Page 1

Natural Gas: Dick Marler: Chairman, Innovations: In President & CEO, Signal Int’l Naval Architecture Why It’s Cheap THE MARITIME EXECUTIVE JOSEPH CORVELLI / GIBDOCK

Standard of excellence

May/June 2010

Global Shipyard Overview


 Global SaleS and Support  extenSive ranGe of productS and ServiceS  onGoinG product development

clockwise from top left VO LU M E 1 4 , E D I T I O N 3 , M AY / J U N E 2 010

ScHelde naval patrol 9113 damen aSd tuG 2810 damen faSt crew Supplier 5009 damen platform Supply veSSel 7216 damen Stan patrol 4708 damen cutter Suction dredGer 450

D A m e N s H i p YA r D s G o r i N c H e m industrieterrein Avelingen west 20

4202 ms Gorinchem

p.o. Box 1 4200 AA Gorinchem

President & CEO Gibdock

member of the DAmeN sHipYArDs GroUp phone +31 (0)183 63 92 67 fax +31 (0)183 63 77 62

the Netherlands

Covers.indd 1 MarEx-38-Gibdock-C1-C4-052610.indd 4

5/25/10 11:58:09 AM

MarEx-38-Gibdock-C1-C4-052610.indd 1

5/28/10 2:20 PM PM 5/25/10 1:01:24

YOUR WORLD IS OUR WORLD. YOUR JOB IS OUR JOB. YOUR BUSINESS IS OUR BUSINESS. Faststream is the global people specialist. We find and match outstanding people from all over the world to specialist positions throughout the maritime, oil & gas and crewing sectors. We have connections in over 150 countries and international offices that cover The Americas, Europe and Asia.

w: e: t: 954-467-9611 Covers.indd 2 MarEx-38-Gibdock-C1-C$-052610.indd 2 classnk_safety_a4_ad.indd 1

5/25/10 11:56:10 AM 27/1/10 08:53:56

MarEx-38-Gibdock-C1-C4-052610.indd 3

5/28/10 2:20 AM PM 5/25/10 11:56:53

A Shipbuilding Original San Diego, California MarEx_38.indd 1

5/25/10 1:42:44 PM


On a planet that’s 71% water, we’re 100% ready to solve your toughest maritime challenges. Right now, Foss tugs and people are pulling for customers from Seattle to Singapore, Boston to Oslo, Piraeus to Panama, and all points in between. Need a big assist? Call 800.426.2885. Or visit our world at

Always Safe. Always Ready. W o r l d w i d e M a r i t i m e Tr a n s p o r t a t i o n • M a r i n e L o g i s t i c s • E n g i n e e r i n g • F u l l S e r v i c e S h i p y a r d

Foss_Maritime_Executive.indd 1 MarEx_38.indd 2

9/21/09 5/25/10 3:39:12 1:42:49PM PM

M ay / j u n e 2 010


Contents 26 32 Case Study:

Executive Achievement

8 | Dick Marler

Chairman, President and CEO, Signal International, LLC


Jewel of Gibraltar By tony munoz


12 PM

Volume 14, Edition 2

Executive Interview:

Joseph Corvelli, President and CEO, Gibdock by tony munoz

by MarEx Staff

Washington Insider

12 | Deepwater Horizon Oil Spill Rocks Washington Policy Makers by Larry Kiern

36 | Trends in Naval Architecture - A Global Perspective by Robert C. spicer, cpt


16 | Why Natural Gas Prices Must Rise by Michael J. Economides

42 | Combating Emissions and Fuel Consumption Through Modern Science By tony munoz

Upgrades and Downgrades

20 | Woodstock for Capitalists

46 | Wheeling & Dealing

by Jack O’Connell

by Barry parker

MarEx_38.indd 3

50 | Green Thrusters by Marex staff

53 | Global Shipyard Directory 56 | Book Review

Off the Shelf: The International Law of the Shipmaster by jeff mudgett

5/25/10 6:44:01 PM

Half Page Vert


3:29 PM

Page 1

publisher / Editor-in-Chief

Tony Munoz :: Senior Editor

Jack O’Connell :: Assistant editor

Nichole Williamson :: Art Director

Evan Naylor :: Assistant Art Director

Daniel Bastien :: Senior Vice President, Sales & Marketing

Brett Keil :: Advertising Sales Manager

Chris Clarke :: Director of Sales - Asia

Philipho Yuan :: Director–Interactive Media

Carlos Dominicis :: Internet Services Manager

Steven Gonzalez ::

The Maritime Executive, LLC (ISSN 1096-2751) 3200 S. Andrews Avenue, Ste. 100 Fort Lauderdale, FL, USA 33316 Telephone: +1 954 848 9955 Toll-Free: 866 884 9034 Fax: +1 954 848 9948 TME: China Of.ce No9 EPD, Yangzhou Export Processing Zone Yang Zi Jiang South Road Yangzhou, CHINA, 225131 Telephone: +86 514 8752 7700 or +86 159 9512 9423 For subscriptions please visit The Maritime Executive (ISSN 1096-2751) is published bi-monthly by The Maritime Executive, LLC, 3200 S. Andrews Avenue, Suite 100, Fort Lauderdale, FL 33316, Tel. +1 954 848 9955. SUBSCRIPTIONS: Domestic subscription rates are $36, per year. International subscription rates are $86, per year. Application to mail at periodicals postage rates is pending at Fort Lauderdale, FL and additional mailing offices. For single copies of the magazine or reprints of articles appearing in this magazine, contact The Maritime Executive at (866) 884-9034. COPYRIGHT: © Copyright 1996 by The Maritime Executive. All rights reserved. The Maritime Executive is fully protected by copyright law, and nothing that appears in it may be reproduced, wholly or in part, without written permission. We cannot be responsible for the claims of manufacturers in any of the items. Editorial manuscripts and photos will be handled with care but no liability is assumed for them. POSTMASTER: Please send address changes to The Maritime Executive, 3200 S. Andrews Avenue, Suite 100, Fort Lauderdale, FL 33316. Change of address notices should be sent promptly with old as well as new address and with ZIP code or postal zone. Allow 30 days for change of address.

MarEx_38.indd 4

5/25/10 3:28:18 PM


Intershield 163 Inerta 160 ®

Ice breaking performance With a 30 year track record, Intershield®163 Inerta 160 is a proven abrasion resistant coating for underwater hulls. Designed for ice-going vessels it offers ultimate performance in the harshest of conditions at temperatures as low as -50oC. Isn’t it time your most precious assets were under our protection? To find out more visit

0944301 Product Ads aw.indd 4 MarEx_38.indd 5

17/12/09 15:23:59 5/25/10 1:43:16 PM


Not Enough Lifeboats Tony Munoz

As we enter the halfway mark of 2010, it seems like a lot of folks are still tucked away in their foxholes waiting for the smoke to clear. And no doubt, 2009 had a lot of it. Last year global trade took its sharpest decline in 70 years, contracting 12.2 percent. AP Moller Maersk, the world’s largest ship operator, posted the first full-year loss in its illustrious 105-year history. Chinese and Korean shipyards, which account for about 73 percent of the world’s shipbuilding orders, needed bailouts by their respective governments. Syndicated shipping loans by the top 20 lenders dropped 38 percent to a total of $33 billion. The result was massive layoffs, empty shipyards, anchorages filled with idle tankers, bulkers and container ships, slumping oil prices, and fleets of boats, tugs and barges sitting at the docks waiting for the winds of change. Sadly, there just weren’t enough lifeboats to save all of the companies and people that have either disappeared or filed for bankruptcy. Like you, I was glad to see 2009 in the rearview mirror. 2010 began on a hopeful note when on March 31 President Obama announced his Administration would review plans to open the eastern Gulf and Atlantic Outer Continental Shelf (OCS) to exploration and drilling. The offshore and shipbuilding industries reveled at the possibility of a renaissance in the OCS. But on April 20 the Deepwater Horizon explosion crushed any and all hopes of a U.S. shipbuilding and offshore revitalization. As BP, Transocean, Halliburton and Cameron are tested by the most onerous caveat of the Oil Pollution Act of 1990, the one called “unlimited liability,” an aggressive finger-pointing blame game has begun as to who is really responsible. Remember, Exxon spent $4.5 billion on the Valdez cleanup, and insurance experts are saying BP may very well have to pony up as much as $15 billion. More importantly, as BP and Transocean lobby Congress to limit their liability, the American taxpayer may once again be on the hook for corporate misdeeds. No matter what happens when this environmental catastrophe concludes, there are not enough lifeboats to get everyone home safely. But not to worry. We persevere, and this latest edition of MarEx contains our usual ample serving of intellectual capital for your reading pleasure. Our global shipbuilding issue went all the way to Gibraltar to get a unique view and cover story on the rebranded Gibdock and its enterprising CEO, Joseph Corvelli. The Gibdock shipyard was opened over a century ago by the British Royal Navy and has a long and storied history. More recently, it has built a phenomenal reputation as a premier ship repair and conversion yard under Corvelli’s inspired leadership. Additionally, our Executive Achievement section features Dick Marler, Chairman, President and CEO of Signal International. Marler, a shipbuilding veteran, has strategically positioned the Signal yards to be a major force in the Western Hemisphere. Not to be outdone, our columnists have once again hit all the right notes. Larry Kiern explains the jockeying on Capitol Hill over the fallout from the Deepwater Horizon and what lies ahead for offshore drilling on the OCS. Jack O’Connell takes us to the “Woodstock for Capitalists” as he traveled to Omaha to attend Berkshire Hathaway’s annual meeting. While most companies quietly announce annual meetings hoping the faithful will stay home, Berkshire’s Super Bowl of annual meetings draws close to 40,000 shareholders. This article will certainly be worth the read – hey, we’re talking Warren Buffet! And Dr. Michael Economides explains why gas is so cheap, but reminds us that it won’t last long. It’s another great article from the renowned professor of energy. Returning author Barry Parker offers a timely look at ship financing aptly titled “Wheeling and Tony Munoz can be contacted Dealing.” If you enjoy ships and money, this is your read. MarEx newcomer Robert “Bob” Spicer at tonymunoz@maritime-exec- takes us on a global tour of naval architects and their firms, reviewing technologies and looking into with comments, input the future of such things as 3D modeling. Concerns about ship emissions continue to be at the forefront of pending governmental regulations, and MarEx found a company that has been working on and questions on this editorial or any other piece in this maga- the issue for almost a decade. Marorka in Iceland has some innovative systems that can monitor and regulate emissions and fuel burn. Reading about this company will save you lots of time and money in zine. The Maritime Executive welcomes your participation in dealing with emission compliance. Not enough lifeboats? Maybe we won’t need them. Thanks for staying with us! our editorial content. Mar Ex

M ay / j u n e 2 010




MarEx_38.indd 6

5/25/10 1:43:17 PM

WÄRTSILÄ® is a registered trademark.

THE LARGEST OFFERING OF ECONOMICALLY SOUND ENVIRONMENTAL MARINE SERVICES. Wärtsilä Environmental Services minimizes the ecological footprint of ships in operation – so that you can meet increasingly stringent environmental demands while optimizing your business results. For example, we have catalysts that treat NOX emissions and scrubbers for removing SOX. Our oily water treatment systems meet the most stringent standards. We also offer total service packages covering start-ups, installations, engineering work, maintenance, repairs and more. Read more at

MarEx_38.indd 7

5/25/10 1:43:18 PM

M ay / j u n e 2 010





By MarEx Staff


Chairman, President and CEO, Signal International, LLC Dick Marler has a vision to build a world-class shipbuilding and repair organization in the U.S. Gulf of Mexico and beyond – into other key markets in the Western Hemisphere. The vision took shape in 2003 when Marler, with over 25 years of shipbuilding experience behind him, led an investment group in the purchase of the premium assets of the Friede Goldman Halter (FGH) bankruptcy. To sidebar that purchase, early this year Signal acquired the assets of the Bender Shipyard in Mobile, Alabama, adding another gem of a facility to the company’s portfolio. Today, Signal International has undergone a complete makeover from its single focus of repairing and upgrading offshore drilling rigs. Thoroughly diversified in the marine industry and with the

MarEx_38.indd 8

addition of the Mobile yard, Marler is confident that Signal will continue to grow and be successful.

Formula for Success

In addition to rig and ship repair, Signal is reestablishing its shipbuilding capability. Marler’s flagship for newbuild construction is the yard in Orange, Texas, where the company invested $40 million in infrastructure improvements and can build vessels up to 850 feet in length. The yard sits on 77 acres with 5,700 feet of waterfront and over 500,000 square feet of covered building halls and shops. Among the innovations introduced was a Continuous Flow Manufacturing (CFM) system designed to ensure commitments on

5/25/10 1:43:25 PM

A young company with a long history is making an impact in more ways than one.

for example, its operations in Mississippi and Texas recorded a remarkably low rate of just 0.22. At its Mobile ship repair yard there have been no accidents since the acquisition, which has just passed the 100-day mark.

Journey to the Top

For Marler, the journey to the top of the shipbuilding industry began in 1974 when he joined Ingalls Shipyard, which was a division of Litton Industries at the time. The experience was enriching, he told MarEx, as a mentor guided him through various key jobs in cost-estimating and engineering, planning, contracts administration, project management and business development. Eventually, he was promoted to Vice President of Business Development, a position he held for a number of years until he became Senior Vice President with multiple responsibilities in shipyard management. In 1998, Marler briefly left the shipbuilding industry and became President of a Washington D.C. startup medical software company. He determined that the fastest growth strategy lay in establishing partnerships and licensing. Marler implemented this sales plan and eventually licensed his company’s core products to the giant McKesson Corporation. About this same time, FGH declared bankruptcy. Marler crafted a detailed business plan and joined with an affiliate of the Texas Pacific Group, a Washington, D.C.-based hedge fund named ACON, and eventually purchased FGH’s prime assets. In February 2003, Signal

M ay / j u n e 2 010

competitive prices and deliveries and to enhance safety. The CFM strategy is based on the systematic delivery of materials to workers, strategically placing required tools in the right place in the assembly and building process to maximize productivity and ensure each worker understands the safety requirements of the process. Additionally, the yard utilizes what is known as VMA (Visual Management Aspect), which incorporates lean manufacturing principles on the shop floor for production procedures and labor utilization. Also employed is the Visual Factory (VF) concept, which provides essential information through signs, charts and LEDs. These processes, backed by a stringent Quality Management System (QMS), have led to certification and recertification under ISO (currently ISO:2008) and an outstanding safety record. Signal is aggressively marketing the Orange facility to build integrated tug/barges, oil rig platforms and next-generation offshore support vessels. In 2003 Marler set two important goals to get Signal moving down the path to success – improved quality and safety. In its first year of operation Signal became ISO-compliant and developed a framework for instilling a corporate culture of safety. Most shipyards determine quality by measuring welding reject and re-work rates, which in the case of Signal is now less than one-half percent. Regarding safety, Signal has steadily driven down its OSHA reportable incident/accident rate. So far in 2010,




An online degree from AMU can help you maintain your edge. AMU offers flexible course planning, experienced faculty, and the ability to transfer credit from approved institutions such as GMATS and MITAGS. More than 70 online degree programs including: » » » »

Transportation & Logistics Management Business Administration Emergency & Disaster Management Information Technology

Or graduate certificates in: » Strategic Leadership » Organizational Management Photo: US Army Corps of Engineers

Get started today or attend a virtual open house.

70,000 students can’t be wrong | American Military University is a member of the regionally accredited American Public University System.

