International Salvage Union is working with BIMCO and P&I Clubs to update wreck removal contracts and the tendering code of practice
Work has started on updating wreck removal contracts and the tendering code of practice as the salvage industry faces greater technical and financial challenges.
Wreck removal has become increasingly important to the salvage industry as the number of maritime casualties has fallen in recent years.
The International Salvage Union (ISU) estimates wreck removal makes up around 50% of its members’ revenues, supporting their continuous investment in providing emergency response capabilities.
However, the rising cost of wreck removal has impacted P&I Clubs’ finances and increased shipowners’ costs, prompting the shipping industry to make the process more cost effective.
That was the backdrop to BIMCO and other parties beginning work with the ISU to revise well-regarded wreck removal contracts. ISU is also working with the International Group of P&I Clubs to revise the wreck removal tendering code of practice, which has not been upgraded since 1998.
ISU president Richard Janssen is chairing the BIMCO group considering contract changes. He said wreck removal accounts for around half of ISU members’ annual gross revenues.
Income from these projects helps ISU members support their vital emergency response activities, which is why the union seeks fair renumeration for the numerous risks entailed in wreck removal.
“Transparent tender processes and contractor selection, using quantitative risk assessment and the fair apportionment of risk are the key matters,” says Mr Janssen.
“I am sure the spirit of co-operation will prevail as insurers and salvors both serve the shipowner and must work in their interests,” he adds.
Several wreck-removal projects have demonstrated how price should not be the only matter to influence tendering. “Assessing the exposure from different angles to then jointly develop the optimum solution sounds like a logical way forward, but is not often recognised as such,” says Mr Janssen.
“Contractors with a proven track record of well-managed, successful operations provide more certainty,” he explains, “and when performance is under government and media scrutiny an efficient, clean and safe job is essential.
“Transparency and realistic pricing is also essential to ensuring a range of contractors are able to compete fairly for work internationally and in all territories.”
Standard Club director of claims Sam Kendall-Marsden shares Mr Janssen’s view that the work should be collaborative. “Salvors ought to be remunerated appropriately to support a viable, healthy salvage industry for the benefit of the broader shipping industry,” he says.
ISU secretary general Roger Evans shares his concern that quantitative risk assessment should not be used for risk transfer, adding that full risk transfer should not be the default position at the outset of contractual discussions.
ISU vice president Nick Sloane emphasises the need for fairness in remuneration and risk analysis. “We do not mind taking risk, but it should be fair,” he says.
Part of this fairness comes from the contract tendering code of practice, agreed by the International Group of P&I Clubs and ISU in 1998. Since then, changes in environmental requirements, size of vessels and authorities’ demands has affected wreck removal tendering.
ISU is concerned that confidentiality, fairness and transparency of the process should be central to the way the contractor is selected. However, the cost of participating in tenders has become an increasing concern.
Also of concern is the continuous fall in use of Lloyd’s Open Form (LOF) in salvage work to record lows and increasing use of fixed sum contracts. These dynamics remove levels of remuneration while transferring more risk on salvors.
ISU members recorded just 35 LOF cases and a historic low for LOF revenue of US$49M in 2019. Mr Janssen explains how this is having an impact on salvors’ abilities for building capacity to handle maritime emergencies, casualties and risk.
“It is now an open question whether the capacity of the industry is satisfactory and whether its capability is aligned with the risks run by underwriters,” says Mr Janssen. Insurers and salvors recognise the importance of LOF, but not always its value.
“LOF facilitates rapid intervention to prevent a casualty from becoming a costly disaster,” says Mr Janssen.
LOF payments enable salvors to invest in equipment, vessels and people to uphold their capabilities to react to ever-more challenging emergencies, “reducing the business interruption to a shipowner and limiting their exposure and that of their underwriters,” says Mr Janssen.
“But appropriate rewards are vital to ensure the continued necessary investment in training and development of highly qualified staff, in specialised equipment and in a robust support organisation so here will continue to be provision of professional salvage services where and when they are needed,” he says.
Due to improvements in maritime safety, there are fewer major accidents. According to Allianz global head of marine risk consulting Rahul Khanna, there was a record low of 41 total losses in 2019. South China and southeast Asia suffered the most total losses, while container ships, roro vessels and car carriers were most likely to become total losses.
American Salvage Association (ASA) president and Resolve Marine client services manager Lindsay Malen Habib says the price of providing services in the US is unsustainable compared with the investment needed in assets and people to meet the stringent equipment and speed-of-reaction requirements of the US salvage and marine fire-fighting regulations.
ASA held a virtual quality partnership meeting with the US Coast Guard, National Oceanic and Atmospheric Administration and other authorities in November 2020 to tackle this and other matters. She describes 2020 as “the most difficult year” due to the global coronavirus pandemic and record year for hurricanes.
During H2 2020, there were 30 named storms, including 13 hurricanes in the north Atlantic, Gulf of Mexico and the Caribbean. For comparison, the season average is 12 named storms, including six hurricanes.
In Q4 2020, Northstar Marine’s Mike Jarvis was appointed vice president of ASA. The association also appointed Joe Farrell III from Resolve Marine and Kerry Walsh of Global Diving and Salvage as new executive committee members.
Resolve tackles Florida car carrier fire
Resolve Marine responded to a car carrier fire in Florida and transferred a salvage vessel to a new port in Alaska during Q4 2020. The OPA-90 salvage and marine fire-fighting responder tackled a fire on a 4,900-car equivalent vessel at the Blount Island Marine Terminal in Jacksonville, Florida. Firefighters contained the vessel fire using aqueous film-forming foam, lightering/spill packages and pumps, supported by dockside lorries, fireboats and FiFi-class tugs, which co-ordinated spraying and dewatering operations.
Once the fire was extinguished and the vessel declared safe for entry, salvors removed 1,494 tonnes of heavy fuel oil and 122 tonnes of diesel oil.
In Alaska, Resolve has transferred salvage tug Makushin Bay to its base on Kodiak Island following calls for more maritime and response services. Makushin Bay is available for emergency response and marine services along Alaska’s south coast. Resolve also maintains salvage response vessels, including tugs, barges and cranes, in Dutch Harbor in the Aleutian Islands.
Donjon removes hopper barge blocking key US Gulf port
Donjon Marine responded to a hopper barge damaged when Hurricane Delta made landfall near Creole, Louisiana. This barge, carrying rock to shore-up the jetties of the Calcasieu Ship Channel entrance, sank and blocked the channel. It restricted deep draft vessels from accessing the Cameron liquefied natural gas export plant, oil refineries in Lake Charles and other energy facilities.
Donjon was tasked with mobilising a salvage team, survey vessel, and its crane Farrell 256 to Cameron, Louisiana to clear this obstruction and return the port to normal operations.
Authorities agreed that destructive removal was the most appropriate way to remove this wreck. Donjon conducted an initial onsite assessment and dive survey of the barge to determine its position, state and orientation in the channel.
A wreck removal plan was developed to first remove the cargo of rock and then use Donjon’s refined breaker bar methodology to cut precise lines and break the barge into sections.
Once cut into manageable pieces, the crane used its heavy digging bucket to lift the pieces onto the material barge. Hopper barge sections were then delivered to the Army Corps of Engineers.
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