undertaken such a study usingVLCC’s as an example.

The study compared an EEDI-compliantand a non-EEDI compliant (no regulation)VLCC for two fuel oil prices -

1. $465 (about current).2. $620 (current plus $50/t CO2 dumping

fee)[1]

Added on are three EEDI levels: Phase I (-10% from baseline), Phase II (-25%), PhaseIII (-35%).

Both ships incorporated feasible, prudent,efficiency measures which currently havenegative abatement cost. Table 1 showstypical results.

In Table 1, the second and third columns

Figure 1: VLCC Spot Rate for the last 21 Years.

Why EEDI won’twork

The IMO may be on the verge of enacting an amendment to MARPOL, which would

require new large ships to meet an Energy Efficiency Design Index (EEDI)*.

Figure 2: Fraction of time market spends in each Worldscale interval.

Footnotes:[1] A ship emits a little over three tonnes

of CO2 per tonne of fuel burned. A $50/t CO2 fee imposed as a bunkers tax would increase the owner’s fuel cost roughly $150/t BFO.

[2] Gratsos, G., Psaraftis, H. and Zachariadis, P., Life Cycle CO2 Emissions of Bulk Carriers: A Comparative Study, Int. Journal of Maritime Engineering, Jul-Sep 2010, pp A 119-A 134.

[3] In economic jargon, the marginal societal value of a ton-knot of transport capacity is far higher in a boom than in a slump. A fee responds to this order of magnitude change in value efficiently. EEDI and other mandated restrictions do not.

p2-28:p2-7.qxd 21/01/2011 17:21 Page 14



were computed by finding the loaded/ballastspeed that maximises the owner’s $/dayearnings for the given spot rate, fuel cost, andspeed/fuel curve. (The optimisation was donein half knot increments, so it can be a littlejumpy.) The fourth column was generated bycomputing how much CO2 each ship wouldproduce per tonne per day delivered on thestandard route (Ras Tanura-Yokohama), andthen ratioing these two numbers. In otherwords, the fleet sizes have been adjusted todeliver the same amount of transport capacity.

The bottom line shows the CO2 producedper tonne of cargo delivered per day for eachship averaged over the market cycle usingFigure 2.

In this case, the Phase I EEDI compliantfleet produces 1% less CO2 over the marketcycle. Table 2 summarises the results.

The Phase 2 and Phase 3 EEDI fleetproduce more CO2 than the non-regulatedfleet. How can this be? The answer is twofold:1) EEDI effectively limits installed power.

But at current and expected BFO prices, a non-EEDI VLCC owner uses all his installed power only in a full boom. So for the great bulk of her life, a non-EEDI ship uses little or no more power than an EEDI-compliant ship.

2) In limiting installed power, EEDI induces owners to use smaller bore, higher rev/min engines.

Table 3 shows CTX’s estimate of how VLCC

owners will respond to EEDI. These engineshave higher specific fuel consumption andmore importantly require a smaller, lessefficient propeller. This means the EEDIcompliant VLCC consumes more fuel whenthe market is not in boom, which is 90% ofthe time.

Even if we unrealistically assume awayproblem (2), our numbers indicate that thePhase 2 (25% reduction in EEDI) EEDI-compliant VLCC fleet will produce about 2%less at-sea CO2 than the non- EEDI fleet. Andthis is only at-sea emissions.

Table 4 shows the VLCC fleet sizerequirements of EEDI.

The increase in build/repair/scrap emissions

is based on Gratsos et al converted toequivalent at sea emissions[2]. Gratsosconsidered only emissions at building, repairand breaking yards. Mining, flying crewsaround, additional cargo loss due to tankbreathing, etc were not included.

Finally, these are all calm water numbers.The low-powered EEDI compliant ship willhave considerably poorer performance inheavy weather than the non-EEDI ship. AsTable 3 shows, in order to meet Phase 3EEDI, VLCC’s will have to go down to about13,000 KW mcr. This is less than half thepresent practice. This ship will not only havegreat difficulty maintaining any speed in badweather, but also her engine will be pushedmuch harder over the market cycle than thenon-EEDI ship’s. And that means a big jumpin machinery failures.

