By Wendy Laursen

The European Parliament voted to adopt a regional EU regulation on the monitoring, reporting and verification of individual ship CO2 emissions on Tuesday. The move to do this, rather than to rely on the IMO’s agenda for shipping’s self-management of change, comes in part from politicians’ recognition of people power.

The International Chamber of Shipping, BIMCO and Intercargo naturally stated their disappointment, but there is a different, perhaps more powerful rally for people power underway that they might be more disappointed about. 

The Guardian has launched a campaign that could impact both the shipping and offshore industries. There is a petition to sign as part of its “Keep it in the ground” campaign addressed to Bill and Melinda Gates, founders of the Bill and Melinda Gates Foundation and Jeremy Farrar and Sir William Castell, director and chair of the Wellcome Trust:

“Your organisations have made a huge contribution to human progress and equality by supporting scientific research and development projects. Yet your investments in fossil fuels are putting this progress at great risk, by undermining your long term ambitions.

“Climate change poses a real threat to all of us, and it is morally and financially misguided to invest in companies dedicated to finding and burning more oil, gas and coal. Many philanthropic organisations are divesting their endowments from fossil fuels. We ask you to do the same: to commit now to divesting from the top 200 fossil fuel companies within five years and to immediately freeze any new investments in those companies.”

The Guardian indicated an element of collaboration against its cause, stating that the U.K. government granted far more meetings to the fossil fuel sector than renewable energy companies between 2010 and 2014.

The contract of the century Bob Dudley, BP’s Group chief executive, spoke of “great courage, great adventures and great leadership” as he traced the company’s progress at its 2015 Annual General meeting this month. He made the obvious point about what people around the world have gained from fossil fuels: “Our aim is always to achieve the best possible value for you, our shareholders. But at the same time we are a business with a wider purpose. The money you invest and the energy we deliver transform economies and transform millions of peoples’ lives.” Last year BP celebrated 50 years in the North Sea. “We were opening up a new world energy frontier at the time and a new era for Britain,” said Dudley. 

Last year also marked the anniversary of an agreement BP first signed in Azerbaijan 20 years ago. “That deal to produce oil became known as the Contract of the Century,” said Dudley. “It has brought new prosperity to the people of Azerbaijan.”   In their latest developments in the country, BP is opening up a new 3,500 kilometre corridor – the Southern Gas Corridor – that will bring a completely new supply of gas to Europe. This year the pipes are being laid in the ground.

“We are leading a flagship for the industry, demonstrating how BP’s major projects continue to move forward at pace. It shows how quickly things can happen when business and governments work well together,” says Dudley.

“Such projects will generate value for BP for many decades to come, and I am very proud to go to work knowing we make big differences to peoples’ lives in this way.”   Dudley acknowledged many people loyal to the company. “I know many of you have been loyal to BP over many decades. As a shareholder in BP, one of Britain’s great companies, one that is over a century old, you understand the value of investing in a business that can look a long way back as well as a long way forward.”

Uniting the power to change

These people, BP’s shareholders, reflect a different viewpoint to those the Guardian is expressing, but Statoil CEO Eldar Sætre, delivering a keynote speech in Houston last week, highlighted the need for unified, not divided, action.

He said that solving the challenge of achieving lower carbon emissions is not something that one company can do alone. “It calls for more engagement as an industry. That engagement requires transparency about our performance and how we conduct business, ongoing dialogue with our stakeholders, and holding ourselves responsible for setting the standards to effectively influence our operating environment.”  Sætre said: “The hard truth is that despite all our technical sophistication, the highest HSE standards, and priding ourselves on managing risk…Our industry is still perceived mostly as part of the problem and not seen as wanting to be part of the solution.”

Statoil acknowledges the scientific consensus on human-induced climate change and embraces the need to meet the two degree target. Limiting warming to no more than two degrees has become the de facto target for global climate change policy.

The UN’s COP 21 meeting on climate change is scheduled for Paris in December. “This means that now is the time to engage: with policy makers to enable the right kind of regulation and with civil society to create trust in our contributions. If we don’t, we risk becoming an industry that neither gets access nor acceptance,” says Sætre. 

So what can we as an industry do, he asks. “First of all, we can continue to replace coal with natural gas. It’s an immediate and highly effective way of cutting emissions. And both Asia and Europe should follow the U.S. on this journey.”

Statoil believes in a price on carbon that effectively stimulates the shift that is needed. “In Norway we have had a high CO2 tax for more than 20 years. Currently it’s at about $65 per ton. That has helped reduce emissions to less than half the global average.”

He calls for innovation and investment in new solutions. Statoil recently launched a technology cooperation with GE aimed at accelerating low carbon solutions.

“Working together we can go further and faster than alone. As an illustration, in the Bakken we are already capturing flared gas, through our CNG in a box solution, using it to fuel our drilling rigs, saving diesel and reducing emissions.” Statoil also recently launched the “End routine flaring” initiative together with the World Bank, UN and other industry partners. “The target, zero flaring by 2030, is one of the most important contributions our industry could make, and by achieving it 300 million tons of carbon emissions could be cut,” he says. “In general there is a lot of naivety when it comes to what it will actually take to transform the global energy systems and transition to a low carbon society. I see a strong role for oil and gas in the world’s future energy mix. Delivering all the oil and gas that a growing population needs, is a major challenge. Delivering it with low costs and low carbon, will require even more.”

Business impact

According to ICS, BIMCO and Intercargo, negotiations on additional measures to help reduce CO2 from shipping will continue at the MEPC in two weeks’ time. “It will be vital for EU Member States to explain how the new EU Regulation can be implemented in a way which is fully compatible with whatever might be agreed by IMO for global application, in the interests of avoiding the unhelpful complication of a separate regional regime,” said the organizations in a statement.

The shipping industry associations reiterate that the latest IMO Green House Gas Study, published in 2014, found that international shipping had reduced its total CO2 emissions by more than 10 percent between 2007 and 2012, despite an increase in maritime trade.

A simple solution

Will this be enough to satisfy people power? The Guardian has over 180,000 signatures for their “Keep it in the ground” petition. “Join us and more than 189,000 others in urging the world’s two biggest charitable funds to move their money out of fossil fuels,” says the Guardian on the front page of their campaign website. “Take a stand,” it urges. 

“Climate change can be tackled using a very simple idea – divestment. It means taking your money away from companies involved in extracting fossil fuels.”

Editor’s Note: The opinions expressed herein are the author’s and not