Tanker Shipping & Trade October/November 2018

Only Major Open Registry on the USCG’s Qualship 21 Roster USCG Qualship 21 Flag State Comparison

A WORLD OF SERVICE The oceans may be vast, but we’re always close. 24/7 service provided from 28 offices, located in major shipping and financial centers around the world.

Choose to fly the world’s local flag.

2018 2017 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005

RMI              

LIBERIA – – –      – – – –  –

PANAMA – – – – – – – – – – – – – –

= years on the Qualship 21 Program

Detention Ratio*

0.71%

1.40%

1.90%

*For 2015–2017.

“The Coast Guard targets Flag Administrations for additional PSC examinations if their detention ratio scores higher than 1.40% and if an Administration is associated with more than one detention in the past three years.”

Source: USCG 2017 Report to the IMO’s Subcommittee on Flag State Implementation.

International Registries (U.K.) Limited in affiliation with the Marshall Islands Maritime & Corporate Administrators

blog.register-iri.com www.register-iri.com london@register-iri.com

This issue of Tanker Shipping & Trade Magazine is sponsored by

The Marshall Islands Registry www.register-iri.com

October/November 2018 www.tankershipping.com

www.nkbms.co.kr

USCG Type Approval Test of NK-O3 BlueBallast System

Successfully Completed

#502 Gwahaksandan-ro, Gangseo-gu, Busan, South Korea [46742] Tel. +82-51-250-1896

“The IMO decision-making process may not be fit for purpose in the 21st century and may be susceptible to commercial influence�

Scott Bergeron, chief executive, Liberian Registry, see page 27

E-mail. njlee@nkcf.com

Contents October/November 2018 volume 12 issue 5 Regulars 3 COMMENT 4 ANALYSIS 7 CONTRACTS & COMPLETIONS 55 LEGAL BRIEFING 56 LAST WORD

Area report 10 China: Chinese finance leasing has become an important source of finance for tanker owners

Chokepoints

www.tankershipping.com Tankers & Markets Editor: Craig Jallal t: +44 20 8370 1717 e: craig.jallal@rivieramm.com Production Editor: Kevin Turner t: +44 20 8370 1737 e: kevin.turner@rivieramm.com Brand Manager – Sales: Paul Dowling t: +44 20 8370 7014 e: paul.dowling@rivieramm.com Sales Manager: Chris Tims t: +44 20 8370 7015 e: chris.tims@rivieramm.com

15 Chokepoints like the Strait of Hormuz are bywords for political ire, but this need not always be the case

Head of Sales – Asia: Kym Tan t: +65 6809 1278 e: kym.tan@rivieramm.com

Green tanker technology

Production Manager: Richard Neighbour t: +44 20 8370 7013 e: richard.neighbour@rivieramm.com

22 New cruise control systems and the return of the Flettner Rotor 24 Could Flettner Rotors make a comeback powering tankers?

Ship registries 27 The title of ‘world’s largest ship register’ is driving innovation and partnerships

Fuels & lubes 32 The choice of fuels and lubricants will be critical come January 2020

Industry focus 36 Innovation and debate at two of the industry’s big events

Ship description 42 DHT Bronco is the latest addition to the tanker herd

Subscriptions: Sally Church t: +44 20 8370 7018 e: sally.church@rivieramm.com Chairman: John Labdon Managing Director: Steve Labdon Finance Director: Cathy Labdon Operations Director: Graham Harman Head of Content: Edwin Lampert Head of Production: Hamish Dickie Published by: Riviera Maritime Media Ltd Mitre House 66 Abbey Road Enfield EN1 2QN UK

Risk management 48 Mitigating risk in all its guises, from piracy, fire and collision, to cyber threats and human error

Next issue

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Main features include: STS transfers; hull and performance coatings; ice operations; emissions technology

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

Tanker Shipping & Trade | October/November 2018

Navios Maritime Acquisition Corporation

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COMMENT | 3

SMM 2018 highlights testy optimism and innovation for 2020

I Craig Jallal, Tankers & Markets Editor

www.tankershipping.com

t is hard to believe that we are less than one SMM away from a monumental change in bunkering, yet even industry insiders still have no certainty that sufficient amounts of compliant fuel will be available in the right places at the right time.

At SMM 2018, there were some attempts to add clarity to the 2020 fuels picture, with ExxonMobil announcing a global tour of regional shipping centres where clients will be about to interrogate the oil major on the issue and learn about fuelling options for end users when 2020 arrives. ExxonMobil also reported its compliant fuel ExxonMobil Premium HDME 50 will be available in the AmsterdamRotterdam-Antwerp region, delivered via a mass flow metering system.

What we do know however is that the change to compliant fuels will have a huge impact on lubrication. Shell had previously revealed some of its thinking on the subject, and at SMM 2018 Riviera Maritime Media’s Jamey Bergman heard more from Shell Marine's new chief executive Joris Van Brussel about lubricants in an ‘uncertain’ world.

But while uncertainty abounds over bunkering in general, it was clear from SMM that LNG is becoming more prominent, at least as a subject for conversation.

In one hall, I came across a group of stands whose occupants professed expertise in LNG bunkering, which struck me as optimistic given only six LNG-powered vessels are currently in operation. Still, it promoted me to investigate further and I will no doubt bring more news and opinions on LNG bunkering back from Gastech.

The number of vessels using LNG exclusively, or in dual-fuel mode, is rapidly increasing though. Rebecca Moore reported from SMM on Gibdock’s contract to retrofit

LNG technology to a Spanish ferry and on class society DNV GL teaming up with Dalian Shipbuilding to develop a 23,000-TEU ultra large container ship.

However, by SMM 2020, LNG might be facing a stronger challenge from the alternative fuels market.

We could be seeing more vessels being retrofitted with LPG-burning engines for instance, with one notable example having already arrived, as Edwin Lampert reported from MAN Energy Solutions in Denmark.

And while LPG has its champions and detractors, few could argue with the proven history of wind power as a tried and trusted propulsion technology. From the fast-expanding alternative maritime technology hub that is Finland came news of an update to the centuryold Flettner Rotor concept. This new wind propulsion technology has been rejuvenated

by Norsepower and fitted to the product tanker Maersk Pelican.

Still, with technology providers jostling for position ahead of the 2020 fuels fray, SMM 2018 revealed a lingering frustration around the global 2020 sulphur cap, albeit one tinged with optimism as this juggernaut of an industry begins to respond to the threat of change with some much needed innovation (and please feel free to nominate those innovations in the Tanker Shipping and Trade 2018 Awards).

But this SMM was only the calm before the storm. By SMM 2020, we will know if the sulphur cap transition came off smoothly, or whether chaos reigns supreme. I sincerely hope that SMM 2020 will be a celebration of how well the shipping industry handled the transition to compliant fuels, but I suspect it will be dark time of finger pointing and recriminations. TST

Tanker Shipping & Trade | October/November 2018

4 | ANALYSIS

If 2018 has been unremarkable, expect fireworks in 2019 It is likely that 2018 will go down as one of the slower years for the tanker markets, but the 2020 global sulphur cap could be the disruptor the market needs

A growing number of articles in the commodity press project an increase in freight rates

D

uring the northern hemisphere’s summer there tends not to be a great deal of action in the tanker markets.

This is partly due to upstream factors, such as maintenance in the North Sea and other offshore areas closing production while operators take advantage of the relatively benign weather to tackle refits and upgrades.

With less product available, the knock-on effect is a slowdown in crude oil exports, a fall in tanker demand and an opportunity for refineries to shut down and undertake maintenance and upgrades themselves. September is when the maintenance schedules come to an end and the tanker market begins to pick up, as stockpiling commences.

However, this year we are seeing crude oil tanker rates, and therefore earnings, continue far below the long-term means and medians well into the latter part of the year. Clarkson Research Services (CRS) report that VLCC average spot earnings to the end of August have only reached US$6,700/day; in May spot earnings dipped to an average of US$3,200/day. Even the better than-expected spot earnings of US$11,200/ day in August is unremarkable compared to the average of US$17,800/day in 2017, and a profitable US$41,500/day in 2016.

On the positive side, CRS reports that active VLCC fleet growth in 2018 could be marginally negative, if demolition continues at the current pace. This chimes with forecasts at the start of the year – by among others former CRS analyst and now Teekay Tankers head of research Christian Waldegrave – which flagged Thanksgiving Day as the balance point.

CRS is now projecting VLCC fleet growth of 4.5% in 2019, approximately the same as its current demand growth projection.

As reported in Contracts and Completions, there were no VLCC newbuilding contracts placed in July or August, and so this year additions to the VLCC fleet have been on par with deletions.

Falling crude oil output from Iran and Venezuela is being more that met by increases from the US

Tanker Shipping & Trade | October/November 2018

shale oil fields. The IEA reports that US shale oil production increased 30% year-on-year and there are several developments to boost crude oil exports

by VLCC. However, the rise of US exports does not replace long-haul imports and ton mile demand continues to decline. CRS projects that seaborne crude oil demand will see 1.2% growth for full year 2018, the lowest for three years.

Looking ahead, there is a huge one-off variable that could change all forecasts. To date, most of the discussion about the 2020 global sulphur cap has been focused on the shipping industry. But there are an increasing number of articles in the commodity press projecting an increase in freight rates. The increase in awareness is a positive step, as are the projections from the oil majors and refinery operators on how they are going to meet demand for compliant fuels. By all accounts, the changeover will occur as early as the beginning of 2019, as refineries run down stocks of high sulphur fuel and adapt to producing low sulphur fuel.

According to a presentation given by Fearnleys senior oil & tankers analyst Dag Kilen at the 11th Annual Capital Link Shipping & Marine Services Forum in London in September, a survey of nearly 100 owners found expectations of delay in implementing the global sulphur cap, with many suggesting a lack of available ships with scrubbers would allow the shipping industry to pass the cost onto the charterers.

A similar survey among charterers found that those involved in the oil industry as traders or oil majors had already time-chartered scrubberfitted vessels, or had taken the step of securing other suitable tonnage. As industry insiders, traders are aware of the physical capacity of the refining industry to produce compliant fuels.

From the perspective of the tanker market, this is both good and bad news. Disruption and displacement of demand is always good for tanker rates. Unless of course, the owner/operator is unable to take advantage due to an inadequatelyequipped vessel or having locked in to a long-term charter in a soaring spot market. TST

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CONTRACTS & COMPLETIONS | 7

Tanker contracting wilts in the heat of the summer 100

VLCCs Approaching Special Survey

80

Number of vessels

The lack of new VLCC orders was one of the surprises of the summer, begging the question, have subdued market rates finally convinced owners to slowdown fleet growth?

60

40

20

0

Overdue

Source: VesselsValue

S

Court Smith (VesselsValue): “Large crude tanker prices have started to increase”

www.tankershipping.com

< 90 days

< 6 months

< 1 year

< 2 years<

3 years

< 5 years

Special Survey Due

o far in 2018 there has been a steady stream of VLCC newbuilding contracting to report. This has in part been driven by forecasts earlier in the year of a narrowing of the supply/demand balance in the third quarter, with Thanksgiving Day assigned as the tipping point. However, as the year progressed, the summer months saw a lull in VLCC contracting.

No VLCCs were contracted during July and August. The largest tanker contracted was a Suezmax, but this is something of a special case – being the AET shuttle tanker ordered from Samsung for a specific project – and will not impact the supply of spot trading vessels for many years, if at all.

The low level of tanker ordering was noted by Clarkson Research Services research analyst oil LPG and chemicals Alexa Parker, who wrote in the Oil & Tanker Trades Outlook “the oil tanker orderbook (10,000+ dwt) stood at 489 vessels of a combined 65.7m dwt, the lowest number of vessels on order since August 2013.”

Cyprus-based Greek owner and operator Enesel SA was active contracting newbuildings.

The NS Lemos-controlled organisation sold two 2004-built Aframax tankers, Pantelis and Sparto, to fellow Greek owner Thenamaris for a reported US$11.5M each (an en bloc sale) and ordered two

114,000 dwt Aframax replacements from Daehan.

These are expected to be fitted with scrubbers.

Three MR2 tankers were also reported as contracted during July and August. Sincere Navigation, which had once switched an order for two Capesize bulk carriers into a solo VLCC order, is listed as having placed an order at STX Offshore & Shipbuilding (STX), although there are now doubts this order is still live. STX is now controlled

by Korea Development Bank (KDB), which found itself the major shareholder after underwriting the financing of the yard. It is reported that KDB is not approving refund guarantees.

The other two MR2s ordered during the summer are for the account of legendary US listed tanker company OSG (aka Overseas Shipholding Group) that has returned from Chapter 11 as an MR2 tanker operator. The two MR2 will be equipped with scrubbers, and OSG has been retrofitting De Nora ballast water management systems to its other tankers.

Sales for further trading

According to VesselsValues’ senior analyst Court Smith: “Large crude tanker prices have started to increase. The discount these ships saw over the past several years is starting to evaporate as the

Tanker Shipping & Trade | October/November 2018

8 | CONTRACTS & COMPLETIONS

replacement cost for newbuilds is rising.”

Another indicator of rising values is that VesselsValue fixed age VLCC (the value of a five-year old VLCC in each year on the chart) is starting to creep upward to the median value. One interpretation of this trend is that the bargain is being squeezed out of the second-hand VLCC market, and the ship might have sailed for those looking to flip VLCCs for a profit.

Nonetheless, there was plenty of activity as regards the sale of VLCCs for further trading.

ADS Crude Carriers purchased three VLCCs with reported seller’s credit for its new venture, which involves retrofitting scrubbers with the aim of reaping potential rewards from the fuel differential.