MarEx_38.indd 9

5/25/10 1:43:27 PM

M ay / j u n e 2 010

EXECUTIVE ACHIEVEMENT Offshore Wind Farms and More

As Marler and most industry observers see it it, there are growing opportunities in offshore alternative energy and, yes, we’re talking here about wind farms. Marler noted that today’s wind farm technology supports shallow water installations, but the trick will be to build the farms in deepwater where the prevailing winds are much higher. Besides, for tourism and coastal communities, moving the wind farms farther off the coast means “out of sight, out of mind.” And, of course, deepwater installations will necessitate floating platforms, and Marler says that’s Signal’s primary business. (As we go to press, the Gulf of Mexico is under siege from the massive oil spill caused by the Deepwater Horizon disaster on April 20. Consequently, the debate over offshore drilling on the U.S. Outer Continental Shelf will be greatly impeded in the near to long-term future – another incentive for alternative clean energy solutions like offshore wind farms.) MarEx asked Marler what Signal’s greatest hurdle has been since its founding seven years ago. “We have a lot of talented management and craft employees who have worked extremely hard to build and organize a top-notch shipbuilding operation,” he said, “and it’s frustrating when the world economy and oil and gas prices falter and we are forced to reduce that talent pool. But our company has quality facilities strategically positioned in the Gulf labor pool where shipbuilding is a way of life for many in Texas, Mississippi and Louisiana. And I believe that Signal will rebound and prosper.” Mar Ex



International began operations, and the industry-savvy Marler was back in the game. At the time of the asset purchase oil was $25 per barrel, and the group was confident it had acquired the yards at the low end of the market. But predicting the vicissitudes of the oil market has always confounded even the experts and, as luck would have it, most of 2004 turned into a lull period. However, in late 2004 the recovery began, and by 2005 a welcome surge in oil prices and activity in the yards eased anxieties. For the next three years the shipbuilding and oil industries enjoyed a robust “sweet spot” but, with the meltdown in the financial markets that commenced in 2008, everybody’s world changed. During the “sweet spot” era in the Gulf, the Signal yards were heavily involved with overhauling, modernizing and upgrading offshore drilling rigs, capturing over 50 percent of the market. Nonetheless, and despite the booming rig business, Marler was keenly aware that diversification was necessary to ensure the company’s continued success. While Signal was working on offshore rigs, it also produced almost 200 fully outfitted sub-assembly and module components weighing up to 250 tons for Northrop Grumman’s LPD-17 class of naval vessels. Besides ship modules Signal worked on a number of miscellaneous marine heavy-fabrication projects to include building one of the world’s largest tension leg platforms for BHP Billiton. The recently acquired repair yard in Mobile is a further example of the diversification strategy, and it is already paying handsome dividends.

MarEx_38.indd 10

5/25/10 1:43:29 PM

MarEx_38.indd 11

5/25/10 1:43:31 PM

washington insider

Written by Larry Kiern, Winston & Strawn LLP

WashingtonInsider M ay / j u n e 2 010

Deepwater Horizon Oil Spill Rocks Washington Policy Makers



The previous Washington Insider column highlighted that, amidst the politically charged atmosphere leading up to the midterm congressional elections, the nation’s new energy policy remained “largely bipartisan, steady and on course.” The column further opined that “While the offshore oil exploration industry remains frustrated with the Administration’s delay in opening more coastal waters to drilling, Interior Secretary Salazar’s deliberate pace may turn out to be a long-term plus by better protecting the industry from collateral assaults by the opponents of offshore drilling.” Unfortunately, this consensus suffered a severe blow on April 20, 2010, when an explosion erupted on the Deepwater Horizon mobile offshore drilling unit in the Gulf of Mexico. Eleven workers perished. Two days later the rig sank to the ocean floor. By Saturday, April 24, remotely operated vehicles (ROVs) detected oil discharging from the riser and drill pipe. Estimates of the volume of those discharges increased from 1,000 to 5,000 to 25,000 barrels a day. Reports warned that the spill could eclipse the 11,000,000 gallons discharged by the Exxon Valdez in March 1989, and scientists feared that the Gulf’s Loop Current might spread the oil up the East Coast.

Policy Makers React

The Obama Administration and Congress seized on fears arising from reports the oil spill was greater than initially thought and might not be shut off for months. Quickly, the spill response grew as more resources were deployed against the spreading slick, which neared the Gulf coastline. On April 29 Homeland Security Secretary Napolitano declared a Spill of National Significance. And by May 14 more than 500 response vessels and 10,000 personnel conducted pollution-prevention operations using almost 1.4 million feet of boom.

MarEx_38.indd 12

On April 26 Secretary Salazar announced that his department would conduct physical inspections of all deepwater rigs operating on the Outer Continental Shelf, and within two weeks inspections reported no serious deficiencies. On April 27 the Interior and Homeland Security Secretaries announced a formal joint investigation by the U.S. Coast Guard and the Minerals Management Service (MMS) into the causes of the incident. And on April 29 President Obama ordered Secretary Salazar to report to him within 30 days on additional safety measures for offshore operations. The next day Secretary Salazar established the Outer Continental Shelf Safety Oversight Board to enhance regulation and management of offshore drilling operations. Simultaneously, key legislators voiced serious reservations about the wisdom of allowing expanded offshore drilling in U.S. waters. Senator Bill Nelson (D-FL) asked the Administration to impose a moratorium on all new drilling pending the outcome of the investigation. White House Press Secretary Gibbs announced shortly thereafter that there would be no new drilling offshore pending the joint agency investigation. On May 6 MMS announced it had postponed indefinitely the hearings previously scheduled as part of the process of leasing offshore drilling sites off the coast of Virginia. And on May 11 Secretary Salazar announced he would separate the MMS into two agencies, one focusing on safety and environmental protection and the other on collecting royalties. The move reflected a longstanding recommendation of agency critics, who characterized the agency as too cozy with the energy industry. Also on May 11 the Senate Energy and Natural Resources Committee conducted the first congressional hearing on the incident. Key industry executives from BP, Transocean and Halliburton

testified, and Senator Lisa Murkowski (R-AK), considered a reliable industry ally, expressed frustration with what she described as “transference of liability and finger-pointing.” The joint agency hearing highlighted the limited MMS approval process. Hearings before the House of Representatives raised questions about the blowout preventer and process of cementing the well. In early May Senator Nelson, Representative Kendrick Meek (D-FL) and others introduced bills to block the Administration’s plan to expand offshore drilling. Senator Robert Menendez (D-NJ) and others introduced legislation that would require polluters to bear the full cost of oil pollution response and damages, thereby removing the statutory limits to liability enacted into law by the Oil Pollution Act of 1990 (OPA 90). Senator Sheldon Whitehouse (D-RI) proposed increasing punitive damages and criminal and civil penalties. Even industry supporters like Senators Murkowski and Mark Begich (D-AK) introduced legislation to increase the size of the Oil Spill Liability Trust Fund (OSLTF) to $10 billion, financed by an increased tax on oil to ensure that there would be sufficient resources available to cover a catastrophic oil spill. On May 5 the White House announced support for legislation raising “significantly” the cap on damages for those liable for oil spills. A week later the White House asked Congress to retroactively raise the cap on damages above $75 million provided by OPA 90, to increase the per-incident cap on claims from $1 billion to $1.5 billion, and the cap on natural resource damage claims from $500 million to $750 million. The Administration proposed to accelerate a statutory increase in the per-barrel tax on oil that funds the OSLTF and also requested emergency appropriations for the Coast Guard and other agencies responding to the incident.

5/25/10 1:43:32 PM

washington insider

Gulf of Mexico Disaster Challenges Bipartisan Support for Offshore Drilling The Lessons of History Are Instructive

the nation’s enormously valuable energy resources below the seabed. That would be the wrong lesson to learn and would needlessly compound the injury.

Not the First Offshore Well Blowout

The Deepwater Horizon blowout was not the first to cause a major oil spill. In 1969 the Santa Barbara oil spill caused by a blowout on a Union Oil rig dumped 80,000 to 100,000 barrels of oil into the surrounding waters and polluted the beaches along Santa Barbara County, California. The infamous Ixtoc I blowout in 1979 off the coast of Mexico was the second largest oil spill in history and further illustrated the risks presented by offshore drilling. Like the Deepwater Horizon, the disaster began with a massive explosion and fire that caused the rig to sink. The discharge was estimated at approximately 10,000 to 30,000 barrels a day. Ultimately, it took ten months to cap

Over one hundred years of operator experience go into every workboat we design for superior on-the-job performance.



Go ahead, kick the tires.

M ay / j u n e 2 010

Disasters like this can profoundly affect public policy. The Exxon Valdez oil spill broke the logjam of oil pollution legislation in Congress and led to the enactment of OPA 90. Of course, while the causes of the Deepwater Horizon incident remain unknown, the oil spill presents a powerful reminder of the risks the nation faces in expanding the exploration for oil offshore. Moreover, it underscores the importance of the joint agency investigation. Although not reported by leading media outlets, the Senate testimony of a drilling expert from Texas A&M University highlighted the role of human error in these kinds of accidents and urged the committee to inquire “whether or not multiple tested barriers were in place at all times.” The first day of hearings by the joint agency investigation disclosed the limited review conducted by MMS when approving the project. Only through a

careful analysis of the facts can our policy makers in Washington hope to make the right decisions. It is important to remember that after the Exxon Valdez oil spill America did not halt the transportation of oil by ship from Alaska or otherwise into the continental U.S. To the contrary, the investigation revealed serious flaws in the nation’s marine transportation safety and pollution response systems and, after eighteen months of congressional hearings and legislative compromises, Congress enacted OPA 90. That legislation led to important changes that both reduced the number of oil spills and improved our nation’s pollution prevention, response and compensation framework. The same kind of progress can be realized following the Deepwater Horizon spill. The challenge will be to respond intelligently to prevent the recurrence of this kind of incident. We should not overreact hastily, out of fear, and needlessly lock up


MarEx_38.indd 13

5/25/10 1:43:34 PM


M ay / j u n e 2 010

washington insider the shoreline. Press reports indicated that the Australian investigation into the causes of the explosion, fire and spill revealed that the rig operator failed to install a pressure containment corrosion cap on the wellhead and violated regulations in other key respects as well. Yet despite these serious accidents, modern offshore drilling has enjoyed an overwhelmingly safe and uneventful record, including a remarkable lack of major spills from the tens of thousands of offshore rigs in the Gulf of Mexico even in the wake of extraordinary storms like Hurricane Katrina. In large measure that is because those performing the work have learned important lessons from past accidents and improved their operations.

Key Takeaways

Extraordinary efforts are being brought to bear on this daunting challenge. Our nation’s robust pollution prevention capability and effective damage compensation scheme developed as a result of Exxon Valdez will work just as they have over

the last 20 years. Experience also teaches us that, although seriously damaged, the environment will recover. We should bear in mind that we can learn from this incident just as we have in the past. Our focus should be on how we can improve our ability to avoid this kind of accident in the future and strengthen our response to it without overreacting and needlessly harming our long-term national interest in maintaining access to our great offshore energy resources. Mar Ex

Larry Kiern is a partner at Winston & Strawn LLP, an international law firm of 900 lawyers. His practice concentrates on maritime issues, including legislative, regulatory, and litigation matters. Before joining Winston & Strawn, he was a Captain and law specialist in the U.S. Coast Guard who served as the Legislative Counsel and Deputy Chief of the Coast Guard’s Congressional Affairs Office.



the Ixtoc I well, which discharged approximately 140 million gallons or more than three million barrels of oil into the Gulf of Mexico. Although 600 miles south of the U.S., oil discharged from the well washed ashore along approximately 160 miles of U.S. coastline. The investigation revealed that the explosion, fire and resulting oil spill occurred because of failures associated with the drilling operation and the inability of the blowout preventer to seal the wellhead. Just last year the world witnessed another major oil spill from a production platform operating about 160 miles off the northern coast of Australia in the Timor Sea. The spill lasted from August to November until another rig could be brought in to drill a relief well to stop it. Authorities estimated the blown-out well discharged 2,000 barrels of oil a day, resulting in a spill that covered 2,300 square miles of ocean surface. Greater environmental damage was averted and less publicity generated in the U.S. because of the well’s distance from both the U.S. and

MarEx_38.indd 14

5/25/10 1:43:36 PM




Page 1


Conveniently located in Gibraltar at the cross-roads between the Mediterranean and the Atlantic, Gibdock offers comprehensive repair, maintenance and conversion services in its three dry docks and protected deepwater port.

Accredited by the Lloyds Register in the areas of quality management, environmental control and health & safety every aspect of the dockyard is operated to meet the highest international standards.

The team at Gibdock have the expertise to handle projects of all sizes from regular maintenance to complex major works with a skill spectrum covering steel, pipe, painting and blasting, mechanical and main engine, tail end and electrical services.

From initial project planning through to successful on-time completion our aim at Gibdock is to deliver a thoroughly professional and friendly experience.



MarEx_38.indd 15


5/25/10 1:43:38 PM

Why Natural Gas Prices Must Rise M ay / j u n e 2 010

MarEx OP-ED:

Abundant supplies and depressed demand have made gas ridiculously cheap compared to oil. Enjoy it while you can. By Michael J. Economides



In an alarmist, post-global-warming, non-carbonconstrained world, which is now almost a certainty, oil, gas and coal will continue to dominate and perhaps even increase their collective share of world energy supplies over the next 20 to 30 years. But contrary to what some have suggested, there will be no BTU parity among the prices of these three energy sources for decades. Demand for oil and its price are likely to skyrocket, with China on the prowl in thirty countries and India not far behind. It is surprising that this has not yet happened, although at current levels the price of oil is almost five times the price of gas in terms of BTU content. Once the U.S. economy really recovers, especially when employment picks up (about 15 percent of American workers today do not drive to work, and gasoline demand had stalled for a while but has already recovered), the escalation in oil prices will be something matching the 2008 experience. The same factors in play then are lurking today: dominance by energy-militant countries such as Russia, Venezuela and Iran, and challenging and expensive production in deep-water offshore Brazil and West Africa and heavy oil in Canada. So $100+ oil is imminent, and the recent spill in the Gulf of Mexico and the expected knee-jerk reaction will accelerate the process. Coal will continue to dominate base electric power production in both the developed and developing worlds, selling at a price well below the price of natural gas.

What Price Disparity?

