The tanker owners perspective Bill Box Senior Manager Communications & External Relations INTERTANKO IOPC Funds Short Course Wednesday 13 November, 2013 INTERTANKO What we are: A voice for the tanker owners What we do: Provide leadership to the tanker industry in serving the world with safe, environmentally sound and efficient seaborne transportation of oil, gas and chemical products What we work towards: A responsible, sustainable and respected tanker industry, committed to continuous improvement and constructively influencing its future zero fatalities, zero pollution, zero psc detentions INTERTANKO the figures 220 members 3,250 tankers 284m dwt 40 countries 75% of independent fleet > 10,000 dwt Associate Members INTERTANKO aims, scope, objectives One of main aims: working for safety at sea + protection of marine environment INTERTANKO is not interested in obstructing regulation, but in ensuring that the end result is fair and workable in practice Part of scope and objectives: co-operating with techl, comml, and envl interests on issues of mutual concern (Tripartite Meeting); taking part in the deliberations of other international bodies; gaining their respect and trust. Safety/TechnicalSeafarersEnvironmentMarine OperationsRegulatory / Legal Damage stability Inert gas Shipyard standards Class standards Fuel quality Mercury in crude Criminalization Crew competence Shore access Fair treatment of Seafarers GHG emissions Ballast water Reception facilities Air emissions Piracy Vetting Port State Control Chemical operations Sanctions Limits of liability Insurance Oil spill compensation Tanker design Structural Integrity Machinery/equipment Fuel switching Safe tank entry Gas detection Biofuels Cargo properties Crew visas Seafarer ID documents Accommodation space Cadet berthing Ship recycling Anti-Fouling Waste management Noise pollution Response mgmt. Hull biofouling Ship striking mammals Loadlines off S. Africa Lifesaving appliances Pilotage Port & Terminals Navigation issues Offshore operations Ship security alert sys ISPS Code Security Officers Ship/Ship transfer Accident investigation Conflicts in law UNCLOS Legislation Charter party clauses FDIP Demurrage Intellectual property Worldscale Anti-corruption INTERTANKO Key focus areas INTERTANKO IOPC Funds Active interest in the work of the IOPC Funds Consultative status / observer status Positive and constructive contributions to the work of the Funds - submissions, active participation in meetings, promotion of the IOPC compensation system in other fora INTERTANKO IOPC Funds Importance of the Conventions to tanker owners i.e. limits of liability (unlimited=no go) Those affected by oil in the water should be compensated fairly and promptly Those on board a ship that accidentally releases oil should be fairly treated, not criminalised INTERTANKO / IOPC Funds one recent issue Definition of ship (for purpose Fund Conventions) Tankers perform storage (1 day years) Conventions definition requires element of transportation Tanker stationary for so long that it ceases to be a ship ? (and therefore not covered for spill?) Working Group: Cut-off time for storage? Intention resume voyage? I-o part of WG... Secrt + members inputting info Effects of incidents: image f/b regulatory Image: restoring trust and reputations Industry-led: Vessel structural surveys: Enhanced Survey Program Condition Assessment Scheme Vessel construction Common Structural Rules Guidelines on maintenance/repair procedures Corrosion resistant steel (crude oil tankers) EU and IMO: Regulatory impact: Accelerated phase-out Restrictions on HFO carriage Increased liability limits Damage is quick; restoration takes T I M E IMO amendments to MARPOL 73/78 (adopted 4/01 eif 9/02) SH phase out: Category 1 by 2007 Categories 26 yrs by 2015 P r e s t i g e 11/2002 > EU Regulation 1726/2003 (eif 10/2003) Phase-out: Category 1 by 2005, Categories 2/3 by 2010 IMO amendments to MARPOL 73/78 (adopted 12/03 eif 4/2005) Phase-out: Category 1 by 2005, Categories 2/3 by 2010 Regulatory impact Regulatory effect Life cycle: Building to Decommissioning/ recycling ODS = Ozone Depleting Substances NOx, SOx, PM Sewage Garbage Accidental oil pollution Ballast water Toxic Antifouling CO2/GHG emissions VOC = Volatile Organic Compounds Noise Biofouling Cetacean strikes Challenges of this decade: Tankers green transportation Changing face of oil transportation Sustainability Piracy Tankers green transportation Average age tanker fleet above 10,000 dwt Based on LRFairplay Years Shipping is energy efficient Toyota Prius - 1 tonne, 1 kg CO2, 12 km Source: Danish Shipowners Association Intl shipping - environmental performance Industry programmes in conjunction with the IMO: Oil pollution - reduced by > 95% since 1970s Engine efficiency - improved by > 20% in last 15 years Volatile Organic Compounds (VOCs) - voluntary measures - VOC emissions down by > 80% and over the next ten years will also deliver: Toxic air emissions (SOx and NOx) - sulphur oxide (SOx) emissions being further reduced by c. 90% and nitrogen oxide (NOx) by c.60% Intl shipping - environmental performance... and industry is working with the IMO to reduce GHG emissions using: Technical measures incentivising designers, shipbuilders, shipowners including the Energy Efficiency Design Index for all new ships Operational measures incentivising operators, charterers, shippers, ports optimising speed, adopting energy management programmes e.g. Virtual Arrival (slowsteam, demurrage paid as per original arr) Pressure from Brussels - reduce GHG