IMO 2020 coupled with ratification of the BWM Convention is bringing a steady stream of tankers to repair yards for “Eco” retrofits
Historically, the short-term supply side influences on the tanker market have centred on tonnage availability. In the 1990s this included slow-steam (in 1995 an average of 6.5% of the VLCC fleet was slow-steaming – Lloyd’s Shipping Economist figures) or combination carriers trading wet. The later had a bigger impact in the Aframax tanker sector with figures showing 10% of the combination carrier fleet trading wet.
Today there is new short-term influence on tanker supply – tankers unavailable to work due to extra time spent during the Special Survey dry docking to undertake “Eco” technology retrofits. According to Clarkson Research Services the retrofitting of Eco technology, mainly scrubbers, will reduce available tanker fleet supply by 1.4% in 2019. While this is not especially statistically significant, the lack of available tonnage at the right time and place will cause short-term spikes in rates, as did slow-steaming in the 1990s.
To arrive at the tanker retrofit impact figure, analysts at Clarkson Research Services used ship movements data and calls at repair yards as an additional indicator of Special Survey and over the last three years, the shipping data provider has recorded over 20,000 repair events at over 600 repair yards.
Another facet is that Eco technology retrofits is driving a new investment cycle alongside the traditional newbuilding cycle of high initial capex followed relatively low expenditures on regular maintenance and Special Surveys. Of course, the Special Survey is also an opportunity to fit scrubbers and Clarkson Research Services reports that its “Scrubber Count” now stands at over 3,000 vessels (all types).
The Clarkson Research Services data also reveals which shipyards are receiving the bulk of the global Special Surveys work in 2018.
The top ten ship repair yards for Special Surveys (all vessels types – source Clarkson Research Services):
An analysis of repair yard event data excluding Special Surveys reveals that 53% of events were Eco technology upgrades, 41% refurbishment and 6% other.
The time required to undertake a retrofit is significant. DHT Holdings reports that during the second quarter of 2019, four ships were undertaking scrubber retrofits, including one project which was done in connection with its third special survey and drydock. Out of the scheduled off hire days in the quarter, 131 days were related to the scrubber project.
The size of the DHT Holding scrubber retrofit is relatively small-scale to those announced by other companies. The largest in terms of number is probably that of Scorpio Tankers. In July 2019, Scorpio Tankers has ordered a further 14 ENVI-Marine emission control systems from Pacific Green Technologies, a strategic joint venture with PowerChina SPEM, a unit of China’s largest engineering, procurement, and construction firm and a supplier of emission technology to Chinese power stations.
Scorpio Tankers has ordered a further 14 ENVI-Marine emission control systems from Pacific Green Technologies, a strategic joint venture with PowerChina SPEM, a unit of China’s largest engineering, procurement, and construction firm and a supplier of emission technology to Chinese power stations.
Eco in the pipeline
More Eco technology retrofits are in the pipeline: ballast water treatment technology supplier Ecochlor has announced that it has an agreement with Euronav of Belgium to supply seven Euronav Suezmax and VLCC tankers with a ballast water management system (BWMS). The agreement comes with an option for Euronav to purchase an additional 30 Ecochlor systems for their vessels between 2020 – 2024. This is a substantial amount of retrofitting work for the repair yards able to handle the largest tankers.
It is known that the Euronav has been a client of Nakilat Keppel Offshore Marine (N-KOM) in Qatar, but there is no confirmation if the BWMS retrofits will take place in Qatar. Of course, Euronav has been an outspoken critic of scrubbers and these are less likely to fit into the company’s retrofit plans for its fleet of tankers.
Frontline has committed to the use of scrubbers, having bought a share in Feen Marine, a manufacturer, and has purchased 18 for future installation. The reported cost of the scrubbers is US$15.7M. In addition, Frontline has purchased four ballast water treatment systems at a cost of US$2.8M. The above figures do not include installation cost.
