Tanker Shipping & Trade February/March 2016

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“The Chinese were present in large numbers. A Chinese bank voiced interest in a US$5 billion investment to expand Iran’s tanker fleet”Sultan Riaz Khan, president and CEO, Tavlon Commercial Enterprise see page 48

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February/March 2016volume 10 issue 1

For more articles visit www.tankershipping.com Tanker Shipping & Trade | February/March 2016

Regulars 3 COMMENT 4 BEST OF THE WEB 7 CONTRACTS & COMPLETIONS10 ANALYSIS12 LEGAL BRIEFING48 LAST WORD

Gas detection15 How gas detection technology is evolving to meet operational requirements

Tank cleaning20 Trials using a new detergent on zinc coated tanks project annual savings of €250,000 per vessel 22 De-contaminating tank cleaning arguments on chemical tankers

Pumps24 MarFlex focuses on growing MR fleet; 3-D printing ‘not yet cost-effective’26 Hydraulic powerpack delivers green pumping power

Singapore29 A busy year for tanker acquisitions32 How VLCCs benefit from ‘boutique management’32 Industry makes connections on cyber security35 FSL Trust realigns its fleet; Womar pools talent

North America38 Has lifting the export ban resulted in an increase in cargo liftings?

Chemical carriers41 Operations: New regulations in China could impact chemical carrier operations in up to 11 ports44 Markets: A growth in methanol trades looks likely45 Design: Owners require larger vessels to meet growing demand for greater cargo parcels47 Markets: Rates not seen since 2009 characterise today’s chemical tanker markets

Next issueMain features include crew: tank cleaning; inert gas generators; power and propulsion; cargo control and monitoringSpecial reports: Greece, CyprusTanker type product tankers: classification, designs, operations, business, markets and trades

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COMMENT | 3

AN ARRESTING ISSUE THREATENS THE INDUSTRY

The 2016 decision hands a civil liability victory to Spain’s government. The judges, headed by Magistrate Ana Ferrer, dismissed liability limitations because they found that the vessel’s Master and the Owner had both acted recklessly. This leaves the P&I insurers potentially facing a claim of up to US$1 billion. It is not clear whether the Spanish authorities will seek to recover from other parts of the industry, including the International Oil Pollution Compensation Funds (IOPC) where the overall limit of compensation is some €171.5 million.

Ms Stanzel adds: “Ironically we have just seen the launch of Europe’s new guidelines on places of refuge (PoR), developed jointly with the shipping industry and with the specific aim of resolving the issues surrounding the granting of a PoR. The proper implementation of these guidelines is intended to avoid repeating mistakes made during the Prestige and MSC Flaminia incidents.

“The guidelines were drafted to ensure better co-ordination and exchange of information amongst competent authorities and industry stakeholders involved in the response to an incident concerning a ship in need of assistance. Capt Mangouras would be living a very different life had such guidelines been followed in 2002.”

In short, the tanker (and wider maritime) industry needs to mobilise to reverse this egregious decision. TST

I n 2013, the Spanish court of first instance in La Coruna acquitted Capt Apostolos Mangouras, Master of the Prestige, of charges of criminal damage to the

environment. Spain’s Supreme Court’s decision to overturn this decision has cast a shadow over the tanker sector and the wider shipping industry.

In what industry association Intertanko has branded “an unorthodox revision of the factual findings of the lower court,” the appeal court has now ruled that Capt Mangouras and the owner of the Prestige acted ‘recklessly’ in 2002 when the 81,000 dwt tanker and its 50,000-tonne fuel-oil cargo were lost off Spain’s west coast.

Tanker Shipping & Trade can only agree with Intertanko managing director Katharina Stanzel’s assessment that the findings of Spain’s Supreme Court are deplorable, unjustifiable and fundamentally wrong. This does indeed set “a deplorable precedent.”

A brief review of the facts bears this out. When the Spanish authorities denied the damaged ship refuge, the now 81-year-old Capt Mangouras bravely did all he possibly could to protect crew, ship, cargo and the environment. After the rest of the crew had been evacuated, he remained on board with the Chief Engineer in order to try and save the ship. Finally, against his judgement, he was obliged by the Spanish authorities to take a series of actions that resulted in the damaged tanker remaining out at sea in appalling conditions, where it eventually broke up.

The Supreme Court in its 2016 finding reinforces the lower court’s acquittal of José Luis López Sors, the former head of Spain’s merchant marine department, who ordered the Prestige to be towed out to sea instead of to a place of refuge where an oil spill could have been contained. In refusing appeals against his acquittal, the Spanish state absolves itself of any responsibility for the disaster.

Edwin Lampert, Editor

“In short, the tanker industry needs to mobilise to reverse this egregious decision”

Tanker Shipping & Trade | February/March 2016 For more articles visit www.tankershipping.comTanker Shipping & Trade | February/March 2016 For more articles visit www.tankershipping.com

BEST OF THE WEB tankershipping.com

WHAT HAPPENED

WHAT NEXT

Underlining his belief in shale’s long-term future, Mr Yergin argued that the key question is whether US shale could cover an eventual shortage in conventional oil supply as global investment collapses. “There has been a US$1.8 trillion reduction in spending planned for 2015 to 2020 compared to what was expected in 2014,” he added.

WHAT THE INDUSTRY SAID

Forty-five listed shale companies are already insolvent or in talks with creditors. The fate of many more will be decided over the spring when an estimated 300,000 barrels a day (b/d) of Iranian crude hits an already saturated global market.

http://tiny.cc/3zr58x


Greek owners come out fighting on taxing issue

The Union of Greek Shipowners (UGS) issued a strong rebuttal of the European Commission’s recently published Decision (C(2015)9019 final/18-12-2015) alleging that some provisions of the Greek shipping taxation regime are in breach of EU state aid provisions and, in particular, the conditions set out in the current Community Guidelines on State Aid to Maritime Transport.

The UGS said: “Greek shipping is a textbook example of free and fair competition and one of the last remaining truly entrepreneurial sectors comprising primarily small and medium sized unquoted private companies, mostly family businesses. It is important that the characteristics of this business model are understood and supported.”

Boston Consulting Group and the Foundation for Economic and Industrial Research state that Greek shipping contributes over 7 per cent of GDP, provides employment to 200,000 people and covers over 30 per cent of the trade deficit.

WHAT NEXT

The UGS said “It is a grave misconception that taxation of Greek shipping companies and shipowners is very low or non-existent. In fact, it has increased in recent years due to groundbreaking agreements with the Greek government to unprecedented levels and overall is probably amongst the highest shipping taxation regimes worldwide.”

There is an implication that Greek owners could base themselves outside the European Union if a resolution is not found – that this could become reality is a sobering thought. Statistics collated by industry analyst VesselsValue on 1 February show that the Greek-owned tanker fleet is more than three times as large and has double the dollar value of the next largest fleet.

http://tiny.cc/21r58x

WHAT HAPPENED

In an interview published in English newspaper The Daily Telegraph, energy analyst Daniel Yergin has questioned whether the Saudi strategy of flooding the market with cheap oil will deliver the US shale industry a knockout blow. Rather, he believes that hedge funds and private equity firms are circling, ready to pick up distressed assets in the sector.

The demise of Shale has been exaggerated, says Daniel Yergin

Daniel Yergin: US shale could cover an eventual shortage in conventional oil supply

For more articles visit www.tankershipping.com Tanker Shipping & Trade | February/March 2016For more articles visit www.tankershipping.com Tanker Shipping & Trade | February/March 2016

Tanker Shipping & Trade's website covers the latest developments in shipping, project updates and new products and services. Our news coverage is now exclusively online and free to read. Here are some of the most popular stories that we covered since the autumn

WHAT HAPPENED

http://tiny.cc/30r58x

Iran returns – and with it 14.1 million dwt of Iranian tankersIranian sanctions have been lifted, heralding the return of 14.1 million dwt of Iranian tankers (worth US$2,775 million) to the global market, according to figures produced by VesselsValue.


This is a great opportunity! It is a landmark occasion for the world, and a tremendous business opportunity. At the 60th Anniversary of National Iranian Tanker Company, an occasion that coincided with the lifting of United Nations sanctions and most European restrictions on doing business with Iran, a Chinese bank expressed interest in a US$5 billion investment to expand Iran’s tanker fleet

WHAT NEXT

For all the enthusiasm, an important note of caution has been sounded by lawyer Jasamin Fichte of Fichte & Co Legal Consultancy.

Ms Fichte, a lawyer with extensive experience dealing with the Iranian maritime community, says that while Iranian-owned and -controlled vessels will now be available to charter to the international community, “the vessels may well be underinsured, certainly in comparison to international tonnage, as they will continue to be insured by the Iranian domestic insurance market.”

Amid the euphoria of the return of a large potential market, it should be borne in mind that “not all sanctions against Iran have been lifted and therefore still careful measures and considerations should be taken with regards to transactions with Iran,” she adds.

http://tiny.cc/f4r58x

WHAT HAPPENED

Tanker bodies urge industry to ratify compensation scheme IMO, together with the International Oil Pollution Compensation Funds (IOPC Funds) and the International Tanker Owners Pollution Federation (ITOPF), is urging its member states to ratify and implement a key compensation treaty covering the transport of hazardous and noxious substances (HNS) by ship.

Entry into force requires accession by at least 12 states meeting certain criteria in relation to tonnage and reporting annually the quantity of HNS cargo received in a state. There are as yet no contracting states to the 2010 HNS Convention. But progress towards the Convention’s entry into force has gathered pace over the past year, with a number of states preparing the necessary implementing legislation.


WHAT NEXT

Together with the IOPC Funds and ITOPF, IMO has produced a six-page brochure that explains to states the purpose and benefit of the HNS Convention and encourages IMO member states to take the next steps to ratify or accede to the Convention.

Karen Purnell managing director of ITOPF is championing the new compensation treaty

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CONTRACTS & COMPLETIONS | 7

Prices are moving up but supply and demand remains balanced O rdering of new

tanker tonnage remains buoyant.

Owners are very aware that vessels with a keel-laid date on or after 1 January 2016 that travel in NOx Emission Control Areas (ECA) will require IMO Tier III certified engines. Despite a keel-laying deadline of mid-2015 for installation of IMO Tier II engines, some owners have been able to install these engines after the deadline by producing relevant classification society documentation. This loophole has allowed owners to make savings of US$1-2 million per ship.

The newbuilding order backlog is at its best level since the 2008 financial crash. At the time of writing it stands at 1,158 units aggregating 117,239,224 dwt with some of this tonnage now only due for delivery in 2019. There were only 221 tankers delivered in 2015. There is some evidence of prices moving up. VLCCs were costing US$94 million in January, up from US$92 million on business last done.

In an end of January briefing, broker E.A. Gibson reported that total investment in new tonnage has reached its highest level since 2007, touching multi-year highs across all tanker categories, except Handy/MRs. But even in the Handy/MR sector, there

was a notable increase in ordering activity in the second half of the year.

