Tanker Shipping & Trade April/May 2016

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vancouverimc.org flexible regime with a strong banking system. Canada offers a competitive, predictable and international shipping business from Vancouver Set up your branch office and manage your without creating a taxable presence. Expand your operations to ancouver, Canada. April/May 2016 www.tankershipping.com “Though tanker rates may slip a bit in the next year or two, overall the environment should be excellent” Wilbur Ross, founder, W L Ross & Co LLC, see page 76
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Tanker Shipping & Trade is written for tanker professionals throughout the world and covers all of the essential elements at the heart of successful tanker management and operations. Since its launch in 2007 we have listened to feedback from readers and advertisers and invested in publishing more editorial pages to include greater in-depth coverage of key topics. Once again we are adding more editorial pages, even though we already publish significantly more editorial than any other journal focused on the tanker sector. Tanker Shipping & Trade is the leading and fastest growing journal in its area. We will continue investing in and developing the journal to strengthen its market leading position at the heart of the sector it serves. Just as Tanker Shipping & Trade has established itself as an essential read for the tanker industry, Riviera’s conferences have quickly earned a reputation as the place where the industry goes to discuss key issues and network.

Transcript of Tanker Shipping & Trade April/May 2016

  • vancouverimc.org

    exible regime with a strong banking system.

    Canada offers a competitive, predictable and

    international shipping business from Vancouver

    Set up your branch office and manage your

    without creating a taxable presence.

    Expand your operations to

    ancouver, Canada.

    Vancouver_international_Maritime.pdf 1 27/04/2016 10:41

    April/May 2016 www.tankershipping.com

    Though tanker rates may slip a bit in the next year or two, overall the environment should be excellentWilbur Ross, founder, W L Ross & Co LLC, see page 76

  • SIMS_pumps.pdf 1 22/02/2016 08:30

  • contentsApril/May 2016volume 10 issue 2

    www.tankershipping.com Tanker Shipping & Trade | April/May 2016

    62

    39

    11

    Regulars5 COMMENT

    7 BEST OF WEB

    11 CONTRACTS & COMPLETIONS

    15 ANALYSIS

    21 LEGAL BRIEFING

    76 LAST WORD

    Crew safety23 DPO testing reveals concerns over competence

    24 A tanker crew provides insight into managing fatigue

    27 Managing migrants when at sea

    28 An expansive approach needed on enclosed spaces

    Inert gas generators 31 The evolution and contribution of mobile systems

    35 Will chemical owners remain passive on IGG selection?

    Propulsion39 An industry held to ransom by green zealots enveloped in a green haze

    42 An Aframax with a scrubber could recoup US$20 million

    43 The advent of data analytics services assessed

    Cargo control45 Digitisation and wireless sensors are the future

    48 Why Scanjet invested in psm instrumentation

    Greece 50 The spectre of a Greek exodus remains

    52 A Greek company on what AIS offers the tanker trades

    54 Tsakos, Kyrtatos and Vafias on what drives the market

    45

    ServoCoreDatabase

    condition monitoring

    damage & safety control

    powermanagement

    automationpropulsion

    control

    tank gauging

  • Tanker Shipping & Trade | April/May 2016 www.tankershipping.com

    contents

    A member of:

    Total average net circulation: 4,000Period: January-December 2015

    Disclaimer: Although every effort has been made to ensure that the information in this publication is correct, the Author and Publisher accept no liability to any party for any inaccuracies that may occur. Any third party material included with the publication is supplied in good faith and the Publisher accepts no liability in respect of content. All rights reserved. No part of this publication may be reproduced, reprinted or stored in any electronic medium or transmitted in any form or by any means without prior written permission of the copyright owner.

    Subscribe from just 249 Subscribe now and receive six issues of Tanker Shipping & Trade every year and get even more: supplements: Tanker Shipping & Trade Industry Leaders and Ballast Water Treatment Technology access the latest edition content via your digital device access to 'web address' and its searchable archive.Subscribe online: www.tankershipping.com

    April/May 2016 volume 10 issue 2

    Editor: Edwin Lampertt: +44 20 8370 7017e: [email protected]amm.com

    Sales Manager: Chris Timst: +44 20 8370 7015e: [email protected]

    Head of Sales - Asia: Kym Tant: +65 6809 3098e: [email protected]

    Production Manager: Sasha Tan t: +44 20 8370 1718e: [email protected]

    Subscriptions: Sally Churcht: +44 20 8370 7018e: [email protected]

    Korean Representative: Chang Hwa Park Far East Marketing Inc t: +82 2730 1234 e: [email protected]

    Japanese Representative: Shigeo Fujii Shinano Co., Ltd. t: +81 335 846 420 e: [email protected]

    Chairman: John LabdonManaging Director: Steve LabdonFinance Director: Cathy LabdonOperations Director: Graham HarmanEditorial Director: Steve MatthewsExecutive Editor: Paul GuntonHead of Production: Hamish Dickie

    Published by:Riviera Maritime Media LtdMitre House 66 Abbey RoadEnfield EN1 2QN UK

    www.rivieramm.com

    ISSN 1753-7029 (Print)ISSN 2051-0578 (Online)

    2016 Riviera Maritime Media Ltd

    Cyprus57 An emergent, resurgent Cyprus

    60 Cyprus as a centre of maritime cyber security

    Product tankers62 Class: LNG-ready tankers; asphalt tankers; reconciling ballast water

    challenges (again)

    65 Design: CSRs drive up costs

    69 Operations: A Google-hosted online service

    73 Operations: Fujairah handled 50 million tonnes of product last year

    74 Business: The interplay between the United States and Latin America

    Next issuemain features include: oil spill/emergency response; ballast water

    management; fuels, lubes and bunker management

    special reports: Sweden; Hong Kong; The Netherlands

    tanker type crude tankers: classification, designs, operations, business,

    markets and trades

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    Maritime Cyber Risk Management Summit 21 June 2016, London

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    COMMENT | 5

    THE TANKER OWNERS PARADOXLAID BARE

    now. But that is not happening in practice.The explanation, Mr Nokta said, is the

    lack of liquidity in the market and the lack of confidence. One of the biggest frustrations that I have is that I am still speaking to basically the same 30 or 40 hedge funds, he said. It is a hedge fund mafia with a handful of mutual funds that you cant break past and get to a much broader net of investors. And it is a similar situation to the physical tanker market, where you dont have as many buyers as the market would hope for.

    The lack of confidence rests on the changeability of the market, or as Mr Nokta put it: how things can change on a whim. Tankers are strong and the outlook is very strong but as other sectors notably offshore and drybulk have shown fortunes can transform almost overnight.

    This combination means that the current cycle can be seen as the operators cycle, a marked contrast with the asset-flipper cycle seen recently, where asset players quickly bought and sold vessels and made outstanding returns in short order.

    To succeed, Mr Nokta said the likelihood is you are going to have to own the assets and generate the cash flows, and then, if you have got the patience, make a really good return. He cited as an example a company buying a five-year-old VLCC for US$75 million today: In a year, at current rates, you would make US$18 million before EBITA, but the asset value would fall to US$57 million. In other words, shipowner investors that can take the long-term view will generate strong cash flows but they can forget about the single big return on an asset sale that characterised the boom years.

    Todays situation may be frustrating even paradoxical in conventional market economic terms. But for the long-term health of the industry, perhaps it is actually a better place to be. TST

    F rustration was one of the abiding themes of the panel discussions and private conversations at March's CMA event in Connecticut. Although the tanker market is strong, assets

    are undervalued, which frustrates tanker owners. Investors, too, are frustrated in their case because tanker stocks have not performed as expected.

    The situation was neatly dissected by Clarksons Platou Securities managing director of shipping research, Omar M. Nokta, in a presentation titled Ideas and opportunities in the tanker market for the next twelve to eighteen months.

    Excluding Nordic American Tankers, which Mr Nokta said has done a fantastic job of really unlocking value and getting a very high stock price, crude and product tankers in the US are trading at about 94 per cent of true value.

