Tanker Shipping & Trade February/March 2019

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February/March 2019

AREA REPORT Singapore remains the jewel in the region’s shipping crown

CHEMICAL TANKERS How mergers and technology are impacting the market

SULPHUR CAP Could compliant fuels drive owners towards scrubbers?

TANK CLEANING Drones and wash-water are changing best practices

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Contents February/March 2019 volume 13 issue 1

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09

Regulars 5 Comment

6 Contracts and completions 13 Analysis 25 Legal briefing 52 Last word

Asian Tanker Conference

9 A look ahead at what to expect from this year’s Asian Tanker Conference in Singapore

13

Area report - Singapore

16 Following a number of high profile and costly failures, why are Singaporean banks still so keen to lend to the local bunker industry?

18 A strong location, coupled with good administration, technical expertise and financial clout mean that Singapore remains the jewel in the region’s shipping crown

Interview - Timothy Cosulich

21 Fratelli Cosulich’s chief executive and board member Timothy Cosulich explains why his views on the sulphur cap have changed over the last 12 months and looks at the options open to owners as they prepare for the

32

sulphur cap

Interview - Mangish Kakodkar

22 The former trader and founding director of AG Shipping & Energy discusses the opportunities that the 2020 sulphur cap offers

Chemical tankers

26 Assessing how consolidation and digitalisation will impact the deep-sea chemical tanker market

Green tanker tech

36

30 US Coast Guard approval is now seen as the de facto standard by which to judge the quality of ballast water treatment systems. But what constitutes a topflight BWMS and what should owners look for among the options?

Tank cleaning

32 Can drone technology improve safety in the tank cleaning process and might wash-water analysis improve shipping’s environmental credentials?

Gas detection

36 By making it easier to detect shipboard gas leaks, new technology is reducing the risk of fire and improving safety

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Tanker Shipping & Trade | February/March 2019

Contents February/March 2019 volume 13 issue 1

Cargo pumps

41 Despite considerable M&A activity over recent years, the requirements for effective cargo pumps have changed little

Tanker newbuilding

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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

has had on the Euronav fleet

Brand Manager – Sales: Paul Dowling t: +44 20 8370 7014 e: paul.dowling@rivieramm.com

Sulphur cap

Sales Manager: Chris Tims t: +44 20 8370 7015 e: chris.tims@rivieramm.com

44 A look at the impact the 157,000 dwt Suezmax tanker Cap Corpus Christi

49 Technical, operational and financial challenges remain unresolved as the sulphur cap looms, and the complexities involved in using compliant fuels may yet drive owners towards the scrubber option

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

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COMMENT | 5

Negative fleet growth?

It sounds like lunacy

T Craig Jallal, Tanker and Markets Editor

I HAVE A FEELING 2019 MAY BE THE TANKER INDUSTRY’S SUPER-BLOODWOLF-MOON YEAR”

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he tanker fleet has been cursed with oversupply for decades, but after the current hump of deliveries fleet growth is set to fall and could even be negative – an almost oncein-a-generation event.

The start of 2019 saw a rare super blood wolf moon, an astrological phenomenon which involves the year’s first full moon (wolf moon), the moon at its closest distance to the earth (super moon), and a total lunar eclipse (blood moon). This is the second of only three such moons that will occur this century; if you missed 2000 and 2019, you’ll have to wait until 2037 for the next one.

While not quite once in a lifetime, these events are extremely rare. The same can be said for those years when the tanker fleet contracts, and I have a feeling 2019 may be the tanker industry’s super-blood-wolfmoon year.

For the global tanker fleet, such a scenario would be what economists’ term 'negative tanker fleet growth'. I had not realised this outcome was a possibility until I wrote the latest Contracts and Completions article for this issue of Tanker Shipping & Trade.

Tanker deliveries in 2018 slowed dramatically compared to 2017, due to a systemic reduction in ordering. A sustained drop in orders over a number of years leads to a potential scenario where the number of tankers leaving the fleet is not being replaced by newbuilding deliveries.

The last time this happened was 10 years ago, when deliveries of all vessel types declined as a result of the financial crisis. At that time, the global recession resulted in vessels being left uncompleted in shipyards, as owners sought to delay delivery into a moribund market. For a while, newbuilding slippage became one of

the main topics of any shipping conference.

This year's potential zero-growth fleet looks to be a market correction; however, the fleet situation will be fluid throughout the year. Back when Japan was the prominent tanker builder, it could be months before we became aware of new orders. Often the news arrived as late as February for orders placed the year before in one large group, skewing the schedule.

Of course, no conversation about shipping would be complete without some mention of the imminent introduction of the IMO’s sulphur cap. In his presentation at the Tanker Shipping & Trade conference in November 2018, Euronav chief executive Paddy Rodgers discussed the potential for fleet absorption. In theory, he said, deliveries could be absorbed by an increase in crude oil demand from global GDP growth, an increase in US crude oil exports, scrapping/recycling and IMO 2020.

The latter is a factor as it will result in delays in port during the fuel transition period, coupled with a requirement to use tankers, especially VLCCs, as an alternative to land-based storage during the transition. Hence, the sulphur cap will be a catalyst that could result in negative tanker fleet growth.

No doubt someone will correct me, but I think we have to go back to the 1990s to see another instance of negative tanker fleet growth. The last shock to the system, the transition from single to mandatory double-hull tankers, was well planned and orderly compared to the multiple fuelling options appearing on the tanker horizon.

These will skew the picture, and I will be keeping an eye on fleet statistics as the year progresses and will be the first to howl should a tanker super blood wolf moon appear on the horizon. TST

Tanker Shipping & Trade | February/March 2019

6 | CONTRACTS AND COMPLETIONS

Tanker deliveries decline in 2018 The gap between supply and demand is closing, due to a decline in tanker deliveries over 2018

T

he decline in tanker ordering in 2017 has resulted in a slowdown in tanker deliveries in 2018, almost the opposite of the situation in 2009.

According to VesselsValue’s data, deliveries fell by 50 tankers (VLCC, Suezmax, and Aframax sized) in 2018 compared to 2017.

In the VLCC sector, deliveries were lower in 2018 (39) compared to 2017, when 50 VLCCs were delivered. Clarkson Research Services (CRS) projects that the active VLCC fleet (excluding combination carriers, laid up and storage) may have contracted slightly in 2018 to 219.9M dwt (2017: 220.6M dwt) and will grow by 5% in 2019.

On the VLCC demand side, CRS projects that there was a 2% growth in VLCC demand in 2018 and this could rise to 5% in 2019. As a result, VLCC supply could match the demand growth in 2019.

The top five receivers of VLCC deliveries – Bahri Tankers, China VLCC, Maran Tankers of Greece, DHT

Tanker Shipping & Trade | February/March 2019

Euronav’s fleet now includes 25 Suezmax tankers, but chief executive Paddy Rodgers remains averse to using scrubbers

Holdings, and COSCO Shipping Energy Transportation – drove the growth in the VLCC fleet in 2018. Indeed, Bahri Tankers’ growth in the VLCC sector can be traced back to 2012, when the Saudi Arabian listed company announced a restructuring programme. This included the takeover of Saudi Aramco’s shipping company Vela and the creation in 2015 of the US$1.5Bn APICORP Bahri Oil Shipping Fund (ABOSF) to purchase new VLCCs. The delivery of the 298,700 dwt Amad in May 2018 was the culmination of 10 VLCCs ordered from Hyundai Samho at a cost of US$98M each. Bahri took delivery of five VLCCs in 2018, the same as in 2017. Following the sale of the 1996-built, 300,400 dwt Wu Xian to a recycling yard in Bangladesh, the Bahri VLCC fleet now numbers

45 vessels, making Bahri the second largest VLCC fleet in the world.

Largest fleet

Currently, the largest owned VLCC fleet belongs to China VLCC, which took delivery of five more VLCCs in 2018 to bring the fleet total to 49 VLCCs. The latest addition was the 307,500 dwt New Assurance, delivered by the Dalian Shipbuilding Industry Corp., in August 2018. The Dalian Shipbuilding Industry Corp., is due to deliver five more vessels to China VLCC in 2019, including New Honor which entered the water in January 2019.

Maran Tankers of Greece (part of the John Angelicoussis group) took delivery of four VLCCs in 2018 (three in 2017). All four 318,000 dwt

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CONTRACTS AND COMPLETIONS | 7

vessels were built by Angelicoussis’ favoured builder Daewoo in South Korea and form a string of 17 VLCCs, including five due to be delivered in 2019. So far, one VLCC, Pascagoula Voyager, was launched in early January 2019. Maran Tankers recently announced that it was to retrofit Ecochlor ballast water management systems (BWMS) to its fleet, but it is not known if this make is fitted to the newbuildings.

DHT Holdings’ VLCC DHT Bronco was the subject of a Ship Description in the October/November issue of Tanker Shipping & Trade. The philosophy of the pure play VLCC company is reported in detail in the article and is required reading for any aspiring VLCC entrepreneurs. It is a sign of the times that the two co-chief executives of DHT Holdings have announced they are moving their offices to Singapore – which will no doubt be discussed at the Asian Tanker Conference. The four VLCC newbuildings that joined the fleet in 2018 brings the average age of the 27-strong VLCC fleet down to seven-years.

The fifth largest receiver of VLCC tonnage in 2018 was COSCO Shipping Energy Transportation (CSET), which took delivery of three VLCCs in 2018 (six in 2017) to bring its VLCC fleet to 43 vessels. The latest delivery was Cosnew Lake, launched in September 2018 from Dalian Shipbuilding Industry Corp., which has produced 24 of the VLCCs in the current CSET fleet. In addition, CSET has six VLCCs on order, four with Dalian Shipbuilding Industry Corp., but none are due in 2019.

Deliveries in the Suezmax sector were down by over 40% in numerical terms year-on-year in 2018, with just 39 deliveries spread over 19 companies.

CRS expects that the active Suezmax fleet (which excludes combination

49

total VLCCs owned

by China VLCC, the world’s largest fleet of such vessels

carriers, laid up and storage) may have grown by 2.4% in the full year 2018, representing a significant slowdown compared to 2017, due to high levels of scrapping. In 2019, the fleet is projected to continue to grow at a similar, moderate pace.

Driving the modest supply growth in 2018 were several deliveries to Dynacom Tankers, Euronav, and Ocean Yield ASA. Over half the Dynacom Tankersowned fleet capacity is in the Suezmax sector and numerically 30 of the 64 tankers in its fleet are Suezmax tankers.

The six Suezmax delivered in 2018 were part of a string of nine Suezmax orders placed at New Times Shipbuilding in China. The last to be delivered was the Sikinos 1. Although Dynacom Tankers has no further Suezmax orders, the yard has reported contracts for very similar tankers on its orderbook.

Scrubbers and BWMS

Tanker Shipping & Trade Tanker Operator of the Year Award Winner Euronav took delivery of four Suezmax in 2018, taking its fleet size to 25 vessels and making it the third largest owner of this size of tanker after Teekay and Dynacom Tankers. The latest quartet were built at Hyundai Samho and given that Euronav’s chief executive is a well-known sceptic of exhaust gas

DEMAND FOR CRUDE AFRAMAX TANKERS IN 2018 WAS SIMILAR TO 2017 AND GROWTH WAS MARGINAL”

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treatment systems (scrubbers), it seems likely that these vessels will be utilising an alternative method to comply with the 2020 IMO global sulphur cap.

One company that is definitely using scrubbers is Okeanis Eco Tankers, which is a scrubber-fitted VLCC partly financed through a sale and leaseback deal with Ocean Yield. Oslo-listed Ocean Yield was formed in 2012 to manage the maritime assets of serial Norwegian investor Kjell Rokke and his main vehicle Aker. Three Suezmax tankers delivered in 2018 were financed by Ocean Yield and are part of a sale and leaseback deal with Nordic American Tankers (NATS), which has taken the three vessels on bareboat charter with options to buy the vessels at various time periods during and at the end of the charter. Neither Ocean Yield or NATS has any further Suezmax tankers on order.

The fall in Aframax deliveries between 2017 and 2018 was around 20%, down to 53 vessels. CRS projects that demand for crude Aframax tankers in 2018 was similar to 2017 and growth was marginal. On the supply side, the active Aframax fleet declined slightly, due to an increase in scrapping. The CRS outlook for 2019 is an increase in demand growth to 3%, driven by Asian crude oil imports. Crude Aframax fleet growth is expected to increase by 3%, according to CRS. Torm took delivery of four LR2 Aframax-sized product tankers in 2018 from the Chinese builder CSSC OME. All four are believed to have been equipped with BWMS and scrubbers.

Torm is reported to have a stake in BWMS manufacturer ME Production.

The Martinos family, Minerva Marine, also took delivery of an LR2 Aframax-sized tanker and three crude Aframax tankers in 2018. The latter were delivered from Sasebo in South Korea, with another due in 2019. It has been reported that Minerva Marine is retro-fitting some of its tankers with Wärtsilä's Aquarius ATEX-compliant Electro Chlorination EX filtration and electro-chlorination BWMS, but it is not known which system is fitted to the newbuildings. TST

Tanker Shipping & Trade | February/March 2019

ASIAN TANKER CONFERENCE | 9

This year’s Asian Tanker Conference will be held at the luxurious Marina Bay Sands Hotel in Singapore, on 26-27 February

Preview: Asian Tanker Conference - 26-27 February At this year’s Asian Tanker Conference the region’s ability to respond to the challenges currently facing the sector will come under the spotlight

T

he theme for this year’s Asian Tanker Conference is ‘Challenge’; how is the region coping with the challenges of new technologies, changing regulations, and regional and macro-level economic concerns.

Held at the spectacular Marina Bay Sands Hotel, the industry’s most influential shipowners, charterers, managers, technical experts and suppliers will be on hand to address these issues and to share their knowledge and expertise on operations and the commercial expectations for the year ahead.

