Chang Yung-fa, Photo By Pan Suofei/ColorChinaPhoto

According to Forbes, the net worth of Evergreen’s Founder and Group Chairman, Chang Yung-fa, is in the range of $1.6 Billion, and he is listed number 782 among the world’s billionaires.

Born in Penghu, an island chain off the western coast of Taiwan in 1927, he entered the shipping business directly after high school in Taiwan and over the years he progressed through the ranks to that of Captain.

In 1968, he struck out on his own to establish Evergreen Shipping with a single secondhand 15,000 ton vessel, Central Trust.  Over the next few years, his one ship quickly multiplied to a fleet of 12, and shortly thereafter, his now global, and rapidly growing fleet was calling on ports worldwide on a regular basis.

Employing over 27,000 employees and more than 220 offices/agents worldwide, the Evergreen Group now comprises about 30 major corporations worldwide, 3 of which are listed on the Taiwan Stock Exchange.

In a report by Taipei Times today, Chang Yung-fa announced he would bequeath all the assets listed in his name to charities, and not his children, as a way of giving back to society and having his money perform good deeds long after his death.

During a tea party with reporters, Chang defined true wealth as being able to help people and give back to society.

“Money is something that should be circulated around the world and not enjoyed exclusively by one individual,” he said. “A lot of people think that earning a lot of money constitutes wealth. For me, working hard to earn a lot of money is certainly not a bad thing, but the happiness from earning a lot of money is fleeting because of the pain you feel when you lose it.”

“But if that money is used for good deeds, it’s wonderful to see people get back on their feet because of the help you’ve given. The happiness gained from doing a good deed always remains in your heart,” Mr. Chang said.

Chang also said that young people should depend less on their parents. They should fight for their future themselves and learn to shoulder responsibility.

M/T Samho Dream

The shipping industry has certainly seen better days, which for some shipowners, has put them in a financial bind.  A recent example is the VLCC Samho Dream which was recently sold at auction after the owner defaulted on it’s bank loans.

So what happens with the crew in that situation?

In Thome Ship Management’s December newsletter, they talked with two of their captains on that very subject, here’s what Captain Jeevan N Thombre of MT HERO 1, and Captain Lakshman Kumar of MT Leander had to say:

Both vessels, being part of the same fleet, were arrested on 12 August 2011.

1. What happened when the vessels were arrested?

Captain Jeevan N Thombre (JNT): Once arrested, a security guard was placed onboard our vessel. He was joined by a Solicitor and an officer from the Sheriff’s office. In accordance with the High Court of the Republic of Singapore, a warrant was issued against the vessel and a copy of the warrant was given to me and a copy was displayed on the bridge.

2. What does it mean when the ship gets arrested?

JNT: It simply means the ship is not allowed to move from its present position. A security guard is kept onboard to make sure the vessel does not leave the port and no one is allowed to visit the vessel without prior approval from the sheriff’s office.  However, there were no restrictions for the crew. Shore leave / Sign-on sign-off can be carried out after getting approval from the sheriff’s office.

Captain Lakshma Kumar (LK): It also means that the Owner, Master and Managers all have no authority to make any decision over the ship, crew and even the supplies of provisions.  Fortunately our own Owners/Managers have taken the initiative to request for provisions, bunkers and urgent stores at a fortnight interval applying through the Sheriff’s Office for approval.

3. What did you do onboard while the ship was arrested? How did you pass your time?

JNT: Although the ship was arrested, we were still carrying out our routine jobs and trying to keep the vessel ready for trading at any time when required.

LK: For me, other than carrying out my usual duties, most of the time I was trying to find ways to boost the morale of my crew. I assured them that no one is going to lose any money working with Thome. I have been working with the company for a long time and I have never experienced any irregularities in the settlement of monthly wage or final BOW. For this tenure though, they might expect some delays in getting their MPO/Allotments.

4. How was Thome supporting you as the Captain when the ship was under arrest?

JNT: Thome supported me as the Captain to sort out all the requirements for the safety of the ship and the crew.

LK: Thome has been supporting me as and when I require their assistance that is why I am with them for the last 10-11 years and proud to be part of them.  However in this kind of situation, I know their hands are tied as everything requires the approval of the sheriff or the solicitor.

5. What advice would you give to other captains in the event their ship was under arrest?

JNT: Keep up the morale of the crew

LK: I agree. Let your crew understand that you are in the same predicament as the Master is part of the crew as well and help your crew meet their basic needs (i.e. wages owed, food and fresh water and bunker).

Headquartered in Singapore, Thome Shipmanagement is a niche provider of personalized, high quality, and specialized shipmanagement services.  Thome manages vessels and and provides officers and ratings under the flags of Singapore, Bahamas, Panama, Liberia, UK, Marshall Islands, and Indonesia, as well as the NIS and DIS registeries.  

Executives of publicly traded shipping and offshore drilling companies have a legal duty to act in the interest of the shareholders of their respective organizations.

To fulfill this duty, executives and their financial managers must identify and undertake honest and ethical investment opportunities that offer a greater investment return than shareholders would otherwise be able to make in the open financial markets for the same level of risk.

To put it bluntly, if company management doesn’t produce enough growth for investors, the investors may decide to entrust their money elsewhere and the company’s stock price will fall.

When it comes to creating growth within shipping and offshore drilling companies, financial managers typically have two options. They can either build a new vessel or acquire an existing vessel from another company.

This article looks at the financial analysis used by drilling companies when determining whether or not it makes sense “financially” to build a brand new drilling rig.

For our case study, we’ll need to consider estimated construction costs, operating expenses and revenues of a state-of-the-art $800 million 6th generation drillship.  We’ll also assume the ship will have a service life of 20 years.