    The average age of the fleets of DHT, Euronav, Frontline and Gener8 (the big four in the VLCC market) is six years. In mid-March, the sales and purchase value of a six-year-old VLCC was US$72 million, though the stocks reflect a US$69 million valuation. Mr Nokta pointed out that It is not that much cheaper than where the actual physical market is, but it is nevertheless cheaper on an already cheap asset.

    Turning to the MR market, Mr Nokta looked in detail at Ardmore, Navios, Scorpio and TEN, where the average age of the fleet is three years old. The benchmark value for these vessels in mid-March was US$31.5 million, but the stock market valuation imputed a US$28 million value.

    In theory, such a situation should result in investors comparing these valuations and buying either vessels or stocks cheaply. Cash flow is strong, companies are paying out big dividends and doing substantial buybacks. The textbook scenario is that they all should be trading at a premium on where the physical market is right

    Edwin Lampert, Editor

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  • www.tankershipping.com Tanker Shipping & Trade | April/May 2016

    BEST OF THE WEB tankershipping.com

    WHAT HAPPENED

    WHAT NEXT

    Drones have the potential not only to deliver urgent parcels but to be used for inspections, too. They could take high-quality photos or videos of certain areas to identify cracks. Such early detection of problems could minimise the costs of solving problems. There is a lot of potential for all Maersk businesses. For instance, Maersk Oil and Drilling are already testing drones for inspections of flare tips or other installations. APM Terminals and Maersk Supply Service are also investigating the use of drones.

    http://bit.ly/TST-Drones

    WHAT THE INDUSTRY SAID

    The first drone delivery to a vessel at sea was successfully completed by Maersk Tankers in late January. The test took place near Kalundborg, in Denmark, and was approved by the authorities. Using drones to deliver urgent parcels to vessels and conduct inspections has big cost and time-saving potential for Maersk Tankers. Further tests will follow before the drones become part of the supply chain for Maersk Tankers vessels.The drone used for the test was from French company Xamen, and is ATEX approved (zone 2). The test involved the delivery of a small parcel. Due to bad weather conditions, it was not possible to launch the drone from the shore as planned. Instead, the drone was flown in from a tugboat. The drone dropped the parcel onto the vessel from a height of 5m.

    Drones will save Maersk Tankers money

    Due to the need for a barge, Maersk Tankers faces high costs for delivery of small parcels filled with urgent spare parts, mail or medicine. In the tankers business, it can be difficult to predict far in advance which port will be called at next. Even when a tanker is in port, it can be complicated and expensive to deliver items to the vessel if it is not alongside the quay.

    WHAT HAPPENED

    WHAT THE INDUSTRY SAID

    Ballast water convention may not need more ratifications

    An IMO secretariat spokeswoman told Riviera title Ballast Water Treatment Technology that potentially and theoretically IMOs Ballast Water Management Convention (BWMC) could enter into force with no further flag-state ratifications.

    In a break from its normal procedures, IMO is updating its database of flag-state fleets every month, instead of at the end of each year. Due to the normal daily variations in flag-state tonnages, the percentage covered by states that have ratified the BWMC could pass the 35 per cent threshold as a result of an end-month reappraisal of its existing parties.

    IMOs change in policy was revealed in an aside in an announcement earlier this week when Belgium became the forty-eighth state to ratify the convention. The announcement stipulated that the basis would be global tonnage data as at end-February 2016. One observer commented that, with the BWMCs shortfall now so low, the general ebb and flow of flag states tonnage could drift it over the line.

    WHAT NEXT

    The policy affects all IMO conventions, although none are as sensitive to small changes in the data as the BWMC. Taking Solas as an example, although the number of parties to the convention (162) has not changed since the start of the year, the proportion of the worlds tonnage they represent has risen from 98.60 per cent to 98.74 per cent, based on the end-February data.

    http://bit.ly/TST-Ballast

    The test involved the delivery of a small parcel

  • Tanker Shipping & Trade | April/May 2016 www.tankershipping.com

    WHAT THE INDUSTRY SAID

    OCIMFs agenda under Andrew Cassels

    Tanker Shipping and Trade spoke to the director of the Oil Companies International Marine Forum (OCIMF) Andrew Cassels. Appointed in June last year, Mr Cassels has by any standards hit the ground running. It is possible to discern his agenda: renewing publications, refreshing aspects of the structure and ensuring that the organisation remains focused and relevant well into the 21st century.

    Mr Cassels entered the role on the back of almost five years as BP Shippings vice president of safety and operational risk. This background means that while he is already implementing changes, he is doing so in a very deliberate and collegial way. His BP experience also means he is familiar with OCIMFs structure and subject matter. So far the format of executive committees has been refreshed to allow for more discussions and debate.

    WHAT NEXT

    The organisation is reviewing its role with the anti-piracy maritime trade information sharing centre it established in the Gulf of Guinea. Sensibly it shouldnt really be operated out of OCIMF, Mr Cassels says. We will not abandon it but the management of the service needs to transition elsewhere. It is not what we are here to do.OCIMFs ISGOT and mooring equipment guidelines (MEG) will be revised. It is approaching 10 years since MEG was last reviewed, while the new ISGOT guide will take two years, he says. Also up for review is the Tanker Management Self Assessment scheme: a third iteration, TMSA 3, is now on the cards.

    Fairly early on he also sat down with his counterparts at Intertanko. These discussions are helping underpin a new Human Elements sub-committee in OCIMF. Understanding the human element is the key to a safer future, he says adding: Why does a perfectly well qualified, trained and competent individual still manage to cause an incident?

    Perhaps proof that Mr Cassels methods are working is that he now has eight pages of things we are going to do next year that everybody agrees with because they were part of developing it within their teams.

    http://bit.ly/TST-OCIMF-agenda-under-Andrew-Cassels

    WHAT HAPPENED

    BEST OF THE WEB tankershipping.com

    WHAT HAPPENED

    WHAT NEXT

    Following on from its annual salary survey, maritime recruitment specialist Spinnaker (through its HR Consulting company) publishes a market analysis report to members. This contains analysis of the salary survey data including commentary on current and future market trends, pay projections, bonus patterns and regional, yearly and company type comparisons.

    http://bit.ly/TST-annualHRearningssurvey

    WHAT THE INDUSTRY SAID

    The Maritime HR Association has published an in-depth analysis

    of the salary survey data provided by its 90-strong global membership, including pay projections and pay and bonus trends across the full spectrum of shore-side maritime job and company types.

    Maritime HR Association reveals who earns what

    The number of shipbroking companies making bonus payments continues to decline, with just under two-thirds of employers paying bonuses to some or all of their staff (compared with 85 per cent two years ago). Big bonuses (100 per cent of base salary or more) still exist for a fortunate 0.5 per cent of employees, but this a significant decrease on 1.3 per cent of employees just two years ago. The usual suspects (global chief executives and charterers) are receiving big bonuses, but senior shipbrokers are receiving over half of the big bonuses.

    Unsurprisingly, long-term incentive plans remain associated primarily with senior management teams and those working with LNG vessels (larger corporations and listed companies that are more likely to be able to offer share schemes).

    The cost of living in Hong Kong has increased over the past couple of years. Mercer reports it to be the second costliest city for expatriates (compared with the sixth most expensive in 2013 and third most expensive in 2014).

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  • www.tankershipping.com Tanker Shipping & Trade | April/May 2016

    CONTRACTS | 11

    Japans newbuilding orderbook has almost doubled in a year. There

    are 255 tankers (18,558,087 dwt) on order today, whereas a year ago there were 137 (7,877,861 dwt). Growth has been driven by a weak yen and the resurrection of the countrys once powerful domestic fleet. Prices, on average, remain 510 per cent higher than their Chinese and Korean counterparts, but foreign owners are increasingly willing to pay the premium in

    exchange for on-time delivery and quality workmanship.

    While Aframax LR2 product carriers dominate the orderbook, VLCC and stainless steel chemical carrier contracts also feature. This is a strong indicator of Japans re-emergence.