As far as I know, similar studies have notbeen done for smaller tankers; but there isevery reason to believe that such studies

Phase 1 Phase 2 Phase 3

Fleet Size +4% +18% +29%

B/R/SCO2 +0.1% +0.6% +1.0%

Table 4. Increase in fleet size for sametransport capacity.

�o EEDI Phase 1 Phase 2 Phase 3

gCO2/dwt-kt@75%MCR 2.54 2.09 1.74 1.51

MCR(kW) 27,500 23,600 16,500* 13,200**

�umber cylinders 7 6 6 6

BORE(mm) 840 840 650 600

RPM(MCR) 75 75 95 105

SFC@MCR(book) 168 168 171 171

PROPDIAM.(m) 9.9 9.9 7.1 6.0

Propulsive efficiency 0.73 0.73 0.67 0.64

Table 3. Main propulsion parameters of EEDI compliant VLCC’s.

WS Ave spd Ave spd Ratio %

�on-EEDI EEDI CO2 Diff.

30 10.25 10.25 1.0000 -0.0

40 10.74 10.74 1.0000 -0.0

50 11.19 11.19 1.0000 -0.0

60 11.97 11.97 1.0000 -0.0

70 13.20 13.20 1.0000 -0.0

80 14.24 14.00 0.9820 -1.8

90 15.00 14.75 0.9846 -1.5

100 15.49 15.25 0.9948 -0.5

110 15.99 15.49 0.9732 -2.7

120 16.25 15.94 0.9903 -1.0

130 16.49 15.94 0.9747 -2.5

140 16.72 16.17 0.9762 -2.4

150 16.83 16.17 0.9632 -3.7

160 16.83 16.17 0.9632 -3.7

170 16.83 16.17 0.9632 -3.7

180 16.83 16.17 0.9632 -3.7

190 16.83 16.17 0.9632 -3.7

200 16.97 16.17 0.9427 -5.7

Average 1.238 1.226 -1.0.

Table 1. Phase 1 Percent reduction in CO2, BASE (noEEDI) vs 6 cyl ship (EEDI). BFO=$465.

• *De-rated from 17,200kW. **De-rated from 14,400 kW.• Disallowed less than 6 cylinders on vibration grounds. Reduction gear not considered.• Lower powered ships spend much more of the market cycle at or close to MCR and above

the min SFC point.• Heavy weather, manoeuvring characteristics of ships on right need to be carefully studied.

BFO Phase 1 Phase 2 Phase 3

COST

$465 -1.0% +2.0% +1.7%

$620 -0.8% +1.6% +1.7%

Table 2. Overall Summary of results Pctreduction in CO2 Emissions averaged overmarket cycle. Negative implies EEDIcompliant fleet better.

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would generate very similar results.EEDI is a loser. So what should we do?

The answer will be obvious to any first yeareconomics student: charge the polluter for hispollution.

Table 5 shows how VLCC owners wouldrespond to a $50 per tonne CO2 dumping feewhich would increase the owner’s fuel oil costabout $150/t.

Over the market cycle, this carbon dumpingfee would generate a 6.2% reduction in CO2,far more than any level of EEDI. But it is howthe fee works that is interesting.

Comparing Tables 1 and 5, below aboutWS150 — in other words, almost all the time-the non-EEDI ship with the fee is steamingmore slowly than the Phase I EEDI compliantship without the fee. It is only in an all-out,full boom that the non-EEDI ship with the feesteams faster than the Phase I EEDI shipwithout the fee. But this is exactly what wewant, for it avoids wastefully expendingresources on additional ships, just to handle a boom[3].

A carbon dumping fee is effective, efficient,and safe. EEDI is none of the above.