The Opportunity Cost of Capital:

The first step in our decision of whether or not to build a new ship is to consider the “opportunity cost of capital“.

We’re all familiar with the expression “a dollar today is worth more than a dollar tomorrow”. If you had the choice of $10,000 today or $10,000 a year from now, which option would you rather have?

If you’re like most people you’d probably opt for $10,000 today. If for no other reason, you could put the money in a bank account and earn interest on it for the year.

The opportunity cost of capital is a business term that places a value on exactly how much more a dollar is worth today vs. a dollar a year from now (expressed as a percentage). In the example above, we chose to collect the $10,000 today vs. waiting a year to collect it.

Had we instead waited a year to collect the same $10,000 we would have lost out on the interest of investing that money in bank savings account. If the bank was paying 2% interest, that 2% represents our opportunity cost of capital.

In other words, it cost us 2% of our capital (the $10,000 that was owed to us)  deciding to wait a whole year to get paid.

The concept of the “opportunity cost of capital” helps financial managers analyze investment options and cashflows on an “apples to apples” basis vs. comparing money received in one time period to money received in another time period.  As you’ll see in a bit, we’ll use this principle when determining the economic viability of our hypothetical drillship project.

In this particular case, we’ll assume that the opportunity cost of capital for building a new drillship is 10%. In other words, the shipping company is expecting to earn at least a 10% return on their investment in a new drillship or else they may as well invest the money in stocks and bonds of similar risk to save the hassle of managing a shipyard project.

Understanding “Net Present Value”

With our opportunity cost of capital determined, we can then “discount” all projected future cashflows (revenue minus expenses) to find the value in today’s dollars of what our drillship investment will “earn” us in the future. The value of the project in “today’s” dollars is also called the “Net Present Value” or “NPV” of the investment.

For example, lets say the opportunity cost of capital for the $10,000 we talked about above was 10% and we wouldn’t receive the $10,000 until the end of 5 years. How much is $10,000 at 10% interest 5 years down the road worth today? To calculated this we simply divide the “principle”, which in this case is the $10,000, by (1.10)^5.

In this simple example, $10,000 at 10% opportunity cost of capital paid 5 years from now is “only” worth $6,209.

Getting back to our drillship example, to calculate the “Net Present Value” of our project, we need to estimate the annual (sometimes called “incremental”) cashflows for each of the 20 years the ship is in operation and then “convert” these cashflows to today’s dollars using the NPV formula we used in the example above.

Remember, we had to cough up $800 million to build our drillship, so the goal here is for the “net present value” of all future cashflow from operating the ship to be greater than $800 million. If the “net present” value of our ship building project is negative (including the cost of the ship) then we are better off foregoing the project and investing the $800 million in something else.

Hopefully I haven’t confused you too badly up to this point, but don’t worry if I have!  To bring the whole picture together, I’ve created some simple spreadsheets in Excel (below) to help illustrate the entire process.

Projected Expenses:

Now that the drilling company has agreed on an appropriate “opportunity cost of capital”, the company must consider the projected expenses of operating the drillship over its 20 year service life. To keep things relatively simple, I have broken these costs down into 3 categories:

Construction Costs: Let’s assume that the drilling company is paying cash for the construction of the new drillship with $400 million being paid at the start of the project and the remaining $400 million paid at the beginning of the next year (we’ll assume a two-year construction period).

Operating Costs: As you can probably imagine, the yearly operating costs for a 6th generation drillship can add up quickly. Between crew salaries, general maintenance, repairs, - “support” staff, consumables and other daily operating expenses, drilling companies spend tens of millions a year operating each one of their drilling units.

In this example, I have estimated operating costs to be $47 million the first year the vessel is in operation. I have also decided to increased these operating costs 3% each year to take into account inflation.

Drydock Costs: Whether or not the shipping company will be able to get their new drillship into a dry dock or not is another question, but regardless, money will need to be budgeted for major service upgrades every 5 years. In this particular example, I decided to include a $5 million upgrade at the 5 year mark, $35 million upgrade during the 10th year dry dock service, and $10 million upgrade at the 15 year mark to keep the vessel among the most capable in the industry.

The following Excel sheet captures these costs:

Projected Revenue:

The market for 5th and 6th generation rigs is still very strong and new-build 6th generation drillships are still commanding $500,000 day rates. Hypothetically, lets assume that our fictitious drilling company scored a 10 year contract at $500,000 per day.

Let’s also assume that the drilling company could operate the vessel with a revenue efficiency of 93% (less than 7% downtime). This would result in projected annual revenues of $169,725,000 for the first 10 years.

Let’s also consider that the vessel will score a 10 year contract extension (at the end of the current contract) only this time at $657,500 per day. At the same revenue efficiency of 93% this will amount to a projected annual revenue stream of $223,200,000 per year (for the final ten years of the vessel’s “life”).

The projected revenue over the “life” of our fictitious drillship is included in the table below. I have also included the “cashflow” from each year which is simply the revenues from that particular year minus the yearly operating expenses from the Excel sheet above:

Using the NPV formula I mentioned above, I programmed the Excel sheet to calculate the NPV of the estimated cashflows for each year of the ship’s projected life. This NPV is the “converted” value of the cashflows in “today’s dollars”. As you’ll see in the total at the bottom of the spreadsheet, the value of the opportunity to invest in the new drillship is over $200 million dollars!

In other words, the investment in building the new drillship (based on our very basic assumptions) is worth $200 million more to shareholders over and above the “opportunity cost of capital”.  That is the growth and value shareholders are looking for.