    China increased its order backlog from 304 tankers (30,999,280 dwt) to 382 units (38,699,332 dwt). Domestic orders feature heavily, and the total includes an order for 60 VLCCs,

    the first of which are now entering service. A number of Greek owners have placed orders for mostly Suezmax tonnage. They have been drawn in by the favourable financing offered by Chinese lenders. Most shipyards are under state control, meaning refund guarantees can be processed faster. Five privately held shipyards have closed. Small and medium sized builders are struggling for finance.

    On the other side of the Yellow Sea, South Korea is reeling from huge losses at Daewoo and Hyundai. The last fiscal year has proved to be one of the worst on record, with tanker orders the only respite. The focus is on attracting new orders, as last year saw more vessels delivered out of South Korean yards than out of Chinese and Japanese ones. Overall, the number of vessels on order fell from 416 to 406, although the deadweight

    The newbuilding orderbook in Japan is gaining ground on Korean and Chinese yards. But are owners over-ordering MR2s?

    by Barry Luthwaite

    JAPANESE YARDS ARE PROSPERING

    TANKERS DELIVERED GLOBALLY*

    Grand total

    53 vessels

    5,151,005 dwt

    1,246,005 dwt

    796,913 dwt

    259,422 dwt

    32,750 dwt

    38,950 dwt

    275,536 dwt

    3,481 dwt

    2,497,948 dwt

    11

    16

    9

    4

    2

    2

    1

    8

    Aframax

    Handymax

    Handysize

    Panamax

    Medium Chemical

    Medium Products

    Small Chemical

    VLCC

    *Source for all figures in these tables: BRL Shipping Consultants. Data as at 22 March 2016

  • Tanker Shipping & Trade | April/May 2016 www.tankershipping.com

    12 | CONTRACTS

    went up 10 million tonnes from 44,976,743 dwt to 54,144,837 dwt.

    One disturbing feature of the current orderbook is the 229 (11,460,728 dwt) medium range (MR2) products carriers on order. Owners have seized the opportunity to order new wider-beam sizes for the small capacity advantage they offer over existing equivalent vessels. Some 1,997 units aggregating 89,743,639 dwt are already in service.

    Saturation point may damage trading prospects for this sector, despite the scrapping of many older units built in the mid-1990s or before.

    More positively, there has been a welcome increase in LR1 business. More routes and shippers are welcoming wide-beam Panamax types, which offer more capacity and act as the hybrid choice between Handymax and

    Aframax. Only 239 LR1s are in service, aggregating 16,230,229 dwt, of which several are ageing and are being replaced. There are 88 LR1s on order, representing 6,330,948 dwt.

    In parallel, a new market in products has opened up for coated LR2 Aframax tankers. There are 214 on order, totalling 24,086,793 dwt. They account for almost 20 per cent of todays trading fleet of 1,191 vessels (120,874,308 dwt).

    In the crude oil sector, 145 Suezmax and 157 VLCCs are on order. The first quarter of 2016 saw 25 Suezmax and six VLCCs contracted. Greece remains far and away the biggest investor in newbuildings, with a total of 218 tankers aggregating 28,930,270 dwt.

    The outlook for the industry remains positive and

    the supplydemand balance is generally encouraging. So far in 2016, 93 tankers have entered into service. 163 were ordered in the last fiscal year. Deliveries now extend through to 2020, with 23 vessels having berthing slots. The order backlog shows 1,266 vessels aggregating 122,286,609 dwt, compared with 1,065 units totalling 94,666,103 a year ago.

    Prices have stood still in real terms because builders have been frightened to raise prices. The price of VLCCs with tier III engines has risen by US$2 million, working out on average between US$94 and US$96 million.

    The initial rush to switch bulk and container newbuilding orders to tanker orders has halted. In fact, only 30 orders were amended. This will do little harm to the present balance. TST

    Japanese yards are being favoured for their high-quality output and timely delivery

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  • www.tankershipping.com Tanker Shipping & Trade | April/May 2016

    ANALYSIS | 15

    Despite extreme movements in the spot market over the last six months or so, tanker earnings

    remain elevated compared with dry bulk and container earnings. In the first quarter of 2016, the direction of these movements was mainly downwards, following a good fourth quarter of 2015 for most segments.

    Against this backdrop it may come as a surprise that market analyst Maritime Strategies International (MSI), in its latest quarterly forecast, increased its freight rate forecast, predicting that annual average 1 year time charter (T/C) rates in 2016 will be comparable to those seen in 2015.

    The high starting point in 2016 drove some of this upgrade: average T/C rates in the first quarter were much higher than they were in the first quarter of 2015.

    MSI believes tanker T/C rates have probably peaked. Period earnings are expected to drift lower across 2016, before falling more sharply in 2017.

    Upward revisions to freight rates are driven by relatively modest downward revisions to tanker supply growth and upward revisions to demand. MSI continues to expect freight market conditions to soften, although the extension of the forecast to 2020 projects a fluctuation in rates as opposed to a prolonged downturn.

    Higher utilisation rates have been supported by an optimistic view on Asian crude imports, with incremental growth driven by China and South Asia, even as contributions from Europe and OECD countries slow in 2016.

    Strong Chinese demand for crude imports cannot be discounted in the current price environment. Over the course of 2015, Chinese oil demand growth was revised upwards dramatically (as it was in the US and Europe) despite weakening economic conditions.

    Increasing liberalisation of the

    refining system and expanding strategic petroleum reserves are reasons why China could exceed more pessimistic views on imports in 2016, even if GDP continues to slow. The US presents another potential positive: as domestic production declines under price pressure, crude imports should comprise a relatively larger proportion of the countrys oil mix.

    These structural factors have improved demand-side conditions for the crude sector, though MSIs view on the macro environment becomes more clouded. Despite relative upgrades from MSIs previous forecast, the shape and descent of rates to 2018 remain consistent.

    An increase in deliveries in 2016 is one driver of this analysis. Deliveries, driven by the larger sizes in the crude and products sectors (VLCCs, Suezmaxes and LRs) will jump in 2016 and will be sustained at high levels over a two- to three-year period.

    MSI forecasts high levels of scrapping in the second half of the forecast horizon (now extended to 2020). The scrapping will play an important role in driving fluctuations in freight rates over the next five years.

    In the context of a more aggressively expanding fleet, the outlook for demand is subject to a higher degree of uncertainty. Dynamics in the oil market and their impact on the tanker industry can be framed around four key issues. On the oil production side, will major oil exporters act to curb production, and how will North American production react to low prices? On the oil demand side, the issues are the health of the global macroeconomic environment, and the strength of any price-driven stimulus to demand.

    From the reaction of OPEC producers to falling prices in late 2014, the market learned that a movement in one element will not necessarily elicit

    Supply-side headwinds are forecast to erode tanker earnings amid volatile demandThe tanker market may be buoyant but weaker earnings are around the corner, writes Tim Smith*

    MSIs view is that OPEC led by its secretary general, Salem El-Badri, pictured, will cut production this year

  • Tanker Shipping & Trade | April/May 2016 www.tankershipping.com

    16 | ANALYSIS

    a certain reaction in another. The MSI Base Case assumes that 2016 will not see any major action from OPEC and others, and that Middle East crude production will continue to expand.

    Despite the increased rhetoric in the first quarter of 2016, MSIs view is that some kind of OPEC cut remains a possibility, though concerted action would be beset by problems. Cohesive action, if it does occur, will take time, and its effects would accelerate the downside view of the Base Case.

    Meanwhile, the US shale industry has not experienced a full cycle. It continues to adapt and improve operations in lower

    price environments. Even so, MSI sees a sizable contraction in North American output offsetting this and helping to rebalance the market.

    There is increasing discussion of OPEC action, and the price threshold for production cuts in shale is moving lower. The global economy looks on shaky ground, and the consumer response to lower prices means seasonal demand is unlikely to be as strong in the OECD.

    MSI has forecast a macroeconomic downside scenario that takes into account the impact of markedly weaker GDP growth on global oil demand.