*This article was written by Jack Devanney,Center for Tankship Excellence, USA,[email protected]

TO

WS Ave spd Ave spd Ratio %

465 620 CO2 Diff.

30 10.25 9.98 0.9854 -1.5

40 10.74 9.98 0.9472 -5.3

50 11.19 10.50 0.9307 -6.9

60 11.97 10.74 0.9197 -8.0

70 13.20 11.74 0.8965 -10.4

80 14.24 12.24 0.8865 -11.3

90 15.00 13.24 0.9094 -9.1

100 15.49 14.00 0.9224 -7.8

110 15.99 14.50 0.9141 -8.6

120 16.25 15.25 0.9301 -7.0

130 16.49 15.49 0.9262 -7.4

140 16.72 15.75 0.9290 -7.1

150 16.83 15.99 0.9297 -7.0

160 16.83 16.49 0.9678 -3.2

170 16.83 16.49 0.9678 -3.2

180 16.83 16.72 0.9867 0.0

190 16.83 16.72 0.9867 0.0

200 16.97 16.83 0.9787 -2.1

... ... ... .... -2.1

260 16.97 16.83 0.9787 -2.1

270 16.97 16.97 1.0000 -0.0

Average 1.238 1.161 -6.2

Table 5. Percent reduction CO2, $50/ton CO2 for non-EEDI ship at $465 versus $620 BFO cost.

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INDUSTRY – SHIP REGISTRIES

MLC top ofBarbados flag agenda

“Our process ofimplementation will allowopportunity for the shipoperators, the crews andthe flag state inspectors to become accustomedwith the required scope,” he explained.

Other issues concerning the recently re-convened Barbados Ship Owners andManagers Association (BSOMA) is thecontinually deteriorating security situationaffecting vessels trading lawfully and theapparent inability of governments to mountadequate protection to vessels.

“Barbados supports the work of the IMO inbringing shipping to the point of it making theindustry’s contributions to the internationaleffort,” Sawyer said.

Turning to the IMO’s voluntary member stateaudit scheme (VIMSAS), he said that Barbados

was in the process of applying for the IMO audit. However, he warned that BSOMA members

were concerned that recent evaluations beingmade by PSC under the new inspection regimerecently announced by the Paris MoU (see page19) are likely to give a higher inspectionpriority to a vessel whose flag has low detentionrates, but which is not IMO audited, comparedwith a flag, which has a higher detention ratewhose flag had undertaken the IMO audit.

“We are pleased with our PSC record whichmaintains us solidly in the Paris MOU ‘WhiteList’ - an area in which most of the Barbadosflag vessels are trading.

“Our position 30th from the top of the tablereflects well compared with flags (listed) nearus in the table as our average of our fleet wasover 20 years (of age) last year,” he said.

Several years ago, the registry introduced aSafety Watch programme toassist its operators keep on topof the detainable items onvessels of 10 years and older inthe fleet. “This, together withour Ship Condition Mappingallows the administration to bealerted in advance thatstandards are beginning to fallaway,” Sawyer said.

Speaking of the possibilityof facing sub-standard vesselsapplying for registration,Sawyer claimed that theregistry has not had to de-register a ship for four years.“We are continually having toturn vessels away whoseowners wish to register withBarbados, due to either thevessel being too old, or thatthe vessel, or the manager hasa poor PSC detention record.With a manager not known byBMSR, we review all of itsvessel’s PSC history,” he said.

Barbados maintains twoforums through whichshipowners and managers may

participate in the management of the registry.Membership of the Ship Owners

Association (BSOMA) is by invitation and ismade up of senior representatives ofcompanies having at least three vessels in theBMSR for a minimum period of three years.

The purpose of the association is to give theclients a voice in the decision making processof running an international ship register.

As well as through the AGM, members areencouraged to voice their opinion regardingthe operation of the Registry throughout theyear and can make depositions regarding theratification by Barbados of new internationalregulations and the application andinterpretation of existing regulations.

In addition, companies havingrepresentation in BSOMA may elect to have aperson of their choice represent their companyon the registry’s technical committee.