Day one takes a macro-level view of the tanker industry and the challenges it faces, while day two homes in on the specifics and closes with what promises to be a fascinating roundtable discussion among shipowners.

In the first session, Banchero Costa Group’s global head of research, Ralph Leszczynski will take a high-level look at the tanker market before breaking the analysis down into the VLCC sector and the other crude oil tanker sectors. On the supply-side, the delivery schedule of the VLCC orderbook

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is not as heavy as it has been in recent years, but there is a distinct skew to the schedule.

On the demand-side, the reaction of crude oil importers to the threat (or reality of) trade wars could be a major driver of demand in 2019. Despite crude oil being excluded from tariffs in the China/USA trade spat, China has already effectively shut the door on US crude oil imports and found readily available sources elsewhere.

China is also going to extraordinary lengths to ensure the security of crude oil supply and that of other commodities by assembling military bases in the disputed regions of the China Sea. This is increasing tensions in the region.

Mr Leszczynski’s presentation on the crude oil market is followed by that of Braemar ACM Shipbroking regional head of tanker research, Anoop Singh, who will concentrate on IMO 2020 and why the product tanker market is expected to be the big (only) winner.

The first panel session is composed of experienced tanker professionals; AG Shipping & Energy’s founding director and global head Mangish Kakodkar has been

Tanker Shipping & Trade | February/March 2019

10 | ASIAN TANKER CONFERENCE

a trader in the commodities markets for some time and that mentality stands him in good stead for the upcoming changes in 2020. Back in April 2018, AG Shipping & Energy Pte purchased the 2006-built MR2 product tanker Phoenix for a reported US$15M, with the express aim of taking advantage of the forthcoming global sulphur cap on marine fuel.

WHILE IMO 2020 IS A GLOBAL REGULATION WITH A ONE-SIZE-FITS ALL APPROACH, BALLAST WATER TREATMENT REGULATIONS HAVE STRUGGLED ALONG A TORTUOUS PASSAGE THROUGH IMO FOR THE BEST PART OF TWO DECADES”

Bernard Schulte Shipmanagement (BSM) has invested in another option for 2020 marine fuel compliance – LNG. BSM’s managing director Capt Peter Raymond was instrumental in the development of Kairos, an LNG bunkering vessel.

Post-2020 compliance will be analysed by BV’s global market leader for tankers, Carlos Guerrero. He will give the class’ technical assessment of the regulations, before joining the following panel discussion on how the tanker industry can meet the following challenges: • Is the bunker industry ready to supply fuel with a 0.5% sulphur cap?

• Will compliant fuel be available in time and will it work efficiently?

• For those going down the scrubber route: what is the payback from fitting scrubbers?

• Do charterers prefer scrubbers and why?

• What is the range of fuel diversity and where are the alternative marine fuelling solutions in Asia?

Based on the premise that EU waste should be recycled in the EU, the EU Ship Recycling Regulation will have a significant impact on the shipping industry. It is now time for tanker owners to introduce appropriate policies for the environmentally friendly end-of-life disposal of their assets.

On day two of the event we look to the future, in terms of progress towards digitalisation in the tanker industry and considering the transition from traditional processes to digital holistic engineering.

This session examines future technologies and the application of big data analytics in the tanker industry and how best to apply digitalisation. Kongsberg Digital executive vice president Hege Skryseth leads the presentation in this area, followed by a case study from Alpha Ori chief business officer Sanjeev Namath and N2Tankers director Capt Madhu Vadakkepat.

The sixth and penultimate session of the event will focus on safety, including a detailed look at the latest safe mooring techniques in a presentation given by Samson Rope Technologies’ technical sales manager, Isaac Rosenberg.

The conference will conclude with the much-anticipated Tanker Industry Leaders Roundtable, where expert opinion will shed light on the challenges and opportunities which lie ahead. Roundtable participants will reflect on 2018 and share their thoughts and predictions for the tanker market in 2019, with a special emphasis on developments in Asia and Singapore.

For more information on the upcoming conference, please visit: www.asiantankerconference.com. TST

Ballast water

While IMO 2020 is a global regulation with a one-size-fits all approach, ballast water treatment regulations have struggled along a tortuous passage through IMO for the best part of two decades, resulting in multiple standards across different jurisdictions.

It is the technicians and ballast water testers that need to know and understand the finer details of the regulations and the jurisdictional idiosyncrasies. The Asian Tanker Conference is fortunate to have SGS regional manager, Guillaume Drillet on hand to explain these processes further.

Tanker Shipping & Trade | February/March 2019

Hege Skryseth (Kongsberg Digital): Considering how tanker operators can best embrace digitalisation

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ANALYSIS | 13

Will 2020 be the catalyst for a better 2019?

F

rom the helicopter viewpoint afforded by Kuehne + Nagel’s (N+K) world trade index, 2018 was a good year. Despite trade wars triggering new tariffs, the N+K world trade indicator increased by 9.5% (measured in nominal US$), almost at the same pace as 2017 (+9.7%), and remarkably higher than either 2016 (-3.3%) or 2015 (-9.3%).

This healthy increase in world trade translated into a small increase in tanker activity. According to VesselsValue, the overall tanker ton-mile increased by 1% year-on-year in 2018.

But despite the rise in ton-miles, the tanker industry will look back on 2018 as something of an annus horribilis.

Clarkson Research Services reports that in 2018, average VLCC earnings stood at just US$15,561/day, the lowest level since 1994. Fortunate then that the final quarter of 2018 did not go the way of 2017, when the expected seasonal uplift failed to appear. Instead, December 2018 witnessed a much needed growth in rates in VLCC earnings, to US$40,938/ day, while average weighted earnings across all tanker sectors were only down by -3.8%. This uplift was forecast as early as March 2018 by Teekay’s director of research and commercial performance, Christian Waldegrave.

Last year, the crude oil tanker market was shaped by the ebb and flow of the crude oil price. Speaking at the Marine Money London Ship Finance Forum in January 2019, Rystad Energy partner Markus Naevestad highlighted the drivers behind the crude oil price in 2018 and explained why they still influence the price.

In March 2018, the OECD commercial oil stocks fell below the five-year average, which in Mr Naevestad’s

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VLCC earnings fell to levels not seen since 1994 in 2018. But while many of the same geopolitical drivers continue to impact the crude oil price, IMO 2020 has the potential to kickstart a turnaround in fortunes

Dr Adam Kent (MSI): The US is “winning the tug of war” on oil production between OPEC, the Middle East, the US and the Americas

opinion “was a signal to OPEC to start producing more crude oil”.

This was followed in May by the re-imposition of US sanctions on Iran, which spooked the market, despite not coming into play until later in the year.

June 2018 witnessed OPEC increasing crude oil production, prompting expectation that the US would cut its crude oil production.

But in October 2018, the EIA announced US crude oil production and stocks had reached an all-time

Tanker Shipping & Trade | February/March 2019

14 | MARKET ANALYSIS

high, a development followed by Saudi Arabia’s announcement that it too had increased production, with the combined impact of an extra 2M b/d into the market. Together with the OPEC+ cuts in December falling short of market expectations, these factors all helped push the crude oil price to US$50 bbl, according to Mr Naevestad.

Considering the impact of US sanctions on Iran, IMO 2020 fuel demand and increased refinery capacity, Rystad Energy projects that the Brent crude oil price will hover in the range of US$60 to US$70/bbl, with a finite price of US$65/bbl in 2019 and US$70/bbl in 2020.

Elsewhere, Maritime Strategies International (MSI) managing director, Dr Adam Kent, predicts a slew of changes impacting the tanker market in 2019 and beyond, not all of which are connected with the sulphur cap.

He believes the US is “winning the tug of war” on oil production between OPEC, the Middle East, the US and the Americas. US crude production is growing faster than that in the Middle Eastern and MSI projects that by 2022, crude oil production from the US and the Americas will account for 28% of global exports.

This will be a boost to ton-mile demand and the tanker market as a whole, but the location of the refineries is also crucial, according to Dr Kent.

This year should be a record one for new refineries, mostly in the Middle East, southeast Asia and India.

Policy matters

“Policy is now one of the issues that the industry has to deal with which could dislocate momentum on the upward path of the cycle,” explained Dr Kent.

In the tanker sector, ‘policy’ includes OPEC actions and in the longer term, the impact of environmental regulation, notably the 2020 sulphur cap. This should be good news for product tanker trades, as new refineries are mainly being built in the Middle East and the Far East, but the marine fuel is required globally. Arctic Securities has forecast earnings of around $20,000/

Tanker Shipping & Trade | February/March 2019

day and $17,000/day this year for LR2s and MRs, respectively.

MSI has noted that Suezmax and even VLCC newbuildings are making maiden voyages carrying petroleum products from southeast Asia to the West.

According to MSI, in one case a newly delivered Suezmax made four consecutive clean petroleum product voyages.

According to VesselsValue, there are 87 VLCCs and Suezmax tankers due for delivery by the end of 2019. These have the potential to be disruptive to product tankers, by carrying clean petroleum products on their first voyage or subsequent voyages. Our analysis suggests that the sulphur cap on marine fuel may not prove quite the bonanza the product tanker sector was expecting.

The outlook for the tanker markets will always hinge on geopolitical factors, and in 2019 these will include trade protectionism in the US and China, the continuation of the re-imposition of US sanctions on Iran and the recent extension of sanctions on Venezuela. On the positive side, China is set to raise crude import quotas for its independent refiners by 42% this year, according to Platts.

Clarkson Research Services projects VLCC dwt demand will expand by 4.9% in 2019, largely driven by growth in longhaul exports from the Atlantic to Asia.

However, this may be balanced out by a 4.9% growth in the ‘trading’ VLCC fleet.

On the product tanker side, the projection is that growth demand will expand by 3.5%, with Clarkson Research Services seeing potential support in 2019 from the return of arbitrage flows to Asia, robust Mexican imports, and growth in exports from the Middle East and Asia.

The outlook for supply growth is slightly smaller at 2.9% in 2019.

Clarkson Research Services expects the IMO 2020 sulphur cap to act as a catalyst for product tanker trade and expects the movement of gasoil will drive growth in inter-regional trades and between the US and Asia. Any decline in fuel oil trade is expected to be spread across crude oil tanker and product tankers. TST

Christian Waldegrave (Teekay): Made an early (and correct) call on late-year growth in VLCC earnings

DESPITE THE RISE IN TON-MILES, THE TANKER INDUSTRY WILL LOOK BACK ON 2018 AS SOMETHING OF AN ANNUS HORRIBILIS"

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16 | AREA REPORT Singapore

Singapore: banks blind to bad behaviour in the bunker business Infospectrum senior analyst William Hogg reports on the baffling behaviour of Singapore’s banks when it comes to the bunker business

William Hogg (Infospectrum): Is Singapore’s bunker market too competitive or are banks failing to understand the nature of the business?

B

unkering has always needed finance to cover expansion and bridge cash flow gaps in a notoriously liquidity-demanding sector, and banks have often been keen to provide it. While the impact on creditors of the recent fails in Singapore's bunker sector are known, the indirect impact may be more significant, undermining confidence in the sector at a time when the bunkering industry seeks liquidity in the run-up to 2020.

Once again, news about a formerly prominent Singapore bunker supply company hit the headlines last December, as Coastal Oil Singapore Pte Ltd filed for liquidation following a creditor's voluntary winding up procedure.

Leading up to Coastal’s filing, observers indicated with some concern that the company had only been handling small volumes; at that time, there was a lack of transparency as to what had prompted the liquidation.

The new year brought with it greater clarity on the matter, with the company’s creditors list circulated. It became apparent that instead of a list of traders and suppliers taking significant hits, it was the company’s banks that shouldered the burden, with claims from banks totalling circa US$354M. The other creditors shown in existing filings account for just US$3M, spread across various entities; this was perhaps symptomatic of the low volume of business that the company had entered into immediately prior to its demise.

How did it come to this? As might be expected, Coastal's banking creditors were primarily Singaporean. At the time of filing, OCBC Bank Singapore’s claims amounted to USD123M, DBS bank to almost USD30M and UOB bank to US$20M. International banks fared little better, with Rabobank and HSBC reporting claims of circa US$68M and US$40M, respectively, and BNP Paribas US$25.2M.

Tanker Shipping & Trade | February/March 2019

As a supplier, with tangible assets in the form of vessels, it is conceivable that the banks perceived Coastal and its affiliates to have sufficient liquidity requirements and security to support this lending. However, a back-of-theenvelope estimate based on Coastal's ‘normal’ trading activities would suggest that Coastal's total liquidity requirement for a proper function would be closer to US$200M* (still far below the US$500M in undrawn borrowing facilities shown in Coastal's accounts for the year to June 2017).

In addition, it seems that Coastal and the wider group's tangible assets were relatively modest; VesselsValue estimates the current market value of the four bunker barges and two coastal tankers - which are reported to be owned by Coastal’s affiliates Heng Tong Fuels & Shipping Pte Ltd and Coastal Logistics Pte Ltd - to be US$61M, a value which equates to just 17% of Coastal’s outstanding bank debt. DBS has already arrested three of these vessels in Singapore, but even if sheriff sales by auction took place, it would generate a maximum of just US$40M. This leaves a giant gap in what the business seemingly needed, and the debts accrued.

While some of this difference is said to have been attributed to unspecified forex losses, local sources suggest that Coastal now faces fraud allegations. Unconfirmed reports of Coastal issuing false documentation to plug a financial hole have been circulating the Singapore market, seemingly supported

by COSCO Shipping International (Hong Kong) Co., Ltd issuing a notice on behalf of its bunkering subsidiary, Sinfeng Marine Services Pte Ltd (a significant bunkering client of Coastal), alleging that documents issued in relation to the debts owed to Coastal were 'not genuine'. If fraud is proved, Coastal's banks

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Singapore AREA REPORT | 17

may have an even harder time recovering funds from any insurers.

