Tanker Shipping & Trade Conference Exhibition and Awards – the key issues and the big winners

The 2018 Tanker Shipping & Trade Conference Exhibition and Awards offered attendees a prime opportunity to consider the latest regulatory and operational developments affecting the tanker markets

This year’s Tanker Shipping & Trade Conference Exhibition and Awards followed the now familiar format of a pre-conference Intertanko members-only breakfast briefing, held under Chatham House Rules. Like the rest of the conference it was chaired by Riviera’s head of content, Edwin Lampert; the briefing was led by Intertanko’s environment director Tim Wilkins and GMS non-executive director Dr Nikos Mikelis, who explained the imminent introduction of the forthcoming European Regulation on ship recycling (EU SRR), an initiative being introduced by the EU.

The briefing revealed that this latest EU initiative appears doomed before it even comes into force, as it fails to address the fundamental issue that ship recycling mainly takes place in Asia, not Europe.

The Intertanko briefing commenced and closed with a delegate poll on their company’s attitude to ship recycling. Before the meeting, Mr Lampert confidentially polled members on the question: Do you have an end of life policy for your vessels?

After the briefing on EU SRR and other scrapping-related subjects, members were asked: Do you now plan to look into having an end of life policy for your vessels?

Nearly half the members present (42%) had no vessel end of life policy. However, after the briefing the majority of members present planned to put a policy in place.

Nearly half the Intertanko members present (42%) had no vessel end of life policy, but most planned to implement one

The conference itself was opened by platinum sponsor DNV GL, whose business director tankers Catrine Vestereng detailed some of the developments the class society was undertaking.

DNV GL business director tankers Catrine Vestereng welcomed delegates to the 2018 event

Ardmore Shipping’s executive vice president and chief operating officer Mark Cameron gave a shipowner’s perspective on the challenges facing the industry. He expressed the view that if there was one thing the tanker industry was good at, it was planning. While there are some “scary looking” projections connected with the 2020 IMO global sulphur cap, he felt that the industry should be pragmatic: “Regarding compliance, some of the numbers being thrown around are inflammatory and project shipping in a negative light. I think oil majors have a big part to play here…and they should address how they intend to deal with those (shipowners) who are deliberately non-compliant,” he told the audience.

In a reference to the approach taken by the US authorities, which involves directly prosecuting individuals on board that hold positions of responsibility for misdemeanours, Mr Cameron said: “Let’s not prosecute the ship staff. Let’s learn from the past. Any of the non-compliance going forward is not going to be a rogue chief engineer or captain making a decision on their own. This will be an owners’ or charterers’ decision. Technical shipmanagers have a big role to play in this, too.”

He said that the industry needed to move on. The regulation on low-sulphur fuel is in place and the timeline is clear, and there is no point in industry leaders continuing to criticise the legislative process. Mr Cameron said the need to be fully supportive of the process: “They should say “we are going to comply”. There are choppy waters ahead, but it is nothing we are not already used to as an industry.”

On the subject of scrubbers, he noted: “I do not think it will be a binary world of scrubbers right, scrubbers wrong”, adding that in the longer term, there will be options to fit scrubbers, if indeed that turns out to be the best solution.

One key issue Mr Cameron wanted to raise was Tier III and scrubbers. “A lot of people still have Tier II-engined ships on order. There is a problem with Tier III and SO_x scrubbers,” he said.

Mark Cameron of Ardmore Shipping explained that it is important to include the whole life costs when making a financial case for scrubbers
 

To this end, he wanted to make the audience aware that fitting scrubbers was not just a capital cost, there was an operating cost, too. The scrubber itself needs energy to operate, and Mr Cameron conceded that on Ardmore Shipping’s tankers: “Every litre of fuel is a prisoner. Our captains and chief engineers can save fuel in litres – we are at that level. And it is a misnomer in the industry to think in tonnes.” In his opinion, burning extra fuel to operate a scrubber does not make environmental or financial sense.

“The oil majors have a big part to play; they should address how they intend to deal with those [shipowners] who are deliberately non-compliant”

Mr Cameron also asked the shipping industry to make a fundamental sense check: “How did we end up with 0.5%? Where did that number come from?” he said. “Surely, if this is about lives, 0.1% would have been a better target. It would have been a straight run distillate product.”