But while the price disparity (and therefore no BTU parity) will be a striking feature of the three energy sources, the prices for oil and gas will be affected by two other major factors that will have a defining impact on the future world energy scene: »» Transnational transportation of oil and gas, the latter in the form of LNG, has become homogenized in terms of both ship quality and abundance. For gas, liquefaction and re-gasification facilities have proliferated, with Qatar, for

MarEx_38.indd 16

example, being able to deliver 10 Bcf/d. Transportability will lead to world-wide equalization of prices for both oil and gas, with little disparity among various parts of the world. U.S. shale gas to Europe? Some have talked about it. LNG to Europe from a variety of origins is already impacting Russia’s stranglehold on the continent. »» Much of the new production comes from what in the past has been called unconventional resources, including deepwater and heavy oil, and shale gas. With the application of new and sophisticated technology, they are no longer unconventional, but they are not cheap either. Drilling through 10,000 feet of water for oil or learning how to produce shale gas can make all the difference. This is not of course automatic. Brazil has done miracles but Mexico, with a closed-in industry, has not drilled deepwater wells yet. Shale gas, which only five years ago accounted for a pittance of production and reserves, has mushroomed and is poised to overwhelm the U.S. industry. What this means is that the old model of resource size (easy-to-recover oil and gas) is no longer valid. Technology, dominated by the U.S., can access these massive new resources. Labor and logistical costs will matter a lot less, and this is a second reason why oil and gas prices in the future will become practically universal with little variation among different locations. Natural gas is then going to settle between $8 and $10 per MMBtu, about twice the current Henry Hub price but comparable to Russian prices into Europe or LNG prices in many parts of the world. The fuel that has the capacity to bridge the price disparity is natural gas which, according to the International Energy Agency, is plentiful at 30,000 Tcf of ultimate recovery and widely distributed. The transformation will take at least two decades to happen on a very large scale, complete with the necessary infrastructure, and will be in one of three forms: GTL (gas-to-liquids), XTL (any

5/25/10 1:43:42 PM

oped Economides

The Contango Effect

Investors rightly believe that the price of natural gas is too low and try to take advantage of this by buying into exchange traded funds such as UNG (United States Natural Gas Fund, which tracks natural gas prices). UNG cannot deploy this influx by buying physical gas, so it must buy futures contracts two months from expiration and sell them as they approach expiration. This,

Underwater Tunnel thruster repair and extraction Underwater Azimuthing thruster repair and extraction Underwater Propeller Repairs

Game Changer

Beyond its clear geopolitical and macro-economic effects, shale gas has had a large impact on current prices (and vice versa). Physically, it has helped U.S. production break out of a decadeslong plateau, surpassing Russia for the first time since 2001. Shale producers probably cannot drill much below $5 and still be profitable, but at $7 there may be an infinite supply of shale gas. Despite the current low prices, shale gas players are in a drillor-lose-their-lease situation. Many of them paid exorbitant fees to landowners to access their lands. The cost of taking near-term

Protecting Your Crew, Vessel & Cargo



Rapid Cost-Effective Worldwide Underwater Repair Solutions T H If you can’t take E the shIp to the dry dock, A why not take the dry dock P to the shIp? L underwater weld repairs V Permanent Underwater Aft propeller shaft seal replacement

of course, tends to support the second-month contract and depress the near-month contract, which creates a “contango” effect, with longer-term contracts priced above nearer-term ones. The depressed near-term price also tends to depress the spot market price. The contango became very large in 2009, which resulted in large losses for UNG compared to the price of natural gas. But the contango allows producers to shield themselves from low spot prices by taking the opposite side of UNG’s position and benefiting from the higher distant prices. Producers can always find the price they need in the futures market. This muffling of the low-price signal enables producers to drill and produce that much more, driving down the spot price even further. However, this effect has diminished greatly in 2010, which is probably indicative of a bottom in spot prices. The market drivers relevant in 2009 are now reaching their limits.

M ay / j u n e 2 010

hydrocarbon-to-liquids) and direct use of natural gas in transportation either as CNG (compressed natural gas) or by electrifying transportation vehicles. Natural gas prices in the U.S. have hugged $4/MMBtu at Henry Hub for a long time because of both the recent economic crisis and demand slowdown but also because of the success of shale gas. Only 21 percent of U.S. natural gas consumption is by residences (and 0.1 percent by vehicles!). The other main users – power, commercial and industrial sources – have been hit to varying degrees by the recession. The “equilibrium price” of gas is probably in the range of $5 to $8. Had we not had a particularly cold winter in 2010 prices might have dropped below $3, and there may still be a chance for that over the next few months. In 1994 gas dropped to about $1/ MMBtu. Inflation has not escalated five-fold since then, perhaps not even 50 percent, but the equilibrium price then was probably about $2 to $2.50. We are in a long-term contango futures market, which puts pressure on current prices.

n With full insurance coverage, and a

proven record of deterrence, insurance companies offer lower K&R premiums and discounted insurance rates n The Nexus Solution saves you

money while protecting your crew, vessel & cargo from the RPG threat in the Gulf of Aden

n Nexus employs the highest caliber for-

SubSea Solutions Alliance Phone: +1-914-826-0045

MarEx_38.indd 17


OEM and class approved repairs

mer Navy SEALs and Delta Force commandos

n Least invasive & most successful full

scope security measures

NexusConsulting Securing Your Future Throughout the World

Find out how Nexus can protect you, visit or contact us at today.

5/25/10 1:43:45 PM

M ay / j u n e 2 010

oped Economides



losses pales in comparison to losing the lease for nonactivity. Furthermore, because of steep decline rates per well in the very low-permeability reservoirs characteristic of shale, producers must keep drilling. The drilling rig count reflects this. While the vertical well rig count has taken a nosedive, horizontal wells – the exclusive well architecture for shale gas – have thrived and even increased. Internationally, shale gas has been noticed. In midApril Russian Natural Resources Minister Yuri Trutnev said that it has become a “problem” for Russia’s Gazprom. “The influence of shale gas raises the prospect of change on gas markets,” Trutnev said in a press conference. What Trutnev was clearly worried about is that shale gas technology, transferred to Europe in countries such as Poland, Germany and France, will have a major effect on Gazprom’s ability to deliver gas into Europe, and this will alter the balance of power on the continent. In an almost whimsical way, Gazprom’s Deputy Chairman, Alexander Medvedev (no relation to the President), has espoused the most preposterous claims from U.S. environmentalists that shale developments and the ubiquitous hydraulic fracturing “endangered drinking water.” In fact, Gazprom was planning to penetrate as much as 10 percent of the U.S. market with LNG. This is now highly unlikely to happen. A report released by Houston’s Tudor, Pickering and Holt

(TPH) in April suggests that shale gas has “destroyed” demand for LNG imports. “Shale gas renders U.S. LNG imports nearly unnecessary over the next five to ten years,” the report said. With U.S. regasification capacity of about 15 Bcf/d, the TPH report predicts average imports of about 1.8 Bcf/d. This means that no new regasification terminals are likely to be built in the U.S. But the TPH report notes that LNG demand in Asia and Europe is growing “more than twice as fast as overall gas demand and approximately six times that of oil.” Unless, of course, shale gas is developed in other countries as well. Mar Ex Dr. Michael J. Economides is a Professor at the Cullen College of Engineering, University of Houston, and Editor-in-Chief of the Energy Tribune. MarEx does not necessarily endorse the opinions herein.

Supplying the federal government and the commercial marine industry for over 50 years with the toughest, most durable all-welded aluminum work and patrol boats around!


MarEx_38.indd 18


5/25/10 1:43:46 PM

It’s about partnership The world’s most environmentally friendly ship The Viking Lady is a brand new, state-of-the-art offshore supply vessel, specially designed to safely service offshore installations in the extremely harsh waters of the North Sea. But what makes this lady really unique is her fuel cell – the first of its kind worldwide on board a ship. The fuel cell and combustion engines on board the Viking Lady are powered by LNG (liquefied natural gas). This significantly reduces harmful emissions compared with the traditional marine oils that commercial ships generally operate on. Compared with a traditional ship, the reduction in harmful emissions as a result of the Viking Lady’s advanced technology equals the emissions from 22,000 cars annually. The Viking Lady is the first commercial ship ever with a fuel cell specially adapted for marine use. The fuel cell has several advantages: it reduces emissions to air and fuel consumption and operates very quietly – all significant for a ship with frequent stops in busy harbours located in populated areas. The propulsion concept is devoloped by the FellowSHIP joint venture where DNV is one of the partners.

DNV serving the Maritime Industry

MarEx_38.indd 19

5/25/10 1:43:46 PM


Upgrades Downgrades

M ay / j u n e 2 010

Woodstock for Capitalists



I love annual meetings. During the months of May and June, annual meeting “season,” I attend as many as I can. Why? Because it gives me a chance to get to know a company “up close and personal.” Oh, you can read the annual report beforehand – and you should – and all the analyst reports in the world, but there’s nothing quite like the immediacy of the annual meeting. Here you get to see management face to face. You can study their expressions, analyze their responses, listen to their tones of voice, and judge their composure as they face both friendly and unfriendly questions. Like the cover of the annual report, the annual meeting is the face of the company. It reflects its personality and character. It is the company. The mood at an annual meeting, as conveyed by management and by the way it conducts the meeting, is the mood of the company. It can be friendly or hostile, inviting or off-putting, open or close-minded, serious or lighthearted, proactive or defensive. You can tell right away if this is a company you’d like to work for or not, just like you can tell by reading its annual report. What’s more, most meetings include a video or PowerPoint presentation on the company’s operations, and sometimes both, in case you still haven’t made up your mind. This is one of my favorite parts because (a) it gives me a bird’s eye view of what the company does in an entertaining and easy-to-grasp format, and (b) it gives me a sense of who the company is – its spirit, essence, personality – via the sound, look and feel of the presentation. What could be better?

Where Is Everybody?

Annual meetings, like annual reports,

MarEx_38.indd 20

Berkshire Hathaway 2010 Annual Meeting, Qwest Center, Omaha. Courtesy: New York Times

have their origin in the financial reform legislation that came out of the Great Depression, which mandates that once a year publicly traded companies convene a meeting of their shareholders of record for the purpose of electing a Board of Directors, appointing independent accountants, and “for such other matters as may properly come before the meeting.” It’s the “such other matters” that can cause problems. Judging by the number of proposals listed on the company’s proxy statement, you can pretty much tell whether this is going to be a routine meeting or something else. If there are more than five or six, watch out. Fireworks could be brewing. The best-run meetings follow a standardized format: welcome, determination of quorum, voting and Q&A on the resolutions listed in the proxy statement, company presentation (optional), results of voting, general Q&A (optional), and adjournment. They can take as few as five minutes or as long as a whole day. The important part is the voting on the various resolutions. As long as that takes place, the company has fulfilled its legal duty and

the rest of the meeting is simply icing on the cake. And here’s what most shareholders don’t realize: In 99 out of 100 cases, the voting has already been decided before the meeting even takes place. Companies know going in that they have the votes to elect their slate of directors and their choice of accountants, and to ratify or defeat whatever other proposals happen to be on the table. How do they know? Because almost all of the voting has taken place beforehand, including – and most especially – the votes of the big pension funds and institutional investors who hold most of their stock. If a company doesn’t have the votes going in, it will postpone the meeting until it does. Why, then, bother to attend? It’s a legitimate question. In the heyday of annual meetings, from the mid-fifties to the midnineties, companies constructed elaborate exhibits and offered product giveaways, free food and drink, and all kinds of enticements to encourage shareholders to attend. There was something for everyone. Wrigley would give away Juicy Fruit and Doublemint gum. Kimberley Clark would give away Kleenex tissues and hand tow-

5/25/10 1:43:49 PM


Annual meetings aren’t most people’s idea of fun. Companies dread them. Shareholders avoid them. Unless it’s Berkshire Hathaway’s.

There is one meeting, however, that has





John W. Gilbert Associates, Inc.

We are the standard in Industrial Dehumidification.







The Super Bowl of Annual Meetings

defied all the odds and gotten bigger and more anticipated each year, despite being held in an out-of-the-way place like Omaha, Nebraska. I’m referring, of course, to the Berkshire Hathaway annual meeting, the “Woodstock for Capitalists,” which this year topped out at 40,000 shareholders, set a record for both attendance and sales, and injected millions of dollars into the local economy. The meeting is so big that it’s held in a sports arena in the Qwest Center that seats 20,000. The remainder watch the proceedings from closed circuit TV screens in the adjoining Convention Center. At any one time about 10,000 people can be found in the giant Exhibit Hall of the Convention Center, buying products from one of the 40-odd Berkshire outlets that have set up shop there. I was reminded of a college bookstore on the morning of the big game – overflowing with people, lines at the cash registers trailing out the door. I have been to many annual meetings in my time, but none like this. It lasts a full day, with the doors opening at 7:00 a.m. and crowds lined up like the opening of a new Super Target or Walmart. Amazingly, there is no security check. No metal detector to walk through. No examination of bags or purses. The only thing needed for entry is the colorful badge issued by the company, which is to be worn around the neck (on a white lanyard also provided by the company) at all times.

M ay / j u n e 2 010

els. W.R. Grace & Co. would offer umbrellas and Land’s End tote bags. People would arrive early to load up on free food and handouts. Companies actually wanted their shareholders to attend. Nowadays it is the rare company that offers even coffee or water to attendees, nevermind something more substantial. The goal seems to be to discourage people from attending. The fewer the better. Two weeks ago I attended the meeting of a multibillion company where there were exactly four real shareholders, not counting company representatives and the press. The meeting lasted less than 15 minutes. In an era of mass communication and growing shareholder activism, you would think that annual meetings would be lively, controversial affairs, heavily attended and eagerly anticipated – the ideal forum for confronting management and letting them know whether they’re doing a good job or bad. And some still are. But the vast majority have turned into dull, ho-hum affairs. The corporate gadflies of yesteryear have given way to corporate raiders and large, well-funded special interest groups, who do their dealing behind the scenes and outside the confines of a public meeting. The result is dwindling attendance and empty auditoriums.

At 8:30 a.m. there’s a company movie, and the meeting begins at 9:30 a.m. Warren Buffett and his 86-year-old sidekick, Charlie Munger, sit side by side on a raised platform on the floor of the Qwest Center and take questions asked by three handpicked journalists – Becky Quick of CNBC, Carol Loomis of Fortune, and Andrew Ross Sorkin of The New York Times. Buffett and Munger don’t have a clue beforehand about the questions. The first concerns Goldman Sachs, and Buffett quickly comes to the defense of a company to which he has loaned $5 billion and which is paying him interest at the rate of $15 per second. “Tick, tick, tick” (he flicks his index finger up and down to mimic the passing seconds). “Fifteen bucks a tick, day and night, 24 hours a day, weekends and holidays included. This is the kind of investment I like.” The crowd loves it. They go crazy. And so it begins. After three and a half hours the principals take a break for lunch. I wander down to the Exhibit Hall and buy some See’s Candies and H.H. Brown shoes and Wells Lamont garden gloves – all companies owned by Buffett. Nothing is free here, but shareholders are offered substantial discounts – hence the long lines. I approach the GEICO insurance counter and within minutes have a quote on my car insurance that could save me $412 a year. There’s even a boat company in the mix –BoatU.S., the AAA of the boating industry, which provides insurance, towing services, and other benefits to its millions of members. I grab a quick lunch at one of the many Dairy Queen kiosks and head back upstairs. Buffett and Munger are already at their places, each with an open box of See’s Candies in front of them. None



Gilbert Naval Architects Boston Naval Architects and Marine Engineers 350 Lincoln Street - Suite 2501 Hingham, MA 02043 Telephone: 781-740-8193 Facsimile: 781-740-8197 E-mail address: Website:

MarEx_38.indd 21

Telephone (757) 873-6800 Facsimile (757) 873-3632; email: 700 Thimble Shoals Blvd. Ste 109 • Newport News, VA 23606-2575

5/25/10 1:43:52 PM

M ay / j u n e 2 010



Shareholder badge for Berkshire Hathaway meeting.