In that respect, Arendals Dampskibsselskab (ADS) is joining DHT and fellow VLCC operator Frontline in lining up scrubber technology for VLCCs. ADS’ newly purchased VLCC Front Page is reported to have been fixed for 120-days storage work off the coast of Nigeria.

In August Teekay Tankers sold six Aframax tankers, Blackcomb Spirit, Emerald Spirit, Garibaldi Spirit, Peak Spirit, Tarbet Spirit, and Whistler Spirit in a sale and leaseback deal to Maritime Asset Partners (MAP), which is registered in Luxembourg and operates out of London. Teekay reported that the move increased its liquidity position by approximately US$60M after the repayment of outstanding debt related to these vessels. MAP describes itself as a non-bank specialised finance platform, established in response to opportunities arising from the diminished supply of credit to owners and operators in the global maritime sector. The backers are believed to be shipping-based families in Norway, including Blystad and Lorentzen, with MAP fronted by ex-Deutsche Bank officers, including Nick Roos.

Reporting on the sale and purchase activity, Clarkson Research Services noted that “the recent uptick in product tanker sales continued in August, with 17 sales reported in the month.

Overall, 121 product tankers have been reported sold in the first eight months of 2018, just 10 sales less than in the full year 2017 and already exceeding the total in 2016.”

One key component of this was the sales activity of Scorpio Tankers International, which is striving to increase its liquidity position with sale and leaseback deals. The latest such deal is the sell and leaseback of STI Benicia, STI Duchessa, STI Mayfair, STI Meraux, STI San Antonio, STI St Charles, STI Texas City and STI Yorkville. Scorpio Tankers stated its aim was to boost liquidity by US$42M in aggregate after the repayment of outstanding debt.

Scorpio Tankers will bareboat charter-in the vessels for seven years and holds purchase options beginning at the start of the third year of each agreement. There is also a purchase obligation for each vessel upon the expiration of each

Tanker Shipping & Trade | October/November 2018

“A key factor in the sale for scrapping of any vessel is the investment required to pass the next Special Survey”

Bank of Communications China: Now holds a tanker fleet worth more than US$600M

agreement. Scorpio Tankers has not released the name of the buyer, but since the commencement of 2018 it has sold 32 tankers, the majority to financial institutions and banks in the Far East, including the Bank of Communications China.

On the deliveries side, a further five VLCCs entered the fleet, including one VLCC for Enesel SA. Other notable arrivals included DHT Bronco and deliveries to Ocean Yield, an Oslo-listed entity backed by Kjell Ingel Rokke which received two Suezmax tanker newbuilding, Nordic Aquarius and Nordic Cygnus.

Demolition sales

121

product tankers sold in the first eight months of 2018

131

product tankers sold in the full year 2017

Removals from the tanker fleet included three sales for scrapping of three VLCCs. This included Kuwait Petroleum Corp (aka KOTC) selling the 20-year old Al Shegaya for US$420/ldt. This follows a sale earlier in the year by KOTC of the 20-year old Al Salheia for US$406/ldt. What is remarkable about these sales is that in the past, KOTC has sold elderly VLCCs for further trading to Greek buyers.

The reason for the change in policy is not clear, but a key factor in the sale for scrapping of any vessel is the investment required to pass the next Special Survey.

The scrap market is ready to take advantage, and cash buyer GMS reported that “Markets are precariously poised at present, with the depreciating Indian Rupee and volatile local steel plate prices bringing grave concern.” TST

www.tankershipping.com

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10 | AREA REPORT China

The Chinese fleet is already daunting in scale at almost twice the size of the largest Greek independent tanker owner

The rise of Chinese finance leasing The last five years has seen the sudden rise of Chinese finance leasing as an important source of finance for tanker owners

I

t is possible that in five years’ time we will look back at 2018 and realise it was the tipping point that changed the face of the tanker industry. But to find the cause of this revolution we must look even further back in time, to 2013.

That was the year when a new type of finance institution appeared at European shipping conferences. Leasing an asset, as an operational or a finance lease, is not new but the entry of Chinese financial leasing as an alternative to traditional bank lending made for an interesting addition to the market. The timing was just right.

The European banks that had been the main financers of tanker tonnage and shipping were under huge pressure to shrink their portfolios in the wake of the financial crisis. Some sold down their shipping portfolios and many closed or severely reduced commitments to shipping.

Speaking at the 3rd Annual Capital Link International Shipping Forum in China in April 2018, CSSC (Hong Kong) Shipping Company Limited deputy general manager of asset management Alex Yan explained that Chinese finance leasing may be new to those outside China, but there are over 6,000 finance leasing

Tanker Shipping & Trade | October/November 2018

companies in the country, some over 40 years old.

And while leasing ships is hardly innovative, the innovation five years ago was to structure leasing deals with non-Chinese companies.

“Five years ago, we were developing (our presence), but now we are one of the mainstream institutions in ship finance,” Mr Yan told the audience in Shanghai. He explained that leasing companies with a shipping division had, in the past, concentrated on the “Eastern face”, but were now turning their attention westwards.

Mr Yan estimates that marine and offshore assets constitute a portfolio of around US$20Bn held by Chinese leasing houses.

ICBC Financial Leasing is part of the stateowned Industrial and Commercial Bank of China, which in 2014 became the largest bank in the world with assets surpassing US$4,000Trn. Earlier this year it was revealed that its portfolio now totals US$7.1Bn, approximately the same size as that of Fortis Bank’s shipping book in 2008. ICBC Financial Leasing’s shipping executive director Bill Guo noted how quickly the European owners had ‘discovered’ Chinese financial leasing.

“This year I went to Athens again, and most

www.tankershipping.com

CHINESE TANKER FLEET CHINESE TANKER FLEET BY VALUE (US $M)

VLCC

$7,002

119

Suezmax

$1,045

21

Aframax

$2,213

74

Panamax

$843

45

Handy Tanker

$4,144

198

Small Tanker

$4,052

550

CHINESE TANKER DELIVERY SCHEDULE 8.0 7.0

Total DWT (millions)

6.0 5.0 4.0 3.0 2.0 1.0

Live Total DWT

Source: VesselsValue as of October 2018

On Order Total DWT

2021

2020

2019

2018

2017

2016

2015

2014

2013

2012

2011

2010

2009

0

12 | AREA REPORT China

people said you don’t need to explain Chinese leasing structures; we understand now. We can sign with one of your boys tomorrow, just tell me the terms of the offer,” he said.

Mr Guo believes this development allows the leasing companies to move onto the next stage of selling finance technology (fintech) solutions, such as the financing of scrubbers and ballast water management systems.

Minsheng Financial Leasing has featured several times in the pages of TST and has been a prominent player in the sale and leaseback of tankers. Minsheng’s chief executive of shipping, offshore and logistics, Jerry Yang noted that over the last five years, the Chinese leasing industry has grown from not financing foreign ships to taking around 20% of global shipping transactions each year.

The key driver of this growth has been the substantial funds backing the leasing companies, which originate from state entities and savings. The financing of ships through leasing projects is a relatively small part of many lessors’ overall portfolios, so while shipping is recognised as riskier, it is not deemed to be potentially damaging.

There is also the question of scale. ICBC Financial Leasing, which already has a fleet of 24 tankers with a value of over US$700M, is likely to grow rapidly. Mr Guo related a story of how he was told not to analyse leasing structures for small companies, but to look at deals that are at least US$500M in size if he wanted to achieve his portfolio growth targets.

The Chinese leasing companies also feel that they understand the foibles of ship finance. “Shipping is a market industry, based on cycles and ship finance is predicated on the counterparty,” said Minsheng’s Mr Yang.

“Traditional banking measures cannot mitigate this type of market risk. Let’s look at the facts; the Europeans had much more experience in terms of risk control measures [and] not to use the word “failure” but they were not successful.”

The financing of ships through leasing projects is a relatively small part of many lessors’ overall portfolios and is not deemed to be potentially damaging

Tanker Shipping & Trade | October/November 2018

He explained that when Chinese leasing entered the shipping market, there was a desire to work with the largest companies across sectors.

“They had proved themselves to be survivors of the cycle.”

Daunting scale

Recently, the Chinese leasing landscape has seen the emergence of joint ventures with foreign operators, the aim being to spread risk to the partners. There is also an element of skill transference involved, in that the closer relationship of such agreements provides the leasing company with direct access to market data.

And the Chinese fleet is already daunting in scale. COSCO Shipping Energy Transportation’s tanker fleet is currently valued at US$4Bn, almost twice the size of the largest Greek independent tanker owner Angelicoussis Shipping Group, whose tanker fleet is valued at around US$2.7Bn. Bernard Schulte Management (BSM) managing director in China Mr Mingfa Liu said: “The number of independent tanker owners in China is limited. However, BSM has been supervising newbuildings in China for foreign owners for a long time. Currently, we are supervising a VLCC for a Chinese owner, which we believe is a first for a third-party shipmanager in China.”

He believes that long-term trade will lead to an increase in the size of the Chinese tanker fleet and that Chinese leasing companies are a key driving force behind this.

“We are working very closely with Chinese leasing companies. We provide third-party management services to them. They need the support of third-party shipmanagement companies,” he said.

For instance, if a foreign owner was unable to make repayments and a tanker reverted to the Chinese leasing company, BSM or another thirdparty shipmanagement company would operate the vessel.

In practical terms, the engagement of Chinese financial leasing in shipping may have only just begun. The funding requirements of the tanker and shipping sectors are tiny compared to the assets of a giant like ICBC. The danger is that the pool of first- and second-tier high-quality owners will eventually be exhausted; then it will take rigorous discipline to abstain from dipping into the lower tiers, in hubristic pursuit of the biggest portfolio. And we should not ignore the nature of shipping itself, which is prone to cycles that indiscriminately ruin new ship finance methods. Let us hope the new Chinese players learn the lessons from high-yield shipping bonds, KS schemes, private equity and all the other funding methods that entered shipping on a high and left with their tails planted firmly between their legs. TST

Mingfa Liu • 2016: appointed managing director of BSM China • Managing director of Wallem Shipmanagement in China • Joined Teekay as primary representative in China • Managing Director for the region and part of the V Group Asia board • Transferred internally to Shanghai to look after newbuilding projects in Asia • Worked for V.Ships in Glasgow

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CHOKEPOINTS | 15

Tanker trade chokepoints of today and tomorrow

W

hen most people think of a tanker chokepoint the first image that springs to mind is the Strait of Hormuz. The narrow, 21-mile channel is the only sea passage linking the Persian Gulf to the open ocean and according to the Energy Information Administration (EIA) of the USA, tankers passing through this chokepoint are responsible for 18.5M b/d, or 30% of the world’s crude oil flow.

As such, the area is a focal point for demonstrations, protests and worse. The latest event occurred in September when swarms of small boats circled and harassed a US naval flotilla. But more dangerous, indeed potentially fatal, is the claim that Iran used a drone to prevent a US Navy F-18 Super Hornet from landing at night on the deck of the US aircraft carrier USS Theodore Roosevelt. These giant naval vessels are susceptible to attack by small boats as they are designed with far bigger targets in mind; hence the success of a suicide attack in Yemen back in 2000, when the 17 sailors on the USS Cole were killed. In February 2017, an unmanned bomb-boat sped into the Royal Saudi Navy Frigate Al Madinah killing two sailors.

From the Iranian point of view, the Strait of Hormuz fall directly under Iranian influence.

“Any hostile attempt by the US will be followed by an exorbitant cost for them,” said Sarollah Revolutionary Guards deputy commander Esmail Kowsari, speaking to the Young Journalists Club in Tehran, which was broadcast nationally in Iran and re-broadcasted by Bloomberg TV in July 2018. He added: “If Iran’s oil exports are to be prevented, we will not give permission for oil to be exported to the world through the Strait of Hormuz.”

These comments were in response to an earlier comment by the US State Department’s director of policy planning Brian Hook who had said the “goal is to increase pressure on the Iranian regime by reducing to zero its revenue from crude oil sales.”

The Paris-based Alphatanker intelligence service reports that should Iran succeed in closing the Strait of Hormuz, it would remove more than 13M b/d of crude oil, or around six VLCC cargoes, from the market.

www.tankershipping.com

The latest conflicts in the Strait of Hormuz highlight the impact chokepoints have on tanker trades

So when Iraq invaded Iran in 1980 and started the Iran-Iran War, the USA did all it could to keep the crude oil flowing out of the region.

The US and its allies supported Iraq, which had hoped for a quick victory, but the war dragged on for eight years, during which both combatants continued to export crude oil. It barely seems believable today, in an era of >>>

TOP: The Straits of Malacca and Singapore are prime examples of cooperation BOTTOM: The Strait of Hormuz has seen plenty of action over the years, much of it belligerent

Tanker Shipping & Trade | October/November 2018

16 | CHOKEPOINTS

instant communications and social media, that shipowners could send such gigantic targets as a VLCC in ballast all the way up to Kharg Island in the middle of a war, but the US and its allies needed that oil.

As the VLCCs ran along the firing range of the Middle East Gulf, crews took shelter in the bows. Fortunately, the targeting of both the Iran and the Iraq military was terrible, but even so, 85 tankers were hit in 1985, including 39 tankers that were outside the declared exclusion zones. Iraq hit 49 ships, Iran 36. A total of 51 sailors were killed that year, but freight rates were very rewarding, and owners made fortunes that supported the growth of tanker companies that are still around today.

The Iran-Iraq War prompted new ways of thinking about how the export countries in the region could get their product to market. One solution was to switch from a reliance on the long-haul export of crude oil to developing oil product exports from local refineries. This spurred the development of the MR2 product tanker.

Another solution involved pipelines. Two major pipelines now by-pass the Strait of Hormuz. Saudi Aramco operates the Petroline, that runs more than 700 miles from the Gulf to >>>

Abqaiq on the Red Sea. The nominal capacity is 5.0M b/d (about 60% of Saudi Arabian output) and work is underway to raise this to 7M b/d.