    The featured chart shows the

    composition of 10+ k dwt tanker market fundamentals (i.e. all major segments in aggregate) under both the MSI Base Case and its downside scenario. Effectively, the downside view accelerates the existing MSI Base Case decline in the utilisation rate, bringing down freight rates as supply growth overwhelms the market. Floating storage has the potential to become an even more prominent feature of the market should production (OPEC or non-OPEC) fail to respond to prices. TST

    *Tim Smith is a senior analyst at Maritime Strategies International

    TANKER FLEET DYNAMICS (10,000 DWT) THROUGH TO 2018

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    10%

    8%

    6%

    4%

    2%

    0%

    -2%

    -4%

    -6%

    Deliveries

    Scrapping

    Total fleet growth (end-year, RH Axix) 161

    Total fleet growth (end-year, RH Axix) 154

    Min dwt

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  • Tanker Shipping & Trade | April/May 2016 www.tankershipping.com

    18 | ANALYSIS

    Looking back tanker re-sales dominated business done In the last 12 months, publicly listed companies purchased 26 tankers with a value of US$1,390 million, and sold 20 tankers with a value of US$659 million writes Craig Jallal*

    In the past 12 months, tanker trading was one of the few highlights in the shipping market: an impressive 372 tankers changed hands. The low oil price opened up storage opportunities for older VLCCs. While the trading of VLCCs usually made headlines in the shipping press, in volume and value terms it was the MR2 tanker sector that kept the sale and purchase brokers busy.

    Tankers with a value of just over US$10 billion were bought and sold between 1 April 2015 and 31 March 2016, reports VesselsValue. The list of top 10 tanker types traded by value was led by MR2 tankers

    (chemical/product), which accounted for nearly a quarter of the sales. VLCCs ranked in second place by value, followed by Suezmaxes. But, overall, crude oil tankers accounted for less than half the value of tankers traded. Of course, given their size, VLCCs led the tanker fleet in terms of capacity sold at 10 million dwt, accounting for around a third of the capacity (by dwt) traded.

    Tankers with a broad spread of age ranges were traded in the past 12 months, but the majority of MR2 tankers (chemical/product) sales were resales and sales of vessels under five years old. The VLCC sales included 11 vessels older than the oil majors

    unofficial chartering cut-off age of 15 years, and these appear to have been sold for storage duties. The trading of VLCCs showed a more traditional spread of peak sales at the 5-, 10-, and 15-year-old age levels.

    The prices paid for these VLCCs sit closely on the median price line derived from the observed sale prices of VLCC sales. Sellers may have realised the best price possible at the time, but these prices were, historically, rather low. The bulk of the sales in terms of numbers of vessels and total value were from companies based in the US, Norway and Greece.

    The table of top 10 sellers ranked by

    TOP SELLING COUNTRIES RANKED BY VALUE (SALES 1 APRIL 2015 TO 31 MARCH 2016)

    no

    capacity (dwt)

    value (US$ mil)

    45

    3,635,800

    2,010.84

    35

    3,226,100

    1,388.07

    44

    4,895,000

    1,298.96

    35

    2,043,000

    781.68

    15

    3,129,500

    774.1

  • www.tankershipping.com Tanker Shipping & Trade | April/May 2016

    ANALYSIS | 19

    value contains a list of familiar names. The Navig8 product tankers sale of a total of 15 ships included three 115,000 dwt Aframax tankers sold to Scorpio Tankers for US$59.5 million each.

    In July 2015, CSSC Shipping in Hong Kong was able to purchase Chinese-built vessels from Navig8 for a considerably lower US$47.5 million each. The middle of 2015 also saw Teekay Tankers buy 12 Suezmax tankers from the private-equity backed Principal Management fleet.

    Despite the prominence of the large Teekay Tankers purchase, Greek buyers (as usual) were the most active. American

    companies also purchased a considerable amount of tonnage. It should be noted that intra-US sales involved a premium for Jones Act vessels, for which VesselsValue has calculated the premium (if no sale price was disclosed at the time).

    If there is a single discernable pattern to tanker sales in the past 12 months, it was the trading of resales, many of which were said to have been initially ordered to beat the deadline for the introduction of the Tier III emissions regulations. In total, there were 58 resale trades in the past 12 months. In April 2015, Scorpio Tankers raised US$150 million to purchase three LR1 resales from

    Navig8, which had merged its VLCC fleet with General Maritime to form Gener8 Maritime. Scorpio Tankers later added an LR2 resale from a third party, while Navig8 sold two LR1 resales to CMB Leasing (these two will be delivered in the summer of 2016). Scorpio Tankers purchased a further three LR1 Aframax tankers from Navig8. The pattern of resales is also coloured by the activity of publicly listed companies. Overall, publicly listed companies purchased 26 tankers with a value of US$1,390 million, and sold 20 tankers with a value of US$659 million. TST

    *Craig Jallal, senior data editor, VesselsValue

    TOP 10 SELLERS RANKED BY VALUE (SALES 1 APRIL 2015 TO 31 MARCH 2016)

    TOTAL

    Navig8 Product Tankers

    Principal Maritime

    Philly Tankers

    Metrostar Management Corp

    Blue Marine

    Navig8 Chemical Tankers Inc

    Dryships

    Yasa Tankers

    Knutsen NYK Offshore Tankers

    Scorpio Tankers

    Other sales

    TOTAL

    756.5

    684

    568

    384

    316

    306.8

    291

    242

    218

    186

    6,228.77

    10,181.07

    no of tankers

    capacity (dwt)

    value (US$m)

    29

    1,232,700

    384.84

    23

    920,000

    344.13

    9

    696,800

    280.7

    11

    902,700

    238.87

    372

    28,812,500

    10,181.07

    112

    5,756,600

    2,316.28

    15 1,698,300

    1,901,700

    1,214,700

    1,284,600

    694,800

    633,500

    20,370,100

    28,812,500

    200,000

    348,500

    169,200

    297,100

    13

    4

    4

    4

    8

    6

    6

    306

    372

    4

    2

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    LEGAL | 21

    RECOVERING POTENTIAL AND CONSEQUENTIAL LOSSES FOR VOYAGE CHARTERSAN UPDATE ON THE ASSESSMENT OF DAMAGES FOLLOWING REPUDIATORY BREACH BY CHARTERERS*

    L ittle has been written on the quantification of damages for breach of voyage charters. The recent decision of Louis Dreyfus Commodities Suisse SA v MT Maritime Management BV, MTM Hong Kong [2015] EWHC 2505 (Comm) provides a welcome addition to the body of law addressing this important point and much needed clarification of the damages available to an owner of a tanker on voyage charter, following breach by a charterer. This decision has particular relevance for tanker owners and their recovery of damages when faced with repudiatory breach by charterers.

    The ship MTM Hong Kong was chartered on an amended Vegoil form for the carriage of crude/refined vegoil from one or more safe ports South America to one or more safe ports Gibraltar-Rotterdam. Prior to this charter being performed, the ship suffered a grounding in the River Congo which caused a delay, the consequences of which led to the owners accepting the charterers repudiatory

    breach that brought the charter to an end.

    The owners continued to direct the ship to South America in aid of a substitute charter. After a lengthy delay, a substitute charter was concluded from Argentina to Rotterdam. The substitute charter was performed and the ship completed discharge on 12 April 2011 in Rotterdam.

    If the original voyage charter had been performed, the voyage would have taken 43.6 days, completing on 17 March 2011. The ship would then have carried a cargo of urea ammonium nitrate (UAN) from the Baltic to the United States, followed by a chemical cargo from the United States to Europe.

    The owners claimed damages consisting of the difference between: the profit which the ship would have earned if not only the contract voyage but also the next two voyages had been performed; and the profit actually earned on the substitute charter to Europe.

    The charterers disputed this method of calculating the owners damages, contending that it was wrong to take into account the

    position up to the end of the substitute fixture which had terminated long after the charter voyage itself would have terminated. The charterers submitted that the correct approach was to apportion the earnings under the substitute charter, so as to reflect the amount earned up to the date on which performance of the voyage charter between the parties would have been completed.