A long list of failures

So far, so very troublesome, but Coastal is far from being the only bunkering company in Singapore to face issues of late. Indeed, Coastal’s bankruptcy follows the fall from grace of six other Singaporean bunker suppliers over the course of just four years. In October 2014, Vanguard Energy Pte Ltd collapsed owing US$36M, followed a month later by the collapse of Dynamic Oil Trading Pte Ltd (painted as the primary cause of the wider collapse of OW Bunker A/S). Compatriot Searights Maritime Services Pte Ltd filed for liquidation in August 2016, with UOB bank reportedly being owed US$112M. Similarly, Vermont UM Bunkering Pte Ltd’s supply license from the Maritime and Port Authority of Singapore (MPA) was withdrawn in 2016, and a year later members of its senior management were charged with conspiracy to cheat customers.

After the MPA failed to renew its supplier license (one of its mass flow meters (MFMs) had allegedly been tampered with), Panoil Petroleum Pte Ltd was placed under judicial management in October 2017. A matter of weeks later, Universal Energy Pte Ltd fell from grace and creditors filed almost US$105M in claims; this time Société Générale accounted for a reported US$56.71M of its outstanding debt.

Last and quite possibly not least, Brightoil Petroleum Singapore Pte Ltd had a winding up procedure against it issued by Petrolimex Singapore Pte Ltd in November 2018. Qatar National Bank is reported to have claims totalling US$21.6M in relation to non-payment of letters of credit, two group-owned tankers have been arrested by Credit Suisse in relation to a US$15.75M claim and ICICI Bank Ltd (Singapore branch) also filed a claim of US$9.9M against the company.

There is no doubt that the market was a factor in some (and potentially all) of these cases, with Singapore's already highly competitive market impacted by tightened supply conditions (or at least an inability to improve 'margin') imposed by the MPA, mandating the use of MFMs for residual fuel in January 2017.

Still, the question remains, given all the issues the Singapore bunkering market has experienced over the last five years, why are banks still lending suppliers seemingly far more

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than their business models would warrant? In certain cases, it would appear that bunkering is (or at least was) regarded by banks as a standard SME lending, rather than essentially trade finance to a sector which is arguably high risk, low reward, with the implication that the lending teams (and potentially auditors) were not aware of the complexity/risk of the sector.

Could these collapses have been avoided if banks had been more stringent in counterparty due diligence, or been better able to price the risk associated with it?

Singapore is set to experience the double whammy of a potential expansion of the MFM regime to gas oil supplies on 1 July 2019 followed six months later by the additional capital demands of IMO 2020. On a global level, bunkering needs finance now more than ever; but Singapore’s issues, in conjunction with high profile incidents such as those surrounding Aegean, suggest that the industry is hardly making itself a desirable target.

While some of the larger players have invested heavily in compliance and financial transparency to meet more stringent banking demands, such investment may not be possible (or desirable) for some of the smaller players.

Hence, more shake-ups seem certain to follow unless new lending practices are put in place or the bunkering industry cleans up its act.

Perhaps cold commercial reality will be the catalyst for this, where regulation has so far failed. TST *assuming not everything is bought and sold on 30 days and allowing for higher cost fuels and some longer-term inventory

INSTEAD OF TRADERS AND SUPPLIERS TAKING SIGNIFICANT HITS, IT WAS THE COMPANY’S BANKS THAT SHOULDERED THE BURDEN”

BELOW: Singapore’s bunkering sector has struggled with a wave of corporate failures

Tanker Shipping & Trade | February/March 2019

18 | AREA REPORT Singapore

Singapore retains its crown despite regional wobbles Singapore is the undisputed centre of Asian tanker shipping and it seems likely to remain so, despite the impact of the US-China trade wars

I

Ralph Leszczynski (Banchero Costa): In 2020, 90% of ships will not have scrubbers

t takes more than just location to make a city a global shipping centre. Key factors include administration, contacts, technical prowess and financial clout and Singapore has them all in spades. “Singapore has [all] the fundamentals to be a strong shipping hub; it has the legal and business framework to support shipping operations and from a shipmanagement company perspective it is on the main shipping hub list with Hong Kong, Hamburg and Limassol,” explains V. Ships group managing director Franck Kayser.

“V.Ships sees Singapore as a very important location and we are working hard to optimise our activities and working to develop into a centre of excellence for tankers,” he says. “This requires investing in experienced tanker people for our operations team and investing in the education of technical staff and seafarers.”

From a regional perspective Banchero Costa’s global head of research Ralph Leszczynski says that the trade war between the US and China will affect the tanker market “only to a limited extent”. He continues: “The US is a growing oil exporter, but it still accounts for no more than 5% of global exports. A significant proportion of US oil exports goes to Asia, but that is mostly to Japan, South Korea, and India, so there is

little direct impact in Asia.”

“The US was never a significant exporter of oil to China, nor was it ever a significant importer of oil products from China,” he says.

“Where the trade war is biting is through the negative effects it is having on the Chinese economy - and one might argue, also the negative effects it has on the US economy. Business confidence and investment in China is falling due, to all the uncertainty about its economy, and this influences oil demand as well.”

Turning to the 2020 sulphur cap, Mr Leszczynski has this warning: “When it comes to fuel availability, I am more concerned about the availability of high sulphur fuel oil than about low sulphur compliant fuels. The reality in 2020 will be that 90% of trading ships will not have scrubbers and will have to rely on compliant fuels. Whilst large hubs like Singapore will have every type of fuel available (even LNG), in small ports bunker suppliers may not have separate tanks and bunker barges to stock a fuel that only 10% of the fleet require.”

So while the lack of impact in Asia from the trade wars is a comfort, the possible impact from 2020 remains a worry for those involved in Singapore’s bunker industry. TST

WHERE THE TRADE WAR IS BITING IS THROUGH THE NEGATIVE EFFECTS IT IS HAVING ON THE CHINESE ECONOMY - AND ONE MIGHT ARGUE, THE NEGATIVE EFFECTS IT HAS ON THE US ECONOMY”

Tanker Shipping & Trade | February/March 2019

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Timothy Cosulich INTERVIEW | 21

Knowing the unknowns: an interview with Fratelli Cosulich’s Timothy Cosulich Fratelli Cosulich’s Timothy Cosulich discusses fuels and why his thoughts on compliance with the sulphur cap have changed over the last 12 months

Timothy Cosulich (Fratelli Cosulich): Now anticipating a high level of IMO 2020 compliance

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T

imothy Cosulich is chief executive and board member of Fratelli Cosulich, a shipping company that dates back to 1857. The group’s activities span the gamut of shipping operations, including: liner, tramp, yacht and cruise agency, ship management, freight forwarding and NVOCC, travel agency, trading, shipowning, custom broking, IT and real estate. The group has 15 offices worldwide and is well-known in Singapore for its bunkering activities. Mr Cosulich is making two appearances at the Asian Tanker Conference: he will be discussing concerns and preparations for the commercial challenges involved in meeting the 2020 sulphur cap regulations; and will also be presenting on how to counter problems with contaminated fuel.

We asked Mr Cosulich how he sees the current state of the tanker market and whether he feels a recovery is likely in the near term?

“I think 2020 will bring some improvement to the tanker market; 2018 was a very bad year, and 2019 is as yet uncertain, but the second half of the year will see more product being sought, bringing a higher demand for tankers and for storage.”

Discussing the current spate of tit-for-tat trade wars, Mr Cosulich notes the impact on Asia has so far been very limited, in terms of tankers and shipping in general. He says: “There is a lot of diplomatic activity [taking place] and in the tankers sector there is the situation with Iran, but this only impacts those dealing in US dollars. China and India companies have a different perspective and are still actively trading with Iran.”

As a bunker supplier, Fratelli Cosulich, is highly involved in regulatory compliance in Asia. In 2018, Mr Cosulich was of the opinion non-compliance with the 2020 sulphur cap

would be significant, but a year on, says “I have changed my mind and now I expect the majority [of operators] will comply.”

This change of heart is based on conversations with industry practitioners, but he warns that due to the fragmented nature of the industry, there may be smaller players who fail to comply.

On the subject of fuel, Mr Cosulich says that availability and type post 2020 remain unknowns, a situation he says is down to the oil majors. He says that while in today’s environment it is possible to mix one heavy fuel with another, post-2020 the oil majors may be supplying fuels of different type, making interoperability all but impossible and resulting in fuel management operations all but disappearing from smaller ports, which generally do not have enough storage or barges to offer a wide range of fuels.

The situation with the bunker barge fleet also remains blurred. “The issue is cost and timing,” explains Mr Cosulich. “The barge operator must wait until the refineries and the fuel suppliers decide what product will be available, but they must also wait to see what product the customers will want to buy.”

Scrubbers, says Mr Cosulich, are an unknown when it comes to payback, “It could be five years, it could be shorter – it all depends on the price of the fuel.”

That said, he feels charterers may still favour scrubbers: “For charterers there is less uncertainty if a vessel is fitted with a scrubber, but we have not seen a clear trend that [suggests] charterers prefer scrubbers or not.”

The Asian Tanker Conference is being held on the 26 and 27 of February at the Marina Bay Sands Expo and Convention Centre in Singapore. For more information please visit: www.asiantankerconference.com/ participation. TST

Tanker Shipping & Trade | February/March 2019

22 | INTERVIEW Mangish Kakodkar

A trader’s eye helps spot opportunities Former trader and founding director of AG Shipping & Energy, Mangish Kakodkar discusses the opportunities that the 2020 sulphur cap offers, ahead of the Asian Tanker Conference

M

angish Kakodkar, global head of AG Shipping & Energy, will be participating in the much-anticipated panel discussion on the tanker market outlook at this year’s Asian Tanker Conference, held in Singapore on 26-27 February.

Mr Kakodkar has been based in Singapore for a number of years, but does not regard himself as a traditional shipowner. His company, which he says “has humble beginnings”, is an industrial gas trading operation serving local companies, also with operations in industrial chemical trading and supply, backed by a logistics operation.

Mr Kakodkar has a background in trading, experience which he feels has helped him spot some of the hidden opportunities lurking in the details of the IMO sulphur cap. In early 2018, with the backing of an unnamed (but widely reported) US equity group, AG Shipping & Energy purchased the 2006-built MR2 product tanker AG Mars (ex-Phoenix) for a reported US$15M. At the time, Mr Kakodkar told Tanker Shipping & Trade that: “Asset prices have [bottomed out] in the current cycle [and] that makes it favourable to enter this sector. Furthermore, we feel the Sulphur Cap 2020 will be disruptive for the shipping industry, with only 2% of the world fleet scrubber-ready.”

Since then, AG Shipping & Energy has taken another tanker into the fleet, the 2013-built LR1 tanker Crescent Glory,

Tanker Shipping & Trade | February/March 2019

Mangish Kakodkar (AG Shipping & Energy): The sentiment in the Asian tanker market is positive at the moment

now renamed AG Neptune. Both tankers are backed by time charters to major oil companies, and a third tanker may be on the way.

Discussing the current tanker market and the prospects of a near-term recovery, Mr Kakodkar said: “The tanker market is very interestingly poised, with most owners having positive sentiments post 2020. This has also led to asset prices firming up across the sector and rates post 2020 being fixed at a premium.”

He went on to explain that MR prices troughed in 2017, which was his entry point. He now sees the regulatory upheaval associated with the sulphur cap as providing a fresh dynamic in the tanker market and believes positive sentiment will continue to build from the second half of 2019 into 2020.

As regards the supply of 0.5% sulphur marine fuel, Mr Kakodkar expects the impact on major ports like Singapore to be fairly limited. In his opinion, these intuitions will be ready to supply, whatever fuel is required.

On the subject of scrubbers, he feels owners will expect a payback period of 48 months, after which, the price differential will decline. There could be a point where the price differential is so small as to make the impact of the scrubber inconsequential.

However, he noted that scrubbers are preferred by the larger consumers of marine fuel oil, such as charterers.

The Asian Tanker Conference is being held on February 26 and 27 at the Marina Bay Sands Expo and Convention Centre, located in the heart of Singapore’s city centre. The conference offers multiple opportunities to engage with an audience of peers, colleagues, clients, customers and industry experts. For more information, please visit: www.asiantankerconference.com/ participation. TST

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LEGAL BRIEFING | 25

Phosphoric acid damage: the dangers and legal protection HFW associate Tom Morgan explains how chemical tanker operators can protect their interests in the face of damage to stainless-steel tanks from the carriage of wet process phosphoric acid

W

et process phosphoric acid (WPA) is a key component in the worldwide fertiliser industry. It is a complex mixture of phosphoric acid, corrosive compounds, such as chloride and fluoride, and other impurities such as metal oxides.

During 2017/2018, a number of chemical tanker operators faced significant damage to stainless-steel cargo tanks as a result of shipping WPA cargoes of North African origin, bound for discharge ports in India. Cargoes were shown to contain corrosive compounds above the agreed specification for carriage. Repairs and delay resulted in losses in the millions of dollars and legal proceedings.

From the shippers' point of view, the aim is to manufacture WPA to reach the P205 acid strength required by purchasers.

But this creates the risk that insufficient regard is given to the concentration and impact of individual corrosive accelerators, such as fluoride and chloride, which can significantly impact stainlesssteel tanks – but are of limited importance to the shippers and receivers.

The WPA cargo is loaded and blended in sub-batches to reach the required P205 strength. Throughout the process, tanker operators have noted a failure to monitor fluoride/ chloride levels in the WPA. Moreover, sampling and testing during the process is only ever as good as the personnel, equipment and accreditation being used.

WPA also has a propensity to be inhomogeneous in nature; corrosive

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Tom Morgan (HFW): Operators should take immediate steps to protect their interests

accelerators can vary significantly between different batches. Pockets of high concentrations of fluorides/ chlorides can corrode tanks beyond that expected by a declared homogenous specification, even if the WPA would be harmless once fully comingled. During fixture negotiations, operators should check the following: • the accreditation of the laboratory; • that chloride/fluoride limits are within the tank manufacturer's safe limits; • that the loading temperature is low; • levels of corrosive inhibitors, such as iron/aluminium oxide, are increased; • request details of the chemical composition of the WPA as it is to be loaded from the shore tanks.