still further Industry pushing mandatory efficiency improvements Reducing GHG emissions on new ships by 30% by % 20% 30% Phase Phase Phase 3 on and after 2025 Reference Line Today Design Index (EEDI) Ship Size (DWT) Attained EEDI < Required EEDI [Tankers>20,000 DWT] Shipping is energy efficient US $ 240,000,000,000 and still has a massive incentive to reduce its GHG emissions even further - the annual fuel bill for international shipping - and one that is set to rise as oil prices rise and cleaner fuels are introduced - fuel bill is often % of total operating costs Changing face of oil transportation World GDP & oil demand - volatile tanker demand Source. IMF/BP/IEA/Fearnleys % Oil demand correlates to GDP Tonne-miles growth stronger because of more long-haul barrels Tanker market rates v o l a t i l i t y Source: Baltice: Exchange/BITR $/day Actual rates improved by slow steaming/backhauls 2005 $87, $27, $185, $5, $4-10,000 (small) or -$1-2,000 (large) Tanker market volatility peaks + troughs Tanker surplus vv phase-out and deliveries m dwt m dwt Hope for 2014? Under above assumptions, 6% growth necessary to regain market balance by 2014 or more removal of DH tankers Weak market, uncertain fundamentals Oil demand increasing 1-2% pa But oversupply of tankers - physical and operational Increasing North American oil supplies (shale oil) replacing Middle East oil West African oil satisfying increasing Asian demand for crude Reduced tanker tonne-miles? Tanker supply and demand - the key 100,000 tonnes North Sea/NW Europe (530 miles) 53m tonne-miles 100,000 tonnes Middle East/NW Europe (11,150 miles) 1,115m tonne-miles Tanker tonne-mile effect Tanker indices % Tanker fleet development (Assumed max phase-out) Tanker fleet increase some 72% m dwtnumber Assumed orderbook August 2011, include chemical tankers Strategic considerations for a tanker investor Young fleet - 70% good for another years China + Asia Pacific expected to drive oil demand Middle East has the production reserves Eyes fixed on BUT world economy unstable and high oil price increases uncertainty Large orderbook and deliveries weaken s/d balance Successful global GHG emission reduction means reduced oil consumption LNG Carrier and Product Tanker market strongest today - fewer ship deliveries, demand for clean energy US shale-oil backing out long-haul Middle East crudes Reducing tonne-miles ? Sustainability Commercial sustainability = viability Strategies for s u r v i v a l Is the old way of doing business the right way for the second decade of the 21 st century? INTERTANKO viability and sustainability Todays tanker market is unsustainable and poses a serious threat to the sustainability of the energy supply chain INTERTANKO viability and sustainability Un-viability manifested + in charter/freight rates not covering basic vessel operating costs + in the late payment of freight and demurrage hits owners cashflow increases owners working capital reqt + in inconsistent, unbalanced charter terms INTERTANKO viability and sustainability Estimated accumulated losses VLCCs + Suezmaxes + Aframaxes $ billion Sustainability Project Headline figures: Accumulated losses since 2009 for large/medium tankers $26bn The same again (or more) accumulated by the smaller sizes INTERTANKO Sustainability Project Aim: To realign tanker industry key stakeholders, and to work towards more balanced tanker trading conditions and fair risk sharing, that will allow sustainable quality shipping regardless of market cycles. To change bad habits/practices (late payments) A m b i t i o u s aim? Start with some specifics... INTERTANKO Sustainability Project NOT about poor freight rates Specifics: Erosion of, and failure to adhere to c/p terms Lack of understanding about Worldscale Inconsistent, subjective, costly vetting practices Delays in freight and demurrage settlements Sustainability Project ty Sustainability Project Contractual obligations? Freight payable on completion of discharge Pilot study: Typical 5-10 days Demurrage payable on receipt owners invoice Pilot study: Typical >3 months Sustainability Project pilot study, demurrage Sustainability Project Primary Focus: late payments by charterers Ultimate Aim: to change ingrained bad habits INTERTANKO Chairman Letter to Charterers >70 top level recipients Oil companies and oil traders Piracy Northernmost Attack 15 Jan 11 MV SAMHO JEWELRY (Pirated) Easternmost Attack 5 Dec 10 MV JAHAN MONI (Pirated) 2005 165 nm off coast 2006 200 nm 2007 200 nm 2008 445 nm 2009 1,200 nm 2010/2011 1,500+ nm 1,400 nm 1,450 nm 1750 nm Haradeere Somali piracy geographic spread 065E 15S Southernmost Attack 28 Dec 10 FV VEGA 5 (Pirated) Arabian Sea/Indian Ocean ship transits N / S transit of Arabian Sea vessels keeping ever further East running out of ocean space! Naval arrest and prosecution of pirates Piracy - Somalia 2009 Statistics - 47 hijackings (21% of incidents) 2011 Statistics - 24 hijackings (12% of incidents) 2013 Statistics - 6 attacks, 1 hijacking (brief), - numerous suspicious incidents Piracy - Somalia Fewer successful pirate attacks: Proactive interventions from naval forces Armed guards Ship speed Implementing BMP B M P Three essential requirements that cannot be over emphasised: Register Register in advance with naval forces Report Report to naval forces Implement Implement Self Protection Measures Gulf of Guinea Violent attacks by armed pirates Aiming to steal cargo, not hold hostages In national waters: no international naval intervention only permitted use local armed guards Thankyou for your attention