The function of this committee is to providea technical resource to enable the operator'sperspective to influence the decisions made bythe registry.

Such decisions may include the assessing ofPSC detention reports to assess the viability oflaunching an appeal against the detention, orthe interpretation of current legislationeffecting operational matters.

Members of the technical committee areeither contacted individually to give their views,or may be brought together for collectivediscussions when this is warranted by the issuesunder consideration, BMSR said.

The Barbados Maritime Ships’ Registry (BMSR) technical committee’s prime concern

today is the implementation of Maritime Labour Convention 2006,

principal registrar Christopher Sawyer said.

Barbados High Commission, Ship Registry, 1 Great Russell Street, London. WC1B 3ND tel: +44 207 636 5739 fax: +44 207 636 5739 email: [email protected]

Be protected.

WHY FLAG WITH BMSR?

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BMSR’s Christopher Sawyer.

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According to the Paris MoU, inrecent years some concern hadbeen expressed by severalmembers that in some casestankers were not being loaded in compliancewith IMO damage stability requirements. Thismeans that in the case of a collision orgrounding, the ship may not survive, resultingin possible pollution or even loss of life.

As a result, the Paris MoU committeedecided to undertake a ConcentratedInspection Campaign (CIC) on tanker damagestability in the region from the 1st September2010 to 30th November 2010 to assess the

situation regarding damage stability.Preliminary results from the CIC on tanker

damage stability showed that a total of 173tankers - 16.2% of those inspected - could notdemonstrate that they were normally loaded inaccordance with the Stability InformationBooklet (SIB).

Broken down into vessel types, out of the173 vessels, there were 77 oil tankers, 84chemical tankers and 12 gas carriers.

The CIC questionnaire was completed on atotal of 1,065 tankers (419 oil, 538 chemicaland 108 gas tankers). A total of 94 (8.8%)inspections found deficiencies directly

related to the CIC. PSC inspectors detained four tankers, as a

direct result of the CIC for not complyingwith damage stability requirements - two oiltankers and two chemical tankers.

Richard Schiferli, Paris MoU generalsecretary said that although just fourdetentions might seem a small number giventhe large number of ships with deficiencies, ithad been agreed that during the CIC,detention was a last resort.

"Only for cases where the ship was loadedfor the forthcoming voyage and could notshow damage stability compliance prior to



The Paris MoU Port state Control (PSC) organisation has warned that significant

number of tankers could still pose a risk to the environment.

Port state Controlgets tough on tankers

SHARING KNOWLEDGEAND EXPERIENCE

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The detailed results will be submitted forreview to the 44th meeting of the PSCcommittee in May 2011, after which the reportwill be submitted to the IMO.

On 1st January this year, the Paris MoUintroduced a new inspection regime (NIR). Under the new NIR, vessels are now ranked; � Low risk.� Standard risk� High risk.

Low risk ships will be awarded with longerinspection intervals by PSC of up to 36months, compared to six months in the current

system. In order to qualify for a ‘low riskship’ category, several criteria need to be met.With regard to flag the following will bedecisive:� Flag appears in the ‘White List’ published

in the annual report of the Paris MoU.� Flag has informed the Paris MoU

secretariat that a final audit report including, where relevant, a corrective action plan has been drawn up in accordance with the ‘Framework and Procedures for the Voluntary IMO Member State Audit Scheme. (VIMSAS).

Flag state performance table updatedLate last year, the Round Table ofinternational shippingassociations (BIMCO,International Chamber ofShipping/International ShippingFederation, INTERCARGO andINTERTANKO) published theirlatest ‘Shipping Industry FlagState Performance Table’.The Table, which is updated annually, can bedownloaded at www.marisec.org/flag-performance.htm

It accompanies the ‘Shipping IndustryGuidelines on Flag State Performance’, whichsummarises factual information derived fromthe public domain. The intention is to providea general understanding of a flag’sperformance and to encourage ship operatorsto reflect on a flag’s quality before using it,the group said.