Although our example drillship, contract, and expense and revenue projections are all fictitious, the principles remain the same. The promise of “riches” is why we’ve seen virtually every drilling company in the world expand the size of their ultra-deepwater drilling fleets with aggressive new-build programs.

We’ve even seen companies with virtually no connection to the oil and gas industry commission new-build drillships on “spec”.

Demand is still strong for these vessels but as more and more are built on “speculation” and enter the market, day rates will inevitably come down and the promise of “huge” investment returns (like those we just calculated) will likely disappear.

Image by Alastair Grant/AP

LONDON — BP PLC shares fell Tuesday amid investor frustration at the company’s growth strategy in the wake of the Gulf of Mexico oil spill and disappointing second-quarter results.

Chief Executive Bob Dudley said BP isn’t about to break itself up, as some analysts have suggested, adding his top priority is to stabilize the company after last year’s Deepwater Horizon disaster.

He said he understood investors’ impatience with theshare price, which has barely budged this year and shows no sign of returning to its pre-Gulf-spill highs. But he said there was no need for a “knee-jerk reaction to suggestions that are thrown out into the market.”

“We. . .have to have the patience to embed safety, risk management, get our operations working with a different culture and structure,” he said. “That requires patience and persistence.”

But Mr. Dudley indicated that BP might consider a restructuring at some point in the future. Asked if it might split off its refining division, as ConocoPhillips has done, he said “we’re not ruling it in or out.”

Analysts were disappointed. “BP appears to be running a business-as-usual strategy and we are not convinced that the market will put up with this for much longer,” said Dougie Youngson of Arbuthnot Securities.

BP said its clean-replacement-cost profit, a closely watched figure that strips out gains or losses from inventories and other nonoperating items, was $5.6 billion in the second quarter, up 13%but below most analysts’ expectations. The company’s net profit was slightly higher than that at $5.62 billion, compared with a $17.15 billion loss last year related to the Gulf spill.

Revenue rose 37% to $103.85 billion from $75.87 billion.

Meanwhile, oil-and-gas production stood at 3.43 million barrels a day — 11% lower than in the same period last year, partly due to the effects of the drilling moratorium in the Gulf of Mexico and divestments of oil fields to pay for the spill. In London trading, BP shares fell 2.4% to 464 pence ($7.55) in response.

BP has struggled to recover from last year’s Gulf disaster, when an oil well it was drilling exploded, killing 11 men and triggering the worst offshore oil spill in U.S. history. The company has had to set aside $41 billion to cover the costs of the disaster, and BP’s share price is still about one-third lower than it was when the Deepwater Horizon rig blew up in April 2010.

Mr. Dudley, who took the reins at BP last October, has tried to put the company back on track — with mixed success. He overhauled BP’s structure, created a new safety-and-risk division, raised $25 billion from asset sales and restored the company’s dividend earlier this year — but at only half the level it was before Deepwater Horizon.

Meanwhile, a highly touted Arctic-exploration deal he engineered with Russian state oil company OAO Rosneft collapsed over opposition from BP’s partners in its existing Russian joint venture, TNK-BP.

Investors were disappointed that BP has so far not come up with anything to compensate for the loss of the Rosneft opportunity. “They shot themselves in the foot over Russia, and so far they haven’t found anything to replace it,” said Paul Mumford, senior fund manager at Cavendish Asset Management, which owns GBP 2.2 million ($3.58 million) of BP shares.

With frustration growing, some investors have called for the company to sell more assets, or even break itself up. Those calls intensified after ConocoPhillips announced earlier this month that it was splitting its refining and production arms into two separate companies.

But Mr. Dudley rejected comparisons with Conoco, which he described as a very different company with a different asset structure.

BP has already scaled back its downstream division, selling 10 refineries over the past 10 years, and has also announced plans to sell its huge U.S. refineries in Texas City, Texas, and Carson, Calif.

Iain Conn, BP’s head of downstream operations, said he “didn’t feel pressure” to move BP away from an integrated oil company.

Mr. Dudley said BP management shared investors’ “great sense of urgency around where our share price is.” But he said the company needed to focus on consolidation and stabilization — strengthening its balance sheet, reducing debt, improving its credit rating and building up its exploration portfolio.

 - By Guy Chazan and Alexis Flynn, Dow Jones & Company

This post was first featured in the fall edition of the Council Of American Master Mariner’s official publication Sidlights. You can find the article on page 18 of the PDF found HERE.

“The only man who never makes mistakes is the man who never does anything.” Theodore Roosevelt

The maritime world is full of strict rules that may only be broken “in extremis”. The best known of these rules are “Never Turn Left”, “The Rule of Gross Tonnage” and my personal favorite “When In Doubt, Call the captain”.

Like a brimstone preacher we put the fear of god into heads of young cadets with the telling of these rules and back them up with sea stories of near misses and failure. The cherry on this sundae is often the saying “Take heed young man, these rules were written in the blood of past mariners.”

I contend these rules are doing more harm than good. Here are three modern examples that lead me to this conclusion:

ONE
Sailing on foreign flagged vessel I was amazed by one thing above all others, the sea stories. Having coffee for the first time with a group of Indian officers and discussing shipboard safety initiatives I soon discovered my sea stories, a collection of half truths I’ve deliberately embellished over the years, were passe. To further compliment personal confusion, my lack of experience in a major incident (e.g. hard collision, multiple-week grounding or engulfed fire, all experienced by at least one of my fellow crew mates) put into question the value of my input. “Wait a second, I protested, I have never experienced a major incident because I am a good mariner. My safety record alone should increase the value of my input.” After a long silence one of the Indian mates said, “John, we do not question your knowledge or ability just your experience. It is not your fault you had the resources available to prevent incidents and mentors able to guide you from trouble. We were not as lucky then but have experience now.”