He questioned the logic of producing 0.5% heavy fuel, and the energy required to produce hybrid fuel alternatives, asking “where is the joined-up thinking?”

And he also called for such logic to be applied to CO₂ legislation. As a company, Ardmore Shipping is a member of numerous trade bodies, all of which have a representation at IMO.

“That does not make for a very efficient process,” he said, explaining that the different industry bodies need to come together in a roundtable forum to form a single long-term view on CO₂ reduction, and how that can be achieved.

He added that as a public company, his shareholders do not pay the company to speculate and as such, Ardmore Shipping will be using compliant fuels.

Mr Cameron closed his presentation with a slide defining demurrage: from the old French demeurage – to linger, tarry. The intention was to speak plainly to charterers about the now-ingrained extension of demurrage payments.

“What is wrong with this industry when it comes to paying the bills for the services rendered?” he asked. “This is a time of change, and if there are representatives of our customers in the audience it is about time you woke up and realised that the practices of demurrage payment today are no longer acceptable and will be less so in a post-2020 world. This attitude of paying demurrage bills with a 200- or 300-day delay is just not acceptable. Come 2020 when we are all trying to make sense of the situation, tying up millions of dollars of our due revenue in the hands of our customers should not be tolerated.”

The big questions

Conference chairman Mr Lampert asked the two industry leaders present, Euronav’s chief executive officer Paddy Rogers and Ardmore Shipping’s executive vice president and chief operating officer Mark Cameron three questions:

1. What do you believe will be the biggest professional decision you will take in 2019?
2. What do you see will be the biggest opportunity?
3. If this trading year on a scale of 0 to 10 was a five, how do you assess prospects for 2019?

Mr Cameron answered first:

The biggest decision Mr Cameron foresaw in 2019 centred around planning. He saw his responsibility is 2019 as being to execute a plan that would ensure the minimal amount of heavy fuel oil remained on board any vessel in the fleet at the start of 2020. If an Ardmore Shipping vessel has heavy fuel on board, there will be a plan to remove this unwelcome product. He felt that storage tanks ashore will rapidly fill up and most of the world fleet will switch to compliant fuels. In his opinion, the options for trading heavy fuel oil will be limited. That means the fleet will switch to compliant fuel in the last quarter of 2019, and that will have an impact on the company’s earnings.

Mr Cameron felt the biggest opportunity will come after 2020, noting: “The elephant in the room here is the need for joined-up thinking on CO₂”.

Finally, he said that for the trading year 2019, Ardmore Shipping is expecting an improvement, and if 2018 was a five, then 2019 may be a seven.

Mr Rogers then gave his considered answers to the three questions.

He felt that 2018 was not a good year for tanker owners, with only Q4 showing a positive performance, and he felt this would carry over into Q1 of 2019. Thereafter, there is the summer slowdown, coupled with a big year for tanker deliveries. Therefore, he said, Q1 will deliver high earnings, falling in Q2 as the loss in demand and the increase in supply coincides. He foresaw a scramble for logistical re-organisation from the middle of 2019 onwards. By ‘logistical re-organisation’ he meant the possibility of tankers arriving at terminals only to wait while the refinery/tank farm cleans a tank of the old product to accept the new cargo of the premium low-sulphur cargo.

This re-organisation will commence with the oil producers, who have sunk costs into the refinery process for producing heavy fuel oil and who will be switching to low-sulphur fuel and/or blended fuel production. Aside from this, there will also be some de-bottlenecking of the Permian Fields, which will boost crude oil production in the US, increase exports and drive up tonne-miles.

“Any of the non-compliance going forward is not going to be a rogue chief engineer or captain making a decision on their own. This will be an owners’ or charterers’ decision”

The second half of 2019 will be a most interesting/difficult period, he said. The driving force will be the increased segregation of bunkers across all aspects of the industry, from refineries, tank farms, bunker supplies and on-board ships as fuel and cargo. “There is not an unlimited access to new pipelines and new tanks ashore. No one is making a particular investment in them,” he said, “But ships have always been a great alternative solution for logistical management.” In that case, if 2018 was a five, then 2019 would be an eight or a nine.