    The ultimate decision in MTM Hong Kong has reinforced the principle set out in Smith v MGuire, while acknowledging the deficiency in that it limits the assessment of damages when the compensation principle can be expected to extend further. The Court has helpfully split damages between the two heads of loss which an owner can (potentially) recover, being (i) those recoverable under Smith v MGuire, and (ii) those recoverable as consequential losses and which extend beyond the end of the charter period. TST

    *This is an edited version of a longer paper by Peter Glover, legal counsel, Norton Rose Fulbright

    Peter Glover (NRF): The charterers disputed this method of calculating the owners damages

  • Tanker Shipping & Trade | April/May 2016 www.tankershipping.com

    22 | SAFETY crew

    If you ask any shipowner today what his biggest headache is, he will say: competence. That was the stark

    assessment of Nils Gunnar Be, DNV GLs area manager for east, mid- and north Norway and the head of its Certification service for maritime training and competence service, SeaSkill.

    In the tanker sector, evidence is emerging that many dynamic positioning operators (DPOs), such as those employed on shuttle tankers, are in need of more regular DPO training, according to his colleague, Aksel David Nordholm, the class societys manager of simulator certification. The situation has significant implications for vessel and crew safety.

    Mr Be and Capt Nordholm made these points while discussing the progress made with DNV GLs Test Centre for Certification of Personnel scheme that the organisation has been offering to simulator-based testing centres since 2013. The scheme is specifically aimed at DPO testing and, to comply, training organisations must establish a separate testing centre equipped with a sophisticated Class A simulator so that challenging scenarios can be modelled.

    Those centres can then offer certificates of competence. DNV GL is not involved in issuing seafarer certificates, only in approving the test facilities. It is the only class society to offer this service, Mr Be said.

    So far, two centres in Norway have been certified. One is Simsea, in Haugesund. But the first to be certified was Kongsberg

    Maritimes Ship Modelling and Simulation Centre (SMSC) in Trondheim.

    Its managing director, Stig Einar Wiggen, describes DNV GLs concept as a very important milestone in the education of DPOs. He states that we expect to achieve a documented higher quality of DPOs, that the certification process will be shorter and cheaper and we aim to provide a well-functioning certification regime with less bureaucracy.

    About 10 other training organisations around the world are working towards certification, with three more expected to reach the standard by the end of this year.

    Between them, the two Norwegian centres have tested about 300 DPOs. But there are an estimated 20,000 certificates in circulation. In the past, these have been awarded based on a ship masters assessment and sea time, with no formal test required. It could take up to seven years to achieve certification but, once awarded, the certificates have been valid indefinitely.

    DNV GLs initiative has changed that. As a result of its initiative, certificates that test centres are issuing are valid for just five years, enabling more regular checks of DP operators levels of competence. Thousands

    of certificates need renewing annually, so the use of simulators to demonstrate competence provides more options for owners and managers to arrange testing, and is quicker for new DPOs. Instead of taking years, we are looking at days or hours on the simulator and only days at sea, Capt Nordholm said.

    But the simulators also demonstrate a need for more training. Tests so far show a failure rate of about 10 per cent, Mr Be said. He views this rate as surprisingly high because most of those taking the tests are renewing existing certificates. Mr Nordholm shares his concern. If that proportion is repeated across all certificated DPOs, it would be a worry, he said.

    They said this worry is felt by the industry, which has welcomed this initiative. DPO competence is not included in the mandatory sections of the Standards of Certification, Training and Watchkeeping (STCW) convention, but tanker charterers generally require owners to confirm that DPOs are certificated.

    Apart from exceptions such as Norway, which has made DPO certification mandatory, it seems to be oil companies, rather than flag states, that are ensuring standards are met. TST

    DPO testing reveals concerns over competence

    DNV GLs unique test centre certification scheme is supporting DPO certification but also revealing a wide range of competence levels

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  • www.tankershipping.com Tanker Shipping & Trade | April/May 2016

    crew SAFETY | 25

    Dutch tanker operator MF Shipping is playing a role in a study of the effects of long-term fatigue on crew performance.

    The study, which is being carried out by a group of academic and industry partners (see box), could lead to changes in the way crew fatigue is monitored.

    One of those involved in the research is Mike Barnett, emeritus professor at the School of Maritime Science and Engineering at Southampton Solent University. Prof Barnett said that as a result of the studys expected conclusions, shore-based teams may be monitoring the health of the crew on board just like they do now with engines.

    The projects results are expected to be finalised in the middle of this year, but not published until the third quarter. Prof Barnett and his colleague Claire Pekcan, an associate professor, described some of its immediate findings

    at a seminar during the Connecticut Maritime Association (CMA) annual conference in March.

    Prof Pekcan explained that the project, called Martha (see below), followed the Project Horizon study that was carried out by Warsash Maritime Academy for 30 months from June 2009. That used simulators to replicate short-term crew fatigue but it could not model the impact, for example, of bad weather or of disturbed sleep from being woken up to do extra duties. So we wanted to see what actually happened in real life, she said.

    Over eight weeks, Martha monitored seafarers from two companies with different working patterns. MF Shipping runs small products tankers in northwest Europe with an intensive port call schedule, while the other company an unnamed Chinese containership operator with worldwide routes requires intensive periods of port calls

    interspersed with oceanic passages, Prof Barnett explained.

    Crew members were issued with sleep actigraphs, which are worn like wrist watches to determine sleep patterns and circadian rhythms. They were also given a questionnaire that asked the participants how they felt at the end of their voyage: much more fatigued than at the start, slightly more fatigued, or about the same. From the feedback, the researchers identified third officers and captains as the ones who felt most fatigued at the end of their voyage.

    Data about sleep patterns from the actigraphs raised concerns about another group: second officers. Humans need around seven or eight hours of sleep each day to avoid poor concentration and inability to be vigilant, Prof Peckan

    Tanker crew support fatigue researchData from seafarers will help form new ways of managing long-term fatigue on board ships

    The projects partners include academics and industry experts from: Dalian Maritime University (China) InterManager (UK-based, with global membership) Southampton Solent University (UK) Stockholm University (Sweden) Stress Research Institute (Sweden) University of Southampton (UK) University of Southern Denmark (Denmark) Warsash Maritime Academy (UK)

    The projects name, Martha, is not as one might be tempted to believe an acronym.

    Rather, it is based on a Swedish project that looked at sleep and waking patterns in non-marine industries. This project went on to develop a predictor programme known by its Swedish initials: Artur.

    This marine-based research benefited from that Swedish data. So the team coined a marinised version of Artur and called their project Martha.

    PROJECT PARTNERS FROM ARTUR TO MARTHA

    Crew members were issued with sleep actigraphs, which determine sleep patterns and circadian rhythms

  • Tanker Shipping & Trade | April/May 2016 www.tankershipping.com

    26 | SAFETY crew

    said. Yet second officers were getting, on average, just five hours, which is not enough, obviously, she pointed out.

    Improving this situation will need fatigue risk-management systems, Prof Barnett told the seminar. These were first developed for aviation and are now being used in the rail industry. They could form part of a ships safety management system, he said. They would not set prescriptive targets but would take a goal-based approach and would be flexible. It is about ownership by shipping companies of their own management of risk, Prof Barnett said.

    This is completely different from IMOs current approach to regulating fatigue risk, which is not based on any science about how tired people get at all, he said. It is a negotiated contract between shipowners and unions, and that is what we have ended up with as international regulation. As a result, there is no incentive for shipping companies to improve. It is quite inflexible: you either keep to the law or you dont, Prof Barnett said.

    But this is changing. Both Prof Barnett and Prof Peckan are part of a group revising the fatigue guidelines (this was formed after Australia submitted a paper to IMO in February 2015) with a view to reducing the current fatigue guidelines to six modules. Module One will focus on seafarers and Module Two will be about fatigue risk-management

    systems, Prof Barnett said. The other four modules have not yet

    been defined. A correspondence group has been formed to continue the work, which he hopes will be completed,

    with the new guidelines agreed by February 2017. Prof Barnett also hopes the guidelines will be written in non-academic language. Well do our best, he said.