What is evident here is a Catch 22. We can not suggest that young cadets experience the dregs of management aboard rusting freighters in the hope of gaining experience through failure.

TWO
In his bestselling book “The Four Hour Workweek”, Tim Ferris tells us that experts are simply the people who have accumulated the highest number of failures in a specific niche. It would therefore make sense to encourage failure among our industries best captains to evolve their expertise. A solid theory in principal. The problem with this thinking, however, is that the failure of a captain, especially one in command of a supertanker or LNG carrier, can lead to disaster in the magnitude of environmental catastrophe or loss of life.

THREE
In his book “Tankers Full Of Trouble”, Eric Nalder tells us that it’s not the young Captains who are most likely to face an incident. Rather it’s the experienced Captain, bored after years of taking the same route over and over, that often tries something new that leads to disaster.

The History

“I never saw a wreck and never have been wrecked, nor was I ever in any predicament that threatened to end in disaster.” Captain Edward Smith

If modern examples are not enough to convince you History is littered with lessons on the importance of failure. The Handbook Of Damage Control is considered the single best manual for preventing the loss of damaged ships. My question is… would the lessons contained in its pages have been learned without hundreds of hulls being lost under the authors’ watch? Would SOLAS regulations, which have saved countless lives, have been written without the tragedy of the Titanic and what about the morality rate on the day of her sinking? Would it have been so high if Captain Smith had prior experience in emergency response?

The Solution

“I have not failed. I’ve just found 10,000 ways that won’t work.” -Thomas Edison

At sea the importance of experiencing failure is second only to avoiding failure in the first place. We can have no desire or even tolerance for disaster at sea regardless of the importance of lessons learned from there occurance, so what is the solution? I offer four:

ONE

“When I interview a Master my first question is ‘Have you ever grounded a ship?’. If the candidate answers no he is either a liar or lacks experience, either way he’s unfit to command my vessels” -Anonymous Ship Owner.

Failure is critical to the learning process and should be encouraged in the resumes of candidates for master. The question of past failure needs to be asked in every senior level interview and should be a mandatory section of a candidate’s resume. It is not critical that past failures lead to a severe loss or that they even occurred at sea. It is important, however, that the candidate’s actions are analyzed and they have a robust understanding of the lessons learned.

TWO

“If you bungle raising your children, I don’t think whatever else you do well matters very much.” -Jacqueline Kennedy Onassis

As senior officers aboard ship it’s critically important that we allow the bridge team the opportunity to make mistakes so they can learn from their failure. During my first cargo discharge aboard a product tanker it took me 45 minutes to strip one tank. I did not learn for many years that my repeated failure to empty and switch tanks (without loosing suction or flooding the pump) caused a fight in the mess. The captain and chief mate were arguing about what should be done with the former saying “It’s an art he needs to learn through failure” and the later saying “We’d all save time and effort if I go teach him”.

Small failures can lead to big results. In this specific case I learned in 45 minutes what it takes some tankermen years to master, transferring from an empty to full tank, but I also learned other lessons like the management of a frustrated deck crew and remaining calm under stress. It is also important to note the conditions in which this lesson was learned. Sure there was great potential for environmental catastrophe or even flooding of the pump room but the lessons was taught in a controlled and monitored environment. In addition to closely monitoring me through the mess room porthole both the pumpman and engine room had been (quietly) put on notice, the weather was clam and daylight strong.

THREE

“Everybody’s a mad scientist, and life is their lab. We’re all trying to experiment to find a way to live, to solve problems, to fend off madness and chaos.” -David Cronenberg

The captain who creates a tanker full or trouble is the same man who played with chemistry sets as a child. He may no longer have the desire to create an explosion but his desire to experiment has not been quelled. Without the trial and testing of theories man has little room to grow and while a boring watch is certainly a safe one it serves no purpose beyond the short term goal of moving cargo from point A to B. It certainly does not prepare the vessel for the unforeseen circumstances of subsequent voyages.

There is a critical difference between experiments and unforeseen incidents. Both have the potential for catastrophic results but one can be accomplished with preparation, planning and under controlled circumstances. One can be dome with well rested personnel and cancelled at the first sign of bad weather or postponed after the failure of critical equipment. The other can not.

For example, advanced shiphandling techniques, like the use of anchors in maneuvering, are taught in simulator training along with guidance from the instructor to use these techniques when emergencies leave you with no other options but is an emergency really the time you want to try a new tactic on your equipment and crew? Would it not be safer to test these practices under ideal circumstances with a powerful tug alongside and ready to correct your mistakes?

My suggestion is to experiment under controlled circumstances.

FOUR

“Courage is not simply one of the virtues, but the form of every virtue at the testing point.” -C. S. Lewis

Are you an expert in the management of major emergencies? Have you ever heard the sound of the hull cracking under your feet as the chief mate calls the bridge with last words for his family? I have. No, I did not experience this tragedy at sea but in the safety of a major emergency lab. Simulators may not be as effective as your own vessel in testing skills like shiphandling or emergency response but when done with an eye for realism and expectation for failure they serve a critical purpose.

Currently the maritime world utilizes simulators for shiphandling, dynamic positioning, cargo ops and bridge team management but have we seen the extent of their ability to let us fail safely? The offshore industry has embrace the management of major emergencies with the simulation of tragic events but this technique has yet to be adopted by the wider maritime community. What other opportunities for training area we missing out on?