Inspecting the inspectors

Before the awards ceremony there was a session on the topic of vetting. Vetting can be a contentious issue, and the Chemical Distribution Institute’ (CDI) general manager Capt Howard Snaith was quick to point out that the CDI is itself inspected by the British Standards Institute and through internal ISO audits.

The CDI is very much a process-driven organisation and has a system for the inspection of inspectors. “Complaints are taken very seriously and in the last 12 months we have revoked one senior inspector’s CDI licence for non-compliance,” Capt Snaith told the conference.

In a question and answer session at the end of presentation, he was asked how best to prepare for a CDI inspection.

“There is no need to prepare for a CDI inspection. All the questions are really just looking to see if practices the vessel should be following are being done,” he replied. Many of the questions refer to statutory requirements, and if those cannot be answered or are failing to be adhered to then the vessel is in breach.

“To give an example, myself and the staff at the CDI never prepare for internal audits or the external BSI inspection. We are living and breathing the regulations and therefore we should be complying,” he said. “If the crew is well-trained and has the right attitude, it will be the same for them. It is a little bit like doing an exam, but with the great advantage you know what questions are going to be asked and it’s an open book exam.”

The Awards

The event ended its first day with a gala dinner, where the tanker industry gathered to show its appreciation for the businesses and individuals driving the industry forward.

In a crowded field, nominees were shortlisted and an advisory panel of industry directors determined the winners.

AET Tankers president and chief executive Capt Rajalingam Subramaniam took home the Industry Leader Award, sponsored by Clean Marine, for his consistent leadership and pioneering role in transforming the industry. Capt Raja, as he is known, called on the industry to achieve the at least 50% reduction in greenhouse gas target set by IMO.

“We all talk about the IMO 2020 [sulphur cap], but IMO 2020 is something that we will get over. And the IMO 2050 target of a 50% reduction over the 2008 baseline is something as an industry we should aspire to achieve,” he said. “Shipping on a per-tonne-mile carried basis is the most energy efficient transport in the world, and we should all be very proud that we are environmentally friendly and energy efficient.” He added: “We inherited this planet, and we must ensure that we pass on this planet to the next generation in a better space than what we inherited.”

As head of the shipmanagement division of MISC, Capt Raja led the team that transformed MISC into a global leader in energy transportation, and his pioneering approach has continued as AET has embraced LNG as the fuel of the future, with Aframax tankers being given an LNG dual-fuel option. AET anticipates that up to half of its Aframax fleet and other petroleum assets, including VLCCs, will also adopt the LNG dual-fuel option over the next few years.

The Lifetime Achievement Award, sponsored by Winterhur Gas & Diesel, went to Thome Group executive chairman Olav Eek Thorstensen for a distinguished career in shipping that has spanned some 50 years.

Giving Mr Thorstensen his award, Intertanko environmental director Tim Wilkins said: “He has been a stalwart of Intertanko’s council. It took him a short 15 years to graduate to executive of Intertanko’s council, but finally he’s gotten there.”

Mr Thorstensen also touched on environmental regulations in his acceptance speech, saying: “The introduction of the sulphur cap, coming into force from January 2020, will be one of the biggest tests for shipping, both from a commercial, financial and a technical point of view.”

He noted: “Questions remain whether there will be enough low-sulphur fuels available at minor ports. It will most likely have a significant impact on existing tonnage. For those owners that choose the scrubber route, there are many considerations to be taken into account, yet time is rapidly running out as the 2020 deadline looms,” he said.

“We see today that more and more owners will see LNG as an alternative fuel for newbuildings, and I suspect most large vessels ordered after 2020 will have LNG or other gasses as fuel.”

Tanker Shipping and Trade gave out seven awards:

Technical Innovation Award - Winner: DNV GL

Operational Excellence Award - Winner: Bahri Tankers

Environmental Award: Sponsor: ITOPF; Winner: Teekay and Wärtsilä Marine Solutions

Tanker Operator of the Year: Sponsor: DNV GL; Winner: Euronav

Tanker Safety Award: Winner: Korean Register

Industry Leader Award: Sponsor: Clean Marine; Winner: Capt Rajalingam Subramaniam, president and chief executive of AET Tankers

Lifetime Achievement Award: Sponsor: Winterthur Gas & Diesel; Winner: Olav Eek Thorstensen, executive chairman, Thome Group