Nordic American Tankers (NAT), like Euronav, has come out publicly that it will not be fitting scrubbers stating: “The Company (NAT) is steadfast on its decision that scrubbers are not a solution for NAT based upon a conservative financial policy. NAT does not take on risk it does not have to.” The significance here is that NAT and Euronav will not be losing days off hire to retrofit scrubbers, but also the repair yards will be missing that particular business.
The Teekay companies have not made any statements regarding scrubbers or ballast water treatment system retrofits but continue to undertake general repairs and maintenance during dry docking. A favoured repair yard is Remontowa SA in Poland. In 2019, Navion Oceania shuttle tanker was one of the several ships repaired at Remontowa. The scope of works included the survey of four tunnel thrusters, both propeller hubs, both main engines overhaul and several electric motors inspection. Additional works like hull maintenance, steel works in cargo and ballast tanks, as well as piping works in several locations had been also carried out.
Over the last two years, six ships of this shipowner moored at Remontowa. In 2018 they were Amundsen Spirit and Nansen Spirit .The third project last year was related to Navion Oslo. So far in 2019, the shipyard has hosted in turn: Stena Natalita, Peary Spirit and Scott Spirit.
As mentioned above, Euronav often sends its tankers to N-KOM. The yards repair business is booming, and not just for tankers. Since operations began in 2011, N-KOM has been one of the Middle East’s leading shipyards, with an unrivalled track record in vessel repairs. Strategically located within Ras Laffan Port in Qatar, N-KOM has delivered in excess of 900 marine and offshore projects to clients from around the world.
N-KOM is a base for prominent maritime service providers such as Gaztransport & Technigaz, Goltens, Wärtsilä, Wilhelmsen Ships Service, Turbo Technik and Cargotec, operating within the shipyard, a great convenience to ship owners and managers utilizing the shipyard.
Due to the upcoming IMO global marine fuel sulphur cap and the implementation of the BWM Convention, N-KOM reports it is seeing a lot of interest from the market for the installation of scrubbers, fuel systems modification and ballast water treatment systems.
So far in 2019, N-KOM has completed six BWTS installations for various types of vessels such as LNG and LPG vessels as well as VLCCs to date. The yard is experienced in carrying out installation of four different BWTS – namely Samsung, OceanSaver, Alfa Laval and Ecochlor, respectively. As such, the duration in the yard between the first and second retrofit was observed to be significantly reduced by 43%, demonstrating N-KOM’s competency and efficiency in handling such complex projects.
In 2018, N-KOM successfully won a competitive bid for the installation of scrubbers and BWTM for a series of VLCCs belonging to one of the top tanker operators. In mid-September 2018, the first VLCC of the series was in the yard for routine dockings and retrofit of an in-line type scrubber as well as a BWMS. Moving forward, starting from the first quarter of 2019, the second and third VLCC of the series will undergo routine dockings and this will include the retrofit of an in-line scrubber as well as of a Ballast Water Treatment system.
Elsewhere in the Middle East, Bahrain-based Arab Shipbuilding and Repair Yard (ASRY) is undergoing a management transition. ASRY appointed a new chief financial officer and started to implement a corporate strategy to improve sustainability and efficiency. Sahar Ataei was appointed as chief financial officer after 19 years with Bahrain’s national airline Gulf Air, most recently in the same position.
The second management appointment is for ASRY’s current ship repair general manager Magdy Sharkawy, to become acting chief executive officer while chief executive Andy Shaw transitions to advisory role. It was Mr Sharkawy who announced at Nor-Shipping 2019 a new agreement with Ulrik Qvale & Partners (UQP). The accord, effective from 12 June 2019, will assign UQP as the exclusive representatives of ASRY within the Norwegian market.
Streamlining the agent network
ASRY’s current ship repair general manager Magdy Sharkawy confirmed the positive impact the deal will have on ASRY’s reputation in Norway. “Having been streamlining our agent network over the past two years we have seen tangible benefits from being represented by agents with multiple principals and diverse revenue streams. UQP represents over 25 companies, across different maritime sectors, and we’re confident this mix will expand our business in the important Norwegian market.”