Final Words

For many years the maritime community has been searching for new ways to prevent and control the occurrence of incidents at sea but the level of loss remains at unacceptable levels. The master of a vessel is suppose to be the voice of sound reasoning that refuses to take any and all unnecessary risk but in doing so fails to train himself and those he commands in the lesson of failure. If we are going to take the next step towards a goal of zero loss then we need to accept the reality of danger at sea and promote the lessons of failure. If we can do so with proper management of circumstances and experimentation the results will lead to improved safety. If we can foster an acceptance of failure and promote individuals that have experienced its lessons, both ashore and at sea, the results will be powerful and lives will be saved.

John Fredriksen owns the trading companies at the center of a civil action brought this past week by the Commodity Futures Trading Commission. The case brings fresh scrutiny to a businessman with the reputation of a maverick, business interests ranging from oil rigs to fish farms, and an estimated net worth of £6.2 billion, or $10.2 billion, that put him at No. 7 in a recent Sunday Times’ list of richest U.K. residents.

The CFTC sued two traders and the companies they worked for, Arcadia Energy (Suisse) SA and its Parnon Energy Inc. affiliate, alleging that in 2008 they amassed and sold off a substantial position in physical crude oil to “manipulate future prices.” The companies are controlled by Mr. Fredriksen’s Farahead Holdings, of Cyprus.

Mr. Fredriksen declined a request for comment. In an interview with the Norwegian newspaper Dagens Næringsliv he dismissed the charges, saying “It’s what happens in an oil market—buying and selling oil. We have done nothing wrong.” In a statement, Arcadia said the CFTC’s complaint was without merit and that it was confident no laws were broken.

The son of a shipyard welder, Mr. Fredriksen was born in a working-class suburb of Oslo in 1944. He started off as a shipping broker, running cargoes of fish from Iceland to Hamburg, Germany. In the late 1960s he moved to Beirut, where he shipped crude oil from Saudi Arabia and Iraq, sending back refined products. He bought his first ship in 1973.

In the 1980s, he was one of the few to export Iranian oil during the Iran-Iraq war. He shepherded tankers through the Persian Gulf from Kharg Island, an oil terminal frequently bombed by Saddam Hussein’s air force. Mr. Fredriksen’s tankers were hit three times by Iraqi missiles.

The controversial business brought him fame in Norwegian shipping circles. His regular table at Oslo’s fashionable Theatercafeen restaurant was nicknamed “Kharg Island.”

His attitude to his homeland hardened in 1986 when the Norwegian authorities charged him with fraud, alleging his tankers had used customers’ cargoes for fuel. Police raided his offices in Oslo, and he turned himself in a few days later. The main charges were later dropped. He paid a fine on a lesser charge.

Ten years later, he garnered more unwanted attention when one of his tankers, Sea Empress, broke up off the coast of Wales, spilling 70,000 tons of oil. He told one interviewer that at that point he considered quitting the tanker market.

Instead, he carried on. That same year he bought Frontline, a Swedish shipping firm that he gradually transformed into a giant through a string of bold acquisitions. In 1996, he owned seven tankers; today, Frontline is the world’s largest independent oil-tanker company, with 81 vessels.

One secret to his success was an early investment in double-hull tankers, considered safer than the more conventional kind because they have an extra space between the hull and the storage tank. After big oil spills like Exxon Valdez in 1989, oil companies gradually stopped chartering single-hull tankers. Mr. Fredriksen made a killing.

“He’s old-style. He takes gut decisions and is not afraid to buck the trend,” said one shipping-industry insider.

Gradually he expanded his business empire, building fleets of “dry bulk” ships that move such commodities as coal, steel and grain, as well as carriers for liquefied natural gas. His Marine Harvest is one of the world’s biggest producers of farmed salmon.

His Seadrill Ltd. has amassed a huge fleet of state-of-the-art rigs capable of drilling in some of the world’s deepest oceans. His bet on Seadrill was seen at the time as perhaps his riskiest. In 2005, he ordered two “ultradeepwater” rigs for nearly $900 million on spec—or without a drilling contract from an oil company to guarantee them. The gamble paid off in the next few years as deepwater oil exploration in such places as offshore Brazil and West Africa flourished.

“We didn’t feel it was a risk,” Mr. Fredriksen said in a 2008 interview with The Wall Street Journal. “We knew there was a boom coming on.”

That year, his companies became cash machines as commodities’ prices soared and shipping and oil services coined it in. Charter rates for Mr. Fredriksen’s dry-bulk ships set records, with tankers earning a profit of $100,000 a day and Seadrill’s most-advanced oil rigs being leased at day-rates of $600,000 and more, up from $70,000 in 2003. Soon, Mr. Fredriksen was being compared with Greek shipping tycoon Aristotle Onassis.

In 2006, Mr. Fredriksen gained Cypriot citizenship, after complaining about Norway’s high tax rates. (He maintained his Norwegian citizenship.) These days, he spends much of his time in London. He bought a house there in 2002 for £36 million—then one of the highest prices ever paid for a London home.

A widower with twin daughters, age 27, who work in his businesses, Mr. Fredriksen’s main hobbies are soccer and fly-fishing. He also is a generous donor to medical research—the Inger and John Fredriksen Ovarian Cancer Research Foundation commemorates his wife, who died in 2006.

The world has changed since the 2008 boom, and so has the outlook for his companies. Soaring rates prompted ship owners to order more vessels, which are now leaving shipyards. That caused a glut in the market and pushed freight rates down to $1,000 a day.

Frontline this week said first-quarter profit had fallen 81% from a year earlier because of sluggish tanker demand.