    The Martha project team reviewing their findings (credit: Southampton Solent University)

    MIGRANTS POSE SAFETY RISKS FOR TANKER CREWRefugees in distress on the high seas pose safety problems for seafarers who rescue them, says Greek risk-management organisation Aspida.

    As of mid-April, Aspida has been operating the Emergency Response Centre International (ERCI), which provides a search and rescue service on the Greek island Lesbos for four months, closely collaborating with the Hellenic Coast Guard. This allows us to provide helpful insight on what to do when rendering assistance in distress, says Aspidas ERCI programme director Mirella Alexou.

    Aspida is using this experience to offer a one-day Refugee Rescue Course that helps prepare seafarers for encounters with migrants in boats at sea. As well as addressing the legal aspects of the situation, it also trains crew in managing the security of the ship with rescued people on board and managing the safety of them and the crew.

    Aspida operations manager Ioannis Gyparis is one of the course instructors and has considered the specific risks of large-scale rescue operations at sea by tankers. Among the

    onboard safety concerns are the risks posed by a lack of proper medical support and infectious diseases among those rescued. A combination of these and other factors could even put the rescuing vessel into a state of distress.

    Due to inflammable cargoes on tankers, their crew face danger if the rescued passengers do not follow or do not understand or do not want to follow instructions, and use items such as lighters or cell phones on board, he said.

    Aspida also offers advice on dealing with fatigue. Chief operating officer Konstantinos Perrotis has published a paper on the causes and consequences of seafarer fatigue, and he supervises anti-fatigue training for crew before they are deployed. We can organise workshops to educate seafarers with coping strategies that will enable them to lead a healthier lifestyle and decrease stress levels during deployments, he said. Aspida works with shipping companies to create healthier work environments and better work conditions that will result in a decrease of fatigue levels. TST

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    Many tankers still lack dedicated enclosed-space equipment, said Michael Lloyd, marine advisor to Mines Rescue Marine (MRM), which offers training and support in dealing with incidents involving enclosed spaces.

    MRM is often dismayed at the standard of some of the equipment supplied to ships, obviously ordered and supplied by persons unfamiliar with what is required or looking for the cheapest available, he said. This is surprising because tanker vessels without doubt have a more advanced safety culture than the general cargo sector, and this shows in their considerably better

    accident record.Capt Lloyd criticised

    tanker companies for showing a tendency to assume that their procedures and onboard practice obviate the need for professional training. From its experience of auditing numerous ships, MRM advises that professional training considerably enhances a teams abilities, including in the best use of the equipment.

    Pointing to the continuing idea that firefighting equipment can be adapted for enclosed-space rescue purposes, Capt Lloyd said suitable equipment has been available for some years. For example, the antiquated design of tank manholes and lightening holes requires a

    smaller breathing apparatus than that required for firefighting.

    Capt Lloyd encouraged tanker owners to invest in specialised stretchers designed for tight spaces and helmets that allow lighting and communications to be built in, freeing hands for essential work.

    He urged owners to provide their ships with oxygen resuscitators. In an oxygen-deficient atmosphere, it will be the delay in recovery to fresh air that can kill, he said. A resuscitator will remove this problem by allowing the rescue team time to recover the casualty while oxygen is being supplied throughout the rescue procedure.

    ENCLOSED SPACES ARE STILL A PROBLEM

    28 | SAFETY crew

    MICHAEL LLOYD (Mines Rescue Marine): Tankers lack proper enclosed-space rescue equipment

    TANKER OPERATOR BACKS CREW WELFARE SCHEMEBelgian tanker operator Euronav is supporting a crew welfare programme, Wellness at Sea, launched last year by the Sailors Society charity.

    Euronav chief executive Paddy Rodgers said in a statement that the company is concerned about the health and wellbeing of its seafarers, adding: it is with a sense of our broader responsibility to the whole industry that we support this initiative, particularly as it emphasises mental and emotional wellbeing, which are often ignored.

    He also emphasised the safety benefits this can bring, saying that when those aspects of wellbeing are absent, their place is soon taken by

    accidents and injury. It is a point that the Sailors Society makes: Fatigue, poor mental health, stress and many other issues all affect seafarers going about their daily work. They can be the difference between safe transit and a major incident.

    The Sailors Society said that Wellness at Sea uses tools such as checklists that tell seafarers what signs of poor mental health to look out for in themselves and in others.

    The programme also includes tips and advice on how to stay healthy, information about the Maritime Labour Convention and how to put it into practice. The Sailors Society said the programme is essentially turning complicated theory into easy-to-understand advice that is easy for seafarers to relate to.

    Sailors Society director of programme Sandra Welch said that the programme had been well received by the industry. Hundreds of seafarers have already completed the course. Ms Welch added that Euronavs support ensures that many more seafarers will benefit from the coaching programme for years to come.

    Companies that have already undertaken the training include Wallem, Univan and Sea Team all with extensive tanker fleets and the container specialist Seaspan. Another supporter is Tim Huxley, chief executive of Wah Kwong Maritime Transport Holdings, which counts LPG tankers and VLCCs among its fleet.

    In a video recorded for the charity, he said that the initiative aims to empower senior officers to deal with crew wellbeing problems. What we are looking to do is to empower them to deal with these problems as they arise at sea, he said. TST

    For more information about the programme, go to http://bit.ly/TST-Wellness

    A Wellness At Sea training session (credit: Sailors Society)

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  • INERT | 31

    E xplosions on oil-carrying ships are as old as the tanker trade itself. Inert gas was used with success on vessels as early as 1933 (Sun Oil US). An extra benefit in those early years was that the depletion of oxygen in cargo tanks led to less corrosion of the steel. Strangely, the Second World War saw no significant increase in the use of inert gas; although the US Navy inerted its air craft carriers with mitrogen (the Japanese did not) most of the tanker fleet was left un-inerted.

    In 1956 the Suez Crisis triggered the demand for much larger tankers to carry crude oil from the Middle East to refineries worldwide. But the increasing size of vessels had a downside that would be made horrifically clear. The 1958 Stanvac Japan (26,492 dwt) is well remembered. The vessel was

    en-route from Bombay to Bandar Mashur in ballast, and in order to load crude again the vessel would probably have been washing out the tanks when it exploded 160 miles south west of Karachi. In this inferno nearly the whole deck opened up like a sardine can: the mid-ship wheelhouse was blown into the sea, with at least 19 casualties.

    Aside from Sun Oil and BP, there was little activity on inerting through the 1960s. Some oil majors experimented with inert gas in the late 1950s and early 1960s: although results were well documented, major implementation of inert gas systems (IGS) was not seen until the 1970s. As Jack Devanney of the Center for Tankship Excellence famously once said: Successful introduction of new technology requires strong direction from management, a hard push at

    the superintendent level, and commitment by the crews. If any of these are lacking, the whole thing falls apart as soon as the first problem is encountered.

    From 1961 to 1969, numerous lives and ships were lost to explosions and fires where IGS probably would have helped. The 1960s brought bigger and bigger ships. Until then the largest tanker had been 100,000 dwt - but this ceiling was soon breached and vessels with more than double that deadweight were launched from shipyards. Prior to this, the common name for vessels over 50,000 dwt was Supertanker so new type names had to be made. The magic word was abbreviation: the world saw the birth of the first VLCCs. Soon though three of those vessels suffered enormous cargo tank explosions while tank cleaning after the cargo was delivered. All of these incidents happened within a period of three weeks in December 1969.

    In 1974 the United States Coast Guard began requiring inerting on post-1974 crude carriers over 100,000 dwt trading to the US. Owners who recognised the importance of worldwide trading flexibility started to order their VLCCs with inert gas systems. Despite this legislation, cargo tank explosions

    (on non-inert vessels) continued into the early 1980s before the underwriters at Lloyds stepped in and imposed a surcharge of 0.1 per cent per year on VLCCs not equipped with IGS.