However, some of these options may be operationally impossible, commercially prohibitive and/or there may be reliability

concerns about the data provided.

Therefore, independent, verifiable sampling of the WPA batches loaded, complete with full chain-of-custody evidence, is invaluable. Options include: • Contemporaneous sampling – taking composite and individual tank samples on loading.

• Sampling by an independent surveyor – trusted independent surveyors should be retained, ideally on a joint basis. Care should be taken to record seal numbers and a clear chain of custody from the vessel to the laboratory. This will protect operators from criticism by opponents as to the provenance of samples.

• Joint inspection of damage – shippers, receivers and charterers should all be invited to attend joint damage surveys.

This puts opponents on notice of the damage, while a party's refusal to attend will prejudice its ability to challenge the scope of the repairs.

• Joint and prompt testing - shippers, receivers and charterers should all be invited to witness sample testing. A party's refusal to attend is likely to prejudice its ability to challenge the provenance of samples. Also, certain elements (including fluorides) can degrade over time. It therefore suits an operator to undertake tests as soon as practicable.

Should damage to cargo tanks arise, operators should take immediate steps to protect their interests, particularly in relation to the sampling process.

Crucially, future legal disputes will turn on the reliability and weight of each party's evidence. TST

Tanker Shipping & Trade | February/March 2019

26 | CHEMICAL TANKERS

Consolidation and digitalisation in the deep-sea chemical tanker market Richardson Lawrie Associates Ltd gives its assessment of the deep-sea chemical tanker market and how digitalisation will impact existing processes

T

he global deep-sea chemical tanker trade has proven to be robust, despite the trade wars that have sprung up between two of the main players in the industry, China and the USA. The deep-sea chemical tanker trade is estimated to have grown to 121M tonnes in 2018,

at a year-on-year growth rate of 2.9%; this follows a growth rate of 2.8% in 2017. Nonetheless, there was a decline in growth on the individual trade lane between the US and China from April 2018 onwards.

On the fleet supply side, the boom in orders in 2013 and 2014 fed into a

high level of deliveries in 2015, 2016 and beyond. This tailed off in 2018 and ordering last year was on average just 46% of the high levels in 2013 and 2014. The influx of new tonnage led to a significant level of scrapping and removals from the chemical tanker fleet in 2017. The figures for 2018 indicate that scrapping was running at around 132,000 dwt and removals of 53,000 dwt.

This has left a relatively modern deep-sea chemical carrier fleet: 74% of vessels are less than 15 years old and only 12% are older than 20 years old.

A large proportion of those are in the hands of the global chemical carrier

Demolitions Similar; Sharp Drop in Removals 400 450

Chemical Tankers Removed

300

Chemical Tankers Scrapped

000Dwt

250 200 150 100 50 0

2012

2013

2014

2015

2016

2017

2018 to Nov

Total Removals in 2017: 485,000 dwt: 139,000 dwt; Removals: 346,000 dwt Total Removals in 2018 (to Nov): 185,000 dwt: Demolitions: 132,000 dwt; Removals: 53,000 dwt

The global chemical carrier fleet operators traditionally scraps tonnage rather than sell into the second-hand market

Tanker Shipping & Trade | February/March 2019

www.tankershipping.com

CHEMICAL TANKERS | 27

Analysing the chemical tanker trades is a never an easy task

fleet operators, which traditionally scrap tonnage rather than sell into the second-hand market, where the tonnage may become competitive with a much lower capital cost base.

It is apparent that the orderbook as a percentage of the fleet has been declining in recent years, but after a rise in the third quarter last year the latest figures show a continuation of the falling trend.

That said, the deep-sea chemical carrier fleet surplus remained high, at over 20% of demand on a deadweight basis in 2017, with a similar estimate for 2018.

One area for concern is in the less than 10,000 dwt sector, where the current stainless steel and nonstainless-steel fleet is dominated by around 2,000 vessels built between 2005 and 2009. Over the next decade this portion of the fleet will enter the realm of scrapping candidates, and/or may be less attractive to charterers. The current orderbook has less than 200 replacements scheduled to enter the fleet in 2019 and just over 100 in 2020.

On the earnings side, the petroleum products tanker and easichem chemical carrier spot markets largely experienced declines in 2018, having been constrained by moderate demand

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growth, rising vessel supply, flat freight rates and increasing bunker costs.

However, there were signs of an upturn for both markets in Q4 2018, with rising freight rates and declining bunker costs.

Spot rates for stainless steel cargoes have followed a similar pattern, apart from the Continent-Far East trade lane which did not see an upturn in the fourth quarter of 2018. One everpresent factor in the chemical carrier trades is the ability of petroleum product tankers to swing into the easichem side. In the spot chemicals business the clean petroleum product tankers entering the trade peaked in 2016 and have since accounted for a declining proportion of the chemical carrier trade.

At the 2016 Tanker Shipping & Trade Conference and Awards, Charles Lawrie opined that growth in developing regions, especially China, might lead to an increase in Chinese ownership and operation of chemical tankers. At the time, around 2% of the fleet was in Chinese hands. There was a spurt in ownership, but this seems to have stabilised at around 4%, according to the latest figures.

One area of the chemical carrier trades that has seen substantial growth is that of consolidation among owners and operators:

• Jo Tankers: chemical operations sold to Stolt Nielsen Limited in 2016.

• Odfjell SE and Sinochem: in November 2017 agreed to form and manage a fully stainless-steel pool of eight chemical tankers of 40,900 dwt, each with 30 tanks. Four vessels will be owned by Sinochem Shipping and the other four will be on long-term bareboat charters, which include purchase options at the end of the charter period.

• Knutsen OAS: sold its remaining 19,100 dwt chemical tanker (34 stainless-steel tanks) in September 2018.

Now has four chemical tankers left, each of 16,600 dwt (epoxy-coated tanks) chartered out to oil companies.

• GSB Tankers: launched in October 2018 a merger between Golden-Agri Stena and Bay Crest Management. Will initially start with a pool of 18 stainlesssteel vessels of around 20,000 dwt.

• Odfjell SE: Odfjell Terminals Rotterdam was sold for US$100M to cut debt. The deal was finalised in September 2018. This follows the sale in December 2017 in which Odfjell Terminals BV entered into an agreement with a fund managed

by Macquarie Infrastructure and Real Assets (MIRA) to sell its 50% ownership in Oiltanking Odfjell Terminal Singapore Pte Ltd for a price of around US$300M. • MOL Chemical Tankers and SEA-Investis to invest EUR400M in the construction of multi-modal tank storage terminal in the port of Antwerp.

• Other developments include: MOL Chemical Tankers acquiring 100% ownership of Nordic Tankers from its sole private equity owner Triton, with full transfer in February 2019; and Eastern Pacific Shipping taking over the chemical fleet of BW Chemical Tankers.

Consolidation brings critical mass

Charles Lawrie, a specialist in economic and market analysis and forecasting, noted the following main factors driving consolidation – whether through mergers, acquisitions, or the formation of pools. No two mergers

Tanker Shipping & Trade | February/March 2019

28 | CHEMICAL TANKERS

are the same, but a requirement to lower expenses and overheads through increasing the economies of scale is a strong driver, although increasing utilisation levels is also a prime motivation. A larger group increases the presence in the marketplace and provides the ‘critical mass’ required to win Contracts of Affreightment (CoAs).

The consolidation process has mainly benefitted the middleranking companies, which have bulked up. Apart from the top six independent operators, there are now five operators that control in excess of 2% of the fleet. This has slightly weakened the position of the top six operators, which in 2012 controlled 45% of the fleet; in 2018 this dropped to 42%.

Another driver of consolidation is to provide private equity with an exit strategy. However, a larger group requires a change in information flow and control, and maritime digitalisation is a key driver in giving management control from the shipto-boardroom level. The influence on a highly technical fleet such as the chemical carriers is profound. Ships are becoming increasingly reliant on software-based control systems connected to shore through high-

MARITIME DIGITALISATION IS A KEY DRIVER IN GIVING MANAGEMENT CONTROL FROM THE SHIP-TO-BOARDROOM LEVEL

Charles Lawrie (RLA): Consolidation is a key factor in the chemical tanker trades

speed satellite links. Ship managers can monitor fleet utilisation, routeing, trim, fuel consumption, emissions management and asset integrity management, and intervene with corrective actions via the crew.

This gives the stakeholders in the process a better view of the logistics behind ship operations and a better understanding of the decision-making process. In Mr Lawrie’s opinion, the system behind maritime digitalisation needs to be proven and robust.

Charterers need to be engaged in the process, especially when it comes to the impact on charter parties/ documentation. A key aim for owners and operators will be to make the handling of demurrage claims more efficient and remove the long delays in payments that have become the norm in the current process. TST

2018: A year of consolidation Some of the mergers that took place in 2018 had their origins in events that took place years before, such as MOL Chemical Tankers Pte Ltd., (MOLCT) purchase of Nordic Tankers, that ended a line of ownership that can be traced back to Wonsild & Son (established 1962).

The sale brought together two companies with similar business models. Both companies operate a relatively small, owned fleet with a high proportion of chartered-in tonnage serving a base cargo developed from long-term contracts of affreightment.

The fleets are similar, too. The Nordic tanker fleet comprises of two 14,700 dwt chemical tankers and three approximately 20,000 dwt owned chemical tankers (all built at Fukuoka, Japan) and a further 15 chemical tankers operated under various charter arrangements serving the trans-Atlantic and Latin America trades.

Tanker Shipping & Trade | February/March 2019

The combined owned MOLCT/MOLNT fleet of 35 chemical carriers makes the company the 11th largest chemical tanker fleet, based on VesselsValue data – excluding vessels on charter.

The sale was completed in February 2019 and thereafter Nordic Tankers continues to trade from Copenhagen and offices in Houston, Stamford and Bogota under the new name MOL Nordic Tankers A/S (MOLNT).

Just days after the completion of the MOLNT deal came the announcement that Eastern Pacific Shipping, a diverse tanker operator with eight stainless steel tank 20,000 dwt chemical tankers managed by Ace Quantum Chemical Tankers, had completed the purchase of 13 similar chemical tankers from BW Group. The sale was first rumoured in December 2018 and confirmed in early 2019. The expanded fleet is reported to be operating in the Ace Quantum Chemical Tankers pool.

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30 | GREEN TANKERS

Options aplenty as ballast water systems come of age The US Coast Guard granted eight type-approvals for ballast water systems in 2018, and new technology may yet turn the industry on its head

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T

here are now 15 ballast water treatment systems (BWMS) type-approved by the US Coast Guard (USCG), the de facto standard by which BWMS are judged - though this was never the intention of the USCG. The latest BWMS to achieve type-approval was De Nora Balpure. De Nora was the ninth manufacturer to apply for USCG type-approval and according to general manager Dr Stelios Kyriacou: “De Nora spent a long time working towards this type-approval and we are delighted that our certification by the USCG has now been granted. Our team has worked hard to ensure owners and operators can partner with De Nora for their ballast water treatment needs in full confidence that we will deliver safe and reliable ballast water compliance for the lifetime of their ship.”

De Nora claims to be the originator and patent holder of the electrochlorination disinfection of ballast water via slipstream method, whereby a small pipe attached to the main ballast line siphons off ballast water through the BWMS. According to De Nora’s proprietary system design, only 0.5% to 1% of the seawater flow entering the ballast line needs to be channelled into the electrochemical unit.

The company says this offers an effective solution for ships with large ballast tanks and high pumping rates, particularly large tankers, bulkers, container ships and LNG carriers, voiding the requirement to store hypochlorite onboard, achieving increased efficiency and avoiding waste.

Techcross become the first South Korean manufacturer to obtain USCG type-approval, this time for its ElectroCleen System (ECS). Approval was granted on 5 June 2018, more than seven months after the company submitted its application on 31 October 2017. Techcross director of sales and promotion Jay Lee acknowledged that the approval

Tanker Shipping & Trade | February/March 2019

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GREEN TANKERS | 31

process “took a little longer than we expected” but suggested that this “might be due to the USCG scrutinising the first application tested by Korea Register of Shipping.”

Samsung has also received USCG type-approval for its Puimar filtration and electrolysis system. In June 2018, BIOUV received type-approval for its BIO-SEA B ultraviolet light-based BWMS and later in the year, at SMM in Hamburg, BIO-UV announced a new sales partnership and zero holding hours, an important principle for vessels that spend relatively little time in port, such as short-sea tankers.

Elsewhere, the Wärtsilä Aquarius electro-chlorination BWMS utilises filtration and electro-chlorination technology, while maintaining a high degree of safety, operability and reliability. It ensures compliance with regulations, even with varying levels of water quality, while safety has been a fundamental consideration in the design, according to the company, with hazard analyses employed to eliminate installation and operational risks. Wärtsilä also offers a BWMS using filtration and ultra-violet irradiation, which is undergoing type-approval.

Another BWMS to win type-approval is the Hyundai Heavy Industries HiBallast unit, which is a filtration and electrolysis system with a capacity of 75-10,000 m3/hour.

Chinese manufacturer Headway has also won USCG typeapproval for its OceanGuard BWMS. Shipowners named by Headway as having its BWMS units in their vessels include Gener8 Maritime, Carnival Cruises, Chemical Transportation Group and Tropical Shipping. In October, Headway announced orders for 105 BWMS from Genco Shipping and Eagle Bulk Shipping.

The first Japanese manufacturer to win USCG typeapproval was JFE Engineering Corp in November 2018 for its BallastAce system. JFE has been working with independent US test laboratory NSF International since 2014 and is planning shipboard tests with Canada’s Fednav. BallastAce combines three functions: filtration, chemical treatment and venturi tubes, which are designed to separate bacteria from mud and sand to enhance the disinfection effect of the chemical agent.