Omaha Steaks

Of course no trip to Omaha would be complete without tasting an Omaha steak, and so on my first night there I visited Johnny’s Café, a long-time fixture in the old stockyards district noted for its fine steaks. I ordered a 14-ounce prime rib, medium rare, and asked the waitress what was so special about Omaha steaks. “They’re corn fed,” she replied, “that’s what gives them the flavor.” And so it did. The steak had a texture and taste like nothing I had experienced before, and I surprised myself by eating the whole thing. Might be worth another trip to Omaha. MarEx

Jack O’Connell, the senior editor of this

magazine and a former maritime executive, is a private investor who may own shares in some of the companies mentioned in his columns. The views expressed in this column are his and his alone and are not in any way to be construed as investment advice.


of the questions thus far has been about Berkshire Hathaway. No one questions their running of the company. All of the

questions focus on current events and how to get ahead in one’s career – with the questioners alternating between the three journalists and nine shareholder stations scattered throughout the arena and convention center. Buffett is saying how he and Charlie have a hands-off approach to management: “We don’t tell our managers how to run their businesses. We keep hands off. We only have 21 people at headquarters. We don’t even tell our subsidiaries to do business with one another. If they want to – if it’s to their advantage – they will. If not, they won’t.” Munger nods in approval. He’s the conscience of the company – tougher than Buffett, blunt, a man of few words. But he gets the last word. After a shareholder asked what would happen to Berkshire if there were a complete financial collapse or some unprecedented cataclysmic event, and Buffett had responded for five minutes with details of cash reserves and contingency planning and so forth, Munger quipped: “I’m not worried about it,” effectively dismissing the question as not worth wasting time on.

MarEx_38.indd 22

5/25/10 1:43:55 PM


Leave These Behind

Eliminate stern tube oil pollution by converting from oil to seawater lubricated Thordon propeller shaft bearings. • Proven Performance • Zero Risk of Stern Tube Oil Pollution • Reduced Operating Costs (No AFT seal) • COMPAC Seawater Lubricated Propeller Shaft Bearing System

* *Certain conditions may apply. Please contact Thordon Bearings Inc. for further information.

MarEx_38.indd 23 Thordon_A4.indd 1 5/25/10 1:43:58 PM 4/3/10 10:24:36

GIBDOCK M AY / J U N E 2 010

Case Study:




In the maritime industry, the Strait of Gibraltar conjures up images of thousands of ships transiting its waters or sitting at anchorage awaiting bunkers, provisions, or to be worked on at Gibdock. While the Strait of Malacca might be considered the busiest crossroads of the shipping world, it’s hard to dispute the Strait of Gibraltar’s formidable traffic of 80,000 ships each year. This unique place has also provided MarEx with an opportunity to get better acquainted with the recently renamed Gibdock, a fascinating shipyard with a 106-year history, and its American CEO, Joseph Corvelli, whose vision for this strategic asset will have maritime executives around the world taking notice.

MarEx-38-Gibdock-CS-Int-052510.indd 24

5/25/10 12:32:58 PM



For nearly 100 years the “Jewel of Gibraltar” serviced the ships of the Royal Navy exclusively. Today it attracts a much wider clientele. By Tony Munoz




n Greek mythology, the Strait of Gibraltar was known as the Pillars of Hercules and marked the western end of the known world. The lore, also adopted by the Etruscans and Romans, said that Hercules, on his way to the Island of Erytheia, had to cross the Atlas Mountains, which joined Africa and Europe. Instead of climbing over the peaks, he used his superhuman strength to smash through them and, in so doing, connected the Atlantic Ocean to the Mediterranean Sea and formed the Strait of Gibraltar. The ancients also cautioned that the Pillars bore the warning “nec plus ultra,” which announced to sailors and navigators alike to go no farther. When Homer wrote about the lost island of Atlantis, he told of its disastrous demise in the place beyond the Pillars, out there in “the

MarEx-38-Gibdock-CS-Int-052510.indd 25

unknown.” Today, the denizens of the modern world simply acknowledge the Strait of Gibraltar as an essential shipping zone, which lies between southernmost Spain and the most northwestern point of Africa. The Strait is 36 miles long and narrows to eight miles between Point Marroqui in Spain and Point Cires in Morocco. Since 1704 the British Crown has ruled the 2.3 square miles (six square kilometers) of the Rock of Gibraltar. In 1704, during the War of the Spanish Succession, the British fleet under the command of Admiral George Rooke took Gibraltar from Spain. Under the Treaty of Utrecht in 1713, control was ceded to Great Britain, whose sovereignty over the years has continually been ratified though a number of other treaties. But Spain

5/25/10 12:33:20 PM

M AY / J U N E 2 010




and Britain have continued their often volatile dispute over the Rock for centuries. In 1969, in a referendum by the people of Gibraltar, the country overwhelming decided to remain under Britain’s rule. Meanwhile, even the EU has pressured Spain and Britain to resolve their issues on Gibraltar’s status; and while they have tried to reach an agreement under the Brussels Process (1984), there have been stumbling blocks. Basically, Spain wants full sovereignty and Britain wants to retain full control of its military garrison and naval base. In 1985, open travel between Spain and Gibraltar was restored, but travelers complained of long delays at the border. In 2006, flights between the two countries resumed for the first time in 30 years. While there is no large-scale agricultural or industrial activity on Gibraltar, much of its income derives from customs duties, offshore finance, Internet gaming, tourism, ship provisioning, and shipbuilding.

The Jewel of Gibraltar

Built as “The Royal Navy Drydock” at the end of the 19th century, the shipyard played a significant role in ensuring the British government’s control of Gibraltar’s strategic military location at the gateway to the Mediterranean Sea. Today, the yard’s three graving docks are among the most extensive ship repair and conversion facilities in southern Europe. In 1904, when the Royal Navy opened the King Edward VII Number 3 dock, and for nearly 80 years, Gibraltar was used extensively to repair many of the Royal Navy’s most prestigious ships. When the UK Ministry of Defense decided to reduce the size of the Royal Navy’s surface fleet in the early 1980s, it had a huge impact on the yard, which in 1982 was privatized by the A&P Group and renamed the UK Ship Repair and Conversion Company. However, over time and as prospective work for the Royal Fleet Auxiliary did not materialize, the A&P Group simply handed the yard over to the Government of Gibraltar. In the following years, the yard variously changed hands from Gibraltar Ship Repair to Kvaerner to Cammell Laird Gibraltar until Cammell Laird’s demise in 2001. In 2005, a private investment group took over the yard and operated it under the Cammell Laird name until the re-emergence of the UK yard in Birkenhead, which adopted the same name. Finally, last year, the new management team, led by CEO Joe Corvelli, renamed the yard Gibdock.

MarEx-38-Gibdock-CS-Int-052510.indd 26

While the yard has had a number of false starts over the years, it is an iconic business facility and one of Gibraltar’s key assets. Gibdock recently appointed John Taylor, a 34-year employee, to be the company’s production director. Taylor joined the H.M. Naval Dockyard-Gibraltar in 1976 as a special-grade shipwright apprentice. His long tenure at the yard is by no means unique. Many of the yard’s employees have built lifelong careers and are an important part of the country’s workforce, due in no small part to the partnership between the government and Gibdock in operating a unique apprenticeship program that provides a steady stream of skilled workers. Corvelli noted that the longevity and professionalism of the workforce have been principal factors in the yard’s success. Additionally, the yard has made numerous investments in infrastructure improvements and new tools and equipment, including a new workshop roof, new crane rails for Drydocks 2 and 3, and new blasting and painting equipment. Complementing the investment in physical infrastructure is Corvelli’s emphasis on strong management and effective quality control and safety systems. While the yard’s strategic location, skilled workforce and extensive facilities provide a lot of arrows to its quiver, it’s the organizational commitment to safety that has been Corvelli’s top priority. Gibdock’s Quality Management System is ISO:9001-certified, and its Environmental Management System is ISO:14001-certified. What truly sets the company apart from other regional yards, however, is its Occupational Health and Safety Management System, which is also accredited by Lloyds Register to ISO:18001 and matches the highest global standards for the repair of ships and offshore vessels. It is also certified under the International Ship and Port Facility Security Code, indicating its dedication to enhancing dockyard and ship security.

Illustrious Past, Promising Future

Corvelli told MarEx that while he is pleased to acknowledge the yard’s role in the Royal Navy’s historic affairs and how some of the most illustrious names in shipbuilding have played a role in its past, the focus today is on enhancing the yard’s operations and developing future business for the company. In this regard, Gibdock has already made enormous strides. Despite the worldwide recession, 2009 was a banner year, during which the yard completed repair and conversion work on over 80 ships. Over half of these took place in the yard’s three drydocks with the rest

5/25/10 12:56:40 PM


owner nationalities. In 2009, companies from Greece, Germany, the Netherlands, Norway, the UK, Cyprus, Denmark, St. Vincent, Belgium, Morocco, Russia, Singapore, Nigeria, Latvia, the U.S., India, the Channel Islands, the Isle of Man and Italy had ships serviced at Gibdock. Corvelli says the company’s strategy will continue to be to attract a wide portfolio of vessel types from around the world. “Many of our customers operate high-value vessels, where scheduling is the critical issue,” he added. “Rather than simply selecting the lowest bidder for repair work, they are more concerned with how to utilize their assets to the maximum. To do that, they need a reliable partner like Gibdock to manage the entire project in such a way that guarantees their schedules.”

M AY / J U N E 2 010

taking place afloat. Gibdock worked on 18 tankers, 16 general cargo ships, 10 tugs, six ro-ros, six container ships and five gas carriers, but most notable was the variety of work undertaken with projects including barges, bulk carriers, cable layers, dredges and research vessels. The yard features two wharves (300m x 9.5m and 435m x 11m) and three drydocks: Drydock 1 (272m x 38m x 10m) is served by two 45-ton-capacity cranes and one 8-ton-capacity crane; Drydock 2 (184m x 29m x 11m) is served by two 15-ton-capacity cranes; Drydock 3 (154m x 29m x 11m) features a retractable cover with 29.5m clearance and is served by two 10-ton-capacity cranes. Corvelli is extremely pleased with the wide variety of ship-


The Industry’s Most Proven and Reliable Data Communications! Boatracs is the market leader in data communications and software applications and has been in business since 1990. We serve thousand of commerical vessels in the offshore, inland, workboat, fishing and government markets throughout North America. • Rely on mission-critical performance with always on data communications without dead zones


Achieve operational efficiencies with affordable order management, mapping and messaging applications

Stay in control of your fleet with near real-time safety, crew, maintenance and location information

Service your customers with timely and accurate order and billing information

Receive world-class customer service and support with our 24/7/365 client care call center

we make it our business!

“the low cost, quality provider” of boats and barges. Post Office Box 2727 | Morgan City, Louisiana 70381 Phone: (985) 384-2111 | Fax: (985) 384-2112 •

MarEx-38-Gibdock-CS-Int-052510.indd 27


5/25/10 12:56:52 PM

GIBDOCK We believe that our focus on redelivering vessels on time in a market where every day counts is demonstrated by the high volume of returning customers.

M AY / J U N E 2 010

A Changing World


The boom years of 2004-2007 led to a spate of newbuilding orders that left many shipowners unable to pay up when the Great Recession began in 2008. 2009 saw a rash of cancellations when, for example, nearly twothirds of all drybulk orders were annulled. And 2010 looks to be no different, although conditions are improving. For Gibdock, these stats mean that shipowners are financially stretched but need to maintain their existing fleets with a minimum of layup time in drydock. Corvelli has strategically positioned Gibdock to assist shipowners facing these challenges. “It is the reason that our core workforce of about 250 workers in the yard are direct employees,” he said. “They have the continuity, experience and professionalism to best serve our clients.” Corvelli points out that Gibdock’s ship repair and conversion services include steel work, painting and blasting, mechanical and engine repairs, tail-end repairs and electrical systems’ maintenance and repair. Rather than rely on subcontractors for these assignments, his team of fulltime, multilingual project managers and craftsmen are some of the most experienced in the world. Centered in a large, full-service deepwater port, the yard allows excellent access for entry, anchorage and berthing. “In 2009, we have seen record levels of business going through the yard,” Corvelli concluded. “And Gibdock is booked well into 2010. We believe that our focus on redelivering vessels on time in a market where every day counts is demonstrated by the high volume of returning customers.” We couldn’t agree more. MarEx

Your Service Partner for Diesel Technology

Marine towage and consulting firm established in 1980 ƒ Merchant Mariner Owners with extensive background in oceantowing world wide. ƒ Towing services all around the US Coast, South America, the Atlantic and Pacific Oceans, Europe, the Middle East, and Asia. ƒ NSCI enjoys a long track-record of successful, reliable service. ƒ We serve all destinations with a deep knowledge base and valuable time saving service infrastructure. ƒ Worldwide sale & purchase of commercial & offshore vessels of all types and configurations. ƒ Management services & operational staff with vast insight and long, “hands on” field-experience.

MarEx-38-Gibdock-CS-Int-052510.indd 28

954 524 0025

16 Years of Excellent Service 1994-2010

Marine Turbo & Diesel, Inc. 1090 7th Street Richmond, CA 94801 U.S.A. Phone: 510-236-3525 Fax: 510-236-3576

5/25/10 12:58:03 PM

Quality. Service. Value.

SIGNAL INTERNATIONAL, Inc. is an integrated company providing global services to the offshore, marine, and naval industries. As a leading supplier of marine and fabrication services, the core business is overhaul, repair, and upgrade of offshore drilling rigs, ships, and other vessels. The company utilizes world-class continuous-flow manufacturing processes for new construction of heavy-duty ocean deck barges and for heavy fabrication services. Recognized as one of the “Best Large Shipyards� for excellence in safety, Signal is known for quality workmanship, on time and on budget. Headquartered in Mobile, Alabama, Signal operates five production facilities in Alabama, Mississippi, and Texas. MarEx_38.indd 29

5/25/10 1:44:03 PM


M AY / J U N E 2 010

Executive Interview:




Corvelli President & CEO, Gibdock

Under the leadership of Joe Corvelli, the rebranded Gibdock is making a

name for itself through expanded service offerings and an increasingly loyal customer base. What makes this shipyard in Gibraltar so special?