-By Guy Chazen, Dow Jones & Company, Inc

gCaptain was critical of many recommendations provided to the offshore industry in the US Coast Guard’s recent Deepwater Horizon Investigation report. Upon first review, our intention was to give alternative options and a more thorough analysis of each point of criticism but we were soon overwhelmed by the sheer number of items we did not agree with. With this in mind we have started looking more closely at each point and developing ideas to help the industry move forward.

Of all the opportunities for safety improvement offshore, gCaptain believes that emergency preparedness is the low-hanging fruit but, in this area, we found the CG’s recommendations to be vague. The following is the CG’s comment on emergency training along with our rebuttal:

“Emergency Preparedness: Transocean failed to require that systems and personnel emphasize maximum emergency preparedness.   As discussed above, Transocean allowed the DEEPWATER HORIZON crew to inhibit or bypass gas alarms and automatic shutdown systems, and it did not require robust emergency drills.”

gCaptain agrees with the fact that Transocean emergency drills could likely have been much more robust in nature, but they did drill every Sunday and performed these drills as required.  Recommendations may include working with the USCG and the US Navy to come up with a new damage control training program and new system of evaluating the effectiveness of weekly drills.  The gas alarm is a totally separate issue, and should not be included in this finding.  Again, see our article: Critical Alarms – Are they being monitored, inhibited or both?

Our recommendation for the industry to “include working with the USCG and the US Navy” is based on our own experience comparing the emergency drills conducted aboard Navy vessels with those aboard offshore rigs. The difference is striking with naval units conducting intense all encompassing evolutions and offshore rigs shoe horning drills into one hour time blocks (frequently shorter) on Sunday mornings.  And yes, we certainly understand the need and opportunity for Navy ships to drill with more intensity than rigs but this does not mean we can’t follow the Navy’s lead.

In the short-term, it’s critically important that offshore rigs begin to take emergency preparation and drills with the same attitude and range as naval units. Drills don’t need to happen everyday offshore but when they do happen, drilling operations need to be shut down and the drills conducted with 100% participation of those involved with real emergencies. This means that client representatives (BP, Chevron, etc) aboard the rig, shoreside personnel (BP & Transocean emergency response teams) and third-party responders (Salvers, CG, standby vessels, medivac dispatchers, etc) all need to participate in weekly drills. This is the only way drills can be conducted with the level of realism needed to provide the highest level of training and it’s the only way for rig workers to feel the high priority each company places on safety operations.

While this is certainly the result most hope, for we have to walk a long path of development before reaching this goal. For this reason the industry needs to look at two aspects of Navy operations to help shape the future; technology and training.

Originating from regulations imposed by North Sea authorities after the Piper Alpha disaster, Major Emergency Management (MEM) class, is an industry standout in providing crews with real-world simulations of disaster scenarios and one-on-one instruction to help crews learn disaster management.  All Transocean Rig Managers, Offshore Installation Managers, and Captains are required to go through this training.  In fact, as a Performance Rig Manager trainee, gCaptain’s Rob Almeida went through this program last summer.

“As a former Integrated Training Team Leader on a Navy warship, I was quite impressed by the training.  The scenarios and timelines were realistic and the instructors at the Petrofac facility were top notch.  They really knew how to create a stressful, and meaningful training environment for the students.”

This was excellent training for the rig’s senior management, but what about the rest of the crew?  How can we take this to the next level?

At the Offshore Technology Conference last week, gCaptain met with L-3 Communications, a leading provider of emergency response technology to the US Navy.  For 25 years L-3′s MAPPS division has provided integrated monitoring and control of all the ship’s platform machinery with special emphasis on fire/smoke/flood detection and damage control.  gCaptain is particularly interested in two leading products from MAPPS; I2BMS and OBTS.

I2BMS is an Interactive Incident Board Management Station which can allow both ship-board and shoreside personnel to view command and control information in realtime as well as solve some of the issues experienced by the Deepwater Horizon team like accountability of personnel. They tell us:

Our current state-of-the-art battle damage control system (BDCS) allows operators to plot damage on the ship’s general arrangement plan (GAP). It offers unrivalled ease of navigation, using familiar Windows® style navigation methods of pan, tilt, zoom and selection with “rubber band.” The real power of the BDCS is its unique ability to use layering to declutter pages. There is only one GAP page in isometric view and one in 2-D view, and all the information necessary to get the status of the ship is available on that one page. The key to easy navigation is that the information is presented in layers. As the operator drills down or zooms into the page, more and more information becomes available (see figures 1 – 3). As always, the complete integration of the BDCS with the integrated platform management system reduces operator workload and improves damage control efficiency by the direct interaction of the systems. On flood detection, automatic sequences can quickly and easily isolate compartments. In an NBC [nuclear, biological, chemical] event, positive citadel pressure can quickly and easily be achieved with automatic sequences. Similarly, a fire can be readily identified and prevented from spreading by automatically isolating the ventilation system and closing automatic fire doors.

While the level of functionality of our BDCS is unrivalled, and the ease of navigation completely unique, our research and development team is always seeking ways to further improve the system and help the ship’s crew be the most effective.