UQP managing director Oivind Qvale, commented: “Adding ASRY to our portfolio of clients allows us to offer our wide customer base of ship owners and managers a leading yard in the Middle East as an option in their repair strategies. Both ASRY and UQP have more than 40 years of experience and reputation, so combining our offering will create some interesting synergies.”
Oman Dry Dock Company achieved a 30% increase in ship repairs in 2018 with 130 projects undertaken. The largest tanker project has been the dry docking of the Shipping Corporation of India of Desh Vaibhav, 316,409 dwt VLCC which suffered a major explosion in the Gulf of Oman. This was a complex operation as the vessel required 60 days of static gas freeing in a remote location in the yard be before work could begin on repairing the vessel.
Gibdock is located on one of the busiest trade lanes, and since the detention of the tanker Grace 1, it is unlikely that any Iranian tankers are going to be dry docking there soon. The facility has been undertaking ballast water treatment system retrofits. Gibdock has completed a complex ballast water treatment system retrofit onboard a 179 m 2013-built, DNV GL classed vessel over a month-long programme of works. The vessel departed the yard with its new ballast water treatment installed and ready for commissioning, having spent 16 days in Gibdock’s No. 1 Drydock, and the rest of the time alongside.
Gibdock technicians carried out all the necessary pipework and preparations onboard, before assembling and installing the owner-supplied UV-type ballast water treatment system. The yard worked closely on this project with Aries Marine, a UAE-based specialist in ballast water treatment retrofit engineering, which supervised this element of the drydocking schedule.
Gibdock ship repair manager, Juan Piñero, said: “This was a complex retrofit, and our engineering staff and pipefitting team rose to the challenge magnificently and completed the works to the client’s complete satisfaction. With this project we have gained further valuable experience in ballast water treatment retrofits, which will hold us in good stead for the future, as a growing number of owners look to carry out this type of work to meet IMO requirements.”
Gemak AS of Turkey completed its 40th ballast water treatment system installation. The lucky recipient was an MOL chemical tanker. Apparently, this is the 25th MOL vessel to enter the shipyard since 2012.
In Singapore Keppel Shipyard has been busy on tanker conversion, although confidentiality over rules naming particular vessels. The yard has secured a contract to modify a floating production storage and offloading (FPSO) vessel with a new aft hull unit. Keppel Shipyard will be responsible for the design of the aft hull, procurement of equipment, fabrication, outfitting, integration and commissioning work on board the existing FPSO.
The installation will also include a new accommodation block that can accommodate up to 140 personnel. The unnamed FPSO arrived at the shipyard in Q4 2018 in preparation for the upgrade. Construction and installation work is scheduled to commence in Q1 2019 and the completed FPSO is scheduled to be redelivered to the owner by the end of 2020.
Technical and commercial ship management services company Newport Shipping has inked cooperation agreements with several marine equipment suppliers and service companies. Recent agreements with hatch cover specialist Navitech, machinery specialist IngeJov, and ShipParts.com for turnkey spares supply, which allows Newport Shipping to procure spare parts and deliver specialised services as part of the group’s global ship repair service offering.
ShipParts.com founder and chief executive David Luan said: “We are delighted to have signed this cooperation agreement with Newport Shipping. The agreement allows its shipowner customers and partner shipyards to benefit from economies of scale, with access to more than 5,800 equipment suppliers and counting, including all the major brands. The agreement also fits well with ShipParts.com strategy of increased global reach of our online spare parts procurement platform.”
Under the agreement, all spare parts required by Newport Shipping customers will be procured and fulfilled by the ShipParts.com portal and delivered to the yard before vessel arrival.
Commenting on the agreement, Piraeus-based shipping services company Navitech technical manager Vasilis Borsis said: “With the signing of this agreement Newport has access not only to specialist technicians expert in the construction, repair and modification of hatch covers, but we can also assist in all hull condition surveys, inspections and repairs. We can provide a quality of repair services internationally expected of Newport’s customers, while we can expand our business. It’s a win-win for all parties.”
Newport Shipping’s chief operating officer Roy Yap said: “We aim to deliver turnkey services to shipowners that go beyond the conventional ship repair scope. The cooperation agreements we now have in place with the suppliers of quality spares and specialist; support our objective of delivering a standard quality level across all our partner shipyards around the globe.”
