UACC CEO, Jens Grønning

UACC’s CEO, Jens Grønning, wants a balanced approach to risk. “Managing risk is one of the most important tasks we face,” he said. “We need to deal with various risk factors on a daily basis. We have always minimised risk as much as we feel is possible, and we try hard to manage the fine balance between what is theoretically possible and what is feasible when running international shipping operations.”

Mr Grønning continued: “In many ways the chemical sector is more ‘industrialised’, and therefore more steady than other more volatile shipping segments such as the products market. From a risk point-of-view, we believe our presence in both the chemical and products markets balance each other out, at least to a certain extent. In addition, we operate in pools because we like the scale it creates and the partnership between owners.”

UACC vessels frequently sail through piracy-affected areas in the Indian Ocean. Regarding this matter, Mr Grønning commented:

“To deal with the risk of attacks by pirates we use armed guards, and we follow the guidance established under Best Management Practice 4 (BMP4). Our ships have been attacked twice, but each time they have been deterred because we were prepared, well trained, and use armed guards to defend the crew, ship and cargo.”

Mewis Duct, courtesy Becker Marine Systems

Reducing emissions is a growing priority for many owners, including UACC, and in the area of environmental risk and how to find efficiency gains, Mr Grønning has clear views. UACC has tested new silicon hull paint available in the market, and the four ships on order will all have Mewis ducts installed. Mr Grønning said: “I am a believer in the Mewis duct, but we have only done model tests so far and I am looking forward to seeing the results of the sea trials. The important thing to remember is that if we can grab 1, 2, 3, 4% savings here and there, they all add up. If we get to 5% fuel savings, it will easily represent a saving of $1,000 a day at sea.”

Mr Grønning pointed out that UACC do slow steam on ballast passages and that its vessels occasionally go down to ultra-slow speed, and especially on ships which are equipped with slide fuel valves and blowers.

Referring to alternative fuels, Mr Grønning believes that LNG is credible, but that it is not a viable solution for the tanker sector any time soon, especially with the current highly diversified trading pattern which includes both remote and under-developed ports. However, Mr Grønning said that he believes LNG is an interesting option for ships plying a regular trade, such as ferries, container
ships and the like.

Mr Grønning believes UACC’s future prospects are bright. “We have faced many challenges already. We were launched during the sub-prime crisis, and that affected things.

The growth in the petrochemical and refinery sectors is very strong and intact, and with refining and production capacity declining in the west, the tonne/mile ratio is going to be favourably affected by sourcing cargoes from farther afield, such as the Arabian Gulf and India,” he said.

Danish-born Jens Grønning joined UACC in October 2008 and is its President and CEO. He was previously COO of Eitzen Chemical ASA, one of the world’s largest chemical transportation companies.  He has more than 20 years’ experience in the shipping industry, with extensive experience of shipping and finance.

He graduated with a higher commercial examination from Copenhagen Business School and took an extensive management course at IMD Business School, Lausanne, Switzerland.

t Mr Ali Obaid Al-Yabhouni, CEO of ADNATCO and NGSCO, image: Lloyd's Register

What do you think are the most important changes your company and the industry can make to meet the challenges of new regulations, high-energy prices and the need for more efficient ships?

In the short term, our aim is full compliance with the MARPOL Convention, particularly Chapter 4 of Annex VI. We aim to have a Ship Energy Efficiency Management Plan (SEEMP) implemented in all the vessels in our fleet by the beginning of next year.

In the longer term, there is a clear need to invest in new energy efficient ships. Current designs can lead to a sharp decrease in energy consumption and, as fuel prices rise, this makes increasing commercial sense. Of course, charter rates are currently at a very low level, but shipowners need the vision and courage to invest in new vessels that are both energy efficient and have lower emissions. Inversely, new building costs have also come down, so there is an incentive for forward looking companies such as ADNATCO to invest in new tonnage, and the ADNOC Group of Companies has plans to continue ordering new vessels.

We feel that the time is right to continue expanding our fleet with a long-term eye to the future market in which energy efficient facilities, bunkering barges, storage tanks onboard and ashore etc. vessels are valued by charterers.

Will most deep sea ships still be burning HFO in 2020? And, if not, what fuel will they be using – for instance, will low sulphur MDO be available in sufficient quantities?