Currently, the tanker orderbook stands at 16 per cent of total trading fleet from 25,000 dwt plus.However, this cumulative

representation masks different developments for individual size groups. The Suezmax fleet has the largest orderbook of all segments, with 24 per cent of its fleet on order. This is a stunning change to the situation less

than two years ago, when the orderbook for this size group was just at 9 per cent. LR2/Aframaxes have the second largest orderbook, at 20 per cent; while the VLCC orderbook stands at 19 per cent. Orders for LR1/Panamaxes are somewhat more balanced at 17 per cent relative to fleet size. Finally, MRs and even more so Handy tankers have the smallest orderbook of all size groups, as a result of reduced investment in new tonnage over the past couple of years. The orderbook for MRs is at 14 per cent, while the Handy orderbook is minimal at just 4 per cent, although this is largely due to owners’ preference for larger MR size because of greater trading flexibility.

Greeks continue to be the largest investors, despite wrangling over their favourable tax status, which the government still seems determined to change under EU pressure. Owners have warned of a large domicile exodus if this happens. Statistics quoted by Tanker Shipping & Trade and based on information collated by industry analysts VesselsValue on 1 February showed that the Greek-owned tanker fleet is more than three times as large and twice the value of the next largest fleet. United States

THE TANKER NEWBUILDING ORDER BACKLOG IS AT ITS BEST LEVEL SINCE THE 2008 FINANCIAL CRASH

by Barry Luthwaite

CHEMICAL TANKERS CONTRACTED SINCE 1 JANUARY 2015

VESSEL TYPE NO DWT

Handymax 4 196,000

Handysize 42 1,108,641

Medium Chemical 10 175,294

Small Chemical 3 17,756

Grand Total 59 1,497,691

CHEMICAL TANKERS ON ORDER

VESSEL CATEGORY NO DWT

Handymax 21 1,038,300

Handysize 127 3,638,949

Medium Chemical 19 324,394



Tanker Shipping & Trade | February/March 2016 For more articles visit www.tankershipping.com

8 | CONTRACT & COMPLETIONS

tonnage has vaulted up the ranks to the number two slot and there is the traditional strong showing from Japan, China and Singapore. China’s stated policy is to see at least 50 per cent of its oil requirements carried in Chinese owned/controlled tonnage. The current economic environment may of course curtail this ambition. With so much of the Chinese shipbuilding industry under the state umbrella, private builders are increasingly looking like an endangered species. It is no surprise that medium-sized builders are struggling to make ends meet. There is a belief that the big corporate shipyards are being favoured. Appeals for funding appear to fall on deaf ears, which of course make it difficult to secure new export business.

As reported elsewhere in this magazine, Chinese yards are looking to capitalise on Iran’s return to the international fold following the lifting of sanctions. One

bank has reportedly allocated US$5 billion to support the renewal of the Iranian tanker fleet. The market will be closely watching how NITC structure their expansion and what sort of mix their fleet will have in terms of newbuildings and secondhand acquisitions. It has been reported that they may order as many as 25 mid to large tankers.

On a more sobering note, the Gibson’s report referenced earlier states: “This year investment decisions have to be considered against the substantial size of existing orderbook coupled with very limited prospects for tanker demolition in the short term, with 80 per cent of the fleet being less than 15 years of age. As such, shipowners will

think long and hard before ordering a new tanker. Any moderation in ordering would then reduce the “hangover” once all of the tonnage currently on order is delivered into the market. TST

Source for all figures in these tables: BRL Shipping Consultants. Data 28 January 2016

TANKERS DELIVERES 2015by vessel type and vessel count

VL

CC

19

ME

DIU

M P

RO

DU

CT

S

9

SU

EZ

MA

X

10

ME

DIU

M C

HE

MIC

AL

7

SM

AL

L P

RO

DU

CT

S

4

HA

ND

YS

IZE

38

SM

AL

L C

HE

MIC

AL

8

HA

ND

YM

AX

94

PA

NA

MA

X

3

AF

RA

MA

X

29

EXPECTED DELIVERY YEAR 2016 2017 2018 2019 2020

VESSEL TYPE NO DWT NO NO NO NO NO

Aframax 212 23,870,515 79 84 38 5 6

Handymax 204 10,259,296 114 65 18 6 1

Handysize 167 5,058,954 75 68 21 3 –

Medium Chemical 36 642,989 17 10 9 – –

Medium Products 22 343,160 10 6 2 4 –

Panamax 86 6,167,048 35 31 20 – –

Replenishment 5 104,000 3 1 – 1 –

Small Chemical 45 267,846 36 8 1 – –

Small Products 98 513,271 75 16 7 – –

Suezmax 125 19,758,145 45 60 16 3 1

VLCC 158 50,254,000 62 59 29 8 –

Grand Total 1,158 117,239,224 551 408 161 30 8

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Iranian-Saudi relations will follow their current path despite an increase in the hostile rhetoric being issued by both

sides, according to authors of Iran and Saudi Arabia Assessment: Scenarios for future developments. They write that from an Iranian point of view, the main concern is to keep on track the process of lifting sanctions against Iranian oil, as Iran prepares to double the production and sale of crude.

Should this transpire, it is felt that there will be no direct increased risk to maritime operations: “In the event that the Iranian nuclear deal is implemented, the resultant easing of sanctions will in turn increase shipping activity. This will not only increase the trade and transport of oil, but commodities in general, especially into Iran. The increase in imports and exports will further underline the importance for Iran in maintaining a stable maritime environment in the Persian Gulf.”

The authors write that an escalation in tensions is of “medium likelihood.” Attacks on the extensive al-Ahsa oil infrastructure are not likely in this scenario, as all installations are considered high-priority sites and as such will be heavily guarded by Saudi security forces. Sabotage of, or attacks on, the facilities are not a concern currently.

The authors do not foresee a major direct impact on shipping. Rather,

increased Iranian or Saudi involvement in Syria or Yemen “will probably primarily have a direct effect on ground-based operations and therefore only possibly indirectly impact port cities in Yemen, Syria and Saudi Arabia. This is also true if the Saudis halt the Syrian peace process, as this will only affect the prospects for a solution, and will not change the dynamics of the battlespace.”

A direct confrontation, such as Iranian naval activity against Saudi shipping or

activity intended to disrupt traffic to the Saudi Arabian eastern ports servicing the oil industry, is highly unlikely in the view of the authors. They also view low-level harassment of commercial shipping as highly unlikely.

In case of any confrontation, the main Iranian combatant would be the Iranian Revolutionary Guard Corps Navy (IRGCN), rather than the regular Iranian Navy. This is because the Persian Gulf is designated as the IRGCN’s area of operations. Any approaches or disruption would probably be conducted by fast attack craft, such as missile or torpedo boats, with the threat of laying out mines in the Hormuz Strait.

The authors of the paper conclude that Iran has limited or no interest in escalating the conflict in this area. Iran has a broader agenda that involves a re-setting of relations with the US and Europe (and the lifting of sanctions) and pursuing its strategic interests in Iraq and Syria, in particular. At the same time, Saudi Arabia does not have an interest in escalating the conflict any further. If escalation occurs, the country is not capable of running two armed conflicts at the same time. TST

*Iran and Saudi Arabia Assessment: Scenarios for future developments is available for download via www.riskintelligence.eu

A fascinating briefing document authored by Risk Intelligence models different potential outcomes of present Iranian-Saudi antipathy and their implications for the maritime business*

How will Irano-Saudi relations impact tanker trades?

10 | ANALYSIS

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12 | LEGAL BRIEFING

One way of summarising the Court of Appeal’s decision in Fulton Shipping Inc v Globalia Business Travel SAU

(‘the New Flamenco’) [2015] is: ‘you can’t sell your cake and eat it too’.

Put in legal parlance: Owners that sell their vessel following an early redelivery may have to account for the benefit obtained from the sale in any claim for damages against the charterers. This will be the case if there is no available market to charter the vessel at the time and the sale is a step taken to minimise the loss caused by the charterers’ breach.

In Fulton Shipping Inc v Globalia Business Travel SAU (‘the New Flamenco’) [2015], the Court reversed the Commercial Court decision and held that the owners of a

cruise vessel (Fulton) should be required to give credit to the charterers (Globalia) for having sold the vessel for a higher value than would have been achieved two years later, had the charterers not breached the contract.

Under English law, an innocent party is entitled to be put in the same position he would have been in had the contract been performed. He will not, however, be allowed to recover losses which he has avoided by taking steps to minimise the impact of the breach.

The New Flamenco was chartered to Globalia in February 2004. In 2007, the parties met to negotiate an extension. Fulton alleged that an agreement had been reached to

charter the vessel for a further two years until November

2009. Globalia

denied that there had been an agreement and redelivered the vessel in October 2007. Fulton sold the vessel in October 2007 for US$23,765,000.

In a London arbitration, Fulton claimed €7,558,375 for the net loss of profits which it alleged it would have earned during the two-year extension. The arbitrator found that an extension had been agreed and that Globalia was in breach by redelivering the vessel early. The arbitrator also found, however, that Fulton had sold the vessel to reduce its losses and that the sale price of the vessel in November 2009 (after the 2008 global financial crisis) would have been US$7 million, US$16 million less than the price obtained in 2007. The arbitrator concluded that this difference, which was a benefit to Fulton, had to be taken into account when calculating damages against Globalia. The result was that the benefit wiped out the claim.

Fulton appealed to the Commercial Court, where it succeeded. Popplewell J found that the benefit arising from having sold the vessel earlier should not be taken into account, because the benefit (the difference in the sale price between 2007 and 2009) was not legally caused by the breach. For Popplewell, Globalia’s breach merely provided the context or occasion for Fulton to realise the capital value of the vessel. The judge also placed importance on the fact that Fulton was free to exercise its right as owners to sell the vessel at any time and held that it would be unfair and unjust to allow the charterers to appropriate the fruits of the owners’ investment in the vessel.

The Court of Appeal, however, disagreed with Popplewell J and reinstated the arbitrator’s decision. The decision also clarifies that different rules apply when there is and when there is not an available market following the repudiation, i.e. the possibility to fix the vessel in an equivalent charter to the one being lost.

Fulton is seeking permission to appeal from the Supreme Court. TST

*Elizabeth Turnbull is a partner in Clyde & Co's marine and international trade department

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Elizabeth Turnbull: “You can’t sell your cake and eat it too”

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GAS DETECTION | 15

Gas detection technology is ripe for a step-change that

will bring it out of the last century, believes Christopher Cappelen, managing director at Norwegian safety service provider Uniservice.

Based on Uniservice’s experience of providing calibration and other services for gas detection systems, Mr Cappelen says today’s gas detection technology is “old fashioned.” He illustrates his point by comparing developments in mobile phone technology with those made in gas detection. A decade ago, phones used infrared as a communication method, whereas now they use Bluetooth. Meanwhile, “infrared has now made its entry into gas detectors.”

This slow adoption of technical advances is coupled with what Mr Cappelen believes is a low level of understanding about gas detection among decision makers. On top of these two factors, maintenance methods used on board ships “belong in the last century,” he says.

Mr Cappelen’s comments focused on improving

communications (within ships, and between ship and shore) that would result in improved safety and better-informed decisions and regulations. Outlining a scenario in which two crew enter a tank that pre-entry tests using a sampling hose showed to be safe to enter, he says one of the crew could be overcome by a pocket of noxious gas, leaving the other facing a climb back to the deck to raise the alarm.

It would be better if the gas detectors could communicate in real-time their location and the atmospheric conditions they are monitoring. An alarm could be raised immediately if there was a problem and help sent without delay, potentially saving lives.

A senior manager at one manufacturer agreed that there would be benefits from portable detectors being able to communicate with the bridge. He believes the technology could be developed, though only customers who focus on safety would be interested, he says. Customers that simply want to meet requirements would “probably turn it down for a conventional detector at a lower cost.”