By Tony Munoz

MarEx-38-Gibdock-CS-Int-052510.indd 30

5/25/10 12:58:41 PM


MarEx: Gibdock is strategically positioned at the crossroads of the Mediterranean and Atlantic shipping lanes, which some 80,000 ships transit each year. How does this benefit the yard? Corvelli: While Gibdock enjoys a fantastic location, perhaps the second best in the world behind the Strait of Malacca, these

Strait. Many of these ferries are high-tech, high-speed catamarans with jets, T-foils, and silicone-based antifouling. These vessels are some of the most technologically advanced in use today. While we service all ships, we are experts at working on cruise, container and tanker vessels and fast ferries. MarEx: The yard was renamed Gibdock in late 2009 to reflect

M AY / J U N E 2 010


MarEx-38-Gibdock-CS-Int-052510.indd 31


its strategic location. It used to transits don’t really have an impact on the health of our business because be called Cammell Laird, one of most of the yard’s work is scheduled. the most famous names in shipWe do not want to simply work with building for over 200 years. Upon Gibraltar is an incredible maritime clients on a job-by-job basis, although purchasing the yard in Gibraltar, nation. Ships from around the world we understand its importance. Rather, were you forced to change the anchor off our coast. It is a cruise we want our business relationships to name? be built on value, a commitment to Corvelli: Without question, Camship destination. While it is a small mell Laird is a highly recognized excellence, and longevity. Our goal is place it is also cosmopolitan and has name in the global maritime industo offer quality and timely services and a wonderful international business try. The Gibraltar yard operated as to build strong customer relationships Cammell Laird since 1998 and was because that is what is really going to community. Being on the Strait of one of the operating subsidiaries of ensure our growth and success. Gibraltar, how could it not be an Cammell Laird PLC. After Cammell MarEx: Has the yard benefited Laird PLC’s bankruptcy, the yard from operators transiting to international hub? continued to operate under the same nearby ports? Ships in the area name after local management purwith layup time and something to chased the assets. Then, in 2005, our repair – does Gibdock solicit this investment group purchased the faciltype of business? ity. In 2007, the old Cammell Laird yard in Birkenhead, UK was Corvelli: Definitely. We have the port of Algeciras to our west operating as Northwestern Ship Repair and had an opportunity and there is a new container facility in Tangiers, Morocco. Besides, Gibraltar is a tremendous bunkering port. The region is a to rename itself Cammell Laird. The situation became confusing target-rich environment. for our customers and the marketplace in general. There is no denying that the historic name of Cammell Laird MarEx: Tell us about Gibraltar as part of the international has its origins in Birkenhead, so when we met with the managmaritime community. ing director in the UK we worked out the logical solution. I have Corvelli: Gibraltar is an incredible maritime nation. Ships from around the world anchor off our coast. It is a cruise ship destinaalways been a champion of Gibraltar, and we desired a name that tion. While it is a small place it is also cosmopolitan and has a celebrated our location and strong heritage. In fact, the opportuwonderful international business community. Being on the Strait nity to rebrand and rename the facility was an easy decision. The of Gibraltar, how could it not be an international hub? yard has a long heritage dating back 100 years and operated as a military yard under the country’s Ministry of Defense. In 1982 MarEx: Are Gibdock’s marketing strategies more local or the yard was privatized and went through a number of ownglobal? ers, and Cammell Laird took over in 1998. Last year we began Corvelli: Currently we have a lot of longstanding relationships with operators from around the world. But locally we do a lot of rebranding the yard as Gibdock. ferry repair work because there is a huge ferry trade across the MarEx: You had a record year in 2009 and are booked well

5/25/10 12:24:47 PM



MarEx-38-Gibdock-CS-Int-052510.indd 32

into 2010. Considering the global economy and the state of affairs in the shipping industry, what was so different in Gibraltar? Corvelli: First, 2009 was the best year ever for the yard. But it also witnessed some very slow periods. In the end, we mirrored the industry by having a strong first half and limping home through the second half of the year. It took a while for the banking meltdown to impact vessel operators. For our company it was the best of times and it was the worst of times. MarEx: So you limped home towards the end of 2009, but started 2010 on a high note. Please explain. Corvelli: Well, our long-term clients have been booking throughout the 2010 calendar. Many owners with ship downtimes are doing repairs and making modifications. Even though many don’t have the discretionary income they are looking to increase efficiencies. While we won’t break any records this year, we are attracting new clients because the word is getting out about Gibdock’s workmanship and “on-time” culture. Furthermore, we are changing the culture of this organization. On my first day on the job here, I set the target of achieving the highest standards on health and safety issues. In terms of scheduling and logistics for the yard, those are commercial business items, but we consider health and safety as fundamental prerequisites to any work we do, and we are constantly working to grow awareness for yard health and safety. MarEx: What is Gibraltar’s population and makeup? Corvelli: Gibraltar’s population is about 28,000 “Gibraltarians.” The country is a tremendous melting pot of ethnicities from all over world. It has a heavy Italian influence as well as Moroccan and African influences. The Dutch historically had an impact here too, but now Gibraltar is an independent UK territory with its own treasury, currency, parliament and ministerial-elected government. MarEx: How is the workforce in Gibraltar? Is it easy to find qualified workers? Corvelli: Not only does the region have a high-quality labor pool but the country has a very unique maritime heritage. Gibraltar is not only a small community, it’s an extremely small country. Gibraltarians have a tremendous sense of community and the shipyard has always been a significant part of the fabric of that community. While there have been other owners of the yard, it’s important to understand the employees have a sense of ownership. It’s a positive attitude of success, heritage, and longevity that drives the workforce. It’s a culture every employee is very proud of, and it’s their dedication to performing at a high level and what that stands for that motivates everyone. It is this proud culture of superior customer service that results in our highestvalue clients returning year after year. MarEx: How many employees do you have? Corvelli: The yard currently has about 250 employees. Based on the number of jobs and projects, there can be between 300 and 400 workers. MarEx: What is their average tenure? Corvelli: We actually have two groups of employees. We have a

5/25/10 12:25:14 PM


M AY / J U N E 2 010

strong group of permanent employees, certainly tug at my heart strings. MarEx: So Gibdock does recruit “lifers,” who are a great asset to the …our long-term clients have been organization. We then supplement this from other countries? booking throughout the 2010 calenfull-time workforce with short-term Corvelli: As I said, Gibraltar has a dar. Many owners with ship downworkers as the workload demands. strong but limited labor pool. But These short-term workers come from we need tradesmen in all shipbuildtimes are doing repairs and making Gibraltar and further afield too – ing categories. So we look locally, modifications. Even though many from all over Europe. The marine regionally, and then overseas. We don’t have the discretionary income trades we work in and the scale of bring in part-time workers from the projects requires a lot of talented Gibraltar and Eastern Europe, Rothey are looking to increase efficienpeople. And, like every marine commania, Bulgaria, Poland, Spain, Porcies. While we won’t break any repany, it is a challenge to find welltugal, the UK. It is no different than cords this year, we are attracting new rounded folks in technical services, the way Americans travel throughout engineering and naval trades. As we the U.S. to get a job. clients because the word is getting grow this challenge becomes ever MarEx: The company has a wellout about Gibdock’s workmanship more present. Personally, I like hirknown apprentice training program. ing and promoting locally, and we Tell our readers more about it. and “on-time” culture. do that whenever we can. I am also Corvelli: Yes, we operate an apprena strong proponent of hiring from ticeship program in conjunction with within our organization, and this the government of Gibraltar. When has served the company well over the years. There are numerous they come to Gibdock, apprentices are about 16-years-old and stories within our company of managers who have worked in the the program takes four years to complete. At the end of the dockyard their entire career and have achieved great personal program the apprentice earns a National Vocational Qualification success, and they are part of what sets us apart and their stories (NVQ), which is to British educational standards. The first year,


You can defend yourself against a shipboard attack. CASTLE SHIPBOARD SECURITY PROGRAM

Advanced shipboard security and vessel defense training for maritime professionals, law enforcement, maritime security operatives, and veterans Certificated with Continuing Education Units through Nova Southeastern University (CBAP)

Training for anti-piracy, counterterrorism, civil unrest, and civil threats

where the professionals train™

Castle ShipBoard Security Program • 1314 Las Olas Blvd., Unit 308 • Ft. Lauderdale, FL. 33301 • 954-529-6124 • • SIG SAUER Academy • 233 Exeter Road • Epping, NH 03042 • 603-679-2003 09SIG250AcademyCastleAd.indd 1

MarEx-38-Gibdock-CS-Int-052510.indd 33


5/25/10 12:25:38 PM

M AY / J U N E 2 010




they work in a monitored training center We have systematically gone and workshop. For the next three years the through the yard infrastructure apprentices are in the yard and working and fixed things with a long-term alongside tradesmen and foremen. vision in mind. Considering it’s an older yard, it had obviously MarEx: Is Gibdock one of the largest required regular maintenance, employers in Gibraltar? and most of what we are doing is Corvelli: We are a significant employer improving the existing infrastrucand certainly one of the largest industrial ture and modernizing various employers. Gibraltar is known for bankthings. ing, insurance, and even online gaming. MarEx: How many yards are in As a shipyard, we have limited space, so growth means having quality clients with the region? How do they comlots of projects. We expect to attract pare to Gibdock? more clients from around the world. We Corvelli: There are yards to the are in one of the best locations for rig east and west of Gibdock, and work as there is tremendous activity in customers in this region do have Africa. Rig work is a natural fit for us competitive options. But what sets as high-value and high-quality work Gibdock apart is our customer where on-time service is paramount. service and craftsmanship. In our Additionally, our delivery logistics line of work there are always issues are excellent whether transiting north and unexpected problems, but what or south. We are at the crossroads to differentiates us is our dedication to every important destination. solving these for the customer as efMarEx: What about your own ficiently as possible, and we deal with There are yards to the east and west of them in a fair and professional way, background in the shipyard indusGibdock, and customers in this region do operating under the concept that try. What lured you to come to have competitive options. But what sets our long-term goal is to build lasting Gibraltar? relationships with all our clients. Corvelli: Growing up on Long Gibdock apart is our customer service Island, New York, I learned to have MarEx: Tell us about the occupaand craftsmanship. In our line of work a love for the sea. So when it came tional health and safety systems time to go to college, I already the company has in place. there are always issues and unexpected knew I wanted a degree in Naval Corvelli: For the last three years we problems, but what differentiates us is Architecture. I have a degree from have consistently and successfully our dedication to solving these for the the Webb Institute of Naval Archiincreased the awareness of health tecture and Marine Engineering. and safety in the yard. This focus and customer as efficiently as possible, and Over the years, I have worked as a these types of internal control systems we deal with them in a fair and professuperintendent in ship operations. have been built into our management sional way, operating under the concept In the 1990s I spent a lot of time initiatives. We are ISO-certified for our traveling in China looking at proQuality Management System to the that our long-term goal is to build lasting spective investments and opportulatest ISO 9001:2008, for our Envirelationships with all our clients. nities. We acquired some different ronmental Management System to ISO businesses there, and I worked 14001:2004 and last year our Occupathem for a while but wanted to tional Health and Safety Management System was certified by Lloyds Register follow my dream and get into boat-building. For 10 years I owned a custom yacht-building to the OHSAS 18001:2007 standard We are very proud of that accomplishment. company. My ship operations background combined with my business management experience made this opportunity right up MarEx: Is foreign expansion in the company’s future? my alley. The chance to join this company and be overseas again, Corvelli: We have so much opportunity in Gibraltar that I cannot even comment on that question. Gibdock is an incredible orgaliving in Europe, was just too inviting. And here I am. nization strategically positioned to handle rigs, ships and repair MarEx: What are some of the improvements done to make and conversion, so for the time being I think our focus is really on the yard more efficient? supporting and expanding this business.. Corvelli: In the past three years there has been a significant amount of investment and yard upgrades. We did a lot of regular MarEx: Mr. Corvelli, we thank you, as do our readers, for your MarEx maintenance, like upgrading cranes and safety equipment. time and insights.

MarEx-38-Gibdock-CS-Int-052510.indd 34

5/25/10 1:00:03 PM

ChartYour YourCourse CourseTo ToImproved ImprovedProfitability ProfitabilityWith With3D 3DPLM PLM Chart Ships aren’t 2D … so why design like they were? Dassault Systèmes provides ship Ships aren’t 2D … so why design like they were? Dassault Systèmes provides ship designers and builders with powerful 3D tools needed to turn innovative ideas into profitable designers and builders with powerful 3D tools needed to turn innovative ideas into profitable ships. Our integrated suite of Product Lifecycle Management (PLM) solutions – including ships. Our integrated suite of Product Lifecycle Management (PLM) solutions – including CATIA, DELMIA, ENOVIA, SIMULIA and 3DVIA – was developed cooperatively with leading CATIA, DELMIA, ENOVIA, SIMULIA and 3DVIA – was developed cooperatively with leading shipbuilders. With enhanced business processes and seamless collaboration between shipbuilders. With enhanced business processes and seamless collaboration between customers and suppliers, DS PLM allows you to consistently bring high quality ships and customers and suppliers, DS PLM allows you to consistently bring high quality ships and offshore platforms to market faster and within budget. Visit to see offshore platforms to market faster and within budget. Visit to see how you can transform your business and leave the competition in your wake. how you can transform your business and leave the competition in your wake.

© Dassault Systèmes, 2008. All rights reserved. CATIA, DELMIA, ENOVIA, SIMULIA and 3D VIA are registered trademarks of Dassault Systèmes or its © Dassault Systèmes, All rights subsidiaries in the2008. US and/or otherreserved. countries.CATIA, DELMIA, ENOVIA, SIMULIA and 3D VIA are registered trademarks of Dassault Systèmes or its subsidiaries in the US and/or other countries.

DS218A_ShipBuild_industry_FINAL_R1.indd 1 MarEx_38.indd 35

9/23/08 1:44:07 3:44:26 PM PM 5/25/10

Alan C. McClure Associates Supervises the Roll-Over of a 264-Foot Ferry Hull.

Trends in Naval Architecture A Global Perspective SHIPS ARE THE FOUNDATION of international trade. From the first felucca sailing along the Nile to the mighty cruise ships, tankers and extreme structures of today, naval architects paved a path across the sea. They played a pivotal role in enhancing commerce between nations and did it with a beauty and grace inherent in the structures they designed and launched into extreme and unforgiving environments. Although the science behind flotation and stability has grown from humble beginnings, the principles remain the same. In every situation, the compressive craft of naval architecture continues to be a blend of pure research, applied science, and the artistry of the practitioner who by some magic of science and imagination creates the world’s most magnificent and extreme structures. While there is one industry which we call

By Robert C. Spicer, CPT

naval architecture, it is really a fragmented work environment. Some practitioners are specialized in the cruise and ferry business while others work with megayachts. Some work with heavy lift ships, container ships, or design the rigs for oil and gas fields around the world. But all contribute to our global marine transportation industry.


Naval architects traditionally have offered many different services – from the first concept on paper napkins across a dinner table with the owner to the detailed design analysis required for construction, each rooted in a specific culture. For example, Deltamarin Ltd. of Finland has its roots in the Wärtsilä shipyards. This positioned the firm to participate in the cruise ship boom that Finland recently enjoyed. Yet



M AY / J U N E 2 010

firms realize the need to grow beyond their origins into different markets and different geographic regions in order to ensure their longevity and carry them through both good times and bad. Mika Laurilehto, Managing Director of Deltamarin, noted that “We not only work in our core business but have also moved into other areas such as RO/RO passenger ferries and offshore vessels for the oil industry.” Deltamarin also formed a joint venture with V.Ships Leisure called V.Delta that has enabled the firm to extend its services into the ship management and operations arena. Deltamarin has offices in Asia and elsewhere and is considering opening a branch in Brazil to support the oil service industry. Alan C. McClure Associates in Houston has for 35 years provided advanced engineering and design services to clients in the offshore exploration and produc-


The first truly global industry keeps getting better. Find out how 3D modeling and computational fluid dynamics are just two of the technologies leading the way to an exciting future. tion industries, but the firm works in the general marine transportation industry as well. According to President Scott McClure, while the firm’s core business is clearly centered in the extreme environments found in the oil industry, including jackup rigs, offshore construction vessels, oil production and storage vessels, it has been important for them to service other sectors as well, such as ferries, barges, tugs and marine terminals. Elomatic, Poland provides services and products to customers in various markets such as offshore vessels, fishing trawlers, multipurpose heavy lift vessels, tugs and luxury megayachts. They also do conversion projects. This diversity has helped them survive and grow even in these difficult economic times, according to Piotr Bilon, Managing Director of Elomatic Poland. Elomatic Poland is headquartered in Gdansk with the company parent’s offices located in Finland and support offices in Serbia, Russia, China and India. Renewable energy and sea-based wind farms in particular have been attracting a good deal of attention recently, and for good reason. Ramesh Maini, President of Zentech, Inc. in Houston, remarked that although Zentech works primarily in the

Alan C. McClure Associates CFD Software CostEffectively Analyzes the Impact of a Breaking Wave on a Jack-Up MODU Platform.

offshore oil and gas industry it recently entered the offshore renewable sector and now has its own jackup rigs and swath vessels ready to install and service the emerging wind farm market. From Houston to Mumbai, Zentech offers marine architectural and engineering services wherever there is a need to develop new concepts from early stage design to final production.



M AY / J U N E 2 010

Since the nature of the maritime business is global it’s only natural that these firms have easily transitioned into a worldwide workforce. Through the increased reliability of interconnected digital offices, firms have created new networks of connectivity that support their businesses. So today, working in Korea on Monday and Mumbai on Friday is very realistic for many.