Fuel choice is clearly a major challenge facing the global shipping industry in terms of cost, efficiency and emissions. Whereas the burning of LNG as fuel is a practical and clean solution for LNG tankers, such as our own LNG tanker fleet, it is unlikely to be an option for other vessels. Burning LNG for propulsion power onboard ships other than LNG carriers will require massive investments in bunkering facilities, bunkering barges, storage tanks onboard and ashore etc.

The reality is that there is at present no readily available substitute for HFO. Low sulphur MDO represents an interesting alternative but, for the time being, is not available in sufficient quantities due to insufficient refining capacity. However, as a shipping company owned by a national oil company with significant refining capacity, I would point out that the refining industry has historically shown itself ready to invest in supplying changing demand patterns. Reconfiguring refineries and installing new units takes time, but if the global shipping industry decides to go down the MDO route, the refining industry will respond accordingly. However, this is not something that can be done unilaterally by any single company. There has to be consensus in the industry and a decision that this is the best way forward.

How can other stakeholders in the shipping industry – class, shipbuilders, charterers, insurers and banks – best help operators to manage the challenges of the future?

Shipbuilders and class have a greater role to play in this regard, because of the vast resources and experience they have in designing the new ships with more efficient and environment friendly engines.  The shipowners are ready to spend extra provided the technology is available.

The class in collaboration with shipbuilders could focus on increased research related to energy efficient ship designs, including using low sulphur and alternative fuels, installing fuel efficient and emission compliant engines, integrated power plants, and the use of exhaust-after-treatment devices.

In an ideal world, charterers would reward energy efficient ships with increased rates, while insurers would reduce their premium rates for new energy efficient ships. We need market-based mechanisms to ensure that this happens.

About Abu Dhabi National Tanker Co…

(ADNATCO) was established in 1975 for the transportation of petroleum products. It is a wholly-owned subsidiary of Abu Dhabi National Oil Company (ADNOC).

ADNATCO owns and operates a fleet of oil tankers, a molten sulphur carrier and two ro-ro vessels and is involved in the marine
transportation of petroleum products and the bulk carrying of sulphur.  National Gas Shipping Company (NGSCO) was formed in December, 1993 to transport liquefied natural gas (LNG) on behalf of Abu Dhabi Gas Liquefaction Company (ADGAS). 

NGSCO operates a fleet of eight LNG carriers, each with a capacity for 137,000 m3 of LNG. NGSCO took deliver y of it s first vessel Al Khaznah in July 1994, followed by a further seven vessels, the last of which was delivered in June 1997. The first four ships were built in Japan and the other four in Finland. Both the Japanese and Finnish built vessels are Moss Rosenberg designs and, when built, were the largest LNG carriers in the world.

The company’s LNG fleet was initially managed by third parties but since the end of 2007 all vessels are fully managed by NGSCO.

Stabilized-volatility would be the most accurate description of the oil markets this past week.  Overall crude prices closed down only about $1 bbl this week; but we have seen them down several dollars at different stages throughout the week and during each trading day.  While the KPI Bridge Oil Composite continues to go down,  fuel oil and gas oil prices are just getting in line with the overall market trend of the last several weeks.  It would not be unreasonable to expect bunker prices to stabilize next week barring any major change in the crude markets.

It is amazing to see how volatile operational costs have become for ship-owner’s and charterer’s.  In this month alone,  we have seen the KPI Bridge Oil Composite go down over $57 MT.  For a vessel burning 20 MT per day that represents decrease of $1140 to daily operating costs.  With changes like this,  a spot charter can go from a winner to a loser quickly, and visa-verse.

With a short week next week, we should all prepare for a lot more volatility.  Offices in the United States will be closes on Monday 28 May in observance of Memorial Day.

About the KPI Bridge Oil Composite                                                                                   

The KPI Bridge Oil Composite is a calculated fuel number based on 14 ports strategically positioned worldwide.  It is calculated on a weekly basis blending 90% fuel oil prices with 10% distillate prices.  The idea behind the number is that it would represent actual fuel costs on a global basis and what vessels would consume on average.  This number will not fluctuate as quickly as daily prices and can easily be hedged or used for voyage calculations.

Fly-over shots of the M/V Rena grounded on the Astrolabe Reef on October 8. Photo: Dudley Clemens

The Master and Second Officer of the stricken M/V Rena that has been stuck on Astrolabe Reef since grounding on October 5 have each been sentenced to seven months imprisonment for their role in the grounding.