Mr Cappelen believes

communicating data ashore could also improve safety– and not only to the benefit of the ship sending the data. If gas detection data were held centrally by an organisation such as the Oil Companies International Marine Forum it could form part of the tanker industry’s ship-vetting routines used to assess ships’ suitability for charter.

If it could be collected and structured in this way, Mr

Cappelen says, it would provide information for legislators and charterers “in their quest to eradicate dangerous vessels and focus on having their cargoes carried on safe vessels.” Applying statistical analysis to the data could be “a very important tool to reduce the likelihood of accidents or incidents,” he said, so “this is a key area for vetting to concentrate its efforts.” TST

Developments in gas detection systems have not kept pace with innovations in other areas of electronics, putting lives at risk, one service provider believes

GAS DETECTION IS SO LAST CENTURY

In this training exercise, rescuers have reached a casualty overcome by noxious gas. Smarter detectors would bring help sooner, believes Christopher Cappelen of Uniservice


16 | GAS DETECTION

Continuous emission monitoring (CEM) can play an important role in enforcing environmental regulations, believes Larry Rumbol, condition monitoring market development manager

at Parker Kittiwake Procal.While governments around the world follow what he describes

as an ambitious environmental policy agenda, “without a similarly determined effort to step up implementation and enforcement procedures, hopes for full compliance will remain unfulfilled,” Mr Rumbol says. To make his point, he notes that in China and India, laws that have established standards for air and water quality have been “undermined by the inadequacy of enforcement capacity in each state.”

Mr Rumbol says that in recent months some port state control authorities “have been very clear about their commitment to strict enforcement,” following the introduction in January last year of some IMO emission control areas (ECAs) and, in July last year, the EU’s Monitoring, Reporting and Verification (MRV) rules.

But Mr Rumbol believes that hoped-for air quality improvements will fail to materialise. One of the key reasons is that “environmental regulators are forced to overcome persistent shortfalls of information and authority to enforce these laws.” The most important step towards addressing this, he explains, is to give regulators access to better information.

Using CEM “represents a simple solution that supports all parties in upholding legislation that is in force.” He says CEM is better than other monitoring mechanisms that have been proposed, such as analysing bunker fuel delivery notes, monitoring fuel tanks and making direct measurements of emissions.

Other monitoring tools may be cheaper at the outset, but other costs should also be considered, Mr Rumbol points out. EU member states are required to inspect the logbooks and bunker delivery notes on at least one in 10 vessels visiting the respective member state each year, and to check fuels on at least 40 out of every 1,000 ships. The inability to demonstrate compliance will lead to delays and possibly fines.

In the USA, the Environmental Protection Agency has warned that providing US federal officers with false information could result in a prison sentence of up to five years and that fines could reach US$25,000 a day. That sum would go a long way towards the cost of installing a CEM system, Mr Rumbol says.

Parker Kittiwake Procal offers just such a system: the Procal 2000 analyser. It analyses exhaust gases from the engines and boilers, checking for SO2, CO2 and NOx. It also monitors the water vapour content of the exhaust gas, enabling the operator to determine the pollutant levels on a wet and dry basis. This gives shipowners “a robust reporting tool to demonstrate compliance with ECA regulations,” Mr Rumbol says.

The Procal 2000 analyser uses an in-situ sample cell that does not require the gas to be extracted, ensuring that accurate real-time data is available instantly, and leaving no need for costly sample-handling systems, he explains. The analyser can accommodate GPS stamping to identify what the emissions were at a particular location.

“Independent and impartial product verification, which we believe is critical to driving successful change within the industry, lends further credibility to CEM as a means of demonstrating compliance,” Mr Rumbol concludes. TST

Emissions monitoring can boost compliance

LEFT: Continuous emission monitoring equipment can confirm compliance (credit: Parker Kittiwake Procal)

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Extended maintenance intervals could be offered as a result of an innovation by Swedish gas detector supplier Consilium Marine & Safety that allows remote access to its Salwico GS5000 gas detection system. The company’s fire detection system has benefited from remote access for some time, and the function was extended to its gas detection technology towards the end of last year.

Remote access makes it possible for an operator to view and control the system from a remote location (which could be elsewhere on the ship or in an office ashore), where a superintendent can make routine system checks. Service technicians will be able to access the system remotely so that they can prepare for their visit and bring the right spare parts. “This will increase the quality of the services we offer, reduce downtime and increase the likelihood of a first-time fix,” says Consilium Marine & Safety gas detection product manager Martin Hagberg.

On board, remote access makes it straightforward to calibrate sensors and carry out maintenance, Mr Hagberg explains. A technician can stand next to a sensor to apply calibration gas and access the control system remotely through a

tablet computer or even a smartphone to commission the system. This task can be done by one person, eliminating the need to shuttle between the sensor and the control panel.

Shore-based managers will have a different requirement, Mr Hagberg says. They could be alerted to gas-detection alarms on board to help them spot, for example, trends in alarms from specific parts of the ship or machinery, and initiate

action if necessary.Asked how shore-side intervention

would be co-ordinated with a chief engineer’s onboard responsibilities, Mr Hagberg acknowledges that managers should avoid using it simply to look over the engineer’s shoulder. Instead, verification of the information that is passed from ship to shore gives superintendents intelligence to help them understand and plan long-term system maintenance, and offer support to deal with gas leaks and faults in the system itself.

Consilium offers remote access on its navigation and fire detection systems, and a development team is working towards bringing these and gas detection data together so that they can be presented on a single web interface. “We definitely believe there is a future in this,” Mr Hagberg says.• Consilium is developing what Mr Hagberg describes as its next generation of gas detection and sampling systems. Few details are available, but there will be significant improvements to the Salwico GS5000 system, which was launched in 2012, including a completely new gas sampling system. It will use the same common communications platform as Consilium’s other safety products, he says.

REMOTE ACCESS IMPROVES DETECTOR SERVICING

GAS DETECTOR DEADLINE NEARS

Later this year an important deadline will pass for shipowners to provide portable gas detectors. In May 2014, IMO’s Maritime

Safety Committee (MSC) approved a regulation under Solas that

closed a loophole left by a previous requirement for emergency training and drills to be carried out for entry into enclosed spaces. The loophole meant there was no carriage

requirement for the testing equipment needed

to carry out the checks that the regulation set out.

The new regulation, XI-1/7, addressed this and set out the

minimum requirements that these instruments should meet.

A deadline of 1 July 2016 was set for these requirements to be met, but at the following MSC meeting, in November

2014, IMO urged flag states to voluntarily implement them early. Martek Marine business development manager Steve Coulson believes that some shipowners are not aware that the regulation is being implemented early. In a presentation that was originally prepared for shipowners, Mr Coulson points out that the “new Solas regulation XI-1/7 has been introduced early by IMO to help save the lives of crew members.”

Tankers are generally already carrying suitable equipment, says Uniservice managing director Christopher Cappelen, with manufacturers engaged in “a big race to fill up non-tanker vessels with relatively simple gas detectors.” This production drive is distracting manufacturers from developing the next generation of more intelligent detectors and bringing them into service, which means that any step-change in technology (see ‘Gas detection is so last century’) will be delayed, Mr Cappelen argues. “That train has left the platform,” he concludes. TST

GAS DETECTION | 19

Consilium’s GS5000 can be monitored remotely. Inset: one of the detector units used with the system (credit: Consilium)

Gas detectors and a calibration unit from Gas Measurement Instruments are used in Martek Marine’s ABC calibration system


IS THE TOTAL COST OF TANK CLEANING UNDERSTOOD?

The quest for economy was high on the agenda of speakers at the

recent Tanker Shipping & Trade conference. A variety of expenses were discussed, but the issue of tank cleaning economics did not raise its head once.

This may simply be a matter of perspective, as one contact (a senior manager at a major north European owner) recently told me. He said: “Some people see this business as shipping, with a requirement to clean tanks, whereas I believe we must view ourselves as a tank cleaning company required to carry cargoes.”

Various economies mean

nothing if the tanks are not ready to load on time. There is an understandable reluctance to risk new procedures and cleaning products because, whatever the inefficiencies, we know the existing processes work.

The cost of failure to clean well is obvious, but are there effective product and process alternatives out there that can also save money?

At operational level, the emphasis is often on negotiating tighter contracts for the provision of existing product. Price per litre and rebate schemes often feature, and the industry accepts arguably archaic standards for what ‘clean’ really means.

For senior executives of tanker owner/operators, economic operation is a crucial part of the business model. In spite of the collapse in the oil price, one current operational benefit is the reduction in bunker costs achievable via tank cleaning*


TANK CLEANING | 21

Savings are achievable, although tighter margins may stifle new product development, particularly if tradition trumps efficiency.

The inertia in the market is not always considered a problem because tanks are cleaned and standards are met. But it is interesting to consider the potential advantages of a novel approach.

During 2015, Uniservice Global worked with a major north European owner to trial a new product (Ecosolut 24) along with the use of an L&I Wave II spectrophotometer. The trials involved cleanings of zinc coated tanks from vegetable oil using this new, highly concentrated detergent,

effective at lower temperatures. Tank readiness was assessed by means of continuous wash-water analysis.

This trial showed very positive results over traditional product and process:• Reduced time to reach operational temperature with less fuel burnedThe results of cleaning chemical efficacy at lower temperature were savings in bunker consumption and earlier operational readiness.• Lower volume of cleaning chemical used• Improved cleaning performanceThere is potential for savings in the cost of chemicals, with an improved end result.

• Tank ‘clean’ in 40 per cent shorter timeThis is a potentially huge economy. The vessel was available for loading days sooner than it would have been had existing procedures/products been used. Continuous measurement of wash water resulted in tanks being considered clean prior to completion of traditional cleaning protocols measured by wall wash.• Reduced need for tank entry by ship personnelFrom a safety perspective, this is a significant improvement.

Clearly, for all its value, the legendary Dr Verwey has so far failed to make tank cleaning ‘sexy’ enough to engage senior executives. Perhaps an analysis of the potential financial and safety benefits of a holistic review of tank cleaning product and methods might.

In the present market, the saving in bunkers is reduced. But the potential will rise as oil prices recover. The saving in cleaning chemicals was in excess of €400 per tank, representing more than €8,000 on this vessel per cleaning operation. A reduction in cleaning time from five to three days might easily equate to €36,000 in daily rate earned, per cleaning operation. The safety benefit is persuasive, before even taking into consideration the financial value.

Assuming eight equivalent cleaning operations in a year, it may be possible to realise annual savings per vessel in excess of €250,000. In any fleet, these savings would certainly eclipse savings available from simply negotiating cents-per-litre discounts on existing product.

A number of operators have implemented wholesale changes in their cleaning regimens, and fleets have saved in excess of US$5 million very quickly. There can be no

guarantee of specific savings because results will depend on a vessel’s trading patterns.

With the size of the potential prize so significant, one might question why there is not a greater drive from the industry to innovate. “If it ain’t broke…” is a not unreasonable position. After all, “No one got fired for buying IBM.”

The risk of a new product or process failing is often cited as a reason for inaction when sometimes inaction is actually a result of a traditional mindset or not reviewing existing arrangements through a rigorous and regular programme.

Be sure that some of your competitors are exploring their options. Their willingness to innovate and success in reducing costs will challenge your existing business. Some of your major customers are considering changing the standards they demand of their chosen partners. How realistic is it to keep on doing what you have always done?