ELOMATIC TR 80 Series Arctic Stern Trawler’s Advanced Hybrid Power System Conserves Fuel for the Owner.


Energy conservation and the environment are on everyone’s mind these days. In the field of naval architecture the rise of wind farms on the ocean horizon has become a driving force for companies like Zentech and Elomatic as they venture into the design of support and service vessels. The increased focus of ship operators on initiatives that conserve fuel on ships already in operation is another key driver. The continued redesign of propellers, hull

ELOMATIC TR 80 Series Stern Trawler.

form and appendages, and the focus on advanced underwater paint systems such as silicon-based or hard coatings are all examples of this. From LED lamps to dynamic trimming software, operators seek to fine-tune their operations and save thousands of tons of fuel annually, and they are turning to marine architects for help. The merging of naval architecture, marine engineering and operations using firms like the V.Delta joint venture offers owners the services they need to conserve


Easy In/Easy Out Good Deepwater Access • On the Gulf of Mexico • 660 Ton Travelift • In-house Design • Experienced Workforce • CNC Plasma Table

energy. According to Naval Architect Giovanna Zito, V.Delta’s four-step approach to energy conservation of fuel history assessment, training, ship energy-saving assessment, and followup can significantly reduce fuel consumption and expense. Zito says energy savings on the order of 10 to 15 percent can be achieved for ships in operation. The focus on energy conservation will only increase in the wake of growing concerns about fuel costs and harmful


12 Fenced Acres Aluminum and Steel


• •

1,200’ of Bulkhead Waterfront New Construction, Conversion, and Repair

quick turnaround for all of your

repair needs

Horizon Shipbuilding, Inc. • 13980 Shell Belt Road • Bayou La Batre, AL 36509 Phone: (251)824-1660, ext. 222 • THE MARITIME EXECUTIVE


M AY / J U N E 2 010


FPSO “Aoka Mizu” by Deltamarin, Ltd.

ELOMATIC TR 80 Series Arctic Stern Trawler is The Replacement Generation for the Famous Polish Fishing Trawlers of the Past.

emissions from ships, and it will drive the way architects think about building and designing vessels going forward. In a recent conversation with Deltamarin’s Laurilehto, he said, “I do not think that we will continue to see larger and larger vessels being constructed in the marine sector due to the energy costs.” Instead, he believes that there will be a need for a larger number of smaller vessels which will be both energy efficient and green.


The new innovations that are being developed in naval architecture are centered on the environment and the use of advanced software tools. Hull forms, hydrodynamic issues and different types of fuel will continue to drive changes in design so that hulls and power plants become more efficient. Owners are now more than ever concerned about the need to save fuel and reduce emissions, and they demand

Cost-effective access to high-speed data services. n Simultaneous voice and IP data up to 432kps n Global coverage n Unrivalled reliability n Easy IP network integration n Highly cost-effective n Completely secure

Delta Wave is a mobile satellite services provider. Products and Services include: Inmarsat®, Iridium®, Asset Tracking, Systems Integration Delta Wave CommuniCations, inC.

“When Only the Best Will Do”

Call: (985) 384-4100 | Toll-Free: (800) 706-2515 email: | Visit us at ATCE.09 in New Orleans - Booth 2261 | LAGCOE 2009 - Booth ROS-72 | OC 2009 - Booth 1 THE MARITIME EXECUTIVE


M AY / J U N E 2 010

these issues be accounted for in the design process. Many architects believe that there will be a growing trend toward the use of hybrid energy solutions that include battery technology. While this may not come into full play on larger ships, it will likely be seen in increasing numbers in smaller ship designs. Other trends include the advances being made in 3D modeling and the use of statistical data banks that will help to achieve improved designs. Layout

NAVAL ARCHITECTURE optimization with 3D models has proved to have remarkable saving potential in optimizing machinery and hull layout and improving construction techniques. Deltamarin which has an extensive reference list of vessels after more than 20 years as a company, such as cruise ships, ferries, tankers, container and bulk carriers, heavy lift vessels, dredgers, pipe-layers, naval vessels, among many others, believes that we will not continue to see larger and larger vessels being constructed in the marine sector due to the energy costs. Instead, there will be a need for a larger number of smaller vessels rather than the current trend toward larger vessels. Another software trend is the increased use of scanning technology in daily work. Piotr Bilon of Elomatic reported, “One of the most promising innovations for the customer is the laser scanning technology available today. This drastically increases the quality of the end product.” Bilon says the time needed to take proper and accurate measurements has decreased dramatically and the influence of the human factor

has been reduced to practically zero. In the oil and gas sector, Scott McClure notes that the greatest innovation is in the use of computational fluid dynamics (CFD). This capability was recently applied to the offshore and marine industry as a way to provide cost-effective analysis of problems that occur due to the complicated flow of fluids. The initial use of CFD software minimizes model-testing programs by determining what works and what doesn’t, thereby reducing the number of model changes and the amount of time required in basins and/or wind tunnels. The software also enables a look at temperature gradients as they might be applied to cold storage of gas containment systems as well as to Arctic applications. While CFD analysis doesn’t replace the need for model testing and data analysis, it will greatly reduce the time and effort involved in design-validation.

Robert Spicer, who holds a Chief Engineer’s license, has worked in the marine industry for more than 30 years. This is his first contribution to MarEx.


The future of naval architecture will include closer attention to overall energy

asba ad 4-10:Layout 1 4/12/10 10:51 AM Page 1

Sept. 30 & Oct. 1 2010

consumption on marine vessels. It will be driven to create structures that can safely work in extreme environments as the search for oil and gas continues. Improvements will come as apprentices learn to improve hull forms, create advanced power generation systems, and reduce energy consumption using sophisticated software tools and the integration of various disciplines into the design process. This will involve a hybrid approach to technology, importing applications from other industries, to improve ship designs. The application of science to real-world problems must be a primary concern of the next generation because, as Mr. Bilon’s professors at Gdansk University of Technology told him on the first day of class, “Navigare necesse est.” To sail is necessary. We need effective marine systems to survive. MarEx

2010 Annual Cargo Conference

Sept. 30 & Oct. 1, 2010 Eden Roc, A Renaissance Beach Resort, Miami Beach, FL Tanker, Dry Cargo & Future Market Trends

Plan to meet your colleagues in Miami...

Visit for up-to-date details THE MARITIME EXECUTIVE


M AY / J U N E 2 010


The tide is turning. A new phase is on the horizon. It is integrated, secure, easy to control and effective. It is revolutionary, and it will rock your world.

Coming soon.

MarEx_38.indd 41

5/25/10 1:44:19 PM

M ay / j u n e 2 010 THE MARITIME EXECUTIVE


Combating Emissions and Fuel Consumption Through Modern Science By Tony Munoz

International shipping is expected to double over the next ten years and, in the process, emit more harmful emissions. About 80 percent of the emissions will occur in the Northern Hemisphere with 70 percent within 250 miles (400 km) of land. In many coastal regions, commercial vessels will contribute more than five percent and up to 30 percent of modeled SO2 concentrations. Moreover, an updated study of ship emissions, using more accurate fuel consumption statistics, puts global shipping emissions of NOx and CO2 at twice the original estimates and SO2 levels at 50 percent higher. The U.S. Environmental Protection Agency (EPA) expects emissions in U.S. waters over the next 20 years will grow by 300 percent over 1996 levels. Similarly, the European Union (EU) states that, by 2020, shipping emissions in EU coastal seas will exceed the total land-based emissions of the 27 EU countries. According to the UN, ship emissions currently account for 2.7 percent of all global emissions and are expected to increase by 150-250 percent by 2050. In response, the IMO has drafted plans for an Energy Efficiency Design Index

MarEx_38.indd 42

and Operational Indicator to ensure all new ships are environmentally friendly and a Ship Energy Efficiency Management Plan for all ships in operation. Despite having overwhelming amounts of information, the IMO has requested additional studies and IMO SecretaryGeneral Efthimios Mitropoulos has made it clear that the shipping industry is not a fragmented entity. With bunker fuel levies left on the table at the Copenhagen climate talks in December, the major stumbling block is establishing global emission targets for both the aviation and international maritime industries. The UN is faced with reconciling the principle of common but differentiated responsibilities for these industries within the UN Framework Convention on Climate Change with the equal treatment of ships under the IMO. The EU appears to be isolated in its calls for emissions targets and has decided to act on its own if neither the IMO nor international climate negotiations (in Cancun, Mexico later this year) succeed in establishing curbs for ship emissions. Furthermore, it has already decided to add aviation to

5/25/10 1:44:21 PM

emissions & Fuel

Global Issues Demand Global Solutions

A predictable thing happened on the way to governmental expedience in dealing with critical issues facing the global community: A privately funded company has essentially solved the problem of monitoring and lowering emissions through its Energy Management and Fuel Performance systems. Marorka, an Icelandic company with offices in McLean, Virginia, has for over a decade been developing energy management products which can assist vessel operators in optimizing fuel consumption and thereby reducing emissions. Led by Dr. Jon Agust Thorsteinsson, Marorka’s Marine Energy Management applications measure, register and analyze energy usage on a single vessel or an entire fleet. With a goal of a five to seven percent reduction in fuel consumption, the applications include an onboard system called Maren, which is based on mathematical formulae and measures energy usage in real time. The system features decision support, giving recommendations in real

MarEx_38.indd 43



A White Knight on the Horizon

M ay / j u n e 2 010

its emissions trading scheme beginning in 2012.

time on how to adjust a ship’s operating parameters to maximize fuel economy. The Maren system is connected to an onshore, Web-based fleet energy management system called the Marorka Portal. Together, Maren and the Marorka Portal keep crew and onshore management informed of where vessel inefficiencies are and what can be done to improve performance. The timing couldn’t have been better. On March 26, 2010, the IMO – acting on the joint recommendation of the EPA in the U.S. and Transport Canada in Canada – designated the waters off the North American coasts as an official Emission Control Area (ECA), where much tougher emission standards will be applied to ships transiting within 200 miles of shore. The EPA’s goal in requesting the designation is to reduce ship emissions in 2020 by 320,000 tons for NOx (or by 23 percent), 90,000 tons for PM2.5 (74 percent), and 920,000 tons for SOx (86 percent). The designation of the ECA means ships entering it must be fuel compliant beginning in 2012. From 2012 until 2015, fuel used by vessels must not exceed 1.0 percent sulfur (10,000 ppm); beginning in 2015, vessel fuel cannot exceed 0.1 percent sulfur (1,000 ppm). “The Maren system complies with the new IMO energy management framework in every respect,” said Thorsteinsson. “By using our system, ships can report exact emission numbers to the U.S. government while in harbor and while transiting U.S. waters.” The ability to monitor emissions and submit a verifiable report is going to be a huge and important job. And while some companies sell solutions focusing on specific aspects, like trim optimization, no company has provided an overall approach to dealing with onboard and onshore energy management in the manner that Marorka has. “Taking into consideration all of the various systems required to operate a vessel, from the most complex to the simplest, if you change one parameter everything changes,” Thorsteinsson stated. “If the speed changes then the optimum trim changes, and so forth. If a ship is sailing from New York to Norway, the ship will transit through seawater of perhaps 30 degrees Celsius to maybe five degrees Celsius. The heat balances on board will change. And that’s what Marorka does. We assist in finding optimal operating points for onboard systems, and when needed we recalculate the optimal.”

Cost Compliance – Not Cheap

Marine diesel engines typically range from 2,500 to 70,000kW (3,000 to 100,000 hp). Unfortunately, emission control technologies are far behind the curve and limited. The EPA estimates that the cost of reducing air emissions for vessels operating in the ECA will be around $3.2 billion by 2020. Additionally, the EPA estimates that the average increase in costs associated with switching from marine residual to distillate fuel will be around $145 per ton, with $6 going toward distillate desulfurization. In other words, low-sulfur fuel will become much more expensive, and there are also considerable concerns about its availability.

5/25/10 1:44:22 PM

emissions & Fuel

M ay / j u n e 2 010

Marorka Maren Overview Screen.

Aside from its high cost and questionable availability, low-sulfur fuel has another problem – safety. There are many documented events of propulsion failures due to switching fuels. Last July the California Air Resources Board’s low-sulfur fuel standards took effect. As reported by the Harbor Safety Committee of the San Francisco Bay Region, from September 2008 to June 2009 there were only 11 propulsion failures due to fuel switching out of 8,630 deep draft arrivals. In the first month of the new regulation, six ships out of 720 arrivals had fuel-related problems. The new NOx standard also raises questions for vessel owners. For example, if an engine is certified at specified load levels, variable loads (such as harbor maneuvering) could result in short



Marorka Portal Dashboard.

Dr. Jon Agust Thorsteinsson, Managing Director/CEO.

bursts of emissions that violate the new standards. Yet despite all the concerns being posed by vessel operators, the EPA said the ECA is expected to yield significant health and welfare benefits by reducing ship-related adverse health impacts. Additionally, the EPA claims that the reduction in health care issues will result in monetized health benefits in 2020 of between $47 and $100 billion in 2006 dollars. MarEx While MarEx does not endorse specific products or services, we did find the Marorka system uniquely effective in monitoring fuel and emissions from vessels. You can find the company on the Web at

R4A5 Reclining Quad

SH4 Quad



the world

F-18-5 Quint

USCG LiCenSinG ChanGeS imminent!

Passenger Seating Bench, captains chairs, and more !

S3 Triple




Doors – Hatches

Train aT MPT

Call us today to set up your complimentary Career Counseling Session and receive a FREE evaluation of your sea service, or register online at

Visit our web site to see our Current Course Schedule


– Individually dogged, QA,

Aluminum, steel, stainless steel, or combination.

You can also download our 92 page Career Reference Manual & Course Catalog Serving Inland and Of fshore Since 1956 P.O. Box 423 Metairie, LA 70004 Ph: (504) 835-7201 Fax: (504) 835-9032 e-mail:

MarEx_38.indd 44

MARITIME PROFESSIONAL TRAINING 1915 south andrews avenue | fort lauderdale, fl 33316 local 954.525.1014 | fax 954.764.0431 | toll free 888.839.5025 e-mail | web

5/26/10 9:48:51 AM


IMAGINE LOSING POWER OUT HERE EPD - Designing power systems for any environment.

World Leader in Integrated Diesel Electric Propulsion/Power Systems Electronic Power Design, Inc. (Houston) and EPD Asia Group (China) are considered among the top design/engineering and manufacturing companies in the world for automated electrical power systems. The company is also recognized for its work in harmonic solutions for a wide range of power systems, either utility feed or generated. Our Range of Services: n Engineering

n Programming

n Commissioning

n Design

n Manufacturing

n Field Service

EPD Brazil now open in Rio de Janeiro!