The other service is L-3′s OBTS training solutions which, like Transocean’s Aberdeen MEM center, provides real-life simulation training to first responders. But, unlike Aberdeen, the company also provides dedicated instructors with the highest level of military damage control experience. Most promising, and in line with the offshore community’s “can do” attitude, is L-3′s understanding that training does not end with a course certificate. As the company states “MAPPS OBTS trains crew members aboard their vessels, using the same Integrated Platform Management System (IPMS) control consoles and interface that they use in the day-to-day operation of their ships.” They tell us:

The OBTS provides operational training similar to that of a full-scope simulator. By using the same IPMS Human Machine Interface (HMI), control sequences and other control and monitoring software functions as are used on the operational IPMS, the MAPPS concept is to train an individual or a team at his usual IPMS station using a real-time simulated environment without affecting the simultaneous IPMS control and monitoring functions of the real plant. OBTS provides a realistic training environment. Whereas in traditional training an instructor would have to abort a scenario that might endanger machinery and personnel, using an OBTS simulation allows the instructor to push the training envelope further. OBTS allows for the full range of remedial action / emergency response, and the more realistic stress that normally comes with them. Performing the training scenario in full allows the trainee to be confronted with pages and interfaces he would rarely use during regular operations. It allows the trainee to go beyond the catastrophic failure point to bring about practical, real-time and realistic feedback to his actions, as opposed to the theoretical responses associated with the conventional approach.

In short, the OBTS is essentially a “flight simulator” for vessel operators and damage control personnel, with the added bonus of instructors that monitor each training objective.

Real or near real-time feedback of specific actions is needed in our industry.  Realistic training exercises are certainly the first step and need to be augmented with the latest simulation and command/control technology, but the path forward most certainly includes a program that can provide feedback and a method to evaluate training objectives.

Since 13 September 2000, Ole Johansson has served as President and CEO of Wärtsilä Corporation, one of the most highly respected marine engine manufacturers in the world.  Mr Johansson, will not only be celebrating his 60th birthday this June, but also his retirement.  The exact timing of his retirement will be announced by Wartsila in the future.

Ole Johansson has worked in various managerial positions in Wärtsilä since 1975, including:

• Vice President 1984-86; Wärtsilä Diesel Group
• Vice President & Controller 1986-94; Metra Corporation
• Senior Vice President & CFO 1994-96; Metra Corporation
• Executive Vice President & CFO 1996-98; Wärtsilä NSD Corporation
• President & CEO 1998-2000

Positions of trust
Chairman of the Board, Outokumpu Oyj; Chairman of the Board, Confederation of Finnish Industries EK; Deputy Chairman of the Board, Varma Mutual Pension Insurance Company; Member of the Board, Wärtsilä Corporation 2010-; Member of the Board, Technology Industries of Finland; Member of the Board of the Finnish Business and Policy Forum EVA and the Research Institute of the Finnish Economy ETLA.

Wärtsilä’s Board of Directors has started the process to appoint a successor for Mr Johansson.

Transocean’s CEO Steven Newman; Ricardo Rosa, Senior Vice President and Chief Financial Officer; Ihab Toma, Senior Vice President of Marketing and Planning; and Terry Bonno, Vice President of Marketing discussed Transocean’s 3rd Quarter financial results in a webcast on Thursday.

A few brief excerpts from this conference call:

from Steven Newman, Chief Executive Officer…

The jack-up market

“We continued to view the worldwide jack-up market is stable, though there are some clear trends developing. I think it’s pretty clear that a bifurcation in the jack-up market is taking place.

Utilization for the worldwide fleet is covering in the low 70s and dayrates are in the $50,000 to $75,000 per day range for the lower spec jack-ups while the standard jack-ups are earning $80,000 to a $100,000 per day. However, utilization for high-spec premium jack-ups is in excess of 90%, and dayrates appear to be edging up slightly above the $125,000 to a $150,000 we’ve seen recently.

The midwater market is also stable with dayrates ranging from $200,000 to $250,000 per day. Though there does seem to be some increased interest as our customers approach year end and finalize their 2011 investment plan.”

The Gulf of Mexico

“Despite the continuing uncertainty in the Gulf of Mexico, coming most recently from the court’s decision to overturn NTL-05, we continued to see evidence of our customer’s long-term commitment to the region.

Late last month, Chevron announced the approval of a $7.5 billion project to develop the Jack and St. Malo deepwater fields. Our Gulf of Mexico revenue in the third quarter reflected this uncertainty. The only rigs which collected operating rate with those supporting BP in Macondo response operation. Other than rigs in the shipyard, the rigs were on standby or special standby as a result of the government imposed moratorium.

Currently, none of our Gulf of Mexico rigs is in a force majeure situation. With the moratorium now officially lifted, we should see a gradual return to normal levels of activity in the Gulf.

The historical performance of our equipment and our people has built strong relationships across our entire customer community. These strong relationships have served us well through the last six months as none of our Gulf of Mexico contracts have been terminated, we have preserved our entire Gulf of Mexico backlog, and we haven’t suffered deterioration in terms of our Gulf of Mexico contracts.”

from Terry Bonno, Vice President of Marketing…

The ultra-deepwater market

“Activity in the ultra-deepwater market has been brisk with several contracts, albeit a few of short-term duration, being executed by the speculative new builds in various market. Even with a temporary near-term softness in the ultra-deepwater market, this last quarter alone resulted in several new contracts, all at market dayrates well above 400,000.

If we combine this positive move with the efficient listing of the moratorium, the continuing success in Brazil and West Africa and the potential for incremental demand in the US Gulf of Mexico, we see improving customer sentiment and increasing demand moving the market in the right direction.”

“Moving to Brazil, further delay is expected in awarding the Petrobras new build tender for up to 28 units, supporting our belief that additional incremental demand will be needed to bridge the gap to the deliveries of the Brazilian new build. “

“We are closely monitoring the upcoming drilling programs in the emerging markets of East Africa, Ghana, Liberia, Sierra Leone, Ivory Coast, and the Black Sea with the expectation that future ultra-deepwater demand will continue to grow and add to the already solid worldwide resource base that supports our optimistic view about the healthy future of the ultra-deepwater market.”