When was the last time you reviewed or sense-checked your procedures? Have you gone to market in search of alternative products? Are you communicating with a variety of chemical suppliers, not only enquiring about existing product, but demanding innovation?

For tank-cleaning chemical suppliers, the challenge is to engage with owners/operators on a strategic as well as tactical level. It is incumbent on us to ensure our products are constantly evolving. Our aim is for them to be safer, more effective, and as efficient as possible.

It is doubtful whether the science of tank cleaning will ever light up the stage at a major industry conference. It is likely, though, that the potential efficiencies will light up eyes in the boardroom. TST

*This article was authored by Tony Walton of Uniservice Global

The economics of tank cleaning did not feature prominently at the November Tanker Shipping & Trade Conference. However the topic is deserving of further

consideration given the potential savings available


22 | TANK CLEANING

Cargo contamination claims are one of the key risks any P&I club deals with when assisting members in

the chemical tanker trade. Ensuring tanks are actually at the right level of cleanliness prior to loading is key, but it is open for debate whether existing testing methods are sufficient to verify the same, explains Director of L&I Maritime Guy Johnson.

Cargo contamination claims and disputes over the cleanliness of tanks on a vessel prior to loading come with the risk of significant claims and losses, and given the very technical nature of the subject matter it is likely that only through extensive scientific investigation it is possible to come to a view as to what the precise underlying issue may be.

That means there will inevitably be significant costs and time involved in the investigation, analysis and debate over the evidence.

One particular feature in these disputes is the methodology by which a vessel's tanks are tested for cleanliness.

A common method is the wall wash inspection which means that part of the cargo tanks are ‘washed’ with a solvent which is then analysed to see what – if any – materials can be found therein, i.e.: to check against the presence of possible contaminants in the tanks.

Over time this method developed from a somewhat straight forward process, intended to demonstrate the ability to clean tanks to a certain standard, and it has now evolved into a very exacting testing regime that may be looking to check for the presence of materials in the parts per million.

Whether wall washing is an effective means of checking the cleanliness of tanks, and whether it remains suitable and appropriate or whether there are acceptable alternatives is a matter of debate. A debate, however, that will have real monetary significance to shipowners and charterers.

While there is no doubt ample room for an intense debate on this issue, given the continued significance and frequency of tank cleanliness disputes and cargo

contaminations disputes in the chemical tanker trade, it is debate worth having.

Good loss prevention in this area requires a very in depth understanding of the particular nature and challenges that one encounters when operating chemical tankers.

Tankers may have tanks made of different materials or coated with different types of coating.

Assuming, for present purposes, that the tanks are well constructed, and maintained, and that any coating is of good quality and properly applied, one must then turn to an understanding of how these react with different cargoes.

At this point one will have to delve into a scientific level of investigation as it is a known issue that a particular tank material and / or coating may react with a particular cargo in one way and quite differently with another cargo. This is because of the fact that the cargoes carried by chemical tankers are - typically - chemically reactive and indeed cargo may end up being absorbed into the coating of a tank which can present serious issues and challenges.

Hence one needs to understand in advance both the vessel / her tanks and the cargo or cargoes for the carriage of which the vessel is to be employed. Additionally one needs to factor in the nature of the previous cargoes carried, and the system as well as procedure for cleaning the tanks between laden voyages.

In other words, operating chemical tankers means having to operate at an advanced level of sophistication which is challenging and requires a high level of knowledge and experience.

Owners that are experiencing repeat issues with tank cleanliness disputes and / or cargo contamination disputes would be well advised to adopt a “back to basics” approach that starts with a close look at the vessel, her present condition, the experience of the crew, the particular types of tanks/coating on board, her cargo experience, as well as the on board systems and procedures for the cleaning of the tanks.

Beyond such an introspective view, it will be necessary to consider the suitability of the vessel for particular cargo trades, the likely demands and standards which cargo and charterers may seek to impose on the vessel, as well as the terms on which the vessel will be performing her cargo voyages. TST

*This is an edited version of an article that originaly appeared on insurer Skuld’s website

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O ver the past couple of years, medium range (MR) tankers have been ordered and delivered in growing numbers, introducing a new generation of ships whose cargo

pumping arrangements are subject to more rigorous demands.Operators are demanding an increase in cargo pumping rate. In

the past, rates of 500 m3/h were sufficient, but now rates around 600 m3/h are requested, says MarFlex technical & QHSE manager Peter Raaijmakers.

Although pumps can operate at up to 20 per cent above their rated throughput, previous pump models have often achieved only via reduced efficiency. MarFlex has responded by extending its MarFlex Deepwell Pump Double (MDPD) range with a higher capacity model but without changing the pump size.

The MDPD-200 is designed to provide a flow of 600 m3/h at its best efficiency point, with a discharge head of 130m.

Its design and manufacture break new ground, Mr Raaijmakers says. During the engineering process, MarFlex used computational fluid dynamics (CFD) to calculate the most efficient cargo flow. This showed an optimal streamlined shape for the pumphead, which can only be achieved by casting it in one piece, he explains.

Normally, only the lower part of the pumphead would be cast, with other parts (such as the flange) welded into place. This reduces welding during its manufacture and makes it more robust: making it in one piece avoids introducing potential weak spots at the welds. It also removes the possibility that welding imperfections will alter the flow that has been optimised during the CFD process, in which fluid velocities have been predicted.

Other improvements claimed for the pump include designing the entrance to its impeller to be smaller than its discharge. Mr Raaijmakers explains that this is to reduce damage from debris in the fluid that is drawn into the pump. If the exit is smaller than the entrance, items could be drawn in and then be unable to escape, causing damage to the impeller.

The pump was introduced to the market towards the end of last year and had secured its first order. It is understood to be a sizeable contract from a major Asian yard.

MARFLEX FOCUSES ON GROWING MR FLEETDEMAND FOR FASTER CARGO PUMPING FROM MR TANKERS HAS PROMPTED DESIGN OF A LARGER-CAPACITY PUMP THAT HAS ALREADY WON ORDERS

3-D PRINTING ‘NOT YET COST-EFFECTIVE’ SAYS SIMS PUMP

Making pump components using 3-D printing “is not yet a cost-effective option,” reports Sims Pump president John Kozel.

Sims Pump is well known for its non-metallic Simsite material. Mr Kozel says that in the company’s experience, non-metallic parts made using 3-D printing have limited strength because of density and reinforcement

limitations. “Even if the thermoplastic is reinforced, it adds little mechanical strength, since all reinforcement must be melted for the 3-D process to work,” he points out.

Mr Kozel described one example of the use of Sims’ 3-D printer: a 3.5in (89mm) diameter gear made from Kevlar-reinforced thermoplastic. It took more than two days to

produce and the finished item “cannot be used in an actual process other than for a toy, mould, or non-functional prototype,” he says.

In contrast, the same piece could be manufactured as a functional part in about one hour if made from metal or a structural composite such as Simsite on one of the company’s multi-axis machining stations.

MarFlex’s new MDPD-200 has a completely cast pumphead

24 | PUMPS


PUMPS | 25

DESMI PUMPS DELIVER UNITS FOR FOUR RFA TANKERS

The first of four tankers for the UK’s Royal Fleet Auxiliary (RFA) is due to be delivered this year by South Korea’s Daewoo Shipbuilding & Marine Engineering (DSME). Tidespring and its three sisters – Tiderace, Tidesurge and Tideforce – are 200.9m long and have a displacement of 37,000 tonnes. They are designed to carry diesel and aviation fuel, plus water, to replenish UK Royal Navy vessels, and feature a range of pumps supplied by Denmark’s Desmi Pumping Technology.

The full scope of supply covers all the cargo pumps, all the pumps in the helicopter refuelling systems, all the centrifugal pumps in the engineroom and an emergency fire pump.

Due to the particular requirements of an RFA tanker, the cargo pumps’ role will be to transfer fuel and fresh water to a receiving navy ship via a replenishment-at-sea system.

The pumps inside the tanks are connected via Cardan shafts to electric motors on the first deck via a gas-tight seal so that the motors are in a non-hazardous zone.

In addition, Desmi pointed out, they are water-cooled, rather than air-cooled, because of the heat that electric motors can produce. This cooling water will be obtained from the ships’ fresh water ring main systems.

For the helicopter refuelling system, pumps and filters handle the fuel when it is being pumped between tanks to the dispensing system in the hangar. The process is controlled by a system designed by Desmi Automation.

In the engineroom, Desmi is supplying pumps for the ships’ cooling, ballast, fire and water systems. They are driven by ABB motors, made to naval standards.

The emergency fire pump was originally to be diesel-driven, but the specification was later changed to become an electrically driven vertical inline pump. This change was requested after the contract had been signed.

The part could be used for any industrial or mechanical process, Mr Kozel says. Yet he believes that making structural products with liquid metal 3-D printing may be cost-effective one day. At present “the technology, speed of manufacture, size of the structure and cost of manufacturing the 3-D part is very limited,” but the technology is rapidly changing.

Mr Kozel is not alone in believing

that 3-D printing is too expensive to be commercial. MarFlex technical & QHSE manager Peter Raaijmakers says the process might have technical advantages, though. It could allow more optimised thicknesses to be used in designs, he says, pointing out that cast components need a certain thickness because of the nature of the casting process, although it may not be necessary as a

strength requirement.Mr Raaijmakers says the potential benefits

are that if the cost of 3-D printing were the same as for casting, some material could be saved and the component’s weight could be reduced. At present, MarFlex is using 3-D printing for rapid prototyping. For pump design, “you would need to do it with stainless steel and that is still quite expensive,” he adds.

Some of Desmi’s pumps destined for the UK’s RFA tankers (credit: Desmi)


WÄRTSILÄ WINS LNG CARGO-HANDLING ORDERS FOR MORE THAN A DOZEN VESSELS

In the closing weeks of 2015 Wärtsilä won a number of significant contracts to supply gas cargo-handling systems, including cargo pumps, for 12 newbuildings.

One of the vessels, a 45,000m3 capacity ship, has been described as a new type of LNG carrier because it uses the A-BOX containment system developed by Norway’s LNG New Technologies. The system consists of an IMO Type A independent tank in an insulated hold space, which has been granted approval in principle by DNV GL. The ship is being built at China Merchants Heavy Industry for Saga LNG Shipping of Singapore.

Wärtsilä will supply the whole fuel and cargo-handling system, which will include its Svanehøj EFP pump series. The company’s literature describes this as a downsized version of its deepwell gas pumps. Having no electrical

components inside the tank, the contribution to boil-off gas generation is minimised. When Wärtsilä launched the pump last year, it estimated that conventional pumps that have their motor installed inside the fuel tank transfer as much as 70 per cent of the electrical energy as heat to the LNG.

Among the other contracts is a series of six of a new type of very large gas carriers (VLGCs) and two conventional VLGCs. These, along with three medium gas carriers, are all being built at either Hyundai Heavy Industries or Hyundai Mipo Dockyards. Together, these 11 gas cargo-handling systems form one of the largest such contracts the company has ever received.

As well as the cargo pumps, Wärtsilä will supply inert gas plants, compressors, heat exchangers and control systems.