The results of the 2010 study demonstratethat the vast majority of the world fleet isregistered with flag states which take theirresponsibilities very seriously.

Many flags have ratified most of the key

IMO conventions, adequate enforcement ofwhich is shown by their Port State Controlrecords. Many flags have improved theirperformance in previous years, somedramatically, and notably six flags had nopotential negative performance indicators atall in 2010.

Since the Table was first compiled in 2003,there has been a noticeable decline in thenumber of flag states that appear on the blacklists of regional PSC authorities.

There were still a number of poorlyperforming flags and for 2010, the list of flagswhich the Round Table believed shipownersshould think very carefully about before using.These included - Albania, Bolivia, Cambodia,

Colombia, Costa Rica, Cote d’Ivoire,Democratic Republic of Congo, Georgia,Honduras, Lebanon, St Kitts and Nevis, SaoTome and Principe and Sierra Leone.

The table and accompanying guidelines areintended to complement the Voluntary IMOMember State Audit Scheme (VIMSAS), bywhich maritime administrations are subject toexternal audit under the auspices of IMO withregard to their implementation of IMOconventions relevant to the safety of life atsea and protection of the marine environment.The shipping industry associations said thatthey welcomed the decision taken by the IMO Council to make this scheme mandatoryin future.

departure, a detention order was issued," hesaid. "Therefore tanker damage stabilityshould remain an area of attention in thefuture."

Pat Dolby, CIC co-ordinator said: "Themost significant finding from the campaignwas that 16.2% of tankers that were inspected,the master could not demonstrate that the shipwas normally loaded in accordance the SIB.This is a significant number of tankers that,during a 'spot check’. could not showcompliance with stability requirements andthus may pose a risk to the environment."

Since the Table was first compiled in 2003,there has been a noticeable decline in thenumber of flag states that appear on the black lists of regional PSC authorities.

“

”

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INDUSTRY - OPERATIONS - DOCUMENTATION


Paper is dead. Long live eDocs. Theelectronic bill of lading (eB/L) is areality, fully available tocharterers, owners and operators,terminals and agents. And 2011 will be theyear when eB/Ls become firmly embedded inthe fabric of the energy shipping markets ofEurope and the Americas.

It’s not before time, either. Bills of ladingare a shipping legacy dating back 6,000 yearsand are familiar to everyone in the industryfrom the super majors and commodity tradinghouses to small family shipowners. But no-one who deals with them on a daily basis hasanything positive to say about the currentpaper process.

Such an archaic process struggles in themodern world, when everything else frommoney transfers and charterparty recaps isalready digital. Using paper actually generatessignificant costs due to the need for parties tocongregate around draft originals for signing;delays caused by physical transfer; need toretrieve paper originals prior to amending billsof lading; risk of fraud; etc.

With documents typically created inmultiple non-integrated systems by variousparties, from a terminal’s documentation team,terminal’s laboratory, ships agents andindependent surveyors, up to 90% ofinformation is re-typed between systems,causing delays, duplication and a highlikelihood of errors and variances. Inaddition, documentation can be created hoursaway from the vessel’s berth, causing yetfurther logistical issues and delays.

Using eDocs instead of paper documentsoffers a number of immediate advantages.Some are purely administrative but most havethe potential to improve the bottom line forcarriers, trading entities and other parties suchas agents and independent inspectors.

eB/L offer faster vessel turnaround thanksto improved document processing, minimisingtime spent at the load port dealing withdocumentation or any delays at discharge portwhile awaiting documentation. They offerreduced outstanding freight payments wherefreight is settled on receipt of documentationby the shipper/charterer. eDocs also offer theability to discharge cargo against an originaleB/L rather than a letter of indemnity (LOI),thereby enabling the carrier to remain withinits P&I cover.

ESS was established in 2003 to realise thesebenefits and enable international tradingpartners to use eB/Ls and supportingdocumentation, safety data sheets and othertrade documents for operational, trading,customs and compliance purposes.