However, pipelines are even more susceptible to damage and attack than shipping. Reuters recently reported that two Saudi Arabian teachers are to stand trial for allegedly providing information to Iran that would show where to blow up the pipeline.

The second by-pass pipeline is the Abu Dhabi Crude Oil Pipeline (1.5M b/d) that runs from Abu Dhabi to Fujairah on the Gulf of Oman.

There are plans to increase its capacity and in 2017 the operator, Abu Dhabi Crude Oil Pipeline Company, issued a US$3Bn bond to fund expansion to 1.8M b/d.

In contrast to the seemingly endless belligerence in the Strait of Hormuz, the Malacca Strait and the Strait of Singapore are examples of cooperation and guidance. The countries bordering the Straits meet on a regular basis, usually under the auspices of the Maritime and Port Authority of Singapore, to discuss safety and aids to navigation. There is mandatory ship reporting in the region, but accidents do happen.

The most infamous was the collision in 2017 between the US naval ship USS John S. >>>

China surpassed the US to become the world's largest importer of crude in 2017 and wants to play a more active role in influencing the price of crude oil

GLOBAL SHIPPING CHOKEPOINTS Threat rating

Tankers in region

No at Narrowest Piont

Width (miles)

Density

Strait of Hormuz

29%

105

11

12

0.916666667

Straits of Malacca and Singapore

26%

95

35

2

17.5

Suez Canal and SUMED Pipeline

9%

12

7

0.5

14

Mandeb Strait

8%

5

1

16

0.0625

Danish Straits

5%

17

9

0.5

18

Bosporus Straits

4%

27

1

0.7

1.428571429

Panama Canal

2%

64

4

0.02

200

Cape of Good Hope

9%

41

5

100

0.05

7

0

51

0

Norway

43

5

20

0.25

Sri Lanka

60

9

20

0.45

140

10

15

0.666666667

2

2

0.1

20

49

6

20

0.3

100

2

9

0.222222222

Bering Straits

Spratly Islands Baltic Dover Straits Strait of Gibraltar

Tanker Shipping & Trade | October/November 2018

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CHOKEPOINTS | 19

McCain and a tanker, resulting in the death of 10 sailors.

According to the EIA, around 25% of the world’s crude oil passes through the Strait of Malacca and the Strait of Singapore. The trade has grown to 16.0M b/d, increasing by 10% in the last five years due to Chinese demand for crude oil.

China is now the largest importer of crude oil in the world. Wood Mackenzie's research director Sushant Gupta noted: “China surpassed the US to become the world’s largest importer of crude in 2017. We expect China’s crude import requirements to grow by about 2.1M b/d from 2017 to 2023, much larger than any other country's incremental requirements. Rightly so, China would want to play a more active role in influencing the price of crude oil.”

His comments were about the initiative to develop a fully-fledged crude oil trading exchange in Singapore, which would benefit both China and its suppliers with visibility on crude oil pricing. >>>

Quietly creating a chokepoint

Less visible are the other elements of China’s influence on crude oil in the region. Soon after tankers leave Singapore for China they enter the South China Sea. Here they must pass between the coast of Vietnam and Indonesia through a seemingly empty sea that it is teeming with uninhabited islands. Yet one group of islands has become the centre of an international dispute.

The Spratly Islands had a truly bizarre history – including a hippy colony called Freedomland – even before some of them were staked by China in a bid to reinforce its claims to minerals (the islands, not the hippies). It has not gone unnoticed that some of these islands now claimed

by China appear to have undergone dramatic transformations into full-scale military bases; indeed, Fiery Island now looks like an aircraft carrier when viewed from above.

From China’s perspective, the development of Fiery Island and others in the region is not an aggressive step, but a defensive move to secure the trade lanes in the South China Sea. The need for China to secure its supplies has become very evident over recent months.

Following another trade spat with the US, China threatened to increase tariffs on US crude oil. These were not imposed, but still China managed to completely change tanker trade flows.

According to BIMCO chief shipping analyst Peter Sand, China did not import any US crude oil in August 2018.

Although crude oil imports from the US were specifically left off the list of US goods and services that would have a new round of tariffs, China did have a point to make.

Mr Sand said that in 2017, Chinese imports accounted for 23% of total US crude oil exports.

In 2018 that number was 22% during the first seven months. In August the share fell to 0%.

“For the crude oil tanker shipping >>>

China’s actions were to test the market. Is there enough crude oil available from other sources if crude oil is added to the tariff list? The answer appears to be ‘yes’

LEFT: Fiery Cross in the Spratly Islands is no longer a barren, uninhabited island

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Tanker Shipping & Trade | October/November 2018

20 | CHOKEPOINTS

industry, distances often matter more than volumes,” said Mr Sand. “Even though volumes were record high, tonne-mile demand dropped by 19% from July to August due to the shift in trade patterns. Exports to Asia are by far the most important. When measuring the tanker demand in tonnes-miles (TM), exports of US crude oil to Asia generated 70% of TM-demand on that trade in August – down from 78% in June and 75% in July.”

So which producers benefitted from the absence of US crude oil imports into China?

Brazil increased its exports of crude oil to China, as did Columbia and traders purchased 1.7M b/d from West Africa. Even Kuwait, a steadfast supplier to the US, moved a record amount of crude oil to China in August.

As at early October, oil traders are purchasing US crude oil again for delivery to China. The view is that China’s actions were to test the market. Is there enough crude oil available from other sources if crude oil is added to the tariff list? The answer appears to be yes.

The Chinese development of the Spratly Islands also suggest that the long-term plan is to ensure that if future tariffs escalate into a trade war, China can maintain a level of security on its supplies.

Still, the Chinese development of the remote Spratly Islands has not gone unchallenged by those countries with claims to the islands and the US has made it clear that it regards the islands as in international waters. But is it possible to secretly create a tanker trade chokepoint in such a way that no one, not even the host nation, notices?

That appears to be happening on the west coast of Finland. The country only has two oil refineries: the largest is the 206,000 b/d Porvoo refinery to the east of Helsinki, just a few hours’ drive from the Russian border. A smaller, 58,000 b/d refinery is on the west coast of Finland, at the >>>

Peter Sand (BIMCO): “For the crude oil tanker shipping industry, distances often matter more than volumes”

port of Naantali in the Turku archipelago.

Around 10.5M tonnes/year of crude oil is delivered by tankers through the tricky passages of the Turku archipelago. Naturally, Finland long ago established military outposts on some of these islands to guard the seaway, which is also used by cruise ships and general shipping entering the port of Turku.

In September 2018 Finland’s main investigative agency, the National Bureau of Investigations (KRP), raided houses on islands along key shipping routes in the Turku archipelago.

The move was prompted by an investigation which centred on a Finnishregistered company called Airiston Helmi, which the authorities believed was involved in tax evasion and money laundering.

The company styled itself as a property developer of summer cottages and had bought a series of properties on islands in the archipelago, some of which were opposite Finalnd’s military bases. Rental summer cottages in Finland are usually styled as “backto-nature” wooden huts, but the Airiston Helmi properties were substantial concrete and steel buildings equipped with helipads, bunkers in the bedrock and piers to berth the ex-Finnish Defence Force ships the company had bought at auction.

What had started as a tax investigation quickly ramped up into something more sinister, especially when it became apparent that Airiston Helmi had Russian connections.

Considering the strong Russian connections evident in the Airiston Helmi raid, Finnish security forces are now investigating if a covert Russian chokepoint plan to shut down tanker traffic to the refinery at Naantali, and general shipping to Turku, had been set in place without the Finnish authorities realising. TST

Tanker traffic in Singapore and the Malacca Straits is carefully controlled

Tanker Shipping & Trade | October/November 2018

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Lean Marine has installed an automated solution on six Team Tankers vessels equipped with fixed-pitch propellers

Automating rpm and propeller pitch to optimise fuel consumption Swedish company Lean Marine has worked closely with chemical tanker operator Team Tankers to develop a “cruise control” system to optimise fuel consumption

O

ptimising fuel consumption by changing engine revolutions and propeller pitch, while maintaining a given speed, is no easy task. A small change of the propeller pitch lever will impact the required speed of the engine (rpm) and only after such changes have been made and the system stabilised can the impact on fuel consumption be measured.

In explaining the problem, Lean Marine director of development and product management Linus Ideskog used the analogy of a cyclist taking part in the Alpine stages of the Tour de France: “Rarely would you see these athletes trying to maintain the same speed both uphill and downhill. If they did, they would quickly run out of energy climbing the mountain and that strategy would be illogical.

However, this strategy is often adopted as the norm for ship operations.”

Mr Ideskog also noted that a tanker is given a speed or rpm order which it maintains throughout changing conditions along its route, with the result being varying power and wasted energy.

Achieving optimal fuel consumption requires keeping a real-time eye on the vessel’s output

Tanker Shipping & Trade | October/November 2018

power and adjusting propulsive parameters throughout a voyage.

Thus, a tanker equipped with a controllable pitch propeller can waste a lot of energy if it is not being used efficiently, according to Lean Marine. Such tankers typically run on either a fixed propeller rpm, letting the angle (pitch) of the propeller blades dictate the propulsive power, or in a combinator mode, with a static setting for different pitch and rpm levels.

As most vessels rarely need their full engine power and operate in varying load and weather conditions, they consistently operate with a lower pitch, which is a proven source of wasted hydrodynamic energy.

As such, there is potential to save a lot of fuel by allowing the pitch and rpm to be controlled separately, targeting maximum propeller thrust for the least power.

But this is easier said than done. It takes a long time and is expensive to constantly monitor and tweak an engine’s output, while manually adjusting the propeller pitch lever.

The solution: automate the process, which was the challenge set by Lean Marine, a group of Swedish innovators with extensive experience in shipbuilding, naval architecture, propulsion and

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GREEN TANKER TECHNOLOGY | 23

Achieving optimal fuel consumption requires keeping a real-time eye on the vessel’s output power and adjusting propulsive parameters throughout a voyage

marine control system technology.

As a start-up just five years ago, it proposed and installed an automated solution on six Team Tankers vessels. These were equipped with fixed-pitch propellers, which was an advantage as it allowed data to be collected without the additional complications introduced by a variablepitch unit.

The resulting data was developed and the algorithms and technology marketed as FuelOpt, a control system installed as an addition to the existing onboard system. The technology optimises a vessel’s performance in real time.

Whenever a vessel is in transit (and using most of its power for propulsion) FuelOpt will step in and minimize costly variations in speed and power due to human operational factors, while optimising pitch and rpm for maximum efficiency.

The system is simple to operate and the technology can be installed into any vessel during operation in just a few days, according to its makers.

“FuelOpt allows owners the ability [to extract the] full potential of their investments in existing equipment,” said Mr Ideskog. “The fuel savings mean that the payback time on FuelOpt can be measured in months.”

Lean Marine is willing to back this up, offering a financial package where the owner can pay for the FuelOpt system in monthly payments.

Analysis leads to efficiency

In addition to optimising fuel consumption in real time, all the data produced by FuelOpt is recorded and available in an analysis tool called Fleet Analytics; this verifies any reductions in fuel use achieved by the system, giving shipowner’s a better understanding of their vessel’s operations.

As a further benefit, Fleet Analytics can be used to illustrate fuel consumption savings, providing fuel consumption performance data when chartering out a tanker. To date, Lean Marine has installed FuelOpt on nearly 100 vessels, with the milestone 100th installation due to take place during 2018.

Mr Ideskog attributes the success of the system to its ability to deliver direct and tangible results, explaining why new orders keep coming and existing customers are now requesting fleetwide installations.

As most vessels rarely need their full engine power and operate in varying load and weather conditions, they consistently operate with a lower pitch, which is a proven source of wasted hydrodynamic energy

www.tankershipping.com

Linus Ideskog (Lean Marine): “Rarely would you see a cyclist taking part in the Alpine stages of the Tour de France trying to maintain the same speed both uphill and downhill”

Bergen-based chemical tanker owner/ operators Rederiet Stenersen, Rederiet Stenersen, a Bergen-based chemical tanker owner/operator, is one such advocate of Lean Marine’s system, having achieved fuel savings when FuelOpt was installed across its entire fleet of tankers.

Discussing the results, Rederi Stenersen director John Stenersen said: “We have seen that the system has delivered the fuel savings promised. In addition to the automated fuel saving, we can now also follow up on our vessels using Fleet Analytics.”

Rederiet Stenersen has 15 vessels equipped with FuelOpt and Fleet Analytics, with the system used at all times during transit.

Consequently, FuelOpt has now clocked up almost 4,000 days in operation across the Rederiet Stenersen fleet. With estimated potential savings of up to two tons every 24 hours, FuelOpt has now helped Rederiet Stenersen save more than 8,000 tons of fuel.

Lean Marine noted there is no limitation on vessel size, and while small- and mediumsize tankers have been fitted with FuelOpt, there is no reason the system could not be fitted to a VLCC. As Mr Ideskog explained: “Our product development is driven by business. We are not developing products for [their] own sake.” TST

Tanker Shipping & Trade | October/November 2018

24 | GREEN TANKER TECHNOLOGY

Flettner Rotor to power tankers The ability of a Flettner Rotor to exploit wind power is well known. Now a Finnish company is trialling the technology on a Maersk LR2 tanker

The use of wind propulsion technology onboard a product tanker vessel could take [the industry] to a new playing field

N

orsepower Oy Ltd was established in 2012 and the aim of modernising the traditional Flettner Rotor, turning it into a commercially viable product. Now the group are spearheading a new project to trial the design on a commercial tanker.