Aligning standards

Companies that have won USCG type-approval have a marketing advantage over the non-approved systems, but a recent change in US law will bring USCG standards in line with those of IMO. Following a bipartisan agreement on language, the USCG Authorization Act with the attached Vessel Incidental Discharge Act (VIDA) was passed by the US Senate at the end of 2018.

The implications of VIDA are many but it essentially brings USCG type-approval methodologies in line with those of IMO. This includes: • VIDA contains language that allows for organisms that can no longer reproduce after ballast water treatment to no longer be considered ‘living’. In other words, dead now also means unable to reproduce.

• Under VIDA the USCG is required to provide details on

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Dr Stelios Kyriacou (De Nora): Design means just 0.5% to 1% of the seawater flow entering the ballast line needs to be channelled into the electrochemical unit

how it will test for reproduction in grow-out organisms.

• The USCG must also consider the most probable number (MPN) methodologies for determining the number of organisms in treated ballast water. This reverses an earlier USCG ruling insisting on the alternate ‘vital stain’ method.

The change in language and the passage of VIDA through the Senate is a long-term boost to the whole of the ballast water treatment industry, as it opens the door to a wider range of treatment systems from different manufacturers.

One of those is Trojan Marinex, whose spokeperson, commenting on VIDA, said: "We are very encouraged with the US Senate's passage of the Bill and look forward to the US House of Representative's passage also. The Bill unequivocally requires the USCG to adopt a reproductive method based on best available science."

The latest company to enter the BWMS arena is BOS, with its Natural Ballast approach. This is a truly disruptive approach in that Natural Ballast does not aim to destroy species in ballast water, nor render them unable to reproduce.

Chief executive Jerry Ng would not reveal, for commercial reasons, exactly how the system worked, but it is believed to utilise a real-time scanner that measures the size of the species in the ballast water intake.

Those batches of water that contain species too large for D2 standard are diverted back overboard or into another ballast water tank. The system uses artificial intelligence and high-speed processors to record the location of the water and as the vessel sails, the BOS Natural Ballast system constantly sorts through the ballast water, bringing in deep-ocean water as required to meet the necessarily level of compliance.

A main concern of the environmental lobby as regards most BWMS is that they necessitate high power requirements, which increases fuel consumption and thus emissions during operations.

According to Mr Ng, the BOS system has a small in-vessel footprint, and only requires a power feed for a small pump, giving it a potentially significant commercial advantage. TST

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32 | RUNNING HEAD sub

There is considerable drive to develop tank cleaning and inspection methods that minimise man-entry (credit: US Air Force)

Tank cleaning made safer and greener

T

he risks involved in tank cleaning were brought into stark focus September 2018, when crew members on board chemical tanker Key Fighter died tragically following a tankcleaning operation.

In the early hours of Saturday 1 September 2018, two crew members were found unconscious on board the Maltese-flagged tanker, owned by Sea Tank Chartering and managed by

Tanker Shipping & Trade | February/March 2019

Drone technology may be the answer to the question of how to improve safety in the tank cleaning process, while wash-water analysis could improve shipping’s environmental credentials

Fjord Shipping. An investigation later revealed the crew members had been exposed to hydrogen sulphide gas in an empty cargo tank, where they had been performing tank cleaning duties.

Other crew members attempted first aid and a rescue helicopter was called which took the two men to a hospital in Ă…lesund. One of the crew, a Spanish national in his 70s, died shortly after arriving at the hospital, while the other crew member, a Philippine national in

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TANK CLEANING | 33

CONFINED SPACE ENTRY HAS BECOME A 'ROUTINE' OPERATION ON BOARD CHEMICAL TANKERS - THIS IS FUNDAMENTALLY WRONG”

his 40s, succumbed on the morning of Sunday 2 September.

The vessel berthed in Måløy, where authorities investigated the vessel and did not find any technical defects; it then continued to Erith, England. Both crew members were married with children and Fjord assisted the families in traveling to Ålesund.

A spokesman for Fjord Shipping said: “Fjord Shipping wants to express its sincere sympathies with everyone who is affected by this tragic accident…

Fjord Shipping has carried out its own surveys and reviewed existing routines to ensure safety on board…

However, since the formal authorities' investigations have not been completed, it will not be appropriate for the company to answer further questions at this stage.”

Confined space entries, such as those that exist to perform post-tank cleaning inspections, are widely recognised as

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a source of risk, and it is accepted that their use should be kept to a minimum.

Still, such entrances are necessary when carrying out visual or wall-wash inspections of cargo tanks to ensure the efficacy of tank-cleaning operations prior to loading a new cargo.

Unsurprising then that the industry as pushing hard to introduce new, safer methods of cleaning, inspection and analysis that could help save lives.

Unmanned inspections

Drone technology has advanced quickly from quirky novelty to a key component of the industry’s toolbox and tank inspection is an area where drones can make a huge difference. August 2018 saw Scottish survey and inspection specialist Cyberhawk perform a full class inspection across 19 tanks on board an oil tanker in a Singapore shipyard, including 12 cargo oil tanks. US class society ABS was present to ensure the inspection was compliant with its specific ruleset for tankers.

Commenting on the project Cyberhawk technical director Malcolm Connolly said: “Since we conducted the first UAV tank inspection back in 2015, the take up of this solution has become increasingly adopted within the industry.

Guy Johnson (L&I Maritime): “Washwater analysis cannot completely eliminate confined space entry, but it can significantly reduce its frequency”

“These previous inspections, however, have only focused on capturing visual data of approximately 20 to 30 critical areas. To comply with ABS rules for this particular category of class survey, we required closeup coverage of 100% of the tank’s internal frame structure at a resolution equivalent to a person viewing the surface at arm’s length.”

The company previously carried out a proof-of-concept inspection with ConocoPhillips in May 2018, inspecting 19 tanks on Polar Discovery in just 16 days and returning in September the same year to undertake further inspections.

Class society DNV GL has also pioneered the use of drones for carrying out close-up surveys in a number of applications, including tank coating inspections. The first such test survey was carried out aboard an oil tanker in November 2015, and the first production drone survey was carried out aboard chemical tanker Apollo in Bremerhaven, Germany, in June 2016.

Drones offer many advantages over traditional inspection methods - such as cranes/cherry pickers and rafting - both in terms of safety and financial impact. First and foremost, they improve the safety of surveyors and other personnel, as the operator keeps their feet firmly on the ground.

Financial savings are possible due to the shorter time required to prepare for close-up access, while costs associated with rafting, such as filling tanks with water, discharge of polluted water, running time for cargo pumps, are also reduced. A further benefit can be found in the flexibility of survey locations, as no access to shore facilities is required.

Finally, the risk of damage to coatings from the construction of staging inside ship compartments is also eliminated.

DNV GL’s research and development department has recently confirmed that thickness measurements can be carried out using drones, and there are ongoing studies into the potential for drones to operate autonomously and be capable of automatically recognising coating and corrosion patterns.

Looking further ahead, DNV GL

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34 | TANK CLEANING

sees potential for surveys to be carried out entirely remotely, eliminating the need for tank entry altogether.

Advances in technologies, such as virtual and augmented reality, increased connectivity and digital tools - such as those dealing with data analytics - could bring with them a range of benefits. Initially this may require human input, in the form of a crew member being directed around a tank by the surveyor, but this could ultimately lead to drones being used to carry out partial pre-scans prior to the surveyor coming on board, and even further ahead, full 3D mapping of spaces.

DNV GL believes as a consequence, surveys will become more efficient, flexible and safer. Remote survey tools could also mean vessel operations are interrupted less frequently, and data analytics could allow for new insights to be gained, leading to improved safety management.

Inspect wash water, not tank walls

Elsewhere in the tank cleaning sector, Nottinghamshire, UK-based chemical consultancy L & I Maritime’s director Guy Johnson has long maintained that the passing of a wall wash inspection process has no impact on whether a vessel can successfully load cargo.

Indeed, he believes this process may actually put seafarers at risk.

Wall wash analysis involves solvent being splashed onto bulkheads inside the cargo tank, then tested to meet pre-set test specifications. But in a white paper titled Responsible Cargo Tank Cleaning – Washing Water Analysis, Mr Johnson says such inspections are effectively random, due to the impossibility of defining which specific places in a tank should be checked; they are also subjective he says, as “two different inspectors will always see the same cargo tank with very different eyes.” Therefore, Mr Johnson believes the test is not reproducible,

meaning it has no legal value in the event of cargo contamination claims, unless proof of negligent action on the part of the inspector can be established.

He adds that as only a small amount of the internal area is wall washed, this means the remainder of the tank is an unknown and potentially not clean.

Mr Johnson has outlined several other issues relating to the difficulty in establishing exact measurements of contamination using wall wash inspection, concluding that the method is not capable of providing reassurance that a tank is suitable for loading.

“Passing the wall wash inspection does not provide cargo interests with the one piece of information that they require, and that is a guarantee that the nominated cargo can be loaded without risk of contamination,” he says.

Instead, Mr Johnson sees wash-water analysis as being a safer, more reliable alternative to inspections carried out inside the tank. The wash-water

TANK CLEANING | 35

analysis method uses UV spectroscopy to identify what is being removed from cargo tanks and coatings during the tank cleaning process itself, rather than seeing what is left behind afterward.

Tank cleaning is stopped when no traces of previous cargo can be found in the washing water, as this means continued washing will not be able to make the tank any cleaner.

This method reduces both cleaning time (each sample takes less than one minute to analyse) and the use of cleaning detergents, positively impacting the environment. “For the industry as a whole, the environment wins every time,” says Mr Johnson.

There are also safety benefits to this method. Mr Johnson says that multiple cargo tank entry during tank cleaning operations on board a tanker only occurs to ensure compliance with the pre-loading inspection specifications for the next nominated cargo. Regardless of whether these specifications are for a visual inspection or wall wash, the cargo tanks still have to be entered.

“Every time a cargo tank is inspected, at least one man has to enter a confined space, which is recognised as being one of the most hazardous operations in the entire chemical tanker business.

“This means that confined space entry has become a “routine” operation on board chemical tankers today - this is fundamentally wrong.

“Washing-water analysis cannot completely eliminate confined space entry, but it can significantly reduce its frequency and even saving one confined space entry is a step in the right direction.”

Discussing the response this washwater analysis has met from the industry, Mr Johnson says: “Generally the response has been positive, but it is clear that different cargo interests have different requirements and the reason the wall wash inspection still dominates the business is because commercial interests are in charge; sadly (in my opinion) the value of cargo is still higher than the value of a man, or the value of environmental benefits.”

He continues: “Everyone buys into the

concept of a safer and greener business, but only if it doesn’t cost anything.

“As long as the value of the cargo is higher than the value of the vessel’s crew or the environment, the wall wash inspection will prevail because commercial interests will always demand what they perceive to be the strictest pre-loading inspections.”

Mr Johnson sees vessels as being held responsible for excessive tank cleaning

despite the fact that this can occur as a result of pressures from commercial interests, who mandate methods of inspection such as wall wash analysis.

He suggests a surcharge or “green tax” that can go toward the costs of cleaning up the ocean. He says: “If commercial interests were partly or equally liable, maybe there would be more willingness to adopt safer and more environmentally aware processes.” TST

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36 | GAS DETECTION

Gas detection: technology drives safety gains New technology is making it easier to detect shipboard gas leaks, reducing the risk of fire and improving safety for seafarers

I

n November 2018, residents of Long Beach reported headaches and nausea and a strong petroleum smell, which local authorities managed to trace to a crude oil tanker berthed in the city’s harbour.

Inspectors from the South Coast Air Quality Management District (SCAQMD) issued a Notice of Violation for fugitive emissions to GAS North America, the shipping agent responsible for the Hong Kong-flagged Nave Photon VLCC. Using portable hydrocarbon detection devices and gasimaging cameras, the inspectors found seven out of 10

inspected pressure release devices were leaking hydrocarbon vapours in excess of limits set out by the agency.

Gas detection technology needs to be current, fit-forpurpose and well maintained; the consequences of a lapse in any of these three criteria could be costly or potentially lethal. IMO brought in Regulation XI-1/7 in 2016, requiring SOLAS-applicable vessels to carry portable gas detectors to monitor enclosed spaces, stating: “As a minimum, these shall be capable of measuring concentrations of oxygen, flammable gases or vapours, hydrogen sulphide and carbon monoxide.”

Infrared cameras such as the GF77 allow detection of gas leaks from a distance (credit: FLIR)

Tanker Shipping & Trade | February/March 2019

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GAS DETECTION | 37

It is essential that owners keep up with the latest measures and technology, discussed below, to ensure the safety of crew and the general population alike.

Mesh networks detect leaks

Straume, Norway-based Scandinavian Reach Technologies (Scanreach) has developed a connectivity solution specifically tailored for the challenges of the maritime environment.

ScanReach’s In:Range system was developed to answer the question “Why can’t we wirelessly track people inside a vessel?”, says chief executive Arild Saele.

The In:Range system is based around wearable sensors in a mesh network, eliminating the need for extensive cabling networks traditionally used for data transfer in large, complex steel environments like ships.

As well as providing accurate location data, ScanReach’s wearables can incorporate gas detectors and temperature sensors, providing information about the environment in which they find themselves.

ScanReach also offers the In:Connect system, a network comprising interior and exterior sensors and a central data processing unit. The sensors can be installed on board existing equipment and can link to third-party sensors.

Features such as temperature sensors and gas detectors mean that in the event of an incident such as a gas leak or fire, information can be accessed about where the most dangerous areas are. Information can be streamed directly to the vessel’s bridge, as well as onshore operations centres or other parties.

ScanReach’s offerings can be integrated with digital platforms Kognifai from Kongsberg and Veracity from DNV GL, as well as customers’ own cloud computing systems.

Successful pilots of the technology have taken place on a Norwegian coast guard vessel, the large trawler Atlantic Star, and offshore support vessel North Sea Giant. The technology is set to launch at Nor Shipping in June this year.