The men were sentenced on a total of 11 charges laid out by Maritime New Zealand that included operating a vessel in a manner causing unnecessary danger or risk, discharging harmful substances from ships, and willfully attempting to alter the course of justice by altering ship’s documents after the grounding.

MNZ laid six charges against the Master, Mauro Balomaga, and five charges against the Second Officer, Leonil Relon, following the grounding. Both men pleaded guilty to all charges against them.

“In this case, the Master and the Second Officer have breached the most basic fundamental principles of safe navigation,” said Keith Manch, Director of MNZ, who welcomed the charges.

An investigation into the grounding found that the Master and Second Officer had deviated from their original passage plan from Napier to Tauranga to save time, but failed to properly assess navigational hazards of the new plan and also not adequately record these changes.

According to the MNZ investigation, the final alteration to the course of the ship occurred around 1.35am and put Rena directly on target to hit the Astrolabe Reef, where it would eventually run aground at 2.14am.

About 10 minutes prior to the grounding, the investigation found, the Astrolabe Reef appeared as blip on Rena’s radar, which would have provided sufficient lead time to change course to avoid the reef had the Master not dismissed it as a small vessel.

“If there is a need to deviate from a prepared passage plan, the alterations must be plotted and the new projected path carefully assessed to ensure all potential navigational hazards are identified,” said Manch.

The Master and Second officer were not only targeted for their actions prior to grounding, but it was their actions afterwards that would also land them in the hot seat.

During the course of the MNZ investigation, Manch added, both officers admitted making alterations after the grounding to the ship’s GPS log, its passage plan and its computer to mislead investigating authorities.

“This offending is also very serious in that it caused genuine confusion for investigators trying to piece together the events that led to the grounding.

“It is vital that when these types of events do take place, we can find out how and why they have happened to help prevent such an event happening again.”

In a separate prosecution, MNZ has also laid a charge under the RMA against the owner of Rena, Daina Shipping Co.

Earlier this week the Rena salvage reached a milestone after surpassing 800 recovered containers from the vessel. The vessel had a total of 1368 containers when it grounded.

Details of the charges against the Master and Second Officer can be found below.

Mauro Balomaga, the ship’s Master:

• One charge under section 65 of the Maritime Transport Act (MTA) 1994, “for operating a vessel in a manner causing unnecessary danger or risk”.
• One charge under section 338 (1B) and (15B) of the Resource Management Act 1991 (RMA) relating to the “discharge of harmful substances from ships or offshore installations”.
• Four charges under S117(e) & 66 of the Crimes Act, that he “wilfully attempted to pervert the course of justice” by altering ship’s documents subsequent to the grounding.

Leonil Relon, the ship’s Second Officer (Navigation):

• One charge under section 65 of the Maritime Transport Act (MTA) 1994, “for operating a vessel in a manner causing unnecessary danger or risk”.
• One charge under section 338 (1B) and (15B) of the Resource Management Act 1991 (RMA) relating to the “discharge of harmful substances from ships or offshore installations”.
• Three charges under S117(e) & 66 of the Crimes Act, that he “wilfully attempted to pervert the course of justice” by altering ship’s documents subsequent to the grounding.

APM Terminals Portsmouth Virginia, the largest privately owned terminal in North America. Image: APM Terminals

COPENHAGEN — The port-operating arm of Danish industrial conglomerate A.P. Moller-Maersk A/S (MAERSK-B.KO), APM Terminals, said Thursday it has made an offer to the state of Virginia to operate the cargo traffic facilities at the U.S. Port of Virginia.

In return for the long-term concession, APM Terminals offers to transfer ownership of its facility in the Portsmouth Marine Terminal at the port to the Virginia administration, in a strategic partnership deal that the company estimates to have a total value to the state of between $3 billion and $4 billion.

The proposal includes operation of freight facilities at the Port of Virginia, which is comprised by four marine terminals and adjacent inland services, all centered around the ice-free, natural harbor of Hampton Roads.

“Our proposal provides for the lowest cost, long-term solution for future growth at this time of a stabilizing economy and the eventual expansion of global commerce,” said APM Terminals Americas Region President Eric Sisco.

Included in the value estimate are initial payments, fixed concession payments, revenue sharing, capital investments and tax benefits, transferring market risk from the Commonwealth to the private sector, APM Terminals said.

The offer has been submitted to Virginia’s Office of Transportation Public-Private Partnerships and will undergo a detailed review in the coming months, APM Terminals said.