Explaining its innovative solution, Norsepower Oy Ltd partner Jukka Kuuskoski said: “The rotors are made from composite materials, making them light and very strong,” and at 30 m tall, the carbon fibre sandwich Flettner Rotors impose a loading that means they are best suited to larger vessels.

The rotating sails have been installed onboard the product tanker Maersk Pelican and it is expected that the rotors will produce a reduction in fuel costs and associated emissions on typical shipping routes of between 7 and 10%.

When wind conditions are favourable the main engines can be throttled back, saving fuel and reducing emissions, while maintaining speed and voyage time.

As well as the physical structure, Norsepower has updated the control mechanism to include automatic software-driven functions. The Flettner Rotors require a small amount of energy to spin, but the payoff is the additional forward energy.

The speed of the spin and the direction of the Flettner Rotor is controlled by a variable speed electric motor requiring 15 to 35 kW, depending on the size of the rotor. The whole operation is fully automatic and requires no input from the crew.

Alongside Norsepower Oy, Maersk Tankers, Energy Technologies Institute (ETI) and Shell Shipping & Maritime are project partners on the installation of two Norsepower Rotor Sails onboard the Maersk Tankers Long Range 2 (LR2) product tanker vessel. ““This project is breaking ground in the product tanker industry,” said Maersk Tankers chief technical officer Tommy Thomassen.

“While the industry has gone through decades of technological development, the use of wind propulsion technology onboard a product tanker vessel could take us to a new playing field.”

The product has now completed rigorous land testing, including thorough testing of various mechanical and performance criteria, and is the first Flettner Rotors design to be Class approved for use on a product tanker.

Extensive measurement and evaluation of the effectiveness of the Flettner Rotors will now take place to test the long-term financial and technical viability of the technology. Independent

Tanker Shipping & Trade | October/November 2018

experts from Lloyd’s Register’s Ship Performance team will analyse the performance data during the test phase to ensure an impartial assessment before technical and operational insights, as well as performance studies, are published.

ETI programme manager Andrew Scott said: “We commissioned this project to provide a unique opportunity to demonstrate the untapped potential of Flettner Rotors. Auxiliary wind propulsion is one of the few fuel-saving technologies that is expected to offer doubledigit percentage improvements.”

Shell Shipping & Maritime vice-president Grahaeme Henderson added: “The shipping industry faces a major challenge in how it can economically ship the increasing amounts of goods and energy the world demands, whilst lowering its environmental impact. We see significant advantages in embracing, testing and driving innovative technologies that we believe show real promise in helping the shipping industry meet this challenge.”

Norsepower Oy’s Mr Kuuskoski noted that the rotors require deck space, making them suitable for tankers, but less so for container ships. Furthermore, they are better suited to vessels on long voyages, such as tankers that are crossing windier oceans. TST

The long open decks of tankers are well suited to the fitment of Flettner Rotors

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SHIP REGISTRIES | 27

Ship registries contest the number one spot With so much riding on the label of ‘world’s largest ship register’, the quest for the top slot is spurring technological innovation and alliances with China

TOP 10 TANKER REGISTRIES

BY VALUE OF FLEET Rank Name Value (US$Bn) 1 Marshall Islands 26.4 1,193 101 2 Panama 18.4 1,229 79

A

ccording to the Guinness World Records Organisation, Panama took the title of World's Largest Ship Registry in 2018, with more than 8,000 ships registered, representing around 18% of the global maritime fleet.

For tankers, the plaudit of largest register sits either with Panama or the Marshall Islands, depending on the measure being used. Panama has the most tankers, but the Marshall Islands the greater capacity (79M dwt compared to 101M dwt). Indeed, on the dwt front, Panama is relegated to third place behind Liberia. The value of the fleet is another measure that can be used to determine ‘largest ship register’ and according to VesselsValue, on that front the Marshall Islands again comes out on top, with a total tanker fleet valued at US$26Bn. Given their dominance as ship registries, these countries carry more than a little influence in terms of current shipping practices. The Marshall Islands for example has been vocal in its criticism of the 2020 global sulphur cap and with good reason; it stands to lose most, if not all, if sea levels continue to rise.

But actions speak louder than words and the Republic of the Marshall Islands (RMI) ship registry has now joined

the Green Award scheme, with ships registered in the RMI certified by Green Award granted a 30% discount on the annual marine services fee.

“Age is often an indicator of a greener fleet, and the RMI fleet is the youngest of any of the top 10 registries,” said International Registries, Inc. (IRI – the manager of the Marshall Island’s ship registry) director, worldwide business operations Theo Xenakoudis. He continued: “We have always aimed to make our fleet environmentally friendly and we are pleased to see that more than 16% of Green Award vessels are RMI flagged. The RMI has also maintained its Qualship 21 status for 14 consecutive years and, in addition, more than 28% of the United States Coast Guard's E-Zero designation vessels are RMI flagged. It is noteworthy to see that so many RMI owners and operators are going beyond the industry's standard for environmental performance measures.”

Green Award chairman, Capt Mattheou, called this cooperation a huge step in the direction of an environmentally conscious and safe maritime industry of the future: “Striking a balance between economically sound and environmentally and socially responsible shipping is of paramount

3 Liberia 16.3 917 83 4 Singapore 13.8 895 45 5 Hong Kong 11.6 475 48 6 Malta 10.2 653 40 7 Greece 9.2 375 50 8 Bahamas 7.4 298 35 9 China 4.5 456 15 10 Japan 4.3 536 11 Source: VesselsValue

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Singapore Registry of Ships forms part of the state of Singapore’s maritime assets

Tanker Shipping & Trade | October/November 2018

28 | SHIP REGISTRIES

importance. That is a task for the entire maritime community. By supporting Green Award, the RMI Registry joins the frontrunners of the industry, actively taking measures to reduce their ecological footprint and improve safety.”

In 2018, RMI registry submitted a technical paper to IMO concerning safety issues with the 2020 global sulphur cap.

Mr Xenakoudis said: “This paper allows the shipping community to have a voice in the development of rules that shape our industry. We are happy to be the catalyst for smart regulation that has been crafted with careful consideration from everyone it effects. Shipowners in particular will bear the impact of this transition and this will hopefully resolve some of the concerns about the regulation.”

The paper voiced fears over the safety implications and challenges associated with using new fuel oil blends compliant with the 0.50% sulphur fuel oil standard, such as potential issues with blend components, stability, compatibility and other fuel oil parameters. All of these issues are viewed as having the potential to negatively impact fuel and machinery systems. The technical information also touches on operational and technical measures to address risks during fuel switching, tank cleaning and fuel system arrangements (heating capacities and tank segregation). According to IRI, the information is intended to facilitate informed decision making around the sulphur cap.

The Liberian ship registry was also a signatory to the above technical paper and went further in its criticism of IMO’s decision-making process. It confirmed its support for an initiative started in 2018 by Australia, which calls on IMO to reconsider transparency and the role of industry bodies in the organisation.

The Liberian International Ship & Corporate Registry (LISCR) is the largest flag state to support the push by Australia, which will lead to a submission to the IMO Council calling into question the existing role of the IMO Council and the IMO Assembly. It will also seek to facilitate greater transparency and the wider representation of maritime interests in IMO. The Australian submission suggests that discussions at IMO should be more open to the public and other stakeholders.

It also notes the decreasing accessibility of discussions and decisions within the IMO Council and Assembly for both member states and the public.

“As a founding IMO member and the

Theo Xenakoudis (Marshall Islands): “We are happy to be the catalyst for smart regulation”

world’s second-largest flag state, Liberia has always been a committed and public supporter of IMO and will continue to be so,” said Liberian Registry chief executive Scott Bergeron. But he continued: “It is only right that we should lend our support to Australia’s push for reform in the light of concern from observers, both within and outside the organisation, that the IMO decision-making process may not be fit for purpose in the 21st century and may moreover be susceptible to commercial influence.”

Away from the sulphur cap, LISCR has recently introduced several improvements to its state-of-the-art web-based client interface system, WayPoint. It has enhanced certificate security features, introducing a QR Code symbol for electronic certificates and streamlining the procedure for document verification.

WayPoint was launched in late-2016 to provide the owners and operators of Liberian-flag ships with secure, real time, user-friendly access to their fleet details, as well as to facilitate International Convention certification applications.

It was upgraded last year to include major improvements designed to help owners and operators manage their fleet-wide regulatory compliance issues more efficiently.

The inclusion of QR Codes will enhance the document verification process, meaning port state control and other interested parties

Tanker Shipping & Trade | October/November 2018

can quickly scan the QR matrix barcode via their mobile phones and be directed to the verification page.

“Liberia was the first flag state to make widespread use of electronic certificates in 2009,” said Mr Bergeron. “We are very happy to see other flags and recognised organisations follow our lead with their own electronic certifications. As technology evolves, so does the need to ensure that security and verification features are robust enough to meet cyber challenges.”

Liberia is also set to gain from the renewal of a maritime cooperation agreement with China for an additional five years.

Under this renewal, Liberian-flag vessels will continue to enjoy preferential rates for tonnage dues when visiting any port in China.

These savings - a 28% port dues reduction - can translate to an effective net increase in time-charter equivalent rates of US$1,000 per day, based on a 100-day voyage. Furthermore, an agreement has been made to establish a technical co-operation committee, so that both countries can collaborate in areas such as port state control, crew training and future maritime regulatory policy.

The agreement gives Liberia a clear advantage over other flag states, such as the Marshall Islands, that do not have diplomatic relations with China and do not receive port dues discounts in China. Moreover, recent maritime law amendments introduced by Liberia, which allow a financing charter to be recorded as a mortgage, are likely to strengthen further the high level of mutually beneficial co-operation between Liberia and its Chinese partners.

The agreement was signed by China’s Minister of Transport Li Xiaopeng and Liberian Maritime Authority Commissioner James F Kollie.

Minister Li noted how the agreement had injected new vitality into the friendly, bilateral relations established between the PRC and Liberia over recent years. He said that the renewal of the agreement will further strengthen co-operation in the shipping, maritime, port and transport infrastructure sectors, as well in the training and education of seafarers.

Playing catch-up

The Panama Ship Registry generally operates at a lower profile than the other highest-ranking ship registries. That said, it celebrated its centenary in 2018, an important achievement for a country where 32% of gross domestic product (GDP) is generated via a connection

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SHIP REGISTRIES | 31

with the maritime sector.

Like Liberia, Panama has also agreed a Maritime Cooperation Agreement with China, signed by Panama’s minister for maritime affairs, Jorge Barakat Pitty and his counterpart Li Xiaopeng. With this document, Panama is elevated to the status of "Most Favoured Nation", and the signing was witnessed by the president of the Republic of Panama, Juan Carlos Varela Rodríguez and the president of the People's Republic of China, Xi Jinping.

A key benefit of this agreement involves vessels registered under the Panamanian flag receiving preferential rates upon arriving at Chinese ports.

There is now reciprocal recognition of seafarers' titles issued by Panama and China, which allows seafarers from each nation temporary embarkation rights in the others’ ports.

Outside the top 10 tanker registries are a number of flags striving to move up the ranks. The ship registry of Cyprus took an important step in that direction following the appointment of Natasha Pilidis as deputy minister of shipping.

Ms Pilidis said: “We believe that there is significant potential to increase the contribution of the shipping sector to the Cyprus economy beyond its current annual 7% of GDP.” According to Ms Pilides, the ministry

Scott Bergeron (LISCR): Aiming to raise levels of transparency in IMO

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can lend support to services far beyond registration and certification. She said it was a core value of the Cyprus flag that the ministry will proactively share intelligence with shipowners and operators, offering the best advice to directly support the protection of their business interests.

While the promotion of the Cyprus flag is a high priority, deputy minister Pilides noted that the ministry is also maintaining a keen focus on upholding the quality and range of shipping services and raising awareness of the complete services that are available in Cyprus.

Palau International Ship Registry (PISR) claims to currently be the first and only ship registry to have implemented, and be certified for, ISO 37001: 2016 related to anti-bribery and anti-corruption standards. There are two significant conventions that cover global anti-bribery: the OECD Anti-Bribery Convention and the United Nations Convention against Corruption.

Commenting on this, Palau International Ship Registry chief executive Panos Kirnidis said: “We are currently the only registry in the maritime sector that has a system and certification to avoid active and passive bribery and corruption issues. We have spent the past few years establishing PISR as a ship registry with technology at its heart, supporting a very strong team of professionals who understand the needs of shipowners and operators.

The aim of the standard is to reduce political corruption and corporate crime in developing countries and to encourage sanctions against bribery in international business transactions carried out by companies or individuals.”

In a laudable statement, PISC said it aims to eradicate corruption in shipping: “We believe in the principles of creating a truly level playing field in today’s international business environments and we have fought for our voice to be heard in shipping; now we want to help our fleet owners to benefit from this.

Our ISO 37001:2016 standard specifies requirements and provides guidance for establishing, implementing, maintaining, reviewing and improving an anti-bribery management system and we have spent the past 12 months integrating this into our overall management system. As the fastest growing ship registry in the world and with our commitment to technology and high ethical standards, we are

Natasha Pilidis (deputy minister of shipping): Raising the status of the Cyprus registry

determined to see any illegal practices eradicated from the shipping world.”

The Singapore Registry of Ships (SRS) is the administration responsible for executing the proper registration of ships sailing under the Singapore Flag and is currently managed by the Maritime and Port Authority of Singapore (MPA). By registering with the SRS, ships must abide by Singapore’s maritime laws. In contrast to some of the other top-10 ship registries, the island state is a major maritime hub.

Recently, more than 180 participants from around 80 maritime administrations and organisations, as well as embassies in Singapore, attended the MPA’s 11th Co-operation Forum, where they reaffirmed their commitment to strengthen cooperation in the Straits of Malacca and Singapore (SOMS), one of the world’s busiest waterways.