26 | PUMPS

Wärtsilä’s Svanehøj ECA LNG pump has no electrical components inside the tank, reducing its impact on boil-off

HYDRAULIC POWERPACK DELIVERS GREEN PUMPING POWER

Dutch cargo pumping service provider MariFlex emphasised its green credentials in December when its president, Ruud Cogels, posted images on the company’s Facebook page showing what he described as “one of our green achievements in 2015.”

He was referring to its HHP-60 mini hydraulic powerpack, which it developed to drive emergency portable submersible pumps using a tanker’s own hydraulic systems. Its environmental benefit comes from its use of vegetable hydraulic oil –

which has been approved by the US Food and Drug Administration – in a separate secondary circuit connected to the pump. This avoids the usual drawbacks of possible contamination from hydraulic oil, Mr Cogels told Tanker Shipping & Trade.

The powerpack and pumps are offered in many parts of the world to support MariFlex’s cargo offloading services. Its literature says that the motivation behind the smaller unit was to address what the company saw as the challenge of providing

its rental department with “a light weight and hassle free solution for handling difficult cargoes on board tankers with large engineroom-powered hydraulic systems.”

But there is always a risk of hydraulic failure and contamination of the vessel’s cargo when using the ship’s hydraulic system to power submersible pumps, which secondary systems avoid. The size of such units and the cost of transporting them, however, had previously been a drawback.

When the powerpack was launched, it was focused especially on the US molasses trade, where “a single [contamination] incident can prove to be disastrous for the business,” Mr Cogels said. “Therefore we decided to take the alternate route.” This trade is not confined to the USA and MariFlex’s Singapore service centre recently reported using an HHP-60 to offload 12,000 tonnes of molasses in Batangas, Philippines.

Although the powerpack is used by MariFlex’s service team, it may also be offered for sale. Asked in December whether it marketed the device, Mr Cogels replied that it had not yet been decided. TST

LEFT: MariFlex’s mini hydraulic powerpack drives submersible pumps using vegetable oil (credit: MariFlex)

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market overview SINGAPORE | 29

Last year was one of the busiest on record for Singapore tanker fleet acquisitions. The current trading fleet numbers 743

vessels aggregating 41,950,438 dwt. With 84 vessels (7,950,819 dwt), Ocean

Tankers, the trading arm of major oil trader Hin Leong, is the country’s largest crude operator. Its fleet ranges from small intra-Asia cabotage product carriers to VLCCs.

With the oil price so low at present, Hin Leong has received several enquiries for storage quotations off Singapore. Ocean Tankers itself recently acquired a VLCC on the secondhand market for storage (so-called contango business). Three of its VLCCs are currently positioned off Singapore, full of crude that Hin Leong will hope to sell at a profit when prices inevitably rise. Demand for this option is steady, but owners are wary of extending charters beyond 2-4 month periods when spot market trading is so strong.

Previously a founder member of the Nova Tankers pool that Maersk spearheaded, the Ocean Tankers fleet was the first to leave the pool, in June 2013 (the pooling arrangement dissolved at the height of the slump). Ocean Tankers departure from the pool was a bold move when the wet trades were still at low ebb but during its time in The Nova Tankers pool it forged important contact with new customers, especially in the West and other non-Asian trade areas.

The Ocean Tankers product carrier fleet operates mainly in Asia, with Hin Leong providing 50 per cent of business for its ships. The company’s ships are built to high technical specifications and were ordered when prices were much higher than today. No newbuildings are expected to be ordered in the near future, apart from possible replacements for smaller single-hull cabotage tankers. Hin Leong advises against too many newbuilding orders being placed because they will adversely affect the satisfying balance between supply and demand.

Singapore-domiciled owners account for 10.2 per cent (113 vessels) of the global tanker orderbook.

Private equity has played its part in funding the latest round of newbuilding orders, but much of the cash has been raised through over-the-counter dealings in Oslo. Singapore’s own financial institutions hope one day to make their mark in a big way in the equity business.

The leading investors in new tanker tonnage are Navig8, BW Group, AET and Eastern Pacific Shipping. All these owners acknowledge the changing face of tanker trading, with a focus on longer-haul routes and bigger vessels for a wider Panama Canal and

TANKER BUSINESS IS PROVING A BRIGHT SPOT FOR SINGAPOREAN INTERESTS IN AN OTHERWISE CHALLENGING MARKET

by Barry Luthwaite

SINGAPOREAN TANKER OWNERS ARE RENEWING THEIR FLEETS

COUNTRY OF DOMICILE SINGAPORE TRADING FLEET TANKERS

VESSEL TYPE NO DWT

Aframax 54 5,866,036

Handymax 131 6,266,108

Handysize 54 1,755,828

Medium Chemical 75 1,280,615

Medium Products 43 657,177

Panamax 63 5,720,931


Small Products 248 1,245,775

Suexmax 7 1,119,835

VLCC 59 17,993,627

Grand Total 743 41,950,438

COUNTRY OF SHIPOWNER SINGAPORE

SHIPBUILDER NO DWT

Korea (South) 50 5,620,580

China 31 1,972,000

Japan 28 900,689

Indonesia 2 13,000

Philippines 2 640,000


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30 | SINGAPORE market overview

improved Suez Canal. Navig8 is investing in chemical tankers: it

recently ordered six 49,000 dwt medium range units from STX Offshore & Shipbuilding, for delivery in 2017. Eastern Pacific (Idan Ofer) is taking the fleet complement to new heights by adding a mix of newbuildings and secondhand units. The latter are required to establish a competitive presence, especially in products, ahead of newbuilding deliveries. BW Pacific is the newest division in the BW fleet, with the former’s fleet complement valued at US$1.6 billion. With total concentration on the products sector, BW Pacific is the world’s largest owner of LR1 Panamax tankers with 17 units in service and a further six on order for delivery in 2016 and 2017. This type is strongly supported by 22 medium range units (including two newbuildings), ranking the owner as the seventh largest in the world. The only disappointment for BW Pacific was failure to secure an IPO listing on the Oslo stock exchange in November last year. This surprised experts but underlined the reluctance of investors to commit to IPOs even when prospects have never been better for tanker trades. This was a warning to other owners that nothing is guaranteed as investors worry about long-term investment in an increasingly uncertain world economy.

The lifting of sanctions against Iran is a double-edged sword. Nobody quite knows what the impact will be other than a lot more oil flowing in an already over-supplied market. The positive side is the boost to companies that previously traded with Iran and thus suffered as a result of the sanctions. At the end of January and early February, Singapore-based Kuo International Bunkering booked loadings of Iranian fuel oil to support its local business, ending a five-year enforced exodus. Singaporean brokers busy with Iranian fixtures have warned about problems in securing insurance and remaining trading restrictions such as the ban on payments in US dollars.

Singapore is noted for its large fleet of smaller 5-10,000 dwt product tankers, but with today’s unprecedented low oil prices these units are experiencing strong competition. The revival of Japan’s shipbuilding industry has seen a large number of 8-15,000 dwt units ordered for domestic owners.

Rounding out, the collapse of OW Bunkering cast a shadow over the world’s largest bunkering port. Several supplier vessels came under arrest due to unpaid bills. TST

Sources for all tables on this page: BRL Shipping Consultants Data as at 2 February 2016

TANKERS ON ORDER: COUNTRY OF SHIPOWNER SINGAPORE

SHIPOWNER NO DWT

Navig8 49 5,365,180

AET Inc 8 996,000

BW Pacific 8 545,400

Eastern Pacific Shipping Pte 8 814,527

BW Maritime Pte Ltd 7 139,993

MTM Ship Mgmt. 7 207,669

Cara Shipping 4 450,000

IMC Shpg. Co Pte Ltd 4 200,000

Nova Shpg. & Logistics 4 138,000

Sentek Marine 4 8,000

Singapore Owner 4 200,000

Prestige Marine Svcs. 2 13,000

Safargo Shipping Pte 2 34,000

Hong Tong Fuels & Shipping Pte Ltd 1 22,000

Marex Maritime 1 12,500


LEADING TANKER COMPANIES

COUNTRY OF DOMICILE SINGAPORE NO DWT

Ocean Tankers 84 7,950,819

AET Inc 57 8,600,870

BW Group 48 5,215,811

Raffles Shpgmgmt. Svces. 42 1,123,090

Hong Lam Marine Pte Ltd 41 327,802

Eastern Pacific Shipping Pte 31 2,658,551

Navig8 28 1,753,495

MTM Ship Mgmt. 22 429,213

World Tankers Mgmt. 19 980,105

Nissho Odyssey Ship Mgmt. 17 305,973

Stellar Shipmanagement 16 82,653

Unix Line Pte Ltd 14 243,134

IMC Shpg. Co Pte Ltd 13 545,223

Hai Soon Ship Management 9 45,802

Panoil Tankers Pte Ltd 9 44,416

Searights Maritime Services 9 52,086

Pacific Carriers 8 222,853

Titan Ocean Pte 8 310,768

Transocean Singapore Pte 8 478,098

Equatorial Marine 7 26,921

First Ship Lease 7 412,749

Others 246 10,140,006

Grand Total 743 41,950,438

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Industry association BIMCO forecasts that 37 VLCCs will be delivered between

February and December 2016. A number of these are destined to come under the management of Singapore-based Goodwood Ship Management, one of the world’s largest third-party managers in this sector.

Goodwood Ship Management managing director and co-founder Ashok Sabnis says the company manages 26 VLCCs and expects this number to swell to 34 by the end of the year.

“We have maintained ourselves as a kind of ship management boutique,” he says from the company’s headquarters in Science Park Road. A programme of controlled growth rather than aggressive expansion has been the order of the day. This approach has found favour with Chinese owners, the most prolific orderers of VLCC tonnage today. “Chinese owners have placed half a dozen VLCCs with us, and indicate a willingness to place more tonnage with us,” he says.

When it comes to shipmanagement ‘size does matter,’ he says, but only up to a certain point. From an operational standpoint, there is little practical difference between running 50 vessels and 100 vessels. The economies of scale enjoyed by the larger organisations really only amount to a few per cent at best.

A more pressing issue is crewing. While salaries now

account for two-thirds of operating costs, recruiting and retaining quality seafarers has never been more difficult, he says. Across different nationalities, salaries have equalised: “there is not much of a pay gap between the European, Indian and Filipino seafarer.”

Perhaps in anticipation of these developments, Capt Sabnis was quick to establish a comprehensive in-house training scheme when he first set up the company in 2008. The company has a training facility in India and has invested in a Transas-supplied full-mission bridge simulator and a full-mission engineroom simulator for training of deck and engine officers.

The largest tankers benefit

Industry makes connections In 2015 the seventh Singtel Maritime ICT Roundtable sought to understand maritime industry attitudes towards cyber security, as well as where the challenges and opportunities lie*

AN OPERATION OF MASSIVE SCALE IS NOT REQUIRED TO MANAGE VLCCS, BUT CREWING AND BALLAST WATER ISSUES REMAIN SIZEABLE ISSUES, SAYS GOODWOOD SHIP MANAGEMENT MANAGING DIRECTOR ASHOK SABNIS

32 | SINGAPORE

A mix of vessel owners and operators joined with representatives

from the Maritime and Port Authority of Singapore and the National University of Singapore Centre for Maritime Studies for a two-hour discussion – moderated by Tanker Shipping & Trade editor Edwin Lampert – on what’s needed to ‘stay ahead of the maritime cyber security curve.’