Long-range gas detection

Most gases have infrared absorption characteristics that mean they can be targeted with cameras using infrared thermography.

Unlike laser detectors, or so-called ‘sniffers’, this technology does not require the operator to be in close proximity to the leak, increasing safety and making it easier to monitor for leaks across a broader area.

Wilsonville, Oregon-based FLIR Systems has recently announced the launch of its first uncooled methane-gas detection camera, the GF77 Gas Find IR. The handheld camera is designed to offer a roughly half

Long Beach harbour, where residents’ complaints of a strong smell, headaches and nausea were traced to fugitive emissions from a VLCC (credit: Ron Reiring/flickr)

price alternative to cooled gas inspection thermal cameras and is based on the FLIR T-Series camera platform.

Spectral targeting improves visualisation and reduces false readings from gases that absorb in other wavelengths, says the company. The GF77 also incorporates laser-assisted autofocus to aid in targeting leaks, and a one-touch contrast improvement to make gases stand out more clearly.

FLIR Systems’ president and chief executive Jim Cannon says: “The FLIR GF77 Gas Find IR gas detection camera is built around an uncooled, longwave infrared detector, which costs less to produce than our higher performance, cooled cameras.”

CO2 leaks may hinder fire systems

ABS has called on shipowners to conduct risk assessments of fixed fire systems, following multiple instances of CO2 cylinders in such systems being found to be empty. The class society has been joined in such calls by the Italian Coastguard - which sent a letter to major shipowners supporting ABS’ assessment and calling for risk assessments to be undertaken - and Italy’s Ministry of Infrastructure and Transport, which has called for: “A specific and documented risk assessment, aimed at outlining any necessary measures to protect workers' safety and health.”

Traditionally, inspection of CO2 cylinders in such systems would involve them being dismantled, weighed,

GAS DETECTION TECHNOLOGY NEEDS TO BE CURRENT, FIT-FOR-PURPOSE AND WELL MAINTAINED; THE CONSEQUENCES OF A LAPSE IN ANY OF THESE THREE CRITERIA COULD BE COSTLY OR POTENTIALLY LETHAL”

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38 | GAS DETECTION

and reinstalled – a difficult operation that requires two people and takes approximately 15 minutes. Another option is the use of pressure gauges: it is assumed that when some of the contents of a pressurised container are discharged, the internal pressure will decrease. But this internal pressure is dependent on the temperature of the agent, which can be difficult to account for, thereby potential giving inaccurate results.

Ultrasound-based measuring technology, such as the Portalevel system offered by UK-based Coltraco Ultrasonics, is an alternative to these traditional methods.

Rather than measuring pressure, it measures the liquid level. Coltraco also offers a PortaSteele product range that can concert liquid levels obtained by the Portalevel system into an exact fill-weight for the agent inside a cylinder, with built-in datalogging capability. The company says this offers time and labour savings over traditional methods, as it does not require the unit to be deactivated, disassembled and then reassembled whenever weighing is carried out. Requiring just one person to operate, it can take as little as 30 seconds per cylinder to identify a leak, according to the company.

Integrated applications

Cambridgeshire, UK-based Ion Science specialises in photoionisation detection (PID) technology. Late last year it released the Sensor Development Kit, which integrates the company’s MiniPID sensors into existing products across a range of applications.

Utilising patented Fence Electrode Technology, Ion Science’s MiniPID 2 sensors are resistant to humidity and contamination from moisture, dust and aerosols, making them suitable for the detection of volatile organic compounds (VOCs) across a range of environments, says the company.

The MiniPID 2 is available in the following models, suitable for detection at varying ranges: 0-3 parts per million (ppm);

Arild Saele (ScanReach): Facilitating the wireless tracking of crew inside a vessel

Tanker Shipping & Trade | February/March 2019

0-40 ppm, 0-100 ppm with a 10.0 electron value output; 0-100 ppm with an 11.7 eV output; and 0-6,000 ppm. All of the MiniPID sensors are available with a choice of three different safety ratings of varying voltage, with a trade-off between longer lamp lifetimes at lower voltages and increased sensitivity at higher voltages.

Developed in response to the increasing demand for measurement of VOCs, the SDK is intended to allow original equipment manufacturers (OEM) to integrate the MiniPID sensor range into existing systems at a low cost.

The small size of the SDK and the number of available interfaces means MiniPID sensors can be easily integrated into existing systems and applications that require PID detectors as a low-cost alternative to fixed and portable gas detection systems.

Ion Science managing director Duncan Johns explained: “For OEMs and systems integrators, the Ion Science Sensor Development Kit is the simplest, quickest and most flexible way to incorporate VOC monitoring into new and existing gas detection applications.”

‘Bump It’ campaign

Since April 2018, the British Safety Industry Federation (BSIF) has been running a “Bump It” campaign, to increase awareness of the need to ‘bump test’ gas monitors whenever they are used.

Existing recommendations state gas detectors undergo servicing and a full calibration at least once a year, but BSIF makes the point that only establishes that the sensor was working correctly at that particular time; through day-today use there are many reasons why the sensor could lose responsiveness or develop problems between tests.

A bump test involves exposing the instrument to a known concentration of test gases, ensuring that sensors detect the gas and that readings are accurate. No calibration adjustments are required unless readings taken in such a test are found to be inaccurate. Such tests are estimated to take between 15-20 seconds per instrument, BSIF says, and the costs of sample gases used for this kind of testing are negligible. Failure to test and document the performance of such monitors however could leave employers exposed to liability in the event of an accident and increase the risk of accidents. It is therefore recommended that such tests are carried out and their results recorded before and after each time a detector used.

Gas detector supplier GfG Gas Detection UK’s sales manager Julian Butler points out that most gas detector manufacturers now offer docking stations that not only automatically calibrate instruments, but also conduct bump tests and store calibration records. The price of such equipment is also falling: “In the past, it might take a large quantity of instruments to justify the expense of investing in a docking station,” said Mr Butler, “but as prices continue to drop, customers with only a few instruments are finding that investing in an automatic calibration station makes very good sense.” TST

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CARGO PUMPS | 41

Despite the mergers, a good pump remains just that The sector may have experienced considerable M&A activity over the last two years, but the requirements for effective cargo pumps remain the same

Motive-fluid nozzle Converging inlet nozzle Motive fluid

Outlet

Diffuser throat Inlet gas, liquid, or other

M

any of the companies making cargo pumps have been in business for decades. The design and technology changes little and the maturity of the product has seen owners look to divest and move onto other technologies.

In the tanker shipping world, the massive volume of cargo flows from tanker to shore or tanker to tanker have been traditionally handled by centrifugal pumps.

Proponents of screw pumps say their ability to handle a range of viscosities at various speeds make them an equally good, if better candidate for use in large tankers. The advantages of screw pumps are said to be: • Constant flow rates, despite varying conditions • Self-priming and high suction lift • Compact design for convenience • Low pulsation, low noise • Wide product range, especially viscous materials • Can run dry for short periods Another advantage is that screw pumps achieve good line stripping without

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Diverging outlet diffuser

suffering vapour lock if entrained air enters the pump.

Ejectors are another proven technology for stripping lines and tanks. TeamTec chief marketing officer Olaf Evjen Olsen explained that the technology is relatively simple and robust. From the suction inlet, liquid is accelerated from approximately 2m/sec to 15m/sec and it can often contain foreign particles such as sand, rust scales and silt. All of TeamTec’s standard stripping ejectors that have a capacity of above 100 m3/h are made in Ni-Al-Bz, with a Monel nozzle, while smaller ejectors are made in bronze with an AISI 316 nozzle.

Bronze metal ejectors are said to be superior against cavitation and corrosion and in terms of general wear and tear.

TeamTec can also deliver ejectors made entirely in stainless steel, or in super duplex materials for special installations on chemical or other tankers.

US company Blackmer (part of PSG Dover group) has been in business since 1903 and is a proven manufacturer of screw pumps. The

Stripping ejectors: a picture of simplicity

company has developed the S Series Twin Screw models specifically for the demands of ship unloading and product transfer to distant tank farms.

The S series pumps have a compact design composed of two sets of opposed screws that engage during operation to form a sealed cavity with the surrounding pump casing. The pumped liquid is moved axially as the screw shafts turn, allowing the liquid to be steadily and constantly conveyed to the centre of the pump, where the discharge port is located.

Leistritz Pumpen of Germany has been building screw pumps since 1924.

The current range of cargo pumps is of the “if it isn’t broken, don’t fix it variety”. The company offers three screw pump models for liquid cargoes accommodating viscosity from bitumen to diesel. The main features of the L2, L4 and L5 screw pump models are the low noise level and lack of pulsation of the liquid. The pumps are driven by electric motor, connected to a diesel engine or a hydraulic motor.

The pumps are available in a wide

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42 | CARGO PUMPS

range of casings depending on the liquids involved, including cast iron, aluminium or stainless-steel. The screw pumps can be installed on the tank top, submerged, or placed in a safe area via a gas-tight seal.

There is also a special version, the NT model (L2NT, L5NT) for use in submerged casings. The barrel removes the need for a pump room on the deck and provides an extra suction chamber, extending the suction beyond the typical seven to eight metre tank depth. Heating coils can be incorporated into the barrel and the stuffing box for pumping high viscosity liquids like asphalt.

Innovations such as a smaller footprint for the pumping equipment or the lack pf pump room are attractive to some operators, but the centrifugal pump is still the popular choice for a wide range of pumping activity on a tanker.

A typical application is to pump seawater to cool the engine. The seawater cooling system on a ship is controlled by centrifugal pumps that send ambient seawater in a circulating loop into a heat exchanger with the vessel’s freshwater cooling system. The freshwater cooling system cools the engines, generators, other cooling loops and auxiliary equipment that consume significant amounts of energy. Seawater that has taken on heat from fresh water is then pumped back into the ocean as cooler ambient seawater is drawn in.

This continuous operation is vital to the ship’s operation.

Digital proponents

Digitalisation is creeping into most systems and processes, and pump systems have not remained immune to this development. The Colfax Fluid Handling’s CM-1000 series allows seawater cooling system pumps to operate at variable speed for energy savings, while its active valve control (AVC) feature limits the risk of pump cavitation and delivers additional savings by adjusting the duty point for optimal operation. Its condition monitoring and operation monitoring

Tanker Shipping & Trade | February/March 2019

DIGITALISATION IS CREEPING INTO MOST SYSTEMS AND PROCESSES, AND PUMP SYSTEMS HAVE NOT REMAINED IMMUNE TO THIS DEVELOPMENT”

features provide maintenance savings by preventing catastrophic breakdowns and increasing mean time between failures.

Pompe Garbarino S.p.A of Italy has a close relationship with the Fincantieri shipyard and is supplier of centrifugal and positive displacement pumps for vessels under construction in the yard.

The company is also a pump supplier to scrubber manufacturers Wärtsilä and to Alfa Laval.

Alfa Laval purchased Frank Mohn AS and the Framo brand in 2017. This year the Framo subsidiary won a contract worth approximately Skr70M (US$7.8M) to supply a pumping system for a floating production, storage and offloading (FPSO) vessel that will be built in China.

The order includes marine pumping systems for crude oil offloading, slop, produced water, off-spec oil and ballast pump duties.

This is the fourth FPSO pumping system order Framo has reported in recent months: in April, it announced a contract for an FPSO vessel in the North Sea, worth Skr125M, and another contract for an FPSO vessel to be built in China, with a value of Skr70M. In June, a further contract for another North Sea FPSO was announced, worth Skr65M. The second marine pump divestment involved the sale of the fluid handling division of Colfax to Circor International for a reported US$860M. Commenting on the sale,

Colfax president and chief executive officer Matt Trerotola said: "Over the past two years, we drove a step change in the Fluid Handling business and, after thorough review, determined that combining it now with Circor is in the best interests of the business, its associates, and the shareholders of Colfax Corporation."

Circor supplies both centrifugal and screw pump types, but for tanker cargo operations and transfers, it recommends three screw pumps.

The Circor Allweiler (< 5‚300 m3/h) and IMO (up to 54 m3/h) threescrew pumps are rotary‚ self-priming positive displacement pumps. The pumping elements consist of three moving parts: the power rotor (main screw) and two symmetrically opposed idler rotors‚ all operating within close fitting housing bores.

The incoming process fluid is conveyed by the rotating power rotor by means of the cavity formed with the intermeshing idler rotors. These two hydraulically-driven shafts‚ which only make rolling contact with the power rotor‚ regulate the amount of internal slip. From suction to discharge, the fluid is transferred by means of a series of constantly forming and re-forming chambers until it reaches the casing outlet.

Symmetrical pressure loading on the power rotor eliminates the need for radial bearings to absorb radial forces. The idler rotors generate a hydrodynamic film which provides radial support similar to journal bearings. Axial loads on the power rotor and idler rotors‚ created by differential pressure‚ are hydrostatically balanced. By this design arrangement high differential pressures can be managed. To achieve higher flow rates‚ double ended or double suction threescrew pumps can be applied‚ with the flow pattern being the same as a twoscrew pump.

Major acquisitions

Also in 2018, Taiko Holdings of Japan took a further stake in MarFlex Holding, resulting Taiko Holdings

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CARGO PUMPS | 43

becoming the 100% shareholder of MarFlex Holding. As a result of this acquisition, Taiko Holdings has also become the 100% shareholder of Snijders, which has been a part of MarFlex Holding since 1 January 2016.

Taiko is one of the larger pump manufacturers in Japan and a wellknown player in the Far East. Over the last 37 years, MarFlex has built up a worldwide name and brand reputation in the field of electrically-driven deepwell pumps, while Snijders designs and produces automation solutions for the maritime, offshore and dredging sectors.

In early 2019, MarFlex achieved a special milestone when Dutch shipyard and engine supplier Dolderman, active in the inland shipping market, ordered its 400th MarFlex deep-well cargo pump.

MarFlex has been working closely with Dolderman for the last 10 years.