The Co-operation Forum is one of the three pillars of the Co-operative Mechanism on Safety of Navigation and Environmental Protection in the SOMS. It is the main avenue for the three littoral States (Indonesia, Malaysia and Singapore) of the SOMS and the international maritime community to engage in dialogue, exchange information and share perspectives on important issues relating to the SOMS. TST

Tanker Shipping & Trade | October/November 2018

32 | FUELS AND LUBES

500 days to go: are you fuel and lubes ready?

As the 2020 sulphur cap approaches, the correct choice of fuels and lubricants may spell the difference between success and failure

Iain White (ExxonMobil): The 2020 sulphur cap will fundamentally change how the marine industry operates

E

arlier this year, Danish shipping giant A.P. Møller-Maersk announced that it would introduce a fuel surcharge 12 months prior to the introduction of the global sulphur cap, on 1 January 2020. The news caused outrage among shippers who would have to pay the surcharge, but the episode masked the fact that A.P. Møller-Maersk was cooperating with Dutch refiner Royal Vopak to develop its own compliant fuel.

A facility at the Vopak Terminal in Europoort will allow A.P. Møller-Maersk to blend, store and handle different fuel types to ensure full compliance with the sulphur cap.

“We are very proud to serve A.P. MøllerMaersk with this dedicated low-sulphur bunkering point in the heart of Rotterdam,” said Royal Vopak global oil director Hari Dattatreya.

A.P. Møller-Maersk head of Maersk Oil Trading Niels Henrik Lindegaard added: “We trust this initiative will put to rest some of the concerns the industry has on fuel availability, as well as secure our continued competitiveness in the market.”

The key phrase here is “continued competitiveness in the market”; only a company the size of A.P. Møller-Maersk can afford to insulate itself from the potential chaos that will stem from a lack of available compliant fuel in 2020.

But having access to the necessary volume of compliant fuel is only part of the equation.

Lower sulphur fuel will impact the efficiency of lubricants in the main engine. A.P. MøllerMaersk believes it has already covered the issue of having lubricants of the correct specification through its SEA-Mate Maersk Fluid Technology, which is already fitted to Maersk Tankers’ vessels.

But what of those tanker companies that do not have the resources of A.P. Møller-Maersk?

How will they protect themselves in 2020?

The first step is to seek advice. Oil major ExxonMobil has launched a series of 'Journey to 2020' symposiums around the world to help marine operators optimise vessel performance in readiness for the sulphur cap. According to ExxonMobil aviation and marine lubricants global field engineering manager Iain White,

Tanker Shipping & Trade | October/November 2018

these events will provide insights and help on fuel options and how to choose appropriate cylinder oils for safe and efficient vessel operation.

ExxonMobil has already introduced Mobil ServSM Cylinder Condition Monitoring which can measure fuel sulphur content.

This service is said to deliver significant cost savings for operators, manage and improve engine protection and optimise performance.

ExxonMobil announced that Premium HDME 50 marine fuel is now available via an independently accredited mass flow metering system (MFMS) in the AmsterdamRotterdam-Antwerp (ARA) region. Measuring bunker delivery via MFMS removes the need to dip tanks. The service has received thirdparty accreditation from Lloyd’s Register.

Shell is also advising customers on lubricants. Speaking to Tanker Shipping and Trade at SMM 2018, Shell Marine's new chief executive and general manager Joris Van Brussel said the 'insecurity and uncertainty' about the fuels market meant his division of the oil major had to cater for all of its customers' potential decisions.

“It's really not an easy time,” he said.

“Recent months have seen some movement by mainstream shipowners towards exhaust gas scrubbing to meet the 2020 marine fuel sulphur cap,” said Mr Van Brussel. “However, with just over a year to go before the new restrictions enter into force, a significant part of the market will shift to fuels with less than 0.5% sulphur.”

Fellow oil major Chevron has also developed a range of 2020-friendly lubricants.

Chevron Marine Lubricants has launched a range of cylinder lubricants called Taro Ultra, compatible with a majority of the engine types, marine bunker fuels and abatement technologies that will be used to comply with the new regulations from 2020 onwards.

In a statement Chevron said lubricant selection must be matched to fuel sulphur content, to ensure compatibility with fuels bunkered across a fleet. Taro Ultra 25 is compatible with low sulphur fuel, distillates and many alternative fuels, according to the company, and Taro Ultra 140 is better for high sulphur bunker fuels that require scrubber

www.tankershipping.com

FUELS AND LUBES | 33

emission abatement technology.

Chevron Marine Lubricants general manager Chia Yoo Soon said a key reason for launching the new product range was to recognise "the need for more diverse fuel options [that] we expect to be available both now and post-2020 ... ensuring the right products are available in the right places".

Another approach is to use a bunker supply management tool. Hafnia Group, a shipowner and operator of tankers, has mandated Inatech, a unit of Glencore, to implement its Shiptech platform for optimising part of the fuel procurement process.

By digitalising the bunker management process, Hafnia’s bunker buyers can focus on market analysis and managing suppliers.

Inatech suggested that an operator with just one ship could have annual fuel costs of around US$2.4M. This is based on a ship using 40 tonnes of fuel a day, being at sea for an average of 200 days and fuel costing US$300 a tonne. Expand that example to 20 ships and annual fuel costs rise to US$48M.

A global epidemic

However, there are already serious concerns over the quality of the compliant fuels that will be offered to owners. Independent tanker

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owners’ organisation Intertanko has criticised governments for what it called a ‘lack of interest’ and ‘lack of initiative’ in response to reports of contaminated bunkers that are suspected of having fouled ship engines and caused mechanical failures over recent months.

Intertanko said there was ‘no sign of any coordinated effort to control and remove’ the contaminated fuels from the market and called for further investigation into the incidents by governments, in addition to ‘serious fines’ for any parties found liable for the contamination and ‘restitution for the ships impacted’.

“The contaminated fuels were initially supplied in the Houston (USA) area,” the report began. “Following this, the same contaminated fuels were supplied in some Caribbean ports such as Panama and then (so far) ‘exported’ and supplied to Singapore and Malaysia. We fear that this will become a global epidemic with the possibility of disastrous events.”

The Intertanko report mentioned the US Coast Guard (USCG), saying a solitary USCG safety alert from June was not enough assurance, given the potential for severe consequences.

Intertanko cited laboratory reports showing statistically significant quantities of the phenolic compound 4-cumylphenol – an assertion backed up by a Veritas Petroleum >>>

ABOVE: Whitstar provides WFS with greater control of the supply chain

Intertanko has criticised governments for what it called a ‘lack of interest’ and ‘lack of initiative’ in response to reports of contaminated bunkers

Tanker Shipping & Trade | October/November 2018

34 | FUELS AND LUBES

Services fuel analysis ,first reported by Platts in May. The 4-cumylphenol compound can cause engine issues such as sticking fuel plungers and fuel pump failure, and the VPS report cited its use in industrial resins due to its adhesive qualities.

The presence of the 4-cumylphenol compound has prompted speculation, including from Intertanko, that the source of the contamination is petrochemical streams used as ‘cutter stock’ to lower viscosity in high sulphur fuel oils (HSFO) when light cycle oils, or distillates, are in short supply.

But if there are doubts over the quality of blended low sulphur fuel, there are also doubts in some quarters that it is even necessary or realistic.

FuelSave chief executive Marc Sima said: “I really can’t see the global fleet switching across to low sulphur fuel in little under two years’ time. Not only would shipowners have to make sure their engines are compatible with the fuel in time, but assuming they are, they would have to revise their supply chains, evaluate compatible lubricating oils, and then sit back and watch their operating costs increase.

“It just won’t happen. Low sulphur fuels may be today marginally more expensive than LNG, but should the industry make the switch en masse, what are the refiners going to do, reduce the cost? I doubt it.”

To meet the 2020 global sulphur cap, Mr Sima advocates the continued use of HFO/ MDO/MGO, with the appropriate emissions abatement technology – a scrubber – as the only cost-effective and proven solution for emissions reduction. >>>

We fear that this will become a global epidemic, with the possibility of disastrous events

Historic changeover

Bunker supplier World Fuel Services is preparing for the historic fuel changeover in 2020 with additional facilities and vessels.

The latest to join the fleet is Whitstar, which will serve World Fuel Services clients around the south coast of the UK. The 75 m-long, 3,100 dwt product tanker was deployed in early September 2018 to operate along the east and south coast, to service UK terminals Owned by Whitaker Tankers of Hull, Whitstar was built in 2004 and is fitted with versatile deep-well pumps capable of delivering fuel in volumes of up to 450 m3 per hour.

The vessel has epoxy-coated cargo tanks, closed loading systems and has tank-level radars fitted.

The hull is also strengthened to enable access to NAABSA berths.

This latest addition to the WFS-operated tanker fleet is large enough to keep storage terminals topped up, but small enough to

Tanker Shipping & Trade | October/November 2018

Marc Sima (FuelSave): “What are the refiners going to do, reduce the cost? I doubt it”

deliver bunkers to vessels.

In chartering the vessel, WFS now feels it has greater control of the supply chain to help it achieve the flexibility required as the sulphur cap approaches.

IMO has reiterated that its 0.5% limit on sulphur in ships’ fuel oil will be in force from 1 January 2020, under the UN body's Marpol treaty.

But while the timeline is fixed, the penalty for non-compliance is less certain.

As Niels Bjørn Mortensen noted in sister publication Marine Propulsion & Auxiliary Machinery, with a current price gap between compliant and non-compliant fuel of some US$225, bunkering 1,000 tonnes of noncompliant fuel could release a “cheating bonus” of US$225,000. And while it is unlikely that an owner would be able to avoid an inspection of the fuel or emissions in ECAs with long-established Port State Control regimes like Europe, elsewhere it is a different matter.

He notes that the main problem regarding enforcement is that at present, it is impossible to monitor which fuel oil is being used and the consequent emissions on the open sea.

Although the United Nations’ Convention on the Law Of the Sea (UNCLOS) does grant littoral states some rights to intervene on ships in international waters, few coastguards would actually consider boarding a ship in open sea to check for compliance with Marpol Annex VI. The jurisdiction of the ships lies basically with the flag state, most of which have no capacity, or interest in, performing such checks.

From a shipowner perspective, especially an owner like A.P. Møller-Maersk that has taken steps to secure a supply of compliant fuel, the main concern would be competitors gaining an unfair advantage by deliberately violating the rules. Some non-compliance might be initiated and executed by the ship’s crew without the consent of the owner and that will not disturb the competition. If, however, a vessel is caught burning non-compliant fuel and it proves to be company policy instigated from top management, the impact on the shipping fraternity would be significant. According to the Trident Alliance (whose members includes Maersk Line and Maersk Tankers) and it is hoped that the most rigorous response would be forthcoming from the authorities to crack down on such practices.

As Per Funch-Nielsen, senior associate at 20|20 Marine Energy argues, there are few more written about subjects in the world of shipping than the global sulphur cap and advice is available on both fuels and lubes.

Now is the time to take that advice, or face the consequences. TST

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36 | INDUSTRY FOCUS

From wind to LNG, shipping looks to the future While SMM covered the gamut of tanker-related products and services, 1,100 miles away near the beaches of Barcelona, the focus was on LNG

T

he inaugural SMM back in 1963 saw just 35 exhibitors attend; this year, 2,289 exhibitors from 69 nations and 50,000 visitors from 124 countries strolled through the grounds of the 93,000 m2 Hamburg Messe und Congress. In such a huge space, one could easily walk 10 miles or more a day just going from one interview to the next.

The motto for this year’s event was ‘Trends in SMMart Shipping’ and there were plenty of new products on display, alongside updates of existing ideas.

From the fast-expanding alternative maritime technology hub that is Finland came news of an innovative take on the 100-year-old Flettner Rotor. This wind propulsion technology has been rejuvenated by Norsepower and fitted to the product tanker Maersk Pelican.

Detailing its solution, Norsepower Oy Ltd partner Jukka Kuuskoski said “The rotors are made from composite materials, making them light and very strong.”

At 30 m tall, the carbon fibre sandwich Flettner Rotors impose a loading that means they are best suited to larger vessels. The rotating sails installed onboard Maersk Pelican are expected to reduce fuel costs and associated emissions on typical shipping routes by between 7% and 10%.

When wind conditions are favourable the main engines can be throttled back, saving fuel and reducing emissions, while maintaining speed and voyage time.

While the LPG-powered engine and Flettner Rotors fit the ‘Trends in SMMart Shipping’ theme, the key issue for many attendees was how to comply with the 2020 global sulphur cap and there was plenty of advice on hand.

ExxonMobil announced a global tour of regional shipping centres where clients can interrogate the oil major and be educated on the end users’ fuelling options when 2020 arrives.

These events will also provide an opportunity for operators to explore the cylinder oil options that best fit their fuel choices. According to ExxonMobil, for the majority of vessels bunkering a 0.50% sulphur fuel, a 40 BN cylinder oil will be the best choice. Vessels fitted with scrubbers will continue to burn heavy fuel oil and will exclusively use a high BN alternative.

“The 2020 sulphur cap will fundamentally

Tanker Shipping & Trade | October/November 2018

Rafael de Gongora (SENER) and Lucas Ribeiro (DNV GL): SENER’s Mr de Góngora receives an agreement-in-principle from DNV GL area manager Iberia & France Mr Ribeiro

change how the marine industry operates,” said ExxonMobil Aviation and Marine Lubricants global field engineering manager Iain White.

ExxonMobil also reported its compliant fuel ExxonMobil Premium HDME 50 will be available in the Amsterdam-RotterdamAntwerp region through mass flow metering system delivery.