-By Flemming Emil Hansen, Copenhagen Bureau

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Time Charter Market, via Clarksons (click for larger)

But the results topped estimates, and the company, which recently undertook a restructuring effort, said it expects its second-quarter results to be better than the first.

Shares were up 4.4% in premarket trading to $5.20. Through Thursday’s close, the stock was up 16% so far this year.

The company, which owns and operates oil tankers, added that it won’t be paying out a dividend in the first quarter.

Frontline completed a restructuring of its business late last year, selling 15 of its wholly-owned special-purpose companies to create a new company, Frontline 2012 Ltd., which it will manage through a subsidiary. Following the restructuring, the company reduced its operating fleet to 48 vessels from 58 vessels.

Frontline reported a first-quarter profit of $7.18 million, or 9 cents a basic share, down from $15.5 million, or 20 cents a share, a year earlier. The latest quarter included a loss of $2.2 million on the sale of a double hull tanker and a $9.4 million gain from the termination of the charter party for a single hull carrier.

Operating revenue dropped 29% to $167.3 million, while operating expenses fell 26%.

Analysts surveyed by Thomson Reuters had seen a loss of 10 cents on revenue of $91 million.

-By Kristin Jones; Dow Jones Newswires

The deal requires ships to reduce the sulphur content of their fuels by close to 90%. Photo: Danish EPA

The EU Wednesday announced an informal agreement requiring, by law, that all ships operating in EU waters meet mandatory sulphur content limits of marine fuels in an effort to reduce harmful emissions from ships.

Under the provisional agreement and in line with Annex VI of the MARPOL Convention, ships operating in the EU’s “sulphur emission control areas”, including Baltic Sea, the North Sea and the English Channel, will have to lower the amount of sulfur used in marine fuel from 1% to 0.1% by 2015.  Meanwhile, ships operating in other EU waters will have to lower the amount of sulfur used to a less onerous 0.5% by 2020.

The agreement is based on international regulations adopted by the International Maritime Organization (IMO) in 2008. However, a key result of the new agreement is that the limits will now become mandatory under EU law, and ships failing to meet the new limits will face fines high enough to cancel out any savings of not complying with the rules.  A formal EU decision on the agreement is expected this summer.

While environmentalists and health advocates are applauding the drastic actions, critics, including some of the Nordic region’s biggest companies, are saying that the new rule will largely have a negative effect on shipping costs and distort competitiveness in the region.

The European Commission estimated that meeting the new limits will cost the shipping industry between 2.6 billion and 11 billion euros ($3.3 billion-$14 billion), reports Reuters, however that number is far outweighed by the estimated public health savings of up to about 30 billion euros.

Air pollution produced by ships in Europe leads to an estimated 50,000 premature deaths each year says the European Council.

U.S. Coast Guard of the MSC Idil taken May 12.

The MSC containership idled since suffering an onboard explosion eleven days ago off the coast of Puerto Rico has been cleared to move on, the U.S. Coast Guard says.

The ship, MSC Idil, was cleared Tuesday after salvors from DonJon-Smit finalized temporary repairs to the ship’s hull.

The 900-foot container ship had suffered the explosion on May 11 approximately 60 nautical miles north of Puerto Rico while on its way to Barcelona, Spain.  The ship’s crew sprung into action and were able maintain full control of the cargo and prevent any discharges of the reported 588,000 gallons of fuel oil and 62,000 gallons of diesel onboard at the time.

The initial report indicated that the explosion occurred in the vessels #5  starboard fuel tank and was possibly caused by hot work. No injuries were reported and an investigation in the accident is ongoing.

Following the initial report the USCG and others involved showed a quick and organized response effort and sent a number of assets to the scene.

“The key to the success of this response was the combined effort from the U.S. Coast Guard, MSC, DonJon-Smit, Atlantic Diving, Borinquen Towing, and San Juan Towing,” said Lt. Kristen Preble, Sector San Juan Incident Management Division chief. “Their ability to quickly and effectively work together to address the safety of the crew, the ship, and the environment under demanding conditions was phenomenal.”

The Coast Guard adds that Panamanian-flagged MSC Idil has continued its transit to Freeport, Bahamas, where Mediterranean Shipping Company (MSC) will have to conduct further assessments of the ship.

Image courtesy Ship Finance International

(Dow Jones) Ship Finance International Ltd.’s (SFL) first-quarter profit rose 21% on a stronger performance in the tanker market.