That vision of an eB/L was realised in

January last year when the first CargoDocselectronic documents were transacted betweenBP Oil UK, Morgan Stanley, Ineos, DenholmBarwil and Broström Tankers at Ineos’ Finnartterminal.

Broström Tankers’ operations directorAndreas Jorgensen said; “for a long time wewanted to move on and catch up withtechnology. We want to be in the forefront ofusing technology efficiently but still in a safeway. CargoDocs eases the administrative burdenfor the captain and fosters real time savings.”

As 2010 ended, ESS entered the Baltic oilexport market with a trial of CargoDocs byRussian forwarder Balt-Forward for RussianExport Blend Crude Oil (Rebco) crude andproducts shipments ex-Primorsk set for thefirst quarter of this year. Together, Primorsk’scrude and products terminals are the largest

Shippingdocumentation - the next step

For tanker owners and operators, 2011 will be the year in which electronic shipping

documents (eDocs) gain critical mass against the paper bill of lading, driven by

regulatory pressure and the need for commercial efficiency, says Alex Goulandris*.

Ineos’ Finnart terminal benefited from using eDocs.

p2-28:p2-7.qxd 21/01/2011 17:21 Page 21


INDUSTRY - OPERATIONS - DOCUMENTATION

hubs for Russian oil exports with combinedthroughput in excess of 79 mill tonnes from935 tanker calls per annum.

Lolita Savchenko, operations director ofBalt-Forward in the Port of Primorsk saidowners and masters should see immediatetime savings. Ms Savchenko estimates thatusing eB/Ls “will eliminate up to six hoursper voyage, which are currently wasted onprinting, signing, stamping and distributingpaper originals. As you can imagine, we arevery enthusiastic about CargoDocs.”

Prior to the operational launch ofCargoDocs, ESS undertook two and a halfyears of testing with a group of internationaltrade partners. This extended testing phaseallowed the shipping and energy industries towork with ESS through its users association,the ESS-Databridge Development Group(DDG) to ensure that CargoDocs was builtaround best industry practices and could beadopted with no operational risk.

Reducing those risks involved a number ofsteps including developing eDocs bestpractices with the industry, building standardworkflow processes into CargoDocs anddeveloping functionality, which enablescarriers to use eDocs through a secure emailclient if always-on internet was not availableon a vessel. ESS also obtained approval fromthe carriers’ P&I Clubs to protect users fromperceived exposure associated with potentialIT risks. ESS published annual IT audits toDDG members and developed ISO27001-equivalent data centre security certification.

In addition, ESS worked with customs

authorities to produce eDocs output that wereacceptable to government agencies andundertook thousands of simulatedtransactions working with as many as 20parties on single trades.

Finnart’s use of CargoDocs was the start ina wave of adoption. Ineos, for example, issueda ‘Notice of Transition’, placing shippers onnotice that it was transitioning from paper toeDocs at both Finnart Terminal andGrangemouth Refinery. Trading companiesalready live include BP, Shell, ConocoPhillips,Morgan Stanley, Mabanaft and Ineos.Shipowners include Broström Shipping,Hellespont Tankers, Teekay Tankers while asignificant number, including Maersk Tankers,AET, BP Shipping, Tarntank, Donsotank andUni-tankers are ready to use eB/Ls. Testing isongoing at ConocoPhillips’ Teesside Terminal,Hamble Terminal (BP) and Baton Rouge(ExxonMobil).

So what will drive wider adoption of eDocsin 2011? Ultimately it’s a choice betweenwasting time and money on an inefficientprocess, or catching up with current businessprocesses. There is also a steady legislativemarch in favour of the use of electronicdocumentation in shipping.