    The worst incident was probably the Betelgeuse/Whiddy Island (Bantry Bay, Ireland) disaster in 1979. The worldwide television coverage caused a massive move towards a new safety culture in the business. A few years later, war broke out in the Persian Gulf: there were at least 346 attacks on tankers in the Gulf in six years. In 286 of the 346 attacks, though, the vessels were repaired and brought back on the market. IMO set new rules requiring IGS on all new oil tankers above 20,000 dwt (chemical tankers were exempted) delivered after May 1982.

    In 1980, two ex-mariners founded a tanker service company in Rotterdam. They started building hydraulic powerpacks, pumps and other liquid cargo-handling equipment to meet the needs of stricken vessels. During the Gulf War they worked for salvors and P&I clubs to discharge explosion-riddled tankers with portable pumps. They recognized the need for a mobile inert gas generator (IGG), the Gulf War being incident-rich. They

    The evolution of (Mobile) Inert gas systems in the tanker trade

    A succession of explosions ushered in the era of the mobile plant says R.M. Cogels*

    The MariFlex Mobile IGG-2000 is an example of mobile cargo-transfer equipment

  • Tanker Shipping & Trade | April/May 2016 www.tankershipping.com

    32 | INERT

    acquired a new Port-inert 1500 from Smitgas and put it to use in 1987.

    Soon after a second unit was acquired and put to use on board the ill-fated Nagasaki Spirit in 1992. The Nagasaki Spirit was actually a victory for inerting. Ocean Blessing was boarded by Malacca Straits pirates, and under their command the ship fled the scene at flank speed to the east. Out of control at 21 knots, the vessel hit the 95,987 dwt loaded tanker port side. Various cargo tanks on Nagasaki Spirit were set ablaze and the fire spread to the defenceless Ocean Blessing. The inferno killed 25 crew on Ocean Blessing, along with some pirates. On the inerted Nagasaki Spirit, though, the fire was confined to the port side aft: crew members abandoned ship via starboard lifeboat, but were murdered by pirates for their valuables. In the following salvage, the vessels cargo was

    successfully transferred with MSP-200 portable submersible pumps from inerted tanks. Since the tanker was disabled, the Portinert 1500 IGG maintained the cargo tanks at under 5 per cent O2.

    Another victory for mobile cargo-transfer equipment occurred in 1994, when FPSO Lasmo Riau (in Indonesia) was equipped with massive 8 hydraulic driven submersible pumps and inert gas from The Netherlands after engineroom failure. In the second half of the decade, most incidents requiring mobile inert gas generators were of the operational type, with service providers stocking these worldwide on a standby basis. Lancer (23,470 dwt) exploded in 1998 on the Parana River in Argentina. Lancer was a chemical tanker carrying a cargo of MEK, MIBK and luboil additives upriver in un-inerted tanks. The vessel had cargo tanks empty of IPA

    and toluene. Lancer suffered three explosions that fireballed one deck tank with ketone into the sky it landed several kilometres downriver. Several cargo tanks exploded and two lives were lost. The twenty-first century has seen almost all tanker explosions involving ships less than 20,000 dwt or chemical tankers.

    In 2004 MariFlex was formed as a result of the merger of two service providers. The company is now at the forefront of liquid cargo-handling equipment, with 24/7 worldwide services such as offloading/pumping, STS transfers, vapour recovery, tanker/barge inerting, debunkering, and salvage support. MariFlex manufactures fire-fighting equipment, pumps and powerpacks. MariFlex Mobile IGG-2000 & N2-500 (nitrogen) generators are self-contained, extremely compact, lightweight and built according to internationally recognised

    standards and guidelines. The 2009 Formosaproduct

    Brick salvage in the Malacca Straits proved the importance of modern safety and the availability of professional off-loading equipment. The salvors transferred the cargo of 70,000 tons of Naphta in just five days at anchorage, making use of specialist personnel and equipment from The Netherlands. Under continuous inert conditions, the emergency STS transfer of the cargo made use of 4 Ex (ATEX) sets of hydraulic portable submersible pumpsets and two IGG-2000 inert gas generators. The big challenge for all service providers in this trade will be to have the latest equipment. Unfortunately, accidents will happen but fortunately our industry has seen the light. TST

    *R.M. Cogels is the founder, president and owner of the MariFlex Group of Companies

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    INERT | 35

    A mendments to the International Code for the Construction and Equipment of Ships carrying Dangerous Chemicals in Bulk (IBC Code) adopted by IMO require all chemical tankers of 8,000 dwt and above, built after January 2016, to fit a nitrogen-based inert gas system.

    Existing chemical tankers and gas carriers are not required to install nitrogen systems, but many owners are investigating their options for voluntary compliance. Specialist trades like chemical and gas carriers attract high-quality owners and operators that are also very demanding customers.

    These owners have recognised that in a highly competitive market, the ability to demonstrate to charterers that they are going beyond minimum regulatory requirements could have a positive commercial impact.

    From conversations with clients it has become clear that employing a nitrogen inert gas system can deliver a competitive advantage because it promotes safety in cargo handling and improves efficiency of shipboard operations.

    A series of explosions and fires on board chemical tankers dating back more than a decade prompted the amendment of the IBC Code. The ships concerned were not required to undertake inerting of cargo tanks and the majority of incidents took place in connection with tank washing or gas-freeing operations.

    The resulting amendments apply to oil and chemical tankers constructed on or after January 1, 2016. The amendments do not apply to tankers constructed before this date and the Solas Convention still includes a specific waiver for all gas carriers. The deadweight limit for fixed inert gas requirements has been lowered from 20,000 dwt to 8,000 dwt.

    Under the revision to the IBC Code, tankers that operate an exhaust gas-based inert gas system must carry out inerting at one of these points: during loading, on the voyage, during unloading, or during tank cleaning with purging prior to gas freeing with air.

    For chemical tankers, it is accepted that inert gas need only be applied before commencing unloading operations. An exemption clause was inserted as a matter of convenience to reduce cargo-handling time, as pre-loading procedures for chemical tankers always require in-tank cargo surveys. An important condition for the above alternative is that nitrogen is the only accepted inert gas medium.

    Since the use of exhaust-based inert gas is a known source of contamination and in order to reduce cargo-handling time at terminals, it is suggested that inerting of cargo tanks should take place before unloading begins.

    Although nitrogen does not need to be applied until before the start of unloading, it must be applied during discharging, during

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    tank cleaning and for purging prior to gas freeing with air.If an owner decides that inert gas will be used before

    commencing unloading, a fixed nitrogen generator system must be provided on board.

    Though regulations permit the use of nitrogen bottles or a shore-side supply of nitrogen, this will result in significant operational restrictions. For example, it is a condition for the operation of the ship that it only performs cargo handling at terminals where nitrogen is available as shore supply.

    Ships must perform purging before gas freeing with air using nitrogen supply from terminals. But considering possible port and terminal restrictions on tank cleaning and gas freeing alongside, this is an unrealistic option. Using nitrogen bottles would require a very large supply of nitrogen on board but even so, the use of nitrogen bottles is not a feasible alternative for inerting during tank cleaning and for purging before gas freeing with air.

    The practical operating option for chemical tanker owners is to specify a nitrogen generator inert gas system, with a capacity of 125 per cent of the cargo unloading rate.

    To provide owners and operators with a means of compliance with the IBC Code or as an optional means of managing inert gas requirements on existing ships, Wilhelmsen Technical Solutions has re-introduced the Maritime Protection nitrogen inert gas system with significant functionality improvements designed to provide efficient performance and increase operational life.

    A unique system design with one of the smallest physical footprints in the market, the Maritime Protection system is ergonomically designed to allow service access from two sides meaning that it can be located in a corner, for flexible, space-saving installation.

    In addition to meeting the requirements of IBC Code amendments, the Maritime Protection nitrogen system is designed and built in accordance with IMO Solas regulations and the MODU Code. The system is delivered with all necessary class acceptance.