The deepwater market

“The two remaining marketed deepwater units available in 2010, the Discoverer 534 and M.G. Hulme, are under consideration by our customers and we expect to capitalize on these opportunities shortly.”

“We believe the deepwater fleet could be challenged by the near-term availability at higher spec ultra-deepwater units continue down.”

The harsh environment market

“Norway continues to present opportunities for our existing fleet with open tendering from various operators. An additional requirement, offshore Eastern Canada is expected will be incremental to the existing fleet offshore Newfoundland. Our presence and performance in both Norway and Canada places us in a great position to further expand our business in both markets.“

The midwater floater market

“Tendering remained active, but the contracting pace slowed a bit in the third quarter. Opportunities, generally short-term in duration, continue to materialize in the UK, Asia, and Australia. We also expect to participate some long-term tenders in India in the next few months.”

“We remain optimistic that oil prices ability will continue to fuel more projects, however we are concerned with the oversupply of deepwater units that could also compete in the midwater market space.”

The jack-up market

“Tendering activity increased while resulting fixtures remained steady over the previous quarter with high-spec jack-ups attracting long-term contracts, while the standard jack-up market remained relatively short duration.

The Transocean fixtures during the quarter are as follows: extension of the GSF 141 at $55,000 for six months in Equatorial Guinea, extension of the GSF Galaxy 2 at 150 for two wells in the UK, and a new contract with the GFS Galaxy 2 at 150 for two wells in the UK.”

“We are optimistic about continuing tendering activity and expect to reactivate a few of our units between now and the first quarter of 2011.”

“However, we remain cautious about the supply overhang from the uncontracted newbuild entry and expect that some more stacking of standard rigs may occur in the near term. As Steven mentioned in his opening comments, we have seen a bifurcation in the jack-up market, whereby the market utilization for high-spec jack-up is over 90%, while standard jack-up utilization is around 75% for the total international jack-up fleet.”

“While we are seeing some downward pricing pressure on the standard jack-up, the high-specification jack-up rates are improving along with increasing worldwide demand, and we expect this to continue through 2010 and 2011. This divergence of utilization can be attributed to efficiency and operational capabilities of the high-spec unit as compared with the standard jack-up fleet.”

A complete transcript of this conference call, including remarks by Ricardo Rosa, Ihab Toma, and the follow-on Q&A session can be found by visiting SeekingAlpha.com or by clicking here.

Have you ever really considered why your workplace is lacking in some areas?  Or why, for example, individuals sometimes act unsafe even when they know the rules?

It’s easy to blame these issues on the managers in town, or the Captain, or the OIM, because they are in charge of that (supposedly) perfectly oiled machine of a company you work for.

So clearly it must be them.  Right?

Not necessarily.

All companies have issues and the Fleet Superintendent is not responsible for your job satisfaction.  It comes down to individuals being empowered to exercise personal initiative and leadership.  What are YOU doing to promote a safe-work culture?  What are YOU doing to promote personal initiative in your workplace?  What are YOU doing to improve the systems and procedures within your company?

One of the issues I saw when I worked offshore was that junior personnel were typically not encouraged to lead discussions at pre-tour meetings, yet as soon as they were promoted into a leadership position, it was assumed their new positional authority would translate directly to their ability to speak effectively in front of groups.

This was obviously not the case, and a culture of partially effective leadership was just the way it was in the offshore industry.

“That’s crap,” I thought.  And I’m going to figure out how to change it.

Being the new guy from New England, I figured I’d take a little risk and say a few things at each tour meeting that didn’t necessarily have anything to do with current operations, yet were in line with promoting leadership and teamwork.

I was standing on my soap box for a minute or two, and a few of the guys probably thought I was ridiculous, but everyone in that room appreciated the fact that I had the gumption to get up in front of a bunch of “country boys” and deliver a positive message before they started their day.

This process has since evolved to the point where junior personnel are the ones who now lead most pre-tour meetings and all associated training on board my former rig.

The vital behavior of promoting public speaking was the behavior I identified, and it was positively reinforced to the point where individuals in the crowd realized 1) they had the ability to get up there and speak, and 2) they had reasonable expectation that it would be positively reinforced by their peers.

Ability, and the question,“is it in my best interest?”, are the two reasons why people do anything in this world.

We are certainly capable of accomplishing almost anything we put our minds to, NASA is a good example of that.  In many cases however, we decide that inaction is a more favorable decision than taking that first risky step out of the “box”.  We view in our minds that the chance of someone negatively reinforcing our initiative is much greater than the chance of receiving praise for it.  And rightly-so considering the fact that most people are more comfortable pointing out errors than giving someone a pat on the back.

Effecting change however is rarely something that an individual can do on his or her own.  It’s also a matter of selling the idea to the social leaders within the group.  For example, A Roustabout on a drilling rig is not going to change the way the rest of the guys in his crew work anything unless he’s able to sell the idea to the senior Roustabout, and subsequently the Crane Operator.  The senior Roustabout provides the social backing required in order to get buy-in from the rest of the deck crew.

Finally, the identify the programs or method currently in place that support, or prevent, initiative in the workplace.  Besides financial rewards, are there other methods for rewarding your employees for a job well done.  How many different types of rewards can you identify that people use in your workplace?  Is positive reinforcement given in a timely manner?   Are correct behaviors reinforced, or correct results?

I encourage you to find answers to these questions and try to identify the vital behaviors required to effect change in your workplace.  Please comment in the forum if you would like to share success stories or failures.

For more insight into this topic, I recommend reading: Influencer: The Power to Change Anything, by Kerry Patterson, Joseph Grenny, David Maxfield, Ron McMillan, and Al Switzler.