Attitudes varied according to size of organisation, and type of trade. Cyber security is seen as a high-priority issue for those in the passenger ship industry, but not for those carrying cargo/freight. At the outset, the majority view among the shipowners/operators carrying cargo was that cyber

security is an emerging issue but presented little or no threat. But opinion shifted as the discussions progressed.

MTM Ship Management managing director Capt. Vijay Rangroo, a third-party manager of mostly tanker and bulk carrier tonnage, asserted that it would take “a few major attacks and disruptions before people take the threat more seriously.” He added: “There are so many other things out there that are more harmful to us than cyber-attacks. The maritime industry is not a high-priority target for hackers.”

Developing this theme, Singtel business development director Freddy Tan acknowledged that ‘cyber security for the maritime

Freddy Tan (NCS): Singtel studies showed that on average it takes 205 days for a cyber breach to be uncovered


SINGAPORE | 33

Riviera and leading international law firm Norton Rose Fulbright are organising the Maritime Cyber Security Summit on 21 June in London.

For more information please email: [email protected]

from boutique managementToday there are 140 cadets in the system. “We select them via open

campus interviews, letting applicants know within 24 hours whether they have been accepted. Those that make it are monitored for the last six months of their course, and subject to passing we enrol them into our induction course. In a phased manner we put them through their paces on three or four different ship types.” One of the students from

the very first intake is now a First Officer with the company. In parallel with absorbing new tonnage, Capt Sabnis says that

drydocking space will be at a premium this year. This situation has been exacerbated by the US Coast Guard’s revision of its policy letter governing extensions for the installation of ballast water management plant.

Previously, if a vessel had a compliance date of March 2016, an owner could obtain an extension up until January 2018 to install an approved ballast water management system. This requirement has now been relaxed: an owner can obtain an extension through to the next scheduled drydocking (which could be around 2020/2021 in some cases) subject to meeting two conditions.

First, an operator has to formally request the extension. Second, the applicant has to put forward a factual argument for the extension.

A consensus is building that full ratification of the ballast water management convention will take place this year, which means the industry will fall under a new implementation schedule as of 1 January 2016. In other words, owners will be able to install ballast water management systems at the next renewal survey, rather than by a set date. The upshot is that operators have rushed to bring forward their docking dates and complete their special surveys, in order to gain the maximum possible extension of the date by which they have to install a ballast water management system.

on cyber securitybusiness is at a bit of an early stage,’ but said that the status quo would not continue. As more applications and more electronics are introduced, and more connectivity and more bandwidth become available, so the topic will accelerate up the industry’s agenda. Developments that will drive this change, Mr Tan said, include new VSAT services, Inmarsat’s KA broadband service due for launch next year, and the trend towards remote maintenance, monitoring and assistance.

“I agree that it is important for us to do a risk-based assessment because we have limited budgets and limited manpower,” said Singapore Shipping Association executive

director Michael Phoon. In light of the cyber security threat he said the Association will prioritise the development of disaster recovery plans “because we don’t know what we don’t know – and if we are ever compromised we must make sure we are able to continue our business.”

Thome carried out a very thorough risk assessment of the entire company including hardware and software, infrastructure, employee attitudes and behaviour, operational routines, contingency planning, and information technology, said Capt. Michael P. Elwert. Taking issue with the idea of the ship as a floating island, he said the study showed you

cannot isolate ships from the office: “Today we synchronise a number of applications between ship and shore. They are integrated.” Overall, 78 risks were identified: “Some big, some small. There were a lot in which some simple and immediate measures could raise our overall security, such as restricting USB key access and ensuring that all staff password-protect their mobile phones.”

Capt. Elwert also made the point that cyber security is about more than hacking. “How many of you keep tabs on your vendors when they go on board your vessels? What exactly are they doing? We need to take a pragmatic approach, without going overboard. But the threat is real.” TST

*This is an abbreviated version of a fuller paper, Staying Ahead of the Maritime Cyber Security Curve, available for download at www.tankershipping.com/s/knowledgebank

Ashok Sabnis (Goodwood): When it comes to shipmanagement ‘size does matter’ but only up to a point

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SINGAPORE | 35

First Ship Lease (FSL) Trust has continued its recent improvement

in performance following measures to adjust the structure of its vessel portfolio to better reflect recent trends in each of the main shipping markets.

FSL Trust Management chief executive Alan Hatton says: “FSL Trust has taken various steps since August 2013 to address changing market conditions. The timely exit of the dry bulk market in early 2014 and the management of the portfolio of tankers to enable the Trust to secure medium-term contracts at improved rates with excellent counterparties during 2015

have built on the strong foundations of the performing bareboat charter book.”

The Trust’s goal, Mr Hatton says, is to bring shipowner efficiency into an investment vehicle by adopting best practices and standards. He deems this essential “given that the non-performance of bareboat charterers had left the Trust responsible for operating a growing part of its fleet.”

Mr Hatton explains that the realignment ensures that “the commercial and technical sides of the Trust’s business complement each other better. As part of this new approach, the Trust

has invested significantly in the maintenance and quality of its vessels. This is a necessary investment to ensure that vessels can perform as required, comply with regulations and secure good business in the future. FSL Trust will continue to look to run a fleet of modern and well-maintained vessels.”

Mr Hatton said that the Trust will continue to identify value-accretive deals in compelling sectors, as was the case with the recent acquisition of the MR tanker FSL Osaka.

The acquisition of FSL Osaka was the first purchase by the Trust which was not a sale and leaseback structure, Mr Hatton says. It was “a debt-free cash transaction, which signifies a departure in investment strategy for the Trust. This kind of deal will provide unit holders with a superior level of return to previous deals and will provide the Trust with strong cash flow,” he explains.

FSL Trust acquired FSL Osaka for US$21.8 million. The vessel joined the FSL fleet in November 2015. FSL Osaka is employed in a pool arrangement and is expected to deliver an annual cash-on-cash yield of 14.5 per cent based on a time-charter-equivalent rate of US$16,500 per day over the next three years.

In 2015, FSL Trust secured new time charters with quality counterparties in the MR and

Aframax sector at improved rates. These include a two-year time-charter agreement for crude oil tanker FSL Hong Kong and new time-charter agreements, worth up to US$61 million over the next three years, for Aframax crude oil tanker, FSL Shanghai and MR product tankers FSL Hamburg and FSL Singapore.

FSL continues improvement FSL Trust has realigned its fleet to reflect market trends, recently acquiring an MR tanker and disposing of two container ships

Womar Logistics operates a number of specialist tanker pools from its Singapore head office, including a pool for coated and stainless steel chemical tankers. An Aframax pool that it operates has seven vessels belonging to owners including Oldendorff Carriers, Schulte Group and Hanjin Shipping Co.

The company was founded in 2009 in Singapore when investors formed a joint venture with Heidmar to operate the Marida Tanker Pool. This pool comprised coated IMO II chemical tankers of 10,000 dwt to

14,000 dwt. The company went on to establish the Han Gang Tankers Pool with larger coated chemical tankers of 16,000 dwt to 25,000 dwt, the Stainless Tanker Pool with ships of 19,000 dwt to 25,000 dwt, and the Sakura Tanker Pool, with Aframax product tankers.

In 2014 Singapore-based shipowner BW Group took over the shares of Heidmar and added two existing and 11 newbuilding 20,000 dwt stainless steel chemical tankers to Womar’s fleet. Womar is 50 per cent owned by BW Group.

Womar carries out commercial management of the pools. It does not carry out technical management, which is the responsibility of the individual vessel owners. Some of them do this in-house, while

WOMAR POOLING TALENT

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others contract third-party technical managers such as Thome Ship Management and Hong Kong-headquartered Fleet Management.

Operations director Manish Jain says Womar commercially manages the pools with ships of up to 25,000 dwt. “Our optimum pool size is about 20-22 ships,” he says.

Womar’s pools operate on a profit-sharing model. All revenues and costs are covered by pool management. Profit is allocated using a formula that takes into account the various technical characteristics of each vessel.

Capt Jain says Womar has plans for substantial growth, in order to be able to extend its services to a larger dedicated fleet. It has a series of 19,000 dwt stainless steel chemical tankers under construction in Japan that feature an efficient design with low fuel consumption. The newbuild tankers will be operated in the Stainless

Tanker Pool. They are technically managed by Thome in Singapore.One of the new BW Group stainless steel tankers joined

Womar’s pool in January 2016. These ships are 146.5m long with a beam of 24m, 19,900 dwt with 22,000m3 total tank capacity in 20 cargo tanks. They are powered by an MAN B&W 6S40ME-B9.3 main engine with a maximum continuous output of 4,629kW. Space has been provided for the installation of an exhaust gas scrubber. The engine gives a service speed of 14 knots, with fuel consumption of 15.6 tonnes per day at the design draught of 9.7m.

The eco-design features also include a slimmer hull and devices such as a surf bulb on the rudder, a non hub vortex propeller and a stator fin. These and other design features meet the criteria set by oil majors.

Singapore-headquartered Ishima, which is part of Italian shipowner d’Amico, is expanding the fleet of tankers it has under management. At present, it is managing a fleet of 40 vessels and supervising 80 being built in South Korean, Vietnamese, Chinese or Japanese shipyards.

Only 20 per cent of the vessels under Ishima’s management are owned by d’Amico. Most of Ishima’s activity is the shipmanagement of third-party vessels.

During 2015 six vessels joined its managed fleet and in 2016 a further seven vessels

will be added. Ishima strongly believes that “the only way of maintaining the highest level of quality and safety is to centralise all activities in-house. For this reason, we have offices in India and the Philippines, and these companies are owned by Ishima. The biggest savings are made by maintaining the vessels at the highest possible standard. This enables our clients to gain the advantages that come with reliability and availability. In the present shipping market, charterers pay close attention to details, so the vessels need to be perfect.” TST

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T o date, there have been just a few crude shipments to Europe and one to the Caribbean. There also have

been reports of Japan buying US crude and condensate for loading in the US Gulf at the end of February and China buying another crude cargo for export in March. Many believe that US crude exports will remain limited in the short term for a number of reasons. Firstly, the WTI discount to Brent, a simple marker for the attractiveness of US crude for international markets, has narrowed.

When the US producers started campaigning for lifting the ban, the WTI discount to Brent was around US$20/bbl. Recently, WTI has at times, traded at parity with Brent due to expanded pipeline infrastructure from Cushing to the US Gulf, a global oversupply of crude and declining US crude production.

Apart from pricing, there are also limitations in terms of infrastructure. So far, exports of US crude have been almost entirely on Aframax tonnage as capabilities for larger shipments are limited.

Loading a Suezmax or VLCC tanker would require STS transfer. The LOOP terminal is the only facility where VLCCs could load directly. However, this

would entail the reversal of the Capline pipeline that runs from St James on the Louisiana coast to Patoka, Illinois, probably a multi-year project. Due to infrastructure limitations, Aframaxes are the main beneficiaries of the changes to US crude exports legislation, with Europe and South/Latin America the most likely destinations. To make large scale long haul economics attractive for Asia Pacific buyers, bigger parcel sizes are needed – on Suezmax and VLCC tonnage.

Plans exist to increase crude export capabilities; however, it will take several years for any major changes to take place.