The change to compliant fuels will clearly have an impact on lubrication. Speaking at SMM 2018, Shell Marine’s new chief executive and general manager Joris Van Brussel said the current insecurity and uncertainty about the fuels market, stemming from the sulphur cap, meant his division of the oil major had to cater for many potential customer choices.

Mr Van Brussel said shipowners opting for high sulphur, heavy fuel oils with scrubbers would be looking for lubricants proven to protect cylinders against cold corrosion under extreme stress. Those taking the low-sulphur fuel route will need cylinder oil formulations with a lower BN number.

“The two-stroke product portfolio for 2020 is largely in place,” Mr Van Brussel said, “but

www.tankershipping.com

INDUSTRY FOCUS | 37

we expect that there will be a requirement for significant volumes of higher BN cylinder oils to be replaced by BN40 or BN70 grades.”

Compared to previous SMMs, there was a big focus on vessels being built or retrofitted to use LNG, either exclusively or in dual-fuel mode.

Gibdock announced it had won a contract to retrofit a Baleària ferry to LNG dual-fuel and this represents the first time the Gibraltar shipyard will carry out an LNG conversion.

Spanish operator Baleària is to invest €60M (US$69M) to re-engine four of its current ferries to LNG fuelling over the next two years. Baleària has adopted a strategic commitment to LNG as its marine fuel, which is already specified for two newbuildings. MAN PrimeServ will convert the engines to LNG dual-fuel.

Gibdock won the contract for the first ferry, Napoles and work will start on 15 November 2018 and is expected to finish on 15 February 2019.

Gibdock chief executive Richard Beards said: “It is nice to be involved in the early stages of what we see as pioneering ship repair work.”

Mr Beards said a “key milestone” in the project would be lifting the 200-tonne LNG tank to place in the vessel – the heaviest lift the shipyard will ever have done. The heaviest tank it has previously lifted is 102 tonnes. The shipyard is bringing in a Crawler crane to carry out the lift.

Another LNG announcement came from class society DNV GL, which launched its new Alternative Fuels Insight (AFI) platform at SMM. The class society explained that the platform offers a comprehensive and continually updated overview of alternative fuel projects, bunkering infrastructure, suppliers and technologies. The new AFI platform builds on the company’s existing LNGi portal, but comes with an expanded focus that covers LNG, LPG

and methanol, as well as emission-reducing technologies such as scrubbers and batteries.

SMM 2018 also saw ABS issue an agreementin-principle to a Chinese shipyard for its design of a large LNG carrier (LNGC) that utilises the GTT Mark III Flex containment system. The award went to Hudong-Zhonghua (HZ) for its 174,000 m3 LNGC concept.

All the conventional-size LNGCs built in China to date have been constructed at HZ and all feature GTT’s NO 96 cargo tanks, another type of membrane containment system. The shipyard stated that with its Mark III design added to its existing capabilities, it will be able to meet the full range LNGC owner requirements.

ABS organised a panel discussion during SMM 2018 during which industry leaders provided insights on the challenges and opportunities arising from the use of LNG as marine fuel. The speakers acknowledged that a classic dilemma remains, namely, while cleanburning gas meets all the requirements for the global sulphur cap, the LNG bunkering infrastructure has been slow to materialise.

Quite aside from the expenditure associated with providing such infrastructure, fitting an LNG-powered newbuilding with a dualfuel propulsion system entails relatively high capital costs.

And while some companies were offering concepts and design outlines for LNG bunkering vessels at SMM, but the details were scant. It was two weeks later at Gastech in Barcelona that LNG bunkering came to the fore.

With technological solutions providers jostling for position ahead of the 2020 fuels fray, SMM revealed lingering frustration around the global 2020 sulphur cap, tinged with optimism that this juggernaut of an industry can respond to the threat of change with innovation.

But the overall feeling one took from SMM

A classic dilemma remains, namely, while cleanburning gas meets all the requirements for the global sulphur cap, the LNG bunkering infrastructure has been slow to materialise

probunkers aims to design, build, own and operate a fleet of LNG supply vessels

www.tankershipping.com

Tanker Shipping & Trade | October/November 2018

38 | INDUSTRY FOCUS

2018 is that this calm will not last much longer and that the storm clouds are brewing with ominous intent.

Gastech goes big on LNG

Alexander Prokopakis (probunkers): “ABS is providing technical support; probunkers is designing the LNG bunkering vessel”

Although smaller than SMM (30,000 vs 50,000 attendees), the 700 exhibitors from 90 countries who attended Gastech were spread over a larger area, and the event had a more relaxed feel. Gastech covers the gamut of the natural gas industry, from extraction, transport and conversion into energy or feedstocks and unlike the SMM displays, at Gastech the stands are populated by division heads and chief executives and it is relevantly easy to meet principals formally, and informally.

Another major difference between the focus on industry safety. The tanker industry aims for high levels of safety, but as numerous incidents show, collisions, allisions and accidents continue to occur. At Gastech, the industry’s positive attitude to safety is evident among the products and services on display; it appears built into the basic sector’s framework.

Shipping was covered at Gastech, but only as part of the overall supply chain that includes LNG bunkering. ABS hosted a presentation by probunkers, the LNG bunkering start up founded by chief executive Alexander Prokopakis.

From its headquarters in Athens, probunkers aims to design, build, own and operate a fleet of LNG supply vessels, initially in seven ports: Houston; Rotterdam (or, alternatively, Antwerp); Gibraltar; Singapore; Hong Kong; Busan and Fujairah. A key element of the project involves standardising as much as possible the design of the LNG bunker barge under the ethos of “design it once, build it many times.”

Mr Prokopakis revealed that the project to build a global network of LNG bunkering stations has significant backing from the Greek shipping community.

ABS will provide technical support as it embarks on designing a fleet of specialist LNG bunker vessels for key ports around the world.

“With its low sulphur emissions, LNG is an attractive proposition for shipowners and operators responding to the 2020 sulphur cap,” said ABS vice president for global business development Peter Fitzpatrick. “However, a lack of bunkering infrastructure has been one of the key constraints on its adoption.”

Another LNG bunkering barge announcement came from Spanish engineering group SENER. DNV GL presented the engineering and technology group SENER with an approval in principle (AiP) certificate for an LNG-fuelled bunkering vessel.

The new design complies with DNV GL class rules and all current and upcoming regulations, including the new emission

Tanker Shipping & Trade | October/November 2018

LNG is emerging in several ship sectors and has great potential, but should be accompanied by the necessary port facilities and infrastructure

control regulations and the IGF Code for fuel with a low flashpoint. Two separate AiPs have been issued, covering the design of the SENER LNG bunkering vessel family, which consists of a small unit with a bunker capacity of 4,000 m3 and a larger unit with bunkering capacity of 8,000 m3.

“We have focused our design on the optimisation of the cost, safety, efficiency and bunkering processes, by minimising operating expenses and capital costs, reducing the risks during loading and bunkering, and managing and reducing the boil off,” said SENER general manager of marine Rafael de Góngora.

He added: “LNG is emerging in several ship sectors and has great potential, but should be accompanied by the necessary port facilities and infrastructure capable of providing quick and efficient gas refuelling, in which LNG bunkering vessels will play an important role.”

The approval process included reference to LNG-specific design issues, such as cargo handling, (liquid and vapour), hazardous zones and risk assessment, mooring arrangements and quick release, manifold, transfer arms and hoses as well as boil-off.

The safety aspect of LNG bunkering is being tackled through the industry body SIGGTO, which has formed a specific body, SGMF. It will be interesting to see the positive influence this body will have on the traditional bunkering trade, which does not enjoy a good reputation for safety.

It was notable too that of the LNG bunkering announcements made at Gastech, none of the companies involved have their origins in the bunkering trade (although Alexander Prokopakis is a former bunker trader).

The next Gastech takes place in September 2019 in Houston, the home of oil majors, gas companies and US-based bunkering companies.

It will be interesting to hear the reaction of the conventional bunkering sector to new kid on the block wearing the LNG badge. TST

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INDUSTRY FOCUS | 41

Elsewhere at SMM...

Lankhorst unveils first phosphorescent mooring rope

“Treat boilers with TLC” says Yara Marine Technologies

Lankhorst’s phosphorescent mooring rope really does glow in the dark

Lankhorst’s new glow-in-the-dark mooring rope – the Tipto Winchline - should improve safety, increase longevity and add a pleasing aesthetic to moored-up vessels.

“Being able to see the mooring rope in the dark greatly increases [the scope for] night mooring operations in the offshore sector,” said Lankhorst Ropes commercial director Hans-Pieter Baaij.

Tipto Winchline is a dedicated floating mooring line developed especially for self-tensioning winches. The addition of a phosphorescent tracer yarn in the rope’s outer jacket allows the rope to glow in the dark, increasing the visibility of the rope.

According to the company, the load-bearing seven-strand core combines high strength and relatively low elongation. Further, the outer non-load-bearing braided jacket also provides protection of the core for longer service life

and increases crew safety by minimising the risk of snap-back.

Further glow-in-the-dark and reflective ropes were debuted at SMM 2018 in Hamburg, to use as tow rope connectors for tugs. Called Lankonect, this is a synthetic fibre rope connection for the main tow line that replaces a conventional cow hitch, shackle or similar hardware.

A typical tow line configuration comprises a main towing line with a forerunner, and perhaps a stretcher, as well as a cow hitch or connector hardware. Laborious and time consuming to make up, there is also a risk of a break in the costly main line and forerunner from overpulling. Lankonect offers a new approach to tow line assembly by removing the need for a cow hitch knot or hardware. It also allows tug operators to set a calculated breaking force for the tow line configuration.

Yara Marine Technologies offered some words of wisdom on fitting scrubbers to VLCCs with large boilers. The boiler on a tanker is required to heat the crude oil cargo to maintain the correct level of viscosity to keep it liquid. “These use a lot of energy,” said chief sales and marketing officer Kai Latun.

“A boiler is a challenge to any scrubber maker, because of the extremely rapid power shifts.

The challenge is to regulate the water flow (to the scrubber) as quickly as the boiler when it starts up.” The solution is a separate scrubber for the boiler. “A boiler is like a candle, it is extremely susceptible to back-pressure variations and the rapid changes in water pressure can create these conditions. In the worst case, like a candle, it could be blown out. That’s why you need to treat a boiler with tender loving care,” said Mr Latun. TST

China is “top shipping nation” China has been named the top international shipping nation for 2018 in a report released by classification society DNV GL and Menon Economics at SMM. The study benchmarks the 30 leading maritime nations around the world across what it calls “four key maritime pillars” that include shipping,

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finance and law, maritime technology and ports and logistics. “The strength of China is overwhelming, ”the report's co-author Menon Economics managing partner Erik WJakobsen said. “It should not surprise us, though, since China is the largest exporting and importing country in the world.”

Kai Låtun (Yara Marine Technologies AS): “A boiler is like a candle, it is extremely susceptible to backpressure variations”

Tanker Shipping & Trade | October/November 2018

42 | SHIP DESCRIPTION DHT Bronco

DHT Bronco is the latest addition to the tanker fleet DHT has a clearly defined approach to managing the tanker cycle, and its latest scrubber-equipped addition fits the bill

T

he newly launched DHT Bronco and the soon to be delivered DHT Mustang are prime examples of the large tankers we can expect to see in the post-2020 global sulphur cap era.

The 317,975 dwt DHT Bronco is fully equipped with scrubbers and ballast water management systems (BWMS) and DHT Holdings has committed to having 14 VLCCs scrubber- and ballast water treatment-ready by the start of 2020. DHT Bronco is a key element in that strategy.

DHT Bronco was launched from Hyundai Heavy Industriesâ&#x20AC;&#x2122; shipyard at Ulsan on 5 May and was delivered to DHT on 27 July 2018. The cargo

arrangement of the VLCC is constructed around five central cargo tanks with five pairs of side tanks and two slop tanks.

This includes transverse swash bulkheads which are arranged in the side cargo oil tanks. The double hull structure includes a double bottom with five pairs of ballast tanks. The double bottom is continuous throughout the cargo tanks, pump room, and engineroom area.

The engineroom structure is built mainly to the transverse framing system and the cargo area is constructed from a longitudinal framing system. The stern frame and the stern tube are fabricated with steel plates and from weldable cast steel.

A full spade rudder was specified, and the neck bearing is arranged at the lower end of the rudder trunk.

Hull cathodic protection is provided by a Cathelco impressed current cathodic protection system, with a mean current density for the underwater hull area of 35 mA/m2, rising to 120 mA/m2 for the rudder and 600 mA/m2 in the propeller area.

All the tanks are fitted with access points, and the structure has been built with high tensile steel in key areas. The hull has been constructed to meet the requirements for a 25-year North Atlantic design life, as per the Common Structure Rules (CSR). It features shell plates that are gradually >>>

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Tanker Shipping & Trade | October/November 2018

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DHT Bronco SHIP DESCRIPTION | 45

MANAGING THE CYCLES Counter cyclical investment philosophy

Sale & Purchase

Chartering

Capital Allocation

THROUGH / INVESTMENT PHASE

RECOVERY PHASE

HIGH MARKET PHASE

• Aggressive growth

• Selective growth

• Divestment of older tonnage

• Spot

• Spot ▶ Term

• Time charters

• Nominal

• Increased

• Formula based

• Delevering

• Delevering

Source: DHT

tapered in thickness from midship to ends.

Jotun supplied the tank coatings and the cargo tanks are coated with KCC shop primer, followed by a coating of Jotun’s Jotacote Universal N10 epoxy paint. The ballast tanks also use Jotun product, in this case Jotacote Universal HF002 epoxy paint with sacrificial anodes.