For more information contact Houston: 001 713 923 1191

EPD-8X10.875-Ad.indd MarEx_38.indd 45 1

Asia: 0086 514 8752 7700

9/25/09 5/25/10 11:46:32 1:44:28 PM AM

M ay / j u n e 2 010

wheeling & dealing

Wheeling & Dealing The fact that shipbuilding and finance are so tightly intertwined has been one cause of the paradox unfolding in the markets for international drybulk, tanker and container vessels. During 2007 and early 2008, as these markets were expanding in bubble-like fashion, financing was plentiful. Suddenly, the music stopped in the third quarter of 2008. Then, slowly at first, the bright side of the credit crisis began to emerge. Simply put, constricted funding has led to reduced deliveries of vessels compared to stated levels in the orderbook. Ted Petrone, President of Navios Corporation, a large owner in the drybulk space, told a breakfast meeting in New York last month that difficulties commencing in the third quarter of 2008 proved to be “a blessing in disguise,” adding that “financing stopped for vessels being built at greenfield yards, some of which did not even exist yet, and brownfield




Florida-based shipping Company with field office in Argentina requires: Superintendent Tanker Operations for Argentina Qualifications: Master Mariner (international trade) Experience: • Minimum 3-4 years sailing on oil/ chemical tankers • Experience in dealing with Oil Major vetting inspections onboard and preparation of vessels for vetting, training crew in ISM code and Tanker operations. Strong knowledge of TMSA and procedures for implementation in office and onboard. Past experience with Spanish-speaking crew preferable. Bi-lingual English/Spanish, a must. Send Resumes to

MarEx_38.indd 46

By Barry Parker

yards.” The Navios executive cited statistics backing up his assertion that “The orderbook is over-marked,” pegging drybulk nondeliveries at 40 percent during 2009 and 50 percent during the first four months of 2010. Non-deliveries might be ships whose completion dates are pushed into the future, but they may also be vessels that were options or simply possibilities rather than real orders (with deposits paid by owners and refund guarantees lodged by shipyards). Petrone described a group of 2009 deals in which Navios Maritime Holdings (NYSE:NM) was able to purchase a half-dozen Capesize vessels at very attractive prices, explaining that the yards had described much larger orders. Insiders suggest that bank financing, a traditional mainstay on the balance sheets of international shipping companies, is still available. At industry gatherings and on numerous company conference calls, bankers and company executives have stated repeatedly that existing relationships matter a great deal. Banks will support their existing client base, but advance rates (the percentage of the vessel cost that can be borrowed) are lower, tenures shorter, and margins higher. The market for equipment financing in the U.S., while distinct from the international market, is impacted by the same broad trends. Joe Markey, Managing Director, Transportation & Logistics, at KeyBanc Capital Markets, explained: “We are lenders to Jones Act companies for both coastwise and inland equipment. We have a limited involvement in the offshore space as well.” He told MarEx that “For the U.S. part of the ship finance market, interest rate margins have improved, although the banking stan-

5/25/10 1:44:30 PM

wheeling & dealing Shipyard cancellations and fluctuating asset values have opened the door to some opportunistic transactions. dards – things like covenants – remain tight and rigid.” A number of listed companies (and presumably some of their private brethren) have come to terms with their bankers on waivers of loan covenants. More often than not, however, they are required to top up their equity through follow-on offerings or other forms of financing – sometimes high-yield bonds, sometimes debt that is convertible into equity in the future. The result has been a plethora of capital market offerings, including a group of Initial Public Offerings during March and April of this year, reflecting strong equity markets at a time of rising ship values.



After noting that shipbuilders are lamenting the difficulties their customers are facing in getting financing, KeyBanc’s Markey stated that “We see the market as being bifurcated – it’s divided into haves and have-nots.” Markey, based in midtown New York, further added that “Unless you are a large company with a strong balance sheet, you’ll have a hard time getting financing from the banks.” He pointed toward a trend where smaller companies, without good access to capital, are selling off assets or even being acquired outright by companies with access to capital. The question of how many vessels will actually be delivered is an imponderable, even to the savviest forecasters. As Navios’ Petrone said at the New York briefing: “A shipyard will not call up and announce that it has just cancelled a half-dozen vessels.” Others in the chain will also seek to keep the disposition of failed orders private. In some cases, a buyer may have already provided a deposit and cannot secure further financing. Where a bank funded the initial deposit, suddenly it too has skin in the game. The yards may need to significantly lower the price of a vessel in order to enable a “resale” transaction to occur. One group eager to talk (if contracts permit disclosure of a deal) are the buyers of yard resales, which are transacted at prices significantly below those of the original purchaser. “We’ve been buyers of distressed vessels,” Petrone noted. Navios, with its massive Capesize acquisition program in 2009, was able to acquire vessels at prices that work back to just above $60 million each. A year earlier, in 2008, those same vessels were being ordered for nearly $100 million each (with prompt deliveries commanding as much as $140 million). Significantly, by coming to the aid of a large German bank involved in the original Capesize order, Navios was able to gain financing with a lengthy ten-year term. Its financing mix also included preferred stock convertible into common shares issued to the yard. To complete the financing trifecta, Navios also issued $400 million of secured high-yield bonds later in the year.

M ay / j u n e 2 010

Haves and Have-Nots

from the Korean Sungdong yard for a purchase price of $69.5 million each (contrasted with the $100-million levels attained during the frenzied market of 2008). At a recent luncheon for analysts and investors, Chairman Nikolas Tsakos said that “The two newbuildings we are taking over are distress sales,” adding that TNP had abstained from buying ships during the market’s cyclical highs. Additionally, TNP is expected to take delivery of the last in a series of eight Suezmaxes ordered in 2004 from Sumitomo in Japan and is considering its financing options for three additional ships. In a clever example of gaining a return that benefits investors, the two Sungdong vessels are linked to an At the Market (ATM) offering presently underway. ATMs, in which shares are sold slowly and quietly over time (as opposed to a standard underwriting deal in which equity is raised through a traditional selling process, including a roadshow) were a common device in 2009. TNP’s stock sales are being conducted through a distribution agreement with Credit Suisse under the umbrella of a larger $300 million shelf registration filed in June 2009. The company CEO explained that, in a new phase of the ATM, two million shares of Treasury stock (previously issued shares that had been acquired by the company through a round of stock buybacks) were now

Cash from ATMs

With less bank financing available, buyers with the ability to access public funds have helped bolster prices of second-hand ships and, importantly, have kept deliveries coming through dealmaking with yards. One buyer with a $300 million war-chest and considerable support from its banks, Tsakos Energy Navigation (NYSE:TNP), has recently purchased two newbuild Suezmaxes

MarEx_38.indd 47

5/25/10 1:44:31 PM

M ay / j u n e 2 010

wheeling & dealing



being offered “at a higher price.” In what Tsakos described as an “accretive transaction for shareholders,” at least a portion of the ATM proceeds will be advanced to the Sungdong yard. “If we make an upfront payment to the yard, we can save $2.5 million on the price per vessel.” Why? Because, according to Tsakos, “Some yards are cash-strapped.” This year’s crop of attractively priced resales includes Globus Maritime Ltd.’s (GLBS on the London AIM) buying two Handymax bulk carriers from the Kouan yard in China. Interestingly, market sources suggest that the Singapore-based seller may have been “flipping” two vessels – another variation on the “distress” theme. SafeBulkers Inc. (NYSE:SB), raised nearly $80 million of equity in March and then announced an order for two Kamsarmax ships (to be delivered from an unnamed Chinese yard in late 2011/early 2012) at $32.2 million each. Similar vessels available for prompt delivery would have been valued at above $90 million each in late 2007.

Newbuilds, Anyone?

One new company, NYSE-traded Crude Carriers Corp (CRU), took advantage of a strong equity market in March to raise more than $250 million. It quickly put the money to work, aided by a revolving credit of up to $150 million from Nordea that will provide bridge financing for vessel purchases. Its initial fleet includes a newbuild VLCC from Japan’s Universal Shipbuilding, purchased from a related private company, Capital Maritime & Trading, for $96.5 million. Capital Maritime then acquired a VLCC resale from Daewoo in South Korea (for $108 million in a rapidly rising asset market) and has granted CRU an option to purchase the vessel. In a move indicative of more positive market sentiments on the drybulk side, some owners are contracting ships rather than taking over failed orders. Diana Shipping (NYSE:DSX) announced that it would be building two 206,000 dwt ore carriers from the Jiangnan yard for delivery in 2012 at a cost of $59 million each. DSX is blessed with considerable liquidity in the form of cash and low leverage; it said only that it was “considering obtaining pre- and/or post-delivery financing.” In recent months another listed company, Paragon Shipping (NYSE:PRGN) has announced that it would build a total of eight vessels at an aggregate price of $223 million. Deliveries from Chinese yards of four Kamsarmaxes (82,000 dwt) and four Handysized bulkers (37,200 dwt) will occur in late 2011 and into 2012. PRGN has typically entered into multiyear charters, a strategy that will ap-

C-MAR group offer a full range of services including technical management of specialized offshore vessels. In addition the group can offer marine manpower and crewing.

peal to financiers when the time comes to fund payments. Not surprisingly, the Navios organization continues to be a major player; in mid-April it announced a plan for its Navios Maritime Acquisition Corp. (NNA.U), formed as a Special Purpose Acquisition Company (SPAC), to acquire 11 newbuild product tankers and two newbuild chemical tankers for an aggregate $457.7 million, with options to acquire two more product tankers for $40.5 million each. Navios’ close relationship with the shipping banks has enabled it to source $334 million of debt financing, making possible attractively priced purchases from three Korean yards – Dae Sun, STX and Sungdong. In a world fraught with opportunity and risk, who says credit crises don’t have silver linings? MarEx Barry Parker is a frequent contributor to the magazine.

We provide: • FMEA • Audits • Damage & mechanical failure investigations • Technical auditing • Development, implementation & maintenance of safety management systems in accordance with the ISM Code.

Global marine and enerGY SerViCeS

MarEx_38.indd 48

5/25/10 1:44:33 PM


Your Fast Track to a Career at Sea MITAGS/PMI’s 24-Month Workboat Mate 500-1600 Tons Program

Exceptional workboat companies need exceptional mariners.

Finally some good news on

The MITAGS/PMI Workboat Mate (500-1600 Tons) Program offers a cost-effective way for dedicated individuals who possess little or no maritime experience to earn highly sought after qualifications.

the waterfront and a timely

MITAGS and PMI are non-profit continuing education centers for professional mariners. The Institutes provide training for both civilian and military seafarers from around the globe. MITAGS and PMI are dedicated to helping mariners maintain and advance their certifications, as well as assisting individuals who would like to enter the maritime profession.

of bringing employees up

PMI is located on Seattle’s waterfront, south of the U.S. Coast Guard station and north of the container and passenger terminals in the heart of the Port of Seattle.

solution to Foss’ challenge the hawsepipe and into the wheelhouse. –Norm Manly, Foss Maritime

MITAGS is located on a spacious, eighty-acre campus that is just minutes from Baltimore-Washington International (BWI) Thurgood Marshall Airport in Linthicum Heights, Maryland.

MITAGS: 692 Maritime Boulevard, Linthicum Heights, Maryland 21090 Toll-Free: (866)-656-5569 | Website:

PMI: 1729 Alaskan Way South, Seattle, Washington 98134 Toll-Free: (888) 893-7829 | Website:

United States Coast Guard Approved Courses

MITAGS-PMI Mates MarEx_38.indd 49 FP Workboat Ad 111408.indd 1

11/13/08 5/25/10 1:44:36 3:51:18 PM PM

Green Thrusters

ma y / j u n e 2 0 1 0

Now you can stay on station while using less fuel and generating fewer By MarEx Staff emissions. Really.



In the world of global climate change, the term “stationary source” usually means things like power plants, refineries, factories and office buildings. But it can also refer to ships in port and drill ships and rigs at sea. And while much attention has been focused on controlling emissions from traditional stationary sources, little if any has been paid to the maritime side of the equation. Of course, MarEx readers are already familiar with such techniques as “cold ironing” to reduce and eliminate emissions from vessels anchored at the dock. Cold ironing, in case you’ve forgotten, is the process of hooking up to a shoreside power source to maintain power on a vessel while in port. It’s already in use in places like Los Angeles/Long Beach and is a proven method of reducing noxious emissions of SOx and NOx. But what about those hundreds of drill ships and drilling rigs around the world that are also a formidable source of emissions? What can be done to reduce those? Let’s begin with a few facts.

Bunker Prices and Pollutant Levels

When last we looked, bunker prices for the IFO 380 grade fuel used by the majority of ships were close to $465 per ton and rising. While this is by no means a record level, it is important to remember that marine fuel costs can represent up to 60 percent of a ship’s overall operating cost, according to a recent report from the Helsinki Commission. Globally, shipping consumes around 300 million tons of bunker fuel per year, and the environmental consequences of burning such low-grade fuel are attracting the attention of regulators, who are exerting increasing pressure to limit emissions of NOx, SOx and other harmful particulates. The Second International Maritime Organization Study on Greenhouse Gas Emissions (IMO GHG) concluded that shipping was responsible for 2.7 percent of global CO2 emissions. The IMO further suggested that, if unrestricted, emissions may in-

Procurement Contractors + Spare Parts Brokers Since 1974



Tel: (1) - 450 - 465 - 2480

MarEx_38.indd 50

Azipod unit propeller with full azimuthing capability.

crease by 150 to 250 percent by the year 2050 due to anticipated growth in international seaborne trade. Total NOx emissions from ships in the Baltic alone were more than 393,000 tons in 2008. While a precise framework covering how ship-specific emissions legislation could be developed eluded the great minds at the Copenhagen summit last December, the IMO has already debated an Energy Efficiency Design Index that points towards a world where individual ships are assessed in terms of their environmental credentials. Careful fuel management and increased efficiency have therefore become vital for both financial and environmental reasons. In this regard, the UK Chamber of Shipping reported last September that it expected new technologies and designs to deliver energy efficiency savings of up to 40 percent on new ships relative to typical ships delivered in the 1990s.

Lower Fuel Consumption = Lower Costs and Reduced Emissions

Beyond smoother foul-release hull coatings and more efficient engine ignition, one such new technology that can be shown to deliver tangible energy savings is the Azipod CZ thruster. ABB Marine, for example, recently raised the capacities it offers on its Azipod CZ thrusters to 4.5MW, specifically targeting the drill ship and rig markets where thrusters are used to hold station as part of dynamic positioning. The company says that using a podded-type solution in a drilling rig application contributes to an increase in overall propulsion efficiency of 10 to 15 percent compared to conventional technology. “Designs for any drilling rig with electric propulsion and dynamic positioning have to address two key issues,” said ABB’s Jorulf Nergard, Vice President, Sales-Floaters. “The first is the need for continuous availability of the electric power plant, which is essential for safe and reliable operations. The second is a desire to reduce fuel consumption and emissions, which is driven by the high cost of oil and demands to improve environmental performance. The podded solution has a significant impact on the latter issue.” Take, for example, a 6th generation semi-submersible with eight thrusters, each generating 3.8MW of power, and assume that thruster capacity is utilized at around 25 percent on average

5/25/10 1:44:37 PM

26-28 October 2010

Dubai International Convention & Exhibition Centre, UAE Under the patronage of His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice-President & Prime Minister of UAE and Ruler of Dubai

g n i p p i h s t s a E e l d d i M o t e t u o r r You

at t s e r e t n i r your e t s i g Re Principal Sponsor


Supporting Organisations

Supporting Media

MarEx_38.indd 51

5/25/10 1:44:38 PM

green thrusters

RUSSIA St. Petersburg

October 5 - 7

ma y / j u n e 2 0 1 0


What’s in a Pod?




over the course of a year. With 10 percent transmission losses assumed, approximately 73,233,600 kWh of energy needs to be produced by the diesel engines. The total fuel needed to feed the thrusters (excluding other loads) is approximately 14,646,720kg of diesel oil per year. If 10 percent of this can be saved by more efficient thrusters, that translates Azipod CZ thruster from ABB Marine. to 1,465 tons of saved diesel oil on an annual basis. Assuming the MDO price is, say, $600 per ton, that adds up to $880,000 saved each year and 4,687 tons of CO2 reduction.