Finally, the need for exports could also be questioned at present. The dramatic collapse in oil prices triggered the decline in US crude output, which has already fallen by 0.45 million b/d since April 2015. A further decline is anticipated this year and in 2017. The EIA expects US crude production to average at around 8.75 million b/d in 2016, down by 0.7 million b/d versus last year and a further drop of just over 0.25 million b/d is anticipated in 2017. If anything, this projected decline in US crude production together with the growing ability of US refiners to process very light domestic crude suggest a rising requirement for crude imports and not exports. This picture, however, is likely to change once oil prices recover and with it, the growth in US shale output. Yet again, with both Brent and WTI trading just over US$30/bbl and limited prospects for a major uplift in prices in the short term; the rebound in US crude production and with it, major increases in US crude exports are unlikely to happen any time soon.

For now shipyards have been the major beneficiary of the US achieving self-sufficiency in oil production, although last year there were no orders placed by American owners in American yards. Interestingly American yards don’t have any orders secured for 2018 and beyond,

Has lifting the export ban seen WHAT HAS BEEN THE IMPACT OF THE US GOVERNMENT LIFTING ITS DECADES-OLD BAN ON US CRUDE EXPORTS?

“Plans exist to increase crude export capabilities; however, it will take several years for any majors change to take place."

New oil and new tonnage is flowing out of North America

38 | NORTH AMERICA market overview


market overview NORTH AMERICA | 39

but they have a huge spike for total tonnage being delivered this year.

US interests, led by big financiers, have lost no time in acquiring suitable vessels to trade coastwise under protection of Jones Act subsidies and US flag-only protection. This is likely to produce more newbuilding orders for US building yards, supported also by the government’s desire to acquire merchant vessels able in times of crisis to be rapidly repurposed for US Navy or humanitarian use. The US Maritime Administration (MarAd) is currently running a Maritime Security Program that will offer US$3.1 million in annual subsidies to US-registered vessels involved in international trades. Owners employing foreign flags will simply change registry if successful with bids. A.P. Moller has exploited this to maximum advantage over many years. A 60-ship maximum has been earmarked, but it is unlikely that all slots will be taken up.

A year ago Congress debated the future of Jones Act protection. Opposition voices said it restricted free trade. Pleas fell on deaf ears, although the matter may be raised again in early 2017 when a new president has been elected. Merchant ship construction in home yards has never been a success, it being too expensive to build vessels. High costs for US-flag tonnage are absorbed by generous subsidies. Prospects for increased cabotage trade have prompted more US owners to engage in Jones Act business.

The major news centred on American Petroleum Tankers’ purchase of four newbuilding medium range product carriers under construction at the Aker Philadelphia Shipyard, for a total of US$568 million. Effectively they were builder’s account vessels under the joint venture Philly Tankers. Deliveries are due in 2016 and 2017, and the four are LNG-conversion ready. American Petroleum Tankers is a subsidiary of Kinder Morgan, having undergone rapid expansion since entering Jones Act business just over two years ago. The new quartet will raise the company’s fleet to 16 vessels, which includes acquisitions previously under financial company control. It has suddenly been

realised that US infrastructure needs upgrading to support the country’s oil products future arising from shale extraction. Newbuilding bunkering barges and articulated tug/barge units

(ATBs) have given a timely boost to smaller shipyards’ order intake. These are required to support lightering operations from deeper-draft tankers unable to enter ports.

This year could see a Torm listing. In 2015, Oaktree Capital Management, raised its shareholding stake in the Danish product tanker operator to 64 per cent, which many see as a prelude to an IPO.

Torm recently added to its 74 product carriers by taking delivery of four LR2 Aframaxes. These vessels have been designed to take advantage of the increased cargo carrying options presented by the Panama Canal. Six

options are attached. IPOS have waned in recent years. Last

year IPOs – led by Euronav and Gener8 (which got less than it had targeted) – raised US$825 million on the New York stock exchange, well down on the US$1.64 billion raised in 2014 and US$2.97 billion in 2013. TST

*With additional reporting by Barry Luthwaite. Data as at 2 February 2016

Speculation mounts that Torm will list in 2016

TormUS$1,776

Gener8 MaritimeUS$2,789

EuronavUS$2,652

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classification CHEMICAL CARRIERS | 41

Emission control limitations are set to be introduced in three areas in China that could impact chemical

carrier operations in up to 11 ports. China is implementing sulphur limitations in the Hong Kong/Guangzhou area, in the waters around Shanghai and in the Bahai Sea, Tianjin and Dalian areas. A limit of 0.5 per cent sulphur in fuel will initially be introduced by ports on a voluntary basis, but it is due to become mandatory from 1 January 2017.

DNV GL Maritime tanker segment director Catrine Vestereng says these limits will challenge chemical tanker owners as they did when similar limits were enforced in Europe’s emission control areas of the North Sea and Baltic in January 2015. “The main challenges when it comes to low sulphur fuels are fuel tank capacity, and those related to the use of ultra-low viscosity compliant fuels in two-stroke main engines,” she explains. “As a consequence of this, we see a number of owners contemplating the installation of exhaust gas cleaning systems and LNG fuel systems, both for new ships and as retrofits for existing ones,” she says. But the introduction of 0.1 per cent sulphur in higher-viscosity heavy fuel oils could simplify operations, if the quality proves to be acceptable.

In Europe, plans to introduce annual CO2 emission reports between ports have caused concerns among owners and class. The European Commission wants owners of all ships of more than 5,000gt operating to and from EU ports to submit their plans to monitor, report and verify emissions by 31 August 2017.

CO2 monitoring is due to begin on 1 January 2018, and verified emission reports are to be submitted to the commission by 30 April 2019. Owners have voiced concern that these rules could lead to pressure on owners to reduce emissions. They said this would be difficult for parcel tankers because of the multi-tank design of the ships, and the energy-consuming operations and the short voyages they perform.

Changes to NOx rules in North America’s emission control area are also causing concern among owners and class. From 1 January 2016, new ships that are expected to operate in US and Canadian waters will need to comply with tier III NOx requirements in Marpol Annex VI. Ms Vestereng says that to avoid these regulations, there were a number of keel layings on newbuilding orders prior to the end of 2015. To meet tier III requirements, ships will have NOx abatement technology for engines installed, such as selective catalytic reactors. “The issue of tier III compliance

Asian ports introduce sulphur fuel restrictionsEnvironmental regulations, including operations in emission control areas and upcoming ballast water management rules, are front and centre in classification society efforts

by Martyn Wingrove

RIGHT: Catrine Vestereng (DNV GL): “We see a number of owners contemplating the installation of exhaust gas cleaning systems and LNG fuel systems”

42 | CHEMICAL CARRIERS classification

may also increase the interest in the use of alternative fuels such as LNG, as low pressure gas engines appear to have emissions below those of the NOx tier III criteria,” Ms Vestereng adds

Bureau Veritas manager for tankers Carlos Guerrero agrees that changes to Marpol regulations will affect chemical tanker design and operations.

He says that the revision of the certificate of fitness that is referenced in Chapter 17 of the IBC Code and several IMO Maritime Safety Committee circulars is causing some owners to retrofit chemical tankers.

“Some operators are replacing flame arresters (P/V valves) in order to comply with this regulation, or at least to certify again the equipment to be in compliance,” he says. “We have also been

involved in some conversions of tankers for LNG fuel, and there are some others under construction with this solution in order to comply with IMO, EU and US regulations with regards to air pollution.”

The expected introduction of ballast water management legislation has also meant challenges for owners and class. For IMO Type I chemical carriers there is the added complication of ballast water providing a safety barrier for cargo tanks.

This means there are two ballast water systems on board, says Italian class society Rina marine business general manager Paulo Moretti. He explains that initially this would have meant owners installing two separate ballast water management systems.

Owners thought this was unacceptable, so a compromise

was agreed. The ballast water around the cargo tanks is an additional precaution required by IMO to prevent cargo spillages to sea in an accident.

“On chemical carriers there are dangerous areas, in contact

with the cargo tanks, and safe areas,” Mr Moretti says. “IACS has come to an agreement for a uniform system, so it is possible to have one ballast water management system, as long as the ballast water in the danger

“For IMO Type I chemical carriers there is the added complication of ballast water providing a safety barrier for cargo tanks”

classification CHEMICAL CARRIERS | 43

area does not mix with that in the safe area.” There needs to be segregation between the two ballast water areas. “This will prevent the spread of contamination of ballast from the danger area to the safe area,” he adds.

IMO’s ballast water management convention is close to being ratified. Countries representing 34.56 per cent of global tonnage have signed up, and only 35 per cent is required for the convention to enter into force.

But for tankers operating in the US, rules are coming from the US Coast Guard.

DNV GL senior principal surveyor Olav Tveit says: “There are still some uncertainties related to the US Coast Guard requirements for ballast water management systems approval,” he says. “The technology is still considered new for tankers, and there are uncertainties related to operation of some systems in hazardous zones and with non-saline and muddy waters.”

Lloyd’s Register design innovation strategic manager Sun-Gu Park expects other changes to Solas and the IBC Code will affect chemical tanker design.

He says updates require new chemical carriers of more than 8,000 dwt to have fixed inert gas systems to prevent explosions and fires during cargo handling.

On chemical tankers, inert gas is required after the cargo tank has been loaded but before unloading begins, and shall continue to be applied until that cargo tank has been purged of all flammable vapours. Owners are specifying that onboard inert gas systems should be nitrogen generators with a capacity of 125 per cent of the unloading rate.

Solas amendments mean designers need to reconsider fire resistance and ventilation on chemical tankers. “The costs for providing additional

inspection hatches, fire dampers and extended length of insulation along the ventilation ducts should be considered,” says Mr Park. “The requirements concerning the location of ventilation openings and the arrangement of ducts, and the requirements for galley exhaust ducts, should

also be considered at the design stage,” he says.

LR is currently working on the development of a chemical tanker. A feature of this design is a horizontal corrugated bulkhead arrangement.

Mr Park explains: “We have carried out direct fatigue analysis using our ShipRight

FDA Level 3 program. This is a first-principles direct calculation for spectral fatigue analysis that is applicable to any structural detail.

The ship’s motions and its induced loads are determined using a first-principle direct calculation procedure of wave loads and ship motions.” TST

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44 | CHEMICAL CARRIERS trade

The bulk liquid chemical carrier market is ‘special’ in that it covers a wide

range of products, often requiring different containment systems, leading to a number of different vessel designs and configurations. In a charter market where contracts of affreightment predominate, it might be described as more service orientated than, say, the oil transportation sectors. This leads to a number of different business models in which owners and operators provide services that are anything from ‘around the world’ to niche businesses defined by geographical region and/or the design of vessel and products carried.

Within this there are owners and operators for whom a long-term commitment to the sector is a principal aim, and those that might be seen more as asset players. To try and

generalise about strengths and weaknesses, and opportunities and threats, would be dangerous. What can be said is that this ‘special’ market has over the years attracted more players with the ability to offer services to its clients in the chemicals industry.

Nevertheless, in recent years owners in the chemical carrier market have experienced many of the same threats as owners in the oil transportation sector: oversupply, a slowdown in the world economy and trade growth, high bunker fuel prices, and tougher regulation. Of late, earnings have improved. Lower bunker prices and continued slow steaming go some way to explaining this trend. Buoyant demand in the products markets has also helped the supply–demand balance as vessels capable of carrying

both chemicals and products are presently drawn to the higher returns available in the products segment.

Our calculations show that vessels capable of switching between the product and chemical tanker segments fixed 24 per cent of the reported spot business in the chemical market in 2014 and 2015.