All the piping, joints, valves, nuts and bolts in the hull and engineroom are specified in accordance with Korean and Japanese industrial standards. All the piping in exposed areas is clamped with SUS316L-specification U bolts with Teflon coating, in accordance with the owners’ standard.

The cargo control console and cargo valves were provided by Nakakita of Japan and feature integrated cargo and ballast water control simulation on the console. All the cargo and ballast valves are hydraulically operated from the cargo control console.

DHT Bronco has a maximum loading capacity of 20,500 m3/hour and a discharge rate of 15,000 m3/hour.

A SAAB remote level gauge system enables ship staff to continuously monitor the tank volume during cargo operations.

Shinko Industries of Japan supplied cargo and ballast pumps. The cargo pumps are rated at 5,000 m3/hour, with two sets of cargo eductors running at 600 m3. The ballast pumps are rated at 3,000 m3/hour. >>>

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An Alfa Laval ASQ-180H inert gas generating system supplies 100% of the required capacity for cargo tank inerting, and there are two auxiliary inner gas generators with a capacity of 50% each.

The total inert gas generating capacity is 18,750 m3/hour The tank cleaning system is a conventional Scanjet set up, with a fixedtype tank cleaning machine provided to each cargo tank. Tank cleaning machines are of the single nozzle (programmable) or twin nozzle (non-programmable) type and are driven by the force of the washing liquid flowing through the system.

BWMS retrofitting

The retrofitting of BWMS is currently something of a hot topic, with several companies specifying BWMS for nearly new tankers.

This fate has been avoided by DHT as DHT Bronco was specified with BWMS at an early stage. The vessel is equipped with the Hyundai Hi Ballast (filter + electrolysis type) BWMS with capacity of 6,000 m3/ hr. The BWMS is operated with two ballast pumps (one steam turbine and one electric motor) rated 3,000 m3/hr. DHT reports that the main reason for selecting the Hi Ballast system over alternative solutions was reduced energy consumption (maximum 240 kW). Moreover, Hyundai HI Ballast is

already in service on DHT VLCCs and has proven very reliable.

The main engine is a Hyundai MAN B&W 7G80ME-C9.5-HPSCR with high pressure selective catalyst reduction, as per Tier III NOx requirements. The main engine nominal rating is 32,970 kW at 72 rpm.

The daily fuel oil consumption at NCR for the main engine was specified at around 65.6 tonnes per day, based on marine diesel oil of 42,700 KJ/kg without the scrubber in operation. However, during the sea trial main engine consumption was found to be about 68 tonnes of HFO per day at NCR. The auxiliary engines consist of two HiMSEN Hyundai 7H21/32, with an output of 1490 KW at 900 rpm. The scrubber is an Alfa Laval Pure SOx Exhaust Gas Cleaning system for the main engine, auxiliary engines and the boilers, with a scrubbing dilution ranging from 3.5% sulphur down to 0.1% sulphur.

In normal seagoing operation the scrubber operates on the exhaust gases of the main engine and the two auxiliary engines. In port, the scrubber also washes the exhaust from one boiler and the two auxiliary engines.

During sea trials with different engine loads, auxiliary engines and boilers in operation the scrubber was found to meet the performance requirements for SECA/

Tanker Shipping & Trade | October/November 2018

46 | SHIP DESCRIPTION DHT Bronco

NECA/2020 global sulphur cap.

The boilers consist of one Alfa Laval composite boiler and two Aalborg OD (KBSD3000 and KBM150) rated at 40,000 kg/hour.

The Aalborg OC-TCi 2,950 kg/hour composite boiler uses a KBM150 burner.

This composite boiler is only used during the port stay when no cargo operations are taking place. The boiler relies on the waste heat (exhaust gas) of the main engine, which should be sufficient for domestic purposes during normal seagoing mode.

The auxiliary boilers are only used for discharge operations in port, for cargo tank inerting and tank cleaning. The boilers are configured for the exhausts to exit via the funnel and through the scrubber.

Alfa Laval supplied the fuel system, which consists of Alfa Laval centrifuges that have a capacity of 5,700 litres per hour and can handle oil types of up to 700 cst / 50-degree C with a separation temperature of 98° centigrade. The centrifugal separators monitor various parameters to enable a flawless separation and have a water transducer to monitor the water content in the oil outlet. The configuration of the fuel system allows a range of fuels, including HFO/ULSHFO/ LSMGO for the main engine, auxiliary engines and boilers, in conjunction with the Alfa Laval Purification system for HFO & MGO. As a safeguard, the vessel is fitted with a huge LSMGO bunker tank, as contingency in case of a failure of the SOx scrubber system.

The fuel oil lines are configured with separate HFO and LSMGO lines to handle the challenges of the 2020 sulphur cap; one boiler can fire on HFO with 3.5% sulphur, in line with the SOx scrubber, and the other boiler can be fuelled with LSMGO for cargo tank inerting while at discharge operations. The boiler control system in designed such that it can be controlled automatically, with one boiler in master control and another on slave mode. The slave-mode boiler will follow up the master boiler and cuts in and out depending on demand.

The propeller is a Hyundai design keyless bore propeller (Wet type) with an aerofoil section weighing 76.5 tonnes.

The four-blade propeller was fabricated in the Hyundai foundry/propeller shop from nickel aluminium bronze material and has a diameter of 10.4 m and a pitch of 7.55 m. In addition, DHT Bronco is

“The tanker has been constructed with worldwide trading in mind and joins a fleet of 26 VLCCs owned and operated by DHT group”

fitted with a bulb and a Hyundai- PreSwirl duct for energy saving.

The steering gear is supplied by Yoowon-Mitsubishi. The YDFT-5302 model was chosen for its compact construction and high reliability. The steering gear comprises two rams and four cylinders and a Rapson-slide type. The design incorporates two variable displacement pumps, one of which is stand-by.

The steering gear is controlled by a Tokyo Keiki autopilot (model: PR-9340ADM-SS2) and incorporates an emergency control in the steering gear room.

Deck equipment includes two HHPtype stockless 27,000 kg anchors attached to a Macgregor windlass, with a capacity of 84 tonnes at 9 m per minute. There are two sets of anchor chains of 412 m each with 14 shackles.

There are 11 MacGregor 30T X 15 m/ minute mooring winches, including one dedicated to single-point mooring. DHT Bronco is equipped with two hose-handling Oriental cranes (SWL 20 T), one 10-tonne SWL Oriental deck crane and one threetonne SWL Oriental deck crane.

The bridge is equipped with two radars (1 X-Band and 1 S-band) with integrated ARPA functions and an inter-switching facility. The vessel has two independent sets of ECDIS ( JRC 9201) with a robust system for obtaining and maintain permits/ licenses which allows paperless navigation.

The engineroom controls are duplicated on the bridge and in the bridge wings.

The vessel has been fitted with two gyro compasses and one magnetic compass, which continuously transmit the heading to the steering system when navigating the vessel on autopilot. There is a voyage data recorder on board for accident investigation and training purposes.

With safety a paramount concern, the vessel has been fitted with CCTV

Tanker Shipping & Trade | October/November 2018

monitoring systems in eight locations, including the bridge, with a feed going to the master’s cabin among other locations.

The shore office has access to the system, enabling them to check on the vessel and its compliment at any time.

The communications system consists of three VHF radios, 1 MF/ HF, 2 INMARSAT-C stations (LRIT is incorporated in one of them), a V-SAT system, FBB 500 and other small units.

These units ensure vessel GMDSS, as well as routine communications irrespective of location.

DHT Bronco is classified by ABS and registered in Hong Kong; all DHT Holdings vessels sail under the USA flag. The P&I club is Gard and the technical manager is Goodward Ship Management in Singapore, a company 50% owned by DHT Holding.

The tanker has been constructed with worldwide trading in mind and joins a fleet of 26 VLCCs owned and operated by DHT group. Sister ship DHT Mustang is due from the same yard later this year and the two newbuildings mean the fleet has an average age of only six years, compared to the VLCC fleet average of seven years.

Most of the DHT VLCCs are trading spot at the time of writing and this is influenced by management’s strategy towards the tanker market cycle.

DHT Bronco is currently reported to be on a US$17,000/day, nine-month time charter to an unknown Chinese charterer.

Clearly, this rate is far below capex and opex requirements, but is in line with current market norms.

DHT has ordered 12 scrubbers from Alfa Laval and has secured US$50M in funding from its banks to cover the cost of retrofitting them. The financing is structured through an increase of the existing US$300M secured credit facility entered into in Q2 2017.

The increased facility will bear the same interest rate equal to Libor + 2.40% and is available immediately. Quarterly repayments will consist of US$2.5M commencing Q2 2020, aligned with the implementation of the 2020 sulphur cap and resulting anticipated economic benefits.

All seven banks in the existing facility participated in the increased facility: Nordea, ABN Amro, Danish Ship Finance, DNB, ING, SEB and Swedbank.

With the support of its banks and the new fully-2020 ready additions to the VLCC fleet, DHT looks well-placed to weather the likely chaos associated with the implementation of the new fuel regulations. TST

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Piracy is on the rise; in the first half of 2018 69 vessels were boarded, 11 vessels fired upon and four vessels hijacked

Safety first: risk management and piracy Risk comes in many guises, from piracy, fire and collision, to cyber threats and human mistakes.

Managing and mitigating these issues must become an industry priority

A

lmost 20 years to the day since the International Safety Code (ISM) was introduced by IMO, officials at the port of Hull became concerned with the approach being taken by the 2008 Russianbuilt 2,800 dwt clean tanker Tecoil Polaris.

UK Maritime & Coastguard Agency (MCA) inspectors boarded and found a catalogue of deficiencies in navigation and safety equipment, together with significant non-compliance with the ISM Code.

These included not having correct navigation charts or a voyage plan, incorrect stability calculations, navigation equipment not working and defects with lifesaving equipment.

The vessel was subsequently detained and its safety certificate cancelled.

The MCA’s lead investigator Mark Flavell said at the time: “This was an extremely serious breach of the ISM Code. In this case, the captain showed complete disregard for

Tanker Shipping & Trade | October/November 2018

the safety of his vessel and crew operating the vessel. The intention was for this vessel to carry 1,665 tonnes of oil to Finland, which could have had disastrous human and environmental consequences.”

Had a few basic precautions been taken, such as vetting the operator and the tanker through physical inspection services, the whole affair might have been avoided.

As a first step, a third-party due diligence report could have been commissioned, to clearly identify the parties involved and to sift out inaccurate data.

Infospectrum is a provider of such reports and its founder and director William Hogg said: “In a global economy that is being transformed by data, it is not the players with the most intel that will prosper most, but those who best know what to do with it.”

To get the most out of the data, the company has created its Infospectrum Counterparty and

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RISK MANAGEMENT | 49

Credit Management System (ICMS), allowing clients to speed up counterparty vetting, onboarding, monitoring and risk management for practices such as chartering tankers or dealing with multiple cargo owners when selling space on parcel tankers.

The next pre-fixture step involves vetting the tanker itself. International third-party bulker, gas carrier and tanker inspection company RightShip operates a predictive online vetting platform called RightShip Qi (Quality index). This uses predictive analytics and real-time risk assessments to target substandard maritime performance.

Sophisticated algorithms analyse data to spot patterns, draw conclusions and determine the likelihood of a vessel having an incident in the next 12 months.

Once the vessel and its owners/operators have been vetted, the next priority is to ensure the crew and vessel remain safe during the voyage. There are obvious concerns, such as tanker routes being subject to harassment from state operators and ad hoc pirate incidents, but less high-profile issues must also be addressed, such as theft of equipment from vessels in port.

“Maritime criminals are extremely well organised, led and resourced, as well as constantly innovating.

They would love the maritime community to stay disorganised”

Piracy – a growing risk

Piracy is on the rise according to the latest data from the International Maritime Bureau (IMB).

IMB is a specialised division of the International Chamber of Commerce (ICC); it is a non-profit making organisation established in 1981 to act as a focal point in the fight against all types of maritime crime and malpractice.

A total of 107 incidents were reported to the

IMB Piracy Reporting Centre (PRC) in the first six months of 2018. In total, 69 vessels were boarded, with 23 attempted attacks, 11 vessels fired upon and four vessels hijacked. No vessels were reported as hijacked in the second quarter of the year.

The number of crewmembers taken hostage increased from 63 to 102 compared to the same period in 2017. The number of crew kidnappings decreased from 41 at the second quarter of 2017 to 25 to date in 2018. However, all 25 crew kidnappings reported this year have occurred over six incidents in the Gulf of Guinea, highlighting the higher risks in this area.

Outside the Gulf of Guinea, incidents have decreased in other piracy hotspots. There were no reported incidents recorded off the coast of Somalia in the second quarter of 2018. Still, Masters are urged to continue to maintain high levels of vigilance when transiting the high-risk area and to follow the latest best management practices.

Discussing these incidents, IMB director Pottengal Mukundan said: “The 2018 figures aptly demonstrate the value of timely and transparent reporting. The reports help to focus on risk areas and to accurately inform vessels of evolving dangers, allowing authorities to deliver an effective response.”

The ability of company security officers (CSOs) to share intelligence goes a long way in keeping crews and tankers safe at sea. This ability has been boosted of late thanks to the CSO Alliance, which works in partnership with the IMB and military services. It is a useful programme as many CSOs are drawn from the ranks of the special services in military units and prefer to maintain a low profile. The >>>

20 years after the introduction of the ISM Code, the UK Coastguard is still finding deficiencies on vessels entering UK ports

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Tanker Shipping & Trade | October/November 2018

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RISK MANAGEMENT | 51

CSO Alliance allows them to share their intelligence without compromising their visibility.

CSO Alliance director Mark Sutcliffe said: “Organised maritime criminals are exactly that: extremely well organised, led and resourced, as well as constantly innovating. They would love the maritime community to stay disorganised.”