AND ExHIbITION “PORTS, TRANSPORT AND INTERNATIONAL TRANSIT” with the official support of Association of Sea Commercial Ports

Maritime Council of the City of St. Petersburg

Association of Inland Waterways, River-Sea Ports and Shipowners

Euro-Asian Transport Union

Institute of Transport Issues of the Russian Academy of Science

Contact Dolphin Exhibitions: Tel: + 44 1449 741801 • Fax: + 44 1449 741628 Email:

44377 - Transtec2010AD-254x86.indd 1 MarEx_38.indd 52

We asked Nergard to compare and contrast the Azipod CZ with a conventional thruster solution as installed on a drilling rig. “A podded solution does not require additional reduction gears and shafts between the motor and the propeller that suffer from power losses,” he said. “Instead, the pod’s motor is connected directly to the propeller. With this solution we can also use far fewer bearings compared with a conventional solution.” According to Nergard, a 4.5MW Azipod CZ thruster competed realistically with a traditional L-drive thruster rated 5MW or more because the podded solution suffered no losses in the gears and bearings in the transmission of thrust from the motor to the propeller, and no loss in the nozzle and towards the hull. “This yields a savings of around 3.5 percent in terms of energy used,” he added. The motor used in the podded solution is directly connected to a triple-sealed shaft, and the housing is directly cooled by seawater, so there is no heat dissipation. This saves around four percent of the heating capacity of the vessel’s cooling system. For a single thruster, that means a saving of around 130kW, while for a complete propulsion system it adds up to a 1MW saving. Further savings are realized by virtue of the configuration of the controls. Propeller speeds are controlled by a frequency converter, where the voltage source is controlled by ABB’s direct torque control (DTC) software. The frequency drive is fed from the electrical 11kV system with a quasi 12-pulse transformer (all are water-cooled). “The steering gear is controlled by electrical motors, where conventional solutions tend to feature a hydraulic power pack,” Nergard added. “This means that we do not need to run the electrical steering motors unless we are rotating the thrusters whereas in the hydraulic power pack solution the electrical motors need to run continuously.” While the weight of the Azipod thrusters is clearly greater than conventional thrusters because the motor is located in the propeller housing, maintenance, dismantling and re-installing is far less complex and can be achieved without interrupting drilling operations. “One of the keys to the design of the Azipod thruster is its simplicity,” Nergard stated. “In order to achieve the greatest degrees of reliability and redundancy, the Azipod CZ has as few parts as possible.” Because the Azipod’s podded design generates more power, it can mean a reduction in the number of cylinders required – say from a 16-cylinder engine to a 12-cylinder engine. This translates directly into savings on fuel and reductions in CO2 emissions. MarEx Who says you can’t have your cake and eat it too?

14/5/10 11:50:14 5/25/10 1:44:39 PM

GLOBAL SHIPYARD DIRECTORY DAMEN SHIPYARDS GORINCHEM Damen Shipyards is market leader in design and construction of a wide variety of first class workboats. Damen Shipyards’ worldwide presence, financial solutions and local support offers a one-stop-shop package unique to the business, based on 80 years experience.

M AY / J U N E 2 010

Damen Shipyards Gorinchem P.O. Box 1 4200 AA Gorinchem The Netherlands t: +31 (0)183 63 90 47 f: +31 (0)183 63 77 62



Donjon Shipbuilding & Repair builds upon Donjon Marine Co., Inc.’s vast experience to provide quality service for shipbuilding, dry-docking, and other related services for the 21st century.

Foss Maritime’s Seattle Shipyard serves a variety of vessels offering repairs, maintenance, major conversions, and yacht services. Foss’ Rainier, Oregon shipyard offers new construction; tug boat maintenance; and conversions, including hybrid tug retrofitting.

Donjon Shipbuilding & Repair LLC 220 East Bayfront Parkway Erie, PA 16507 t: +1 814 455 6442


Headquartered in Erie, Pennsylvania, Donjon Shipbuilding & Repair offers affordable, quality service, paired with the highest standards, to offer Shipbuilding & Barge Construction, Vessel Conversion & Repowering, Drydock/Repair/Maintenance, Steel Fabrication & Assembly, and more. Foss Maritime 660 West Ewing Street Seattle, WA 98119-1587 t: +1 800 426 2885 f: +1 206 281 4702



General Dynamics NASSCO has been designing and building ships since 1959, specializing in auxiliary ships for the U.S. Navy and tankers and containerships for commercial service. Located in San Diego, NASSCO employs more than 4,100 people and is the only major ship construction yard on the West Coast of the United States.

Gibdock is located at the gateway to the Mediterranean on one of the principal crossroads of world shipping. Centred in a large, full service deepwater port, the yard offers three drydocks and berthing alongside, and complete commercial shiprepair and conversion services, including – steel/pipe work, painting/blasting, mechanical, engine and tail end repair, and electrical systems maintenance.

NASSCO 2798 Harbor Drive San Diego, CA 92113 t: +1 619 544 3400 f: +1 619 544 3541

MarEx_38.indd 53


GIBDOCK Main Wharf Road The Dockyard Gibraltar t: +350 200 59400 f: +350 200 44404

5/26/10 3:38:42 PM

M ay / j u n e 2 010

Global shipyard directory horizon shipbuilding

Halimar Shipyard is a full-service shipyard incorporating the latest technological and engineering advancements. Located on the Intracoastal Waterway in Morgan City, Louisiana with swift access to the Gulf of Mexico, as well as the inland waterways of the United States, Halimar provides quality products and services for the marine offshore industry.

Whether your project calls for steel, aluminum, or fiberglass--new construction or repair/refurbish--ABS, SOLAS, or un-classed -- Horizon builds to your requirements with highest quality, on schedule, and within budget. Our proven customer base includes the offshore oil industry, specialized yacht and cruise industry, tug and barge operators, and U.S. and foreign governments.

Halimar Shipyard, LLC P.O. Box 2727 Morgan City, Louisiana 70381 t: +985 384 2111 f: +985 384 2112

Horizon Shipbuilding

Horizon Shipbuilding, Inc. 13980 Shell Belt Road Bayou La Batre, AL 36509 t: +1 251 824 1660 ext 222 f: +1 251 824 1664

moose boats

SeaArk Marine

Moose Boats builds the highest-quality aluminum catamarans in the industry. Our boats are designed to meet a variety of missionspecific applications for law enforcement, emergency response and security patrol purposes. Widely known for their durability, sensible design and un-paralleled attention to detail, Moose boats are simply the finest aluminum utility boats on the market.

SeaArk Marine designs and builds boats in a variety of models and sizes to best suit the customer’s application and mission requirements. Specializing in military, governmental and commercial areas including patrol, security, fire and search and rescue, SeaArk has earned and maintained its reputation as the premier builder of small and midsize all-welded aluminum boats.



Halimar shipyard

Moose Boats, Inc. 274 Sears Point Road Petaluma, CA 94954 t: +1 866-GO-MOOSE

SeaArk Marine, Inc. P.O. Box 210 Monticello, AR 71657 t: +1 (870) 367-9755 f: +1 (870) 367-2120

signal international

todd Pacific shipyards

Signal International, LLC is a leading Gulf of Mexico provider of marine and fabrication services. Signal’s facilities span the Gulf of Mexico, affording easy access to offshore rigs and platforms. Two yards in Texas and two in Mississippi expeditiously deliver quality workmanship to maximize customers’ uptime.

Since 1916, Todd Shipyards Corporation has proudly built and repaired ships on the Seattle waterfront and provided thousands upon thousands of jobs to generations of skilled craftspeople throughout the Puget Sound area. Today, the Company’s operations are conducted through its wholly-owned subsidiary, Todd Pacific Shipyards Corporation (Todd).

Signal International stands ready to do the tough job, in accordance with each customer’s specifications - on time and on budget.

Signal International, Inc. RSA Battle House Tower 11 North Water Street, Suite 16250 Mobile, AL 36602 t: +1 251 544 2620

MarEx_38.indd 54

Todd Pacific Shipyards Corporation Harbor Island 1801 16th Ave. SW Seattle, Washington 98124 t: +206 623 1635 f: +206 442 8505

5/25/10 4:40:00 PM

salary survey

MarEx_38.indd 55

Discipline Technical Technical Technical

Position Manager Director Vice President

Typical Salary 118K 145K 190K

Salary Maximum 144K 175K 285K

Salary Minimum 85K 120K 150K

Operations Operations Operations

Manager Director Vice President

112K 155K 195K

139K 185K 310K

80K 125K 180K

Commercial Commercial Commercial

Manager Director Vice President

127K 170K 200K

175K 240K 375K

88K 125K 180K

Executive Executive Executive

President - CEO Chief Financial Officer Chief Operating Officer

350K 325K 300K

800K 700K 600K

200K 200K 180K

Current Roles

Position Director Marine Operations Marine Superintendent Chartering Manager Naval Architect Shipyard Manager DP Specialist SIRE Manager Charterer LNG Advisor Country Manager

Salary 150K 130K 150K 95K 150K 130K 130K 130K 135K 165K

t: 954-467-9611 e:

5/25/10 4:35:32 PM

book review

Off the Shelf:

By Jeff Mudgett

M ay / j u n e 2 010

The International Law of the Shipmaster by John A. C. Cartner, Richard P. Fiske and Tara S. Leiter (Informa, 2009)



Tara Leiter’s description in the MarEx newsletter of her recently released legal treatise as a “ready reference tool and guide to shipmaster law” piqued my interest. And all under one cover! As anyone who has ever sailed knows, master mariners the world over have long sought just such an official, reliable explanation of the legal complexities faced each and every day. To put her claims into context, consider this comparison: Twice a voyage, a ship’s master is authorized by his owner to hire an expert in order to safely navigate his vessel into port. This expert, better known as a pilot, advises the master on the local nuances of their joint venture. Together, they avoid all obstacles, safely reach berth and discharge the cargo the master has been entrusted with. As someone who has sailed under the guidance of thousands of pilots, I cannot tell you how comforting that expertise is. Many times, sitting in that chair on the bridge, observing the pilot’s skills, I found myself wishing there was a similar aid concerning knowledge of the laws of the waters we were currently sailing through. As every “person in the center” recognizes, a coherent, timely source of law – a survey, if you will – of the multitude of jurisdictions captains find themselves within has long been impossible to obtain. That lack of legal knowledge was the shipmaster’s Achilles’ heel, for it was as much the master’s duty to safely navigate the legal minefields as it was to avoid the rocks below the surface. Now, personal criminal liability has reared its ugly head, making an intimate knowledge of the law all the more critical. These days, ship’s captains can no longer afford to look the other way, hoping for the best. The International Law of the Shipmaster may have finally provided the master with a “pilot” to obtain “almost instant information and guidance for voyage and transit, cargo, engineering, medical, labor, weather, salvage, and conditions in port.” Most importantly, Messrs. Cartner and Fiske and Ms. Leiter have provided the information in an easily referenced fashion for a


Mergers, Acquisitions, Divestitures & Auctions Are you ready to sell your business or are you ready to expand your business through a merger or acquisition? We presently have investors and buyers that are seriously interested in all types of marine and marine related companies worldwide.

9786 Timber Circle, Suite A, Daphne, AL 36527 USA

MarEx_38.indd 56

Phone 251-626-0713 Cell 504-650-5000 Fax 251-447-0423 E-mail

rapid appraisal of the situation. Peace of mind for the ship’s captain after all these years! The authors have done an incredible job of making the previously unexplainable coherent to the ship’s master and laymen, even providing maritime lawyers with a handy reference guide. But it is underway, in the very jaws of dilemma and decision, where Shipmaster will prove the most handy to the “old man,” thereby saving his owner and underwriter considerable funds. By way of example, the three hypotheticals starting at page 126 offer factual situations commonly faced by a captain at sea, as well as ample proof of the authors’ knowledge of the situations and intricate factual combinations that captains often face. (My only comment to the authors would be that they include more hypotheticals. Hopefully they will consider a second edition applying more “sea stories” in order to highlight the issues contained within the legal jigsaw puzzles that masters, time and time again, find themselves in.) Further, the authors have done so in a courageous fashion, unlike so many other legal treatises that offer help but almost universally fail because of their own fear of liability. Many lawyers/ authors would have shied away from the positions taken regarding difficult areas of the law to define and ultimately predict. By their strong opinions, the authors have given the “person on the spot” something to fall back on and rely upon. Well done. With this treatise, a master can now arm himself beforehand, not afterwards in a lawyer’s office, with knowledge of the applicable laws while making innocent passage through territorial waters – the same way they utilize charts to navigate by. Talk about an aid to navigation! For this reason, The International Law of the Shipmaster should be considered as much a ship’s bible as the Rules of the Road and Bowditch on Navigation. It is my opinion that unless this treatise is found on the bridge in the ship’s library behind her two radars, the vessel is unseaworthy. Shipmaster should also be a part of each owner’s, insurer’s, cargo interest’s, agent’s, etc., library, not to mention every serious maritime law office in the world. The opportunity to serve as master remains one of the most stressful and at the same time finest adventures any human being could ever hope to enjoy. Over time, the position has evolved until it now requires half-seafarer, half-lawyer for success. This book fills many of the gaps so as to aid the master in completing an uneventful voyage. Following seas. MarEx Jeff Mudgett is co-founder and former editor of The Maritime Executive.

5/25/10 1:44:51 PM

YOUR WORLD IS OUR WORLD. YOUR JOB IS OUR JOB. YOUR BUSINESS IS OUR BUSINESS. Faststream is the global people specialist. We find and match outstanding people from all over the world to specialist positions throughout the maritime, oil & gas and crewing sectors. We have connections in over 150 countries and international offices that cover The Americas, Europe and Asia.

w: e: t: 954-467-9611 Covers.indd 2 MarEx-38-Gibdock-C1-C$-052610.indd 2 classnk_safety_a4_ad.indd 1

5/25/10 11:56:10 AM 27/1/10 08:53:56

MarEx-38-Gibdock-C1-C4-052610.indd 3

5/28/10 2:20 AM PM 5/25/10 11:56:53

Natural Gas: Dick Marler: Chairman, Innovations: In President & CEO, Signal Int’l Naval Architecture Why It’s Cheap THE MARITIME EXECUTIVE JOSEPH CORVELLI / GIBDOCK

Standard of excellence

May/June 2010

Global Shipyard Overview


 Global SaleS and Support  extenSive ranGe of productS and ServiceS  onGoinG product development

clockwise from top left VO LU M E 1 4 , E D I T I O N 3 , M AY / J U N E 2 010

ScHelde naval patrol 9113 damen aSd tuG 2810 damen faSt crew Supplier 5009 damen platform Supply veSSel 7216 damen Stan patrol 4708 damen cutter Suction dredGer 450

D A m e N s H i p YA r D s G o r i N c H e m industrieterrein Avelingen west 20

4202 ms Gorinchem

p.o. Box 1 4200 AA Gorinchem

President & CEO Gibdock

member of the DAmeN sHipYArDs GroUp phone +31 (0)183 63 92 67 fax +31 (0)183 63 77 62

the Netherlands

Covers.indd 1 MarEx-38-Gibdock-C1-C4-052610.indd 4

5/25/10 11:58:09 AM

MarEx-38-Gibdock-C1-C4-052610.indd 1

5/28/10 2:20 PM PM 5/25/10 1:01:24

The Maritime Executive Magazine - May/June 2010  

The Maritime Executive Magazine, Articles, News and Pressreleases relating to the Maritime Industry

Read more
Read more
Similar to
Popular now
Just for you