Another big acquisition in this sector in 2018 was the Kongsberg group of Norway agreement to buy RollsRoyce’s commercial marine business for an enterprise value of £500M (US$662M). The purchase included the propulsion, deck machinery, automation and control and smart shipping technology divisions of RollsRoyce’s portfolio. Kongsberg has a presence in the pump market through its link-up with Consultas, which has resulted in a range of products and system solutions in the loading computer arena.

K-Load is Kongsberg’s 3-D system. It utilises a 3-D hydrostatic model of a vessel – providing a full geometric definition – as the basis for the calculation of loading conditions, floating position and stability, and longitudinal strength.

This creates a precise description of the actual loading conditions, dispensing with the need to rely on pre-computed tables, simplifications or assumptions. The result in no dead freight or overload. By utilising the full geometrical definition of the vessel as the basis for the computation, additional applications have been developed to improve load

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ABOVE: Cutaway of the Leistritz L4-type screw pump showing internal components

ANOTHER BIG ACQUISITION IN THIS SECTOR IN 2018 WAS THE KONGSBERG GROUP’S AGREEMENT TO BUY ROLLS-ROYCE’S COMMERCIAL MARINE BUSINESS”

planning and condition handling.

These include applications relating to water ballast distribution, water ballast exchange, damage stability, pumping among other systems. The applications are digital and can be linked together to create a maritime digitalisation environment. The K-Load solution is type-approved by DNV and Lloyd’s Register, ensuring the quality of the product and the calculated results it delivers.

The latest pump company to be divested from its parent is the Aalborg, Denmark-based pump manufacturer Svanehøj Group. It is optimistic about going it alone following its divestment from Wärtsilä, which was announced in October 2018.

Svanehøj was acquired by Copenhagen-based investment house Solix, which has committed to support the deep well and in-line pump specialist by strengthening its sales and servicing arm and investing in new production development.

“Even though we have been very pleased being a part of the Wärtsilä family, we are confident that we will also benefit positively from the transfer to Solix,” says Svanehøj’s sales director Jens Peter Lund. TST

Tanker Shipping & Trade | February/March 2019

44 | TANKER NEWBUILDING

New Suezmax tanker extends Euronav fleet The arrival of the 157,000 dwt Suezmax tanker Cap Corpus Christi into the Euronav fleet in August 2018 marked the end of a series of four tankers built at the Hyundai Samho Heavy Industries shipyard in South Korea

W

ith Cap Corpus Christi, Euronav now has 25 Suezmax tankers in its fleet. The Euronav Suezmax fleet has an average age of 10 years old – in line with the global average age of the fleet. Euronav’s VLCC fleet age is around seven years old, compared to a global fleet age of over 10 years.

The Samho Suezmax quartet of Cap Pembroke, Cap Port Arthur, Cap Quebec and Cap Corpus Christi are all engaged on seven-year timecharters to independent oil refiner Valero at Quebec until 2025.

These long-term charters, along with other fixed-term contracts, provide Euronav as a publicly listed company the benefit of a secure, steady and visible flow of income for around 20% of its fleet. These income streams are reflected in the company’s commitment to a minimum fixed dividend of US$0.12 per share each year and provide a firm base for the rest of the Suezmax fleet, which operates in the more volatile, and occasionally lucrative spot market.

The role of Valero in the new Euronav Suezmax story in an important one. Valero is an independent petroleum refiner and biofuel producer, operating 15 refineries with a global capacity of 3.1M b/d. Euronav has been a partner with Valero since 2005, developing further a relationship which was established by its predecessor company which ordered newbuildings specifically to serve the refinery in Quebec back in 1998.

This relationship continued to grow and in 2016 it was reported that Euronav had ordered two ice-class Suezmax tankers from Hyundai Samho to continue to serve the Valero refinery in Quebec. In 2017, the option for two more Suezmax was exercised.

Valero also owns and operates an oil refinery in Pembroke in Wales, and one of the first voyages undertaken

by Cap Pembroke was to that Valero refinery. In keeping with the Suezmax namesakes and destinations, Valero also owns

Tanker Shipping & Trade | February/March 2019

CAP CORPUS CHRISTI DIMENSIONS Length overall

277 m

Length between perpendiculars

267 m

Breadth, moulded Depth, moulded Draught design, moulded Draught scantling, moulded

48 m 23.1 m 16 m 17.15 m

and operates refineries at Port Arthur (Texas), Quebec (the Jean Gaulin refinery), and the Bill Greehey refineries in Corpus Christi (Texas).

Cap Corpus Christi is a 157,000 dwt double hull crude oil tanker with six pairs of cargo tanks plus two slop tanks. The cargo tanks are coated in accordance with IACS interpretation as per IMO Resolution MSC. 288(87) “Performance Standard for Protective Coatings for Cargo Oil Tanks of Crude Oil Tankers”. The hull is strengthened for ice and its specification is to Finnish Swedish ice-class IC; the hull construction specification limits the use of tensile steel to a maximum of 56% of hull steel weight.

The ship’s hull is designed to withstand 25 years of North Atlantic sailing.

To cope with the very low winter temperatures and ice conditions of East Canada, the vessel is equipped with a covered fore area, preventing the accumulation of ice on the forward mooring station.

The accommodation is designed to offer a comfortable working and living environment, arranging all the working spaces along the same deck and the cabins and recreation spaces above. There is also an indoor

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TANKER NEWBUILDING | 45

swimming pool in a heated space.

The cargo handling system is designed for up to three grades of crude oil at a time. Beyond the three direct lines, an independent stripping line is provided, keeping the double valves segregated. There are three vertical centrifugal pumps supplied by Shinko with a capacity of 4,000 m3/hour. Its prime movers, which are turbines, are of three stages, contributing to the reduced consumption during discharging. Emerson Marine has provided the tank radar and the tank cleaning equipment is supplied

by Polar Marine. Nakakita remote control valves are fitted in the cargo and in the ballast tank system, while Hanla has provided the independent tank level alarms systems.

The steam provided to the cargo oil and slop tanks can also be used to de-ice the weather deck. Electrical heat tracing has been installed on the fore mast, independent PV valves and ballast vent heads to avoid freezing. For the same purpose, steam heaters are provided in various compartments including steering gear, pump room, emergency generator and foam rooms.

A ballast water treatment system supplied by the shipyard’s associated company Hyundai EMD disinfects the ballast sea water. The HiBallast ballast water treatment system is a filtration and electrolysis system with a capacity of 75-10,000 m3/hour.

Inert gas is provided by a Kashiwa boiler flue gas system and a Kangrim donkey boiler can supply steam for domestic use and also serve to top-up inert gas if required.

The main engine is a Hyundai-WinGD 6X72 with Delta bypass tuning with a maximum continuous rate of 16,300 kW x 79 RPM and fitted with two Hyundai METtype turbochargers. The air compressors are supplied by Donghwa Pneutec. The engine can operate on heavy fuel oil, ultra-low sulphur fuel oil and marine gas oil (MGO).

A unique diesel switch system supplied by Pantechnic has been installed to facilitate smooth fuel change over.

THE MAIN ENGINE IS A HYUNDAI-WINGD 6X72 WITH DELTA BYPASS TUNING WITH A MAXIMUM CONTINUOUS RATE OF 16,300 KW X 79 RPM, FITTED WITH TWO HYUNDAI MET-TYPE TURBOCHARGERS”

Given Euronav’s public statement that it is not convinced of the economic or environmental argument behind scrubbers, the engine flue is not fitted with a high sulphur fuel scrubber. Since the vessel has to comply with IMO Tier III NOx emissions limits when in the North America ECA zone, a low pressure selective catalytic reduction has been installed using 0.1% MGO. The main engine drives a Hyundai high performance Ni-Al-Bronze keyless propeller through an Eagle Industry cast iron stern tube with a white metal bearing.

To add propulsion efficiency, there is an HHI preswirl duct (designed for ice conditions) and a rudder bulb. The spade-type rudder is operated through a two-ram, four-cylinder hydraulic ram Kawasaki-Flutek steering control system connected to the Kongsberg bridge manoeuvring system. Service speed at the scantling draught and at the normal continuous rating (12,170 kW) of main engine with 15% sea margin at the condition of clean bottom in calm and deep sea to be about 14.6 knots.

In the machinery space is a Hyundai Marine-Atlas incinerator system, with burning bilge water capability.

There are three Yanmar 6EY22ALWS four-stroke

Euronav’s long-standing relationship with Valero led to the contract for four ice-class Suezmax tankers

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Tanker Shipping & Trade | February/March 2019

46 | TANKER NEWBUILDING

Euronav now has 25 Suezmax tankers in its fleet, with an average age of 10 years old

generators and a GPC-Doosan emergency generator.

The electrical system is controlled by a Hyundai main switchboard supplying three-phase electricity, 220 v electrics and navigation bridge electrics.

The board also supplies the electricity for the Metos kitchen and laundry equipment and the air conditioning system. The Hi Air Korea air conditioning is designed to provide ambient air while operating in conditions from -25C to +35C. Variable Frequency Drivers (Schneider) have been installed to essential consumers for reducing the electrical consumption. Enhanced heat insulation has been provided in the external walls and decks of the accommodation. Exposed cabins also have an individual electric heater.

On the deck, the two electro-hydraulic, high pressure type, non-auto tension split type drum mooring windlasses are supplied by Flutek. The anchor chain is from the Daihan portfolio attached to two 12-tonne Kumwa anchors (a spare is also supplied). Fail safe chain compressors (stoppers) are provided by Pusnes. There are nine 20-ton capacity winches and a dedicated winch for SPM operation. Two 20-ton Oriental Precision cranes provide the hose handling capabilities. The cranes are certified for personnel transfer.

On the safety side, there is a Consilium fire detection system installed with fixed gas detection system and portable units, all supplied locally by Riken Keiki Korea.

The foam on deck and fixed CO2 fire-fighting equipment in the engine room and pump room is from the NK Co., Ltd., portfolio and is supported by loose fire-fighting equipment supplied by the same company, in conjunction with a Kashiwa local fire-fighting system. TankTech supplied the emergency towing system.

Tanker Shipping & Trade | February/March 2019

Two 32-person conventional HLB Hyundai lifeboats are supported by electric motor-driven Oriental Precision davits.

One lifeboat is also a rescue boat. Heating elements have been provided for keeping the life-boat engines warm. The lifeboats are raised at the A deck level for better protection from green seas. In total there are four Viking liferafts, each with a capacity of 20 people.

In the navigation bridge, which has heated glass and special shelter at the port bridge wing for the Quebec pilots, the main supplier of bridge equipment is Furuno: AIS, ECDIS (3), radar, ice radar, route planning, speed log, satellite speed log and echo sounder. Furuno also provides the communication equipment including: GMDSS, Inmarsat-C, Inmarsat Fleet Broadband, VHF and the VDR. The autopilot and gyrocompass are Yokogawa Denshikiki units. In addition, there is a UHF onboard communication system, an Iridium System and extended LAN business network and crew network on board.

VSAT installation provides full connectivity with shore, covering both business and crew communication needs.

Euronav has its own fleet performance system and a shaft power meter, diesel generator power meters, and mass flow meters for all the consumers have been installed.

The signals of the above sensors, together with signals of 30 more sensors, are collected in the server of the vessel and sent to a database at Euronav headquarters. This data is processed by an experienced dedicated team which follows the performance of Cap Corpus Christi together with the performance of all other Euronav vessels.

Like the other three Suezmax tankers, Cap Corpus Christi is classed by Lloyds Register, sails under the Greek flag and is certified to transit the Panama Canal. The officer and crew complement are 32 people, including a pilot. TST

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7 th

EDIT ION

The Asian Voice in a Global Industry Featuring some of Asia’s most influential thought leaders in the maritime sector Andreas Sohmen-Pao Chairman, BW Group and Chairman, Singapore Maritime Foundation

Esben Poulsson Chairman, International Chamber of Shipping, President, Singapore Shipping Association, Chairman, Enesel Pte Ltd

Jeremy Nixon Chief Executive Officer, Ocean Network Express (ONE)

Liv Hovem Chief Exective Officer DNV GL - Oil & Gas

Søren Toft Member of the Executive Board and Chief Operating Officer, A.P. Møller – Mærsk A/S

Neil McGregor Group President & Chief Executive Officer Sembcorp Industries

George Procopiou Chairman Dynacom Tankers Management

Teymoor Nabili Journalist and Broadcaster Managing Editor of TheSignal.asia

Dr Şadan Kaptanoğlu President Designate BIMCO and Managing Director HI Kaptanoğlu Shipping

Visit www.sea-asia.com for the updated list of speakers.

Sea Asia Global Forum High level panel discussing the future of the shipping industry

Parliamentary Debate “This House Believes That Too Much Is Expected Of The Shipping Industry On Environmental Matters”

Oil, Shipping and The Future Energy Mix What does the push to fossil fuels mean for shipping?

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SULPHUR CAP | 49

Uncertainty abounds as sulphur cap closes in Approaching the biggest fuel switch in marine history, some clarity is emerging about compliance choices. But technical, operational and financial challenges remain unresolved

A

look at orders for exhaust gas cleaning systems and LNG-fuelled ships confirms that most shipowners will be complying with IMO’s 2020 sulphur rule by using compliant fuel. According to DNV GL’s Alternative Fuels Insight portal (accessed in early February), just over 2,700 ships will have scrubbers by 2020. Among these are 282 crude oil tankers and 415 product or chemical tankers. The market for gas-fuelled ships is even smaller, with just 238 vessels expected in service next year (excluding gas carriers). Among these are 17 tankers trading today, with a further 33 on order.

Those numbers barely make a dent in the IMO-regulated global fleet of 57,000 vessels (according to 2017 fleet statistics for Equasis). The remainder, close to 95% of the fleet, will rely on compliant fuel.

According to S&P Global Platts Analytics head of oil pricing and trade flow analytics Richard Joswick, around three million barrels (or around 200,000 tonnes) of heavy fuel oil a day used in the marine market will need to be replaced with compliant fuel. How this will be achieved is not yet clear, says Mr Joswick.