From 1st January 2011, all traders must useEMCS for all movements of duty-suspendedexcise goods within the EU. EMCS is acomputerised system which will capture andprocess information in respect of allmovements of excise goods in dutysuspension (including oil products) within theEuropean Union. It will replace the currentpaper-based Administrative AccompanyingDocument (AAD) for intra-EU dutysuspended movements, capturing andprocessing AAD information online,validating data and allow real-timenotification of dispatch and receipt of goods.As a result, EMCS will link over 150,000traders in 27 national administrations acrossthe EU.

Rotterdam rulesIn 2008, the Rotterdam Rules were opened forsignature and to date, 23 states have signedthem. The Rotterdam Rules give functionalequivalence to eB/Ls to sit alongsidelegislative recognition of eB/Ls in the US. In2003, acknowledging the importance of e-commerce in shipping, Article 7 of theUniform Commercial Code was revised,introducing new rules for electronicdocuments of title.

Following its historic first eB/L transaction,the Finnart terminal and Broström’s BroDeliverer made history again soon afterwards

when original eB/Ls were issued, transferredthrough the trade chain to the receiver, whichproduced them back to the vessel while it wasstill moored at the loadport - a process whichtook just 13 minutes.

Even on short-sea shipments like this, theoriginal paperwork would normally remain onthe vessel, forcing all parties in the trade chainto rely entirely on Letters of Indemnity. Butrather than follow his normal practice ofsifting through a stack of paperwork, thevessel’s master - Ove Horgerud - checked thecontents of the eB/Ls and supportingdocuments prepared by the terminal online.Satisfied that they were accurate, he instantlysigned the documents for multiple parcels ofrefined products electronically and with just asingle click.

The terminal, having itself electronicallysigned all the required certificates of qualityand quantity electronically issued the full setof eDocs to the shipper, Morgan Stanley. Onceit was satisfied that the eDocs were accurate,the company transferred them to cargoreceiver BP Oil UK, rather than issue atrading LOI. BP, having checked the contentsof the eDocs online, produced the eB/L backto the vessel, requiring delivery at thedischarge port - Belfast.

The carrier, satisfied that it was deliveringagainst an original eB/L, did not require adischarge LOI prior to delivering the cargo.There was no faxing or printing, no couriercharges and no risk of loss of documents orcopies. Each participant also has an archive ofall the documents associated with theirvoyage, easily accessible in their electronicfiles for a minimum of 12 years.

As an argument for abandoning paper billsof lading and moving to eDocs, it was a veryprofitable use of 13 minutes.

*Alexander Goulandris co-foundedElectronic Shipping Solutions(www.essdocs.com) while studying for anMBA at Wharton School of Business. He hasbeen the company’s CEO since it wasestablished in 2003.

It was set up to address the perceivedinefficiencies of paper documents in shippingand to enable trading partners to useelectronic documents, including bills oflading, safety data sheets and customsdocumentation for operations andcompliance purposes.

ESS eDocs is currently in use at some ofthe world’s largest energy traders andshipowners, whose input and governancehelps drive ESS’s solutions.

Prior to ESS, Goulandris worked as amaritime litigator for six years with Freehill,Hogan & Mahar LLP in the US and HolmanFenwick Willan LLP in the UK, Greece andHong Kong.

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ESS’ Alex Goulandris.

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Pirate ‘Mother’ ships– the pros and cons

INDUSTRY - OPERATIONS - PIRACY

With more hijackings taking place in the Indian Ocean and Gulf of Aden regions almost

daily, Danish concern RiskIntelligence has examined the use of hijacked vessels as

‘mother’ ships. These are now being used to launch attacks further away from the coasts.

Somali pirates have used a variety ofcaptured vessels for variouspurposes in the past years. The usesof such vessels have ranged fromfloating service stations, to temporary motherships, or as ferries for reinforcements toongoing operations (eg Hansa Stavanger inApril 2009). Initially, the operational use ofmother ships in areas of operations wasconfined to captured dhows or relativelyinconspicuous fishing vessels, or smaller craft,such as the tug Yenegoa Ocean in 2008. Most ofthese mother ship uses were limited in scope.

Since the first sortie of the hijacked generalcargo sh

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