Numerous new chemical plants are slated for the Middle East, the USA and China, and newbuilding deliveries have been minimal. These are, perhaps, reasons to be optimistic.

Yet the OECD has again downgraded its estimates of the world economy for 2016. Economic growth this year will be lower than last year, with only a modest recovery forecast. China’s latest five-year plan calls for greater self sufficiency in

chemicals. Producers in the USA and the Middle East that have the advantage of low-priced feedstocks may move further downstream to extract additional value from the supply chain. Looking at chemical carrier supply, the newbuilding orderbook has risen back to around 25 per cent of the existing fleet. These are reasons to be cautious.

We calculate the current fleet of chemical carriers that habitually trade in the chemical sector to be about 18.3 million dwt. If you look at the age profile, it is a very young fleet. Less than 1 million dwt in this fleet is over 20 years old.

Another important consideration is the number of vessels capable of switching between the chemical and product segments. A significant downturn in the products segment will see a greater number of vessels return to the chemical tanker market. TST

*Charles Lawrie is a co-founder and director of consultancy Richardson Lawrie Associates

A GROWTH IN METHANOL TRADES LOOKS LIKELYMethanol trade is expected to boost deepsea chemical tanker trade. But a full newbuilding orderbook and competition from product tankers could constrain growth, says Charles Lawrie

Base case Upside casePlanned Methanol Capacity – USA, China and Middle EastCapacity in mln tonnes

174

252

19

design CHEMICAL CARRIERS | 45

Deltamarin develops new chemical carrier designDeltamarin has

developed a new design for a series of

38,000 dwt chemical tankers under construction in China. The Finnish naval architect is unable to elaborate on the Ch.Delta design for contractual reasons, but says it is based on the design principle of the existing Delta series, of which the B.Delta bulk carrier was the first.

The Ch.Delta tanker design was developed because owners are ordering larger vessels to meet growing demand for greater cargo parcels. Deltamarin ship design sales director Konstantinos Fakiolas says main fleet owners such as Odfjell, Stolt Nielsen and Navig8 were concentrating their renewals on stainless steel tankers in the range of 33,000 dwt to 38,000 dwt, such as the Ch.Delta design.

“The major developments are following the principle of cargo capacity increases versus keeping as close as possible to the main trade dimensions and limitations,” Mr Fakiolas explains. “This is while reducing fuel consumption and improving ship energy performance, which is the mainstream of eco-ship designs.” He says other owners were replacing ageing 15,000 dwt tankers with ships of around 20,000 dwt, and that there is demand for chemical tankers of 25,000 dwt. “It seems that owners prefer stainless steel tanks for larger than 30,000 dwt IMO I or II chemical tankers, so as to have flexibility for the carriage of multiple cargoes. As for smaller than 25,000 dwt vessels, the dominant preference is for coated tanks.”

The latest designs need to comply with shallow draught requirements in some ports, and to have the operational flexibility that owners need. “The main elements needed are a high number of tank segregations to cover the variety of cargo types, lower fuel consumption, operational optimisation and energy efficiency,” Mr Fakiolas says. Owners are also looking for improvements in cargo handling, loading, unloading and safety arrangements. “They also want improved flexibility, such as effective and fast cleaning of cargo tanks,” he adds.

Mr Fakiolas says some newbuildings were designed with facilities that would enable owners to retrofit ships for LNG fuels in the future: “Ships can be prepared for future use of LNG through the installation of the minimum equipment, foundations and piping.” He adds that owners could install LNG tanks and engines, which are expensive items, at a

later date. Mr Fakiolas expects broader use of LNG fuel after 2020, especially in regional trades and emission control areas.

New requirements from the Oil Companies International Marine Forum (OCIMF) are also having an impact on chemical carrier design. “OCIMF has recommended the installation of Power Take in (take-me-home) arrangements, so that a chemical tanker may be navigated safely at a port or sheltered location in the case of major damage to the main propulsion,” Mr Fakiolas explains. “Many owners are installing this arrangement in newbuild chemical tankers.”

Marine engineering company ICE Group has developed fuel-efficient IMO II chemical tanker designs to meet increasing demand for fuel economy as well as restricted emission requirements. Executive chairman Steinar Draegebo says some of the main developments in chemical carrier design are lowering fuel consumption, improving cargo-handling efficiency, reducing the requirements for ballast water and optimising loading and discharge capacities.

“Designers are reducing fuel consumption by focusing on hull optimisation and the selection of propulsion systems such as a large diameter slow-speed propeller in combination with high-efficiency rudder design,” he says. “Owners want an optimal sizing of crew by focusing on efficient cargo handling and general operation of the vessel.” Mr Draegebo adds that naval architects are also improving bow designs in order to reduce resistance in a head sea (when waves run directly against the course of a ship), as well as improving resistance in intermediate loading conditions. TST

The Finnish naval architect has introduced the fuel-efficient 38,000 dwt Ch.Delta design for tankers under construction in China, while ICE has developed IMO 2 and IMO 3 tanker designs

by Martyn Wingrove

Pictured the B.Delta design for bulk carriers. The ‘Delta design series’ is being expanded to cover tankers and will be known as Ch.Delta

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markets CHEMICAL CARRIERS | 47

On average, vessels are earning 6 per cent more on time-charters with extended periods and securing 10 per cent more in

spot business earnings, versus last year. Supply/demand is stable, with the right

amount of tonnage available. The newbuilding backlog stands at 199 units aggregating 5,168,549 dwt. Within this total, 59 vessels totalling 1,497,691 dwt were firmed in the last year against 46 commissioned in the same period, adding 1,254,698 dwt to the global fleet. Given the newbuilding orderbook backlock, prospects for chemical transport are very favourable for owners and operators over the next two years.

Some owners are taking the opportunity to renew their fleets: the maximum age limit now peaks at 20 years. This applies particularly to Scandinavian operators who would otherwise get 25 years trading out of one owner because the vessels are so meticulously maintained. In the second half of 2015 there was a steady stream of small and medium newbuildings, most of which were fully stainless steel. Japan has proved the main beneficiary, with orders from overseas as well as domestic players.

With a strengthening economic position, Japan is well placed to compete for intra-Asian business. With Europe cutting back on storage capacity, tonnes per mile is contributing to higher earnings on longer-haul routes. The pace of Middle East petrochemical industry

development is rapidly increasing. A further boost from Iran is due, now that sanctions have been lifted. Iran will take time to adjust, so there will be a boost for charter business. More petrochemical capacity will come on stream in the US, giving further impetus.

A worry for owners is that fewer quality yards are available for construction of sophisticated designs, especially in the parcel sector. Bankruptcies are mounting in China: the biggest casualty is Jo Tankers, where eight chemical tankers were pulled at Nantong Mingde following dissolution of the builder.

New sources of finance are present. Private equity is playing a vital role in the owners’ renaissance. York Capital Management and Kohl Kravis Roberts have played a major role in Connecticut-based Chembulk Tankers, which has risen debt free and independent from the ashes of Indonesia’s Berlian Laju Tanker (BLT) since the start of December of last year. The whole restructuring process took four years and the private equity owners are now studying fleet acquisitions on a newbuilding, secondhand or charter basis. This has seen 23 ex BLT chemical tankers wholly owned into the Chembulk Tankers fleet.

A further 12 have switched on a time-chartered basis. TST

Source for all figures: BRL Shipping Consultants. Data as at 26 January 2016

RATES NOT SEEN SINCE 2009 CHARACTERISE TODAY’S CHEMICAL TANKER MARKETS

by Barry Luthwaite

CHEMICAL MARKETS ARE IN EQUILIBRIUM

CHEMICAL TANKERS DELIVERED SINCE 1 JANUARY 2015

Grand total

46 vessels

1,254,698 dwt

8Small

Chemical

52,481 dwt

11Medium Chemical

194,435 dwt

22Handysize

758,057 dwt

5Handymax

249,725 dwt

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48 | LAST WORD

With impeccable timing that meant more than 300

guests could be ‘legally present’ without fear of contravening sanctions, the National Iranian Tanker Company (NITC) held its 60th anniversary celebrations. It was of course no coincidence: the day and hour had been chosen to coincide with the substantial lifting of international sanctions against Iran.

The Chinese were present in large numbers. A Chinese bank voiced interest in a US$5 billion investment to expand Iran’s tanker fleet. The chairman of Guangdong JOVO Group, a trader of LNG, stated in the local press that his company wants to establish a joint venture with NITC to produce LNG floating production facilities. The JOVO Group wants to buy the output from the joint project, which will secure their LNG procurement needs.

Proceedings were opened by NITC managing director Dr Ali A. Safaei. Familiar faces from the company’s recent past were also present, notably Mohammad Souri, the well-regarded previous chairman and managing director of NITC. Today Mr Souri advises the petroleum minister, Bijan Namdar Zanganeh, on strategic assets.

Mr Safaei set the scene with a presentation detailing NITC history, along with indications of its potential

future course. The tanker company became a private entity in 2000. Its shareholders are the National Iranian Oil Company pension fund (34 per cent), the government pension fund (33 per cent) and the Iranian social security fund (33 per cent). Mr Safaei said that a tranche of shares could be made available to the public “at some point in time.”

In 1976, NITC established a joint venture with BP comprising 10 tankers. Today, VesselsValue.com lists NITC’s fleet as numbering 56 vessels with an average age of 10 years. Five of the VLCCs were built in 1999, and two Suezmaxes were delivered the same year. Three more were built in 2000, and five Aframaxes were also built that year. With the current oil glut these units might serve a strategic purpose as storage tankers, while NITC assesses the commercial cost of putting some of them through drydocking/special surveys. In times of high demand, some oil majors and traders will charter units over 15 years of age.

That said, a fleet renewal programme is on the agenda. This will cover not only NITC’s requirements, but also those of Islamic Republic of Iran Shipping Lines (IRISL Group). NITC has 2,350 seafarers on its books, as well as 565 shore-based staff. They were trained at NITC’s Pars Maritime Training Institute, which was established 30 years ago. Officials stated that Iran

holds a considerable amount of condensate at sea. This will go on sale immediately after the removal of sanctions.

As well as the bigger picture relating to the grand ambitions for Iranian oil and gas reserves, smaller details were not neglected. One notable point of interest is the impending reactivation of Iran’s access to the SWIFT (Society for Worldwide Interbank Financial Telecommunications) system to facilitate transfer of funds. This should end the need to carry large amounts of cash when trading and operating in Iran.

Time will tell whether, in the words of Iranian president Hassan Rouhani, the lifting of sanctions has opened a new chapter in the country’s ties with the world. Those present will know that while Iranian-owned and -controlled vessels will now be available to international charterers, they will continue to be insured by Iranian domestic insurers. This coverage is less comprehensive than that found on the wider international market.

Iranian optimism about this new chapter has been reflected in the stock market, which has registered gains of 6 per cent since the beginning of the year. This performance is a marked contrast with that of regional markets, and most major international ones, too. TST

*Sultan Riaz Khan is president and CEO of consulting firm Tavlon Commercial Enterprise

IRAN IS OPEN FOR BUSINESS The 60th anniversary celebrations of NITC coincided with the lifting of sanctions against Iran. Sultan Riaz Khan had a ringside seat*

“Iranian optimism about this new chapter has been reflected in the stock market, which has registered gains of 6 per cent since the beginning of the year.”

Riaz Khan: Shares in NITC could be made available to the public “at some point in time”

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Tanker Shipping & Trade February/March 2016

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