    The system is fitted with reliable and longer-lasting membranes that have improved resistance to high temperatures, enabling the ship to operate the inert gas system at ambient temperatures up to 55C when specified.

    The system is fitted with a fully automated control and monitoring system that protects the membranes from potential damage and costly repairs. Wilhelmsen Technical Solutions fully owns the system design and has moved the assembly in-house, providing for better quality control.

    To ensure optimal system performance at all times and to reduce the risk of failure, Wilhelmsen Technical Solutions has also introduced a full range of support and service solutions, comprising various packages designed to fit customer needs.

    *Stein Lovskar is commercial development manager at Wilhelmsen Technical Solutions

    36 | INERT

    Around 2004, a spate of fires and explosions on product and chemical tankers led to IMO considering and subsequently introducing revised inert gas (IG) regulations for new chemical tankers from 2016.

    Although we support these new regulations, together with other industry associations including IPTA and Intertanko, the International Chamber of Shipping (ICS), has repeatedly made the point that the fires and explosions reported were not primarily caused by a lack of inert gas but rather by a failure to follow or comply with established guidance and industry procedures, ICS marine director John Murray said at Rivieras Tanker Shipping & Trade Conference.

    This point highlights the fact that during consideration of the new SOLAS regulation there was serious concern that requiring an increased use of inert gas, and specifically nitrogen on product

    and chemical tankers, risked increasing the incidence of injury and death in enclosed spaces. IMO recognised this risk and produced new and amended guidelines on entry to enclosed spaces and for tank entry including when nitrogen is used.

    Furthermore, in September 2015, the Paris and Tokyo MOUs instigated a concentrated inspection campaign (CIC) on enclosed space entry. To support shipowners preparation for this CIC, ICS has distributed material to assist the development, adoption and compliance with effective enclosed space entry procedures.

    Regulatory changes formed much of the framework that informed the recent revision of the ICS Tanker Safety Guide (Chemicals). The fourth Edition was published late in 2014 and while reflecting regulatory changes it provides clear updated guidance to assist safe cargo operations and particularly

    those relating to tank entry on ships when an increased use of nitrogen is expected.

    At MSC 96, Malaysia proposed a further amendment to SOLAS, requiring that the tanks of chemical carriers remain inerted at all times that cargo and cargo vapours are present. The recently amended IMO requirement is for inert gas to be applied prior to discharge of low flash cargo. It could be anticipated that to further amend the regulation as suggested by Malaysia would have a significant impact on the industry.

    Despite these measures, the picture is still not complete, said Mr Murray. Ships crews must have access to and demonstrate full compliance with clear and effective, company developed ship specific operating procedures. These should be based on, and certainly not be replaced by current regulation, guidelines and industry best practice. TST

    TACKLE CREW INERTIA TOO, SAYS JOHN MURRAY

    JOHN MURRAY (ICS): A failure to follow or comply with established guidance and industry procedures

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    PROPULSION | 39

    Heated marine engineering debate demystifies the

    green haze

    At the inaugural Doug Woodyard Memorial Debate, Intercargo secretary general David Tongue, spoke in favour of the motion that This conference believes

    it does not pay to install green technologies. He said that the industry was an easy target for politicians looking to further their career aspirations. In support of his case, he gave numerous examples and asserted that even the green lobby conceded that even if every ship was removed from the Arctic, it would have no impact on that regions black carbon problem. The real source, he asserted, was coal-fired power stations in Russia and China, but it is not politically correct to say that. He also targeted the Ballast Water Management Convention introduced on Friday the 13th, 12 years ago something we should have seen as a sign even then. He argued that this convention from hell is seriously flawed. Intended to deal

    with the translocation of species from one part of the world to another, it failed to take into account that there are three other vectors of species movement: hull bio-fouling, aquaculture, and natural translocation.

    The industry is plagued by aspirational politicians pedalling personal agendas with no regard for the shipping industry, he added. The mayor of New York banned the overboard discharge of grey water so he could turn to his constituents and assert that he had dealt with the problem. He later admitted that he put that measure in place because shipping had no impact on the financial state of New York.

    Also speaking in favour of the motion was the erudite Captain Herbert Soanes, chief commercial officer of Misuga Holland. He looked at the commercial angle, implied by the word pay in the motion. He stated: Charterers do not and have never paid for

    Delegates at this year's European Marine Engineering Conference in Amsterdam heard that they were being held to ransom by green zealots enveloped in a green haze who were imposing meaningless regulation on the industry with no sense of cost

    An impassioned debate saw differences over what 'pay' meant but consensus around the role politicians play

  • 40 | PROPULSION

    incremental technological advancements. A two-tier market has almost never existed. Mainstream financing is not available for green technologies. Though there are many reasons for this, one stumbling block is that it is difficult to quantify the savings such technologies bring. In

    recent years there has not been a major technological breakthrough that has radically improved efficiency.

    Capt Soanes added: During last years Danish Maritime Days event, KfW Ipex banks head of shipping, Carsten Weber, said that KfW had financed only one green

    technology deal: the retrofitting of 40 propellers. That happened only because the propellers were going to be made in Germany. They would get the support of German export finance and 90 per cent of the loan would be guaranteed by the German government, so there was no risk. In order to

    finance green technologies you need external support. It cannot be self-standing, unfortunately, but that is the truth.

    While at DVB Bank from 2004 to 2014, Capt Soanes participated in the financing of roughly 3,000 ships. He explained that financing and investment decisions are based on the bank being sure that it will get its money back, which means that the assets will earn sufficient cash flow to return the money. Financing of ships by banks only happen when an entity other than the bank such as German Export Finance takes the risk, he explained. If it is purely on the merits of the deal, it will not happen. A bank might get involved if financing 20 ships for an owner. Here the bank will typically look to cross-finance or cross-collateralise the green technology investment, He added. Rounding out his argument, Capt Soanes contrasted the outlook today with the industry mood of the mid-2000s, when the buzz word was peak-oil and you could not open a shipping publication without some mention of eco-vessels.

    Funded by private equity, many shipowners were lured by the snake oil appeal of eco-vessels, he argued. Snake oil is the term which used to be used for fraudulent medical products, and has since broadened to anything with questionable benefits. My point is that just like peak oil, ecovessels charm has faded over time, he stated.

    Making the case that green technologies do pay, Ardmore Shipping chief operating officer Mark Cameron said that while present low oil prices did not favour investments in green technologies you cannot walk past the environmental debate. He asserted that financing was opening up for new investments and

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    PROPULSION | 41

    that such investments were also deeply pragmatic. Ask yourself: why do 20 per cent of charterers review the RightShip ship efficiency index, if they are not selecting vessels based on environmental performance? Did you know that two billion tonnes of cargo is now shipped by charterers using this index? In a bad market, who has the more attractive ship? he asked.

    Picking up on Capt Soanes reference to KfWs financing of a retrofit project, he pointed out that the installation costs for retrofits remain at a direct correlation to fuel price. Return on investment is therefore a somewhat spurious measure, as the variable fuel price is completely uncontrollable. In todays fuel price scenario, payback time is significantly extended, though the environmental benefits associated with fuel savings are immediate and concrete.

    In conclusion, he said what would be really innovative would be to find ways to incentivise technology developers so that their return on investment is not unfairly skewed towards clawing back their research and development costs in the shortest possible time. This would make the early adoption of technology much more palatable to owners faced with significant capital costs, he explained.

    Also speaking against the motion, DFDS director for environment and sustainability Poul Woodall argued that those saying that green technologies did not pay were transfixed by history and needed to understand present and future realities as well as the moral imperative to go green. We need to define what pay really means, he asserted, arguing that the dividend from going green went beyond the purely

    financial. Shipping is a great benefit to society and we create wealth, he said. But we can only continue to do that if we align with society, and that is why we have to invest in these technologies.

    Delegates were asked to vote on the motion before the debate, and then at its

    conclusion. In the first round 88 per cent agreed it did pay to install green technologies. In the second round t