Yap said similar agreements are currently being negotiated with other suppliers, notably scrubber and ballast water treatment system manufacturers.
“We will be shortly announcing several cooperation agreements with scrubber makers and 3D scanning and engineering companies towards providing a turnkey scrubber retrofit offering backed with financing.
“We are further exploring introducing riding squads to carry out afloat repair works and scrubber retrofits, which can shorten the duration for retrofit considerably or carry out the retrofits entirely or partially afloat; with or without drydocking. This is expected to reduce the off-hire times faced by shipowners for scrubber retrofits.”
The expansion of Newport Shipping’s services and Oman Dry Dock Company’s growth in repairs are indicators of the overall increase in the tanker conversion and repair sector. Another strong indicator is the arrival of outside investors into the industry. US-based Chatsworth Securities has joined forces with ONEX Elefsis Shipyards to become a shareholder and the exclusive investment bank for the Greek company’s capital needs.
This includes funding a shipyard purchase. ONEX Elefsis Shipyards has agreed to acquire the second biggest shipyard in Greece through Greek Bankruptcy Law and a rehabilitation plan expected to be approved by the Greek Courts by the end of 2019.
The shipyard company is working with the Greek Government and creditors to restart the shipyard as successfully as another ONEX Group company did in the case of Neorion Syros Shipyards. The whole deal will exceed US$400M within the next 15 years. This is expected to be the biggest turnaround in the history of Greek shipyards and one of the largest shipyard rejuvenation projects in Europe.
Chatsworth, which deals exclusively with institutions and family offices, has raised over US$3Bn of capital in IPOs, secondary offerings, corporate capital raises and traditional and alternative asset management firms and its industry focus includes shipping, biotechnology, property, insurance, transportation, financial, capital markets, asset backed lending, alternative energy, oil & gas.
Chatsworth managing director and one of the original founders Ralph Di Fiore commented: “This is a very important co-operation [project] for our group. By joining ONEX Elefsis Shipyards with an economic stake in the company our commitment to its success is paramount. Once more we are pleased that the company selected Chatsworth as its exclusive investment bank. ONEX Shipyards is a very successful group which transforms bankrupted and closed shipyards, by creating international competitive advantages, by creating new well-paid jobs and by improving services above industry’s standards through innovation, speed and quality. We have seen the generation of added value that will be beneficial for our company, partners and shareholders. We trust and believe the ONEX Shipyards founder and chief executive Panos Xenokostas, who stated ’I have a vision to create a global brand that will enhance the business prospects and reputation of Greece as a destination for shipping services and we are very excited for the future’".
Mr Xenokostas commented: “Chatsworth joins our journey and we are very happy about that. Its network, financial strength and expertise in raising capital is adding value to our organisation and helping to unlock the group’s prospects. Our job is to recreate Greek shipyards that were in decline for decades. That is “Phase 1” in our plans. We started with Neorion in Syros and we continue with Elefsina. Neorion was a game-changer in the industry. We are very proud of our shipyards’ workers, technicians, engineers and experts who are working hard and smart to make our shipyards the first choice of excellence to global shipowners.”
Should the Elefsina projected be completed in 2020, what would be the market for tanker Eco retrofits? The DNV GL Alternative Fuels Insight Website Veracity currently shows 466 tankers equipped with scrubbers. However, VesselsValue reports the total tanker fleet is over 11,000 vessels, which indicates the take-up of scrubbers among the tanker fleet is tiny.
As we have seen from the above, the key time to undertake Eco retrofits is during the Special Survey. According to VesselsValue, there are just over 1,800 tankers with Special Surveys due in 2020. This includes 136 VLCCs or approximately 17% of the VLCC. Of course, not all these VLCCs are going to have longer than usual Special Survey dry dockings to fit Eco technology in 2020, but it gives an indication of the potential impact on the supply and brings into play a new short-term supply disrupter not seen since the slow-steaming and combination carriers seen in the 1990s.