The company, which operates large vessels for the transport of crude oil, had seen a weaker tanker market and higher expenses weigh on profits in recent months. But the spot tanker market rebounded at the end of the fourth quarter of 2011, and the latest quarter outperformed the preceding two quarters.

Ship Finance recently agreed to end its chartering agreements with Horizon Lines Inc. (HRZL) under an agreement that makes Ship Finance a large stakeholder in the ocean shipping company.

Following the deal, Ship Finance now has seven container vessels in the spot market, said Chief Executive Ole B. Hjertaker. Given the changed profile of its container business, the company is evaluating structural alternatives to maximize its value, he said, including carving out the container business into a separate entity.

Ship Finance said in March that Chief Financial Officer Eirik Eide would leave in the second quarter after a two-year stint to join another shipping company. He will be replaced by Senior Vice President Harald Gurvin.

For the latest period, Ship Finance posted a profit of $39 million, or 49 cents a basic share, up from $32.1 million, or 41 cents a share, a year earlier.

Operating revenue increased 17% to $84.1 million.

Analysts polled by Thomson Reuters recently expected per-share earnings of 40 cents on revenue of $116 million.

Operating expenses rose 11% to $38.1 million.

Shares closed Wednesday at $13.83 and were mostly inactive premarket. The stock is up 48% so far this year.

-By Kristin Jones; Dow Jones Newswires

SS Badger, Image courtesy Lake Michigan Carfery, Inc.

Via K&L Gates

Lake Michigan Carferry, Inc., the operator of the SS Badger today filed the first ever individual permit application to authorize routine discharges from the vessel under the federal Clean Water Act. The SS Badger is the last coal fired vessel passenger ferry operating in the United States. It ferries thousands of passengers and equipment between Ludington, Michigan and Manitowoc, Wisconsin. As a coal fired vessel, ash from the boilers must be discharged while the vessel is underway.

The Clean Water Act requires that all discharges into waters of the United States be authorized by a permit under the National Pollution Discharge Elimination System (“NPDES”).  Until 2008 discharges incidental to the normal operations of vessels were exempt from the permit requirement.  In 2008 EPA established a nationwide permit program that regulated 26 incidental discharges from normal operations of vessels.   While the coal ash discharge was included in the 2008 nationwide permit, because the Badger is a ‘one of a kind’ vessel, EPA determined that any future permit for the discharge of coal ash should be considered through an individual NPDES permit. Historically this discharge was exempt by regulation because it is a discharge incidental to the normal operation of a vessel.But that regulation was eliminated.

Preparing the individual permit application was challenging and unprecedented. First the EPA required that the company ask permission to file the application. We think this is the first time in the history of the Clean Water Act that a company that wanted to apply for a permit which the law requires, first had to ask permission to do so. We don’t know if this is a position that EPA will take with just the maritime industry, or whether it will apply to others as well. Fortunately EPA granted us permission in late February.

Second,  unlike other industries that must have NPDES permits, there is no established federal program for individual NPDES permits for the maritime industry. EPA has been relying on the nationwide “vessel general permit”  to cover the industry. Third, unlike all other entities those are required to have NPDES permits, the Badger moves and does not have single fixed discharge location  which makes testing and other issues a particular challenge. Fortunately, EPA determined back in 2008 that allowing this discharge to continue was appropriate and we think that remains the case, despite effort to develop an alternative technology.”

Testing shows that given how the coal ash discharge occurs, it does not violate applicable water quality standards and policies, and does not create risk to human health and the environment.

The 1,000+ page application describes how permitting the continued discharge of the coal ash under certain conditions is the “Best Available Technology” which is the legal standard that must be met to obtain an NPDES permit to discharge any pollutant, including dirt and even hot water.  The company is currently working toward conversion of the ferry to liquid natural gas, which would eliminate this discharge and the need for a permit to authorize it, but those systems are not technologically feasible or economically realistic for the Badger.  The current permit expires on December 19, 2012. This application was filed over a month before the June 29, 2012 deadline set by EPA Region 5.  The application also pointed out the significant  reduction in air pollution and other issues as a result of thousands  of cars and trucks not having to drive hundreds of miles around Lake Michigan to get to Wisconsin.

Mark Ruge, Barry Hartman and Christine Joachim Boote in the Washington office of K&L Gates assisted the company in preparing the application materials, working with Kathryn Hall, an environmental scientist with Limnotech in Ann Arbor, MI.