“It can be done but it is disruptive,” he warns. “It requires big price changes. There will be a lot of volatility and people won’t necessarily know

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Scrubber users, including DHT, report that port regulations will have a negligible impact on the business case

how they will be covered. How much will be covered by marine gas oil and how much by low sulphur blends of residuals and gas oils?”

Platts estimates that around half of the initial demand for compliant fuel will be covered by low-sulphur blends.

In the short term, until refiners increase coker capacity to convert crude into lighter products, marine gas oil (MGO) will make up much of the shortfall, even beyond 0.1% sulphur emission

control areas (ECA).

So while more than nine out of 10 ships will sail on compliant fuel, it is still not clear what that fuel will be in the early days of the low-sulphur regime.

Even less clear is where these lowsulphur blends will be available and their exact composition. ExxonMobil is one of the few global fuel suppliers to have listed where its 0.5% sulphur product will be available. But, as ExxonMobil engineering manager for aviation and marine lubricants Iain White notes, in many markets local blenders will supply most of the compliant fuel. That spells potential problems for ship operators as blenders seek to balance cost and compliance.

“With today’s residual and distillate fuels you know what you’re getting,” he says. “In the future, some refiners will blend these fuels to the 0.5% sulphur limit but may pay less attention to density and viscosity. These factors will be well within specification, but they have an impact on ignition characteristics as well as storage and handling.”

As low-sulphur blends rely on cheaper fuel streams, Mr White projects an increase in the occurrence of cat fines, the abrasive residues of catalytic cracking found in cheaper low-sulphur fuel streams. These particles can cause wear and scuffing damage as the piston head pushes them into the cylinder lining. The lower lubricity in low-sulphur fuel offers less protection against these effects, meaning that cat fine incidences may be more severe as well as more prevalent.

Corrosion concerns

There may also be potential for further engine damage from low-sulphur

Tanker Shipping & Trade | February/March 2019

50 | SULPHUR CAP

fuels. Major engine developers MAN Energy Solutions and Winterthur Gas & Diesel have opposing views about the role of sulphur in helping to lubricate engines. MAN advises users of low-sulphur fuel to replace piston rings with a ceramic-metal composite version and to occasionally run through cylinder lubricant with a higher basicity. WinGD believes no changes are necessary to its concept.

This discussion is covered in detail in the February/March edition of sister title Marine Propulsion & Auxiliary Machinery. Suffice to say here that the lack of consensus is concerning for ship operators, who must rely on their engine maker’s advice. But the mechanisms of wear are the same for all engine cylinders regardless of who makes them, and one designer must be wrong.

Further uncertainties surround the stability of blended fuel, given the fact that blending paraffinic and aromatic fuel streams causes the asphaltene to drop out of solution in residual oils, leading to sludging. There are also fears about compatibility between fuels, confirms Parker Kittiwake principal chemist Dr David Atkinson. He reports that a recent surge in compatibility ovens – heating units which can indicate if two fuels will play nicely together – suggests that shipowners are beginning to prepare their crews for the new regime.

“I suspect these will be used to test that bunkered fuel is compatible with another fuel onboard while it is kept quarantined in a separate tank,” says Dr Atkinson.

Both to ensure compliance with the strict sulphur limit and to minimise compatibility issues that may lead to engine troubles, cleaning tanks of high-sulphur residue will be essential before the 2020 regime takes effect.

It is a practicality that shipowners can easily forget to schedule into the operations of a busy ship and, according to fuel treatment company Aderco’s CEO Olivier Baiwir, planning should begin now.

“Flushing and cleaning of tanks

Tanker Shipping & Trade | February/March 2019

Japan Engine Corp's mono-fuel MGO engine sidesteps uncertainty around low-sulphur blends

prior to bunkering new fuel is the most imperative of the tasks needed to be tackled,” he says. “Even the slightest amount of high-sulphur fuel remaining in the tank will mean non-compliance.

Shipowners, ship managers and operators need to be lining up their treatments in preparation for the end of 2019, when they will be bunkering the new fuels.”

Aderco’s drop-in fuel treatment takes six months to help flush highsulphur residues out of tanks. As a result, Mr Baiwir suggests that vessel operators should be planning treatments in March in preparation for a June start. Conventional tank cleaning would take a shorter time but would require a drydocking; another complexity for users of compliant fuel, particularly for vessels under charter.

A simpler solution

These complications could also serve to make MGO more attractive, even for vessels not sailing within ECAs all the time. This would at least dismiss fears about fuel stability, compatibility and availability: MGO is not a blended fuel and so does not separate; its global compatibility is relatively assured and easy to test; and it is already widely

available even beyond major bunkering hubs. As it has a lower viscosity than HFO or low-sulphur blends, it also requires no heating of tanks or the fuel supply line, and would require less maintenance of pumps and purifiers.

Platts already believes that around one third of the shipping market’s compliant fuel demand will initially be filled by MGO. Engine designer, Japan Engine Corp (J-Eng), is betting on owners seeing advantages in using the fuel as a compliance option in the longer term. The company recently demonstrated its mono-fuel 5UEC50LSJ engine, which is claimed to reduce fuel consumption by 5% compared to the corresponding conventional engine model.

The designer hopes to reduce the costs of running on MGO by optimising the engine. This is achieved partly by fine-tuning combustion, including atomiser design, fuel injection pressure and scavenge air arrangement. The new model also uses water injection to reduce NOx formation by lowering combustion temperature. It is best suited to vessels below 60,000 dwt, in particular handysize bulk carriers, and will be available for delivery in late 2019.

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SULPHUR CAP | 51

The complexities awaiting those using compliant fuels may make the challenges of scrubber installation and operation seem less daunting.

That may partly explain the surge in scrubber orders from June last year. Then, around 1,300 scrubbers were installed or on order; today, the numbers likely to be in operation by next year are more than double that, at over 2,700. In the report on fuel availability commissioned by IMO as it decided when to implement its global sulphur limit, CE Delft and its partners suggested that around 3,000 scrubbers could be installed by 2020; a prediction that has moved from seeming wildly inaccurate to eminently sensible.

There is another relationship between that projection, used by IMO, and the sulphur cap. According to Ridgebury Tankers CEO Robert Burke, that report was used by IMO as part of its justification for introducing the cap next year. Ridgebury has bought six scrubber systems for its Suezmax tankers from Pacific Green Technologies at a cost of US$17.9M. Speaking in January, Mr Burke explained that calling scrubbers a loophole was disingenuous. Rather, he said that IMO had relied on increasing scrubber numbers to reduce the amount of compliant fuel needed in the market, hence easing the transition to the lowsulphur regime.

Scrubber numbers look set to continue to rise beyond 2020; at least in the short term, orders for retrofits are now extending into 2020 while orders for newbuilds with scrubbers extend into 2023, according to DNV GL’s data. In the longer term, much will depend on the spread between HFO and compliant fuels. According to Mr Joswick of Platts, there is little expectation that HFO will come down in price, with a global tightness in the supply of heavy crude combining with the “IMO effect” to squeeze production and increase price. But that does not necessarily translate to a smaller price spread between HFO compliant fuel.

Restrictions on ship discharges in some ports – most recently Fujairah and Waterford – do not appear to be affecting the appeal of scrubbers. In its most recent earnings call, Wärtsilä’s marine business president Roger Holm described the impact of such restrictions as ‘limited’. With more than 450 scrubbers sold, Wärtsilä is the clear market leader.

Mr Holm notes that the small areas covered by such bans mean that their operational impact on vessels is minimal. That thinking is echoed by tanker company DHT Holdings, which will have open-loop scrubbers on 18 of its VLCCs by 2020. Revealing the company’s Q4 results for 2018

Robert Burke (Ridgebury Tankers): IMO relied on scrubber uptake to bring sulphur cap forward

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on 7 February, CEO Svein Moxnes Harfjeld explained that the company’s consideration of the business case for scrubbers had factored in the impact of such regulations. Other preparations have also helped protect the company from this contingency, including the ability to segregate fuel grades – including HFO and compliant fuel – thanks to its tank configuration.

Sold out

Wärtsilä is among those manufacturers to have reported that they have ‘sold out’ of scrubbers ahead of the 2020 regime change. But the good news for shipowners still considering scrubbers is that, even today, it may still be possible to order and install scrubbers before the 1 January deadline.

According to Barry Bednar, CEO of consultancy Avantis Marine, suppliers can still be found who will deliver scrubbers within eight months.

Avantis is relatively new to the market but boasts a team that has overseen around 60 scrubber installations. Mr Bednar argues that neither supply nor installation should prevent shipowners from having scrubbers in place before the rule change.

“When it comes to installing, you don’t necessarily need a yard,” he says. “If you need a bigger inlet or outlet than your current sea chest, you can have it cut by a diver. You will need to get to a yard at some stage, but you can put a scrubber in place without drydocking.”

With less than a year to go until the sulphur cap is introduced, uncertainty abounds regarding the technical implications, operational impact and cost of all compliance options. If there is a bright spot, it is the emerging consensus that the sulphur changes will bring only a short term, albeit major, disruption.

Mr Joswick sums it up: “A year or two from now they will have figured it out. There is new refinery capacity coming online and there will be more scrubbers. It’s a big issue in 2020, less so in 2021 and by 2022 or 2023 it will be easy.” TST

Tanker Shipping & Trade | February/March 2019

LAST WORD | 52

Taking a long-term look at corporate responsibility

A Mark Cameron (Ardmore Shipping): "Let’s not go down the road of prosecuting the people on the ships"

IT IS NO GOOD LOOKING BACKWARDS AND CRITICISING IMO FOR 2020.

WE NEED TO ACCEPT THE SITUATION, PLAN AND PREPARE AND IMPLEMENT COMPLIANCE”

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rdmore Shipping executive vice president and chief operating officer Mark Cameron explains why boardrooms across the industry must present a unified front in terms of environmental responsibility Preparing for IMO 2020 is going to involve some challenges and it is not all about the question of dollar value; it’s a question of doing the right thing and doing it the right way.

When it comes to IMO 2020 compliance, we have to make sure we project the positive intent as an industry. The oil majors and OCIMF have an important role to play; they should be making it clear how, on a commercial level, they will deal with those vessels and operators that are non-compliant.

In this respect, we should learn from the past. Let’s not go down the road of prosecuting the people on the ships. Any fuel-related non-compliance that takes place post 2020 is unlikely to be the result of the individual actions of a chief engineer, or a captain making a rogue decision on their own.

This is not like MARPOL, in the sense that there will be rogue actions like pumping oily water over the side of the ship. It will be an owner or charterer’s decision and we need to support our staff and do the right thing.

Shipmanagers have a big role to play in this. They are prepared to make strong public statements saying that there are going to ensure compliance from the 1 January 2020.

But there is a large proportion of the world fleet operated under technical managers and we need to hear statements from the technical managers that, from 1 January 2020, the ships they manage will be compliant.

The maritime industry is great at planning and if we can do anything, we can plan and implement successfully, but we need leadership. It is no good looking backwards and criticising IMO for 2020. We need to accept the situation, plan, prepare and

implement compliance.

That includes planning beyond IMO 2020.

It will not, in my opinion, be a binary world of scrubber right or scrubber wrong. In the longer term there will be options to change.

Of course, in the shorter term, if you have invested in scrubbers then you must justify that investment to shareholders. Likewise, if scrubbers do turn out to be the solution, then there will be time to revise the earlier decision not to fit scrubbers.

We have to stop thinking of fuel consumption in tonnes per day and think in litres of fuel per day. This change of mindset can make a big difference when you start looking at the amount of fuel consumed in other processes, such as tank cleaning. This thinking overturns the traditional approach and brings in a more mindful way of thinking.

Finally, how did we end up with a 0.5% sulphur cap on marine fuel? Where did that number come from? Wouldn’t it have been a simpler process to adopt a 0.1% standard.

It would have been a straight run distillate product, rather than the move toward a 0.5% hybrid. Will it not take more energy to produce a hybrid 0.5% sulphur fuel than a straight run 0.1% sulphur fuel, and will not more CO2 be produced in doing so?

If the ultimate debate is about CO2, then let’s have some joined-up legislative thinking. There are so many individual organisations in shipping that have representation at IMO. It does not make for a very efficient process. We need to have roundtable forums bringing all these organisations together and agreeing to present as a single unit.

By 2050 or even 2030 many of us in boardrooms today will no longer be closely involved in the industry. But it is our responsibility today, as leaders, to accept that the longer time scale on CO2 is probably the most important item on any boardroom agenda. TST

Tanker Shipping & Trade | February/March 2019

ALWAYS COMPLIANT

A Better Ballast Water Treatment System…

Efficient, sustainable and effective, the Envirocleanse inTank™ ballast water treatment system is the most advanced and sustainable system on the market. Our inTank™ solution does not require filters or changes to your current ballasting operations.

Unlike in-line treatment systems, the Envirocleanse in-Tank™ system works in transit.

This saves both time and money because it eliminates time-critical failures and significantly reduces the electrical power needed during port operations when energy demands are at their peak.

Guaranteed compliance every time and in every location.

No impact to cargo operations

• No filters means no backwashing and no downtime in port • Treatment process takes place in transit

Minimal Crew Interface

LOWER COST LESS POWER DEMAND N O F I LT E R S

• Ease of system operations • Does not require attention of crew while in port

Power Supply Not Impacted

• Continual dosing in transit allows smaller operating unit • Uses power during non-peak demand times • No need to repower a ship

Circulation Return EC Generator Assembly Bulk Chemical Assembly

Guaranteed Compliance

Nozzle Supply

• No regrowth potential in transit • Able to meet demands of challenging water

Seachest Dosing Module

Visit eco-enviro.com for more information and download our informative brochure.

Call or click today!

(713) 840-0404 info@eco-enviro.com

A division of Charter Brokerage LLC

a BERKSHIRE HATHAWAY Company

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