The aim of the CSO Alliance is to collect data from CSOs worldwide, whether that be a suspected sighting, a stowaway attempt or an opportunistic cargo crime, and to track and log every criminal activity anywhere in the world. This information can then be shared and lessons learnt.

A former CSO for Jo Tankers, who wished to remain anonymous, explained: “I am one of the founding members of the CSO Alliance, and the reason I signed up was that I was looking for more information, ideas and ways of working, related to security in general and piracy in particular. I was looking for a discussion group from various countries as to how they were handling all the security issues.”

But even when the vessel has been checked, the operators approved and the pirates avoided, there remain a host of onboard risks that must be mitigated. For example, in a recent paper calling for improved firefighting systems on board container vessels, the International Union of Marine Insurance (IUMI) noted “further steps are required to improve fire safety”.

According to statistics from the VTT Technical research centre in Finland, 33 vessels a year are expected to be lost as result of onboard fires. One such incident occurred in March 2018, when five people lost their lives in the Maersk Honam fire. Quite aside from the human tragedy, the financial damage from the fire will be the biggest on record, running into the hundreds of millions of dollars.

IUMI’s concern is based on the growing size of vessels and the inadequacy of fire prevention measures. As vessels become larger and more sophisticated, so the financial interest tied up in the ship increases. From a marine insurer's perspective, it is a simple equation: the larger the vessel, the more cargo it will carry and hence the greater the sum that must be insured.

Safety equipment manufacturer Coltraco >>>

“Some insiders estimate that 20% of a ship’s [firefighting] CO2 cylinders have discharged or partially leaked at some point in their lifetime”

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reports that a ship’s gaseous extinguishing system typically comprises between 200 and 600 cylinders, containing 45 kg of CO2 under high 720 psi/ 49 bar pressure. And while IMO SOLAS & FSS Code Chapter 2.1.1.3 states: “Means shall be provided for the crew to safely check the quantity of the fire extinguishing medium in the containers,” some industry insiders estimate that 20% of a ship’s CO2 cylinders have discharged or partially leaked at some point in their lifetime. Furthermore, it is not unheard of for marine ‘servicing companies’ to unintentionally leave extinguishers disabled.

Most marine servicing companies only have four hours on a vessel in a port to test up to 600 cylinders. It takes about 15 minutes for a two-person team to shut down, dismantle and weigh a single CO2 cylinder, which equates to 16 cylinders in the four-hour window. Still, every CO2 cylinder on a vessel will receive a “tested and certified sticker”.

Four:

hours available for a marine servicing company to check a vessel in port

The human element

A lack of definition regarding the assessment of risk is cited as a concern by Prevention at Sea’s business development manager George Ellinas. He noted: “Since the IMO does not specify a particular management approach to assessing risk, shipowners and ship management companies are left to choose methods that are in line with their organisational structure, their ships and modus operandi. Without listing them, current risk management methodologies tend to increase the probability of some risks remaining unrecognised and uncontrolled.”

Prevention at Sea believes that beyond those hazards which may jeopardise safety and put the environment at risk, there are a plethora of other risks that could have serious consequences for operators. These include the operational risks of getting off hires; delays at port; non-conformances; heavy fines; and improper navigation techniques.

Prevention at Sea has identified the ‘human element’ as the root cause of such risks, which it says are directly or indirectly linked to: the lack of a safety culture; poor behaviour and risk perception; insufficiently designed procedures; bad practices and seamanship; ineffective regulation monitoring; misunderstanding or wrong interpretation of instructions; lack of communication and teamwork; and a lack of training and ‘transfer’ of shipping knowledge.

All human-element risks call for a different type of risk profile calculation and risk assessment methodology; one that takes into account the complexity of the ship’s operations, the role of the human contingent, and the surrounding conditions.

These factors can compound the risks of safety, security, cyber security, pollution and health.

An effective risk assessment methodology needs to be comprehensive, allowing for the identification of risks before they escalate. Prevention at Sea recommends a methodology that involves key >>>

15:

minutes required for a two-person team to shut down, dismantle and weigh a single CO2 cylinder

16:

cylinders that can realistically be checked in the four-hour window available

600:

fire extinguishing cylinders on some vessels

Tanker Shipping & Trade | October/November 2018

52 | RISK MANAGEMENT

risk indicators based on experience, industry standards, technical knowledge, best practices and an analysis of past data.

Its Human ELement Maritime Enhancement Tool (H.EL.M.E.T.) measures risk perception and disposition to incidents and potential losses by identifying risks and automatically raising red flags at an early stage.

Such an inspection can be run alongside the other measures detailed above to provide an all-round assessment of a vessel and operator’s risk profile.

The inspection should divide a vessel into zones, covering for example, areas such as safety management, navigation practices, procedures to ensure structural safety, engine operations, mooring, cargo operations, always factoring in the human element. >>>

Mr Ellinas said: “It is very worrying that despite current inspections and surveys carried out onboard or ashore, ‘operational incidents’ are on the rise. This fact is an indication that the human element and the associated potential maritime risks are being placed under the radar.

Current inspections and surveys focus on the conditions at the time of the inspection and the results of the past year. There is no evaluation of the current risk profile [as] outdated and generic 3x3 or 4x4 risk matrices [are used] to identify the severity of tasks performed in isolation of other tasks happening at the same time. This is far from an effective marine risk assessment methodology.

An effective marine risk assessment methodology needs to be comprehensive and predictive. Don’t cure, prevent.” TST

INCIDENTS ON VETTED VESSELS (2017) Likelihood of incident occurring 0%

6%

12%

18%

1 star

2 star

George Ellinas • Over 20 years’ experience in business development, business process improvement and operations.

• Managed and coordinated multicountry projects, field operations and project costings across the Gulf, the Levante, North Africa and Europe and at a global level.

• Joined Prevention at Sea in 2018 to oversee business development.

3 star

4 star

5 star

RightShip Risk Rating as at 01 January 2017 (Source: RightShip Qi) RightShip Qi provides online vetting. A tanker with a one-star score on the RightShip platform is 19 times more likely to be involved in an incident than a tanker with five stars

It is very worrying that despite current inspections and surveys carried out on board or ashore, ‘operational incidents’ are on the rise

Tanker Shipping & Trade | October/November 2018

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Across two days in November, Riviera’s Tanker Shipping & Trade Conference & Awards, will address these challenges across nine sessions and how to chart the perfect storm ahead. There will be plenty of networking opportunities, our dinner and awards will again provide an excellent social setting for meeting, renewing and making new industry contacts and our exhibition is the ideal forum to market products and services to the industry’s decision makers.

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• Keynotes on the latest vetting requirements and practices.

• Tanker training in an age of reduced crews and increased automation/digitalisation • What charterers are looking for from owners. What owners can expect from charterers.

• How far are we away from a fully digitalised tanker industry – and what are the implications • Technology: Balancing compliance, efficiency and economics • Resolving market confusion over the implications, cost, longevity and legal effectiveness of the ballast water and 2020 fuel choices available.

INTERTANKO Breakfast Briefing: Ship recycling and sustainability From 9:00-9:50AM on 20 November INTERTANKO members and associate members are invited to attend.

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LEGAL BRIEFING | 55

Settlement agreements in commercial shipping disputes Fiona Cain, partner, Haynes and Boone CDG, LLP, considers two of the main disputes that can occur in newbuilding contracts Does an agreement made ‘subject to board approval’ constitute an offer capable of being accepted?

Fiona Cain (Haynes and Boone CDG): What does “subject to board approval” really mean?

In Goodwood Investments Holdings Inc. v Thyssenkrupp Industrial Solutions AG, the purchaser of a luxury superyacht, Palladium, made a claim against the builder for breach of warranty in relation to the yacht’s paint system. A settlement offer, made during the course of a subsequent arbitration, included various terms and proposals, one of which required formal approval of the agreement by the builder’s own board of directors.

The purchaser responded to the offer by confirming its acceptance, but the parties did not execute a formal settlement agreement and in later conversations, the builder insisted that no binding settlement had been concluded. The court was asked to determine whether or not the purchaser’s response to the builder’s offer created a binding and enforceable settlement agreement.

The court recognised that it is possible for parties to conclude a binding contract even where a formal document is to follow and will contain terms which have not yet been agreed. However, the court held that the meaning of the words “subject to contract”, which is well established, is the same as “subject to board approval” - that is, such words indicate that the parties do not yet intend to be contractually bound.

More specifically, it does not constitute an offer capable of being accepted so as to give rise to an immediately binding contract, and thus, neither party is bound until such approval is given.

Importantly, however, the court also noted that whether an agreement has been formed ultimately depends on the parties’ intent, emphasising that the whole course of the parties’ negotiations must be considered.

Can a binding agreement be made without the signature of one of the contracting parties?

In IMS S.A. v. Capital Oil & Gas Industries Ltd, IMS’s vessels had been arrested by Access bank which alleged that cargoes of oil due to

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be delivered on those vessels at the direction of Capital were mis-delivered. IMS sought the losses it had incurred as a result of the arrests under letters of indemnity provided by Capital following the arrests. The parties met to discuss IMS’s claims and IMS alleged that this resulted in the two parties signing separate counterparts of a settlement agreement, which were exchanged by the parties. At trial, however, only one copy was introduced into evidence: IMS’s copy signed

by Capital.

In its judgment, the court first addressed the issue of whether a signature was necessary and acknowledged that it is possible for parties to reach a binding oral agreement, even when parties intend to record the agreement in an executed document. However, given that the clear intent of the parties in this case was to require execution of the agreement by both parties, the court then addressed the largely factual question of whether the agreement had indeed been signed by IMS. The court found that based on IMS’s conduct, it was obvious that IMS believed that it was negotiating and had concluded a binding agreement. Moreover, the court also found that had the parties not intended for the agreement to be valid and binding, then it was inconceivable that Capital would not have said so in response to the many requests for payment from IMS. To have avoided this issue, both parties should have signed both copies of the agreement or taken copies of the counterparts. TST Fiona Cain is counsel at Haynes and Boone CDG and has 20 years’ experience of energy, offshore oil and gas construction, and shipbuilding litigation and arbitration. Ms Cain’s practice primarily focuses on legally and technically complex, high-value maritime and offshore construction disputes. She has also worked on a broad range of contractual disputes involving UK and international parties and crossborder issues.

Tanker Shipping & Trade | October/November 2018

56 | LAST WORD

2020 sulphur cap: do nothing and you only have yourself to blame With the global sulphur cap barely a year away, 20|20 Marine Energy senior partner Adrian Tolson and senior associate Per Funch-Nielsen advise that now is the time to act

Per Funch-Nielsen “Ships will remain the cheapest option for moving large quantities of commodities”

A

s former President of the United States George W Bush once remarked, “the reason the Oval Office is round is there are no corners to hide in.” The metaphor implies taking responsibility for your actions and with the 2020 global sulphur cap closing in, every shipowner or charterer should take note.

Post 2020, ships will remain the cheapest – and sometimes only – option for moving large quantities of commodities, so there is likely to be a limited impact on volumes transported. But as Poten & Partners warned in September, shipping costs are set to rise considerably for charterers of tankers after 1 January 2020. According to its analysis, charterers using vessels fuelled with marine gas oil (MGO) could face a 33% premium over a ship equipped with a scrubber that can legally burn HFO. What is more, Drewry has estimated that the spread could be as high as US$300 per tonne in 2020. Early adopters of scrubbers among tanker owners, such as DHT and Frontline, will have a clear advantage over their competitors, given bunkers currently account for circa 30% of a vessel’s operating expenses; a figure that could rise significantly post 2020.

It is currently speculated that little more than 2,000 vessels will be equipped with scrubbers by 2020. But outside of the major hubs, there are likely to be few ports guaranteeing HFO supply because around 90% of the global fleet is expected to burn MGO or distillate blends.

This is especially pertinent for clean tankers, the varied trading routes and size constraints of which make investing in a scrubber a less certain proposition.

This issue extends beyond the MR market because, as Drewry notes, there is enormous uncertainty about whether the spread between HFO and MGO/LSFO will last long enough for companies to get their money back on fitting scrubbers.

Whatever happens, the reality is that the

Tanker Shipping & Trade | October/November 2018

global sulphur cap is already changing the structure of the oil market and will soon begin to substantially disrupt the supply-and-demand equilibrium as well. Once you take into account on-going refinery expansion and low-refined product inventory levels, there are clearly going to be opportunities to be exploited.

We expect to see large-scale redistribution from bunkers’ production areas to the purchase places of bunkers, but this will not necessarily benefit the LR and MR segments. Tanker owners are ordering new ships almost as fast as older tonnage is being scrapped, and we know of at least five VLCCs that have carried diesel on their maiden voyages this year – a move which eradicates the demand equivalent to seven or eight MRs at both ends.

That said, VLCC owners are not having everything their own way. A substantial portion of the VLCC fleet is 15 years or older now, and this bars them from some charterer’s lists.

Traders may not have a problem with their age, but oil majors have corporate reputations to protect and are conservative when regarding vintage tonnage. A two-tier market now exists, as there was between single-hull and doublehull tankers 10 years ago.

The traditional trading conditions for the tanker market will become a thing of the past; whether you see that as positive or negative depends to a large extent on how you see the repercussions of the changes in fuel demand playing out.

There is uncertainty about what the fuel supply chain will look like in less than 500 days’ time. As such, owners and fuel buyers need advice and counsel on how to implement and manage the solutions they have chosen to ensure compliance, mitigate risk, and keep their costs as low and as controllable as possible.

This is not the time to do nothing; now is the time to react. If your fuel supply chain fails post2020, you only have yourself to blame. TST

www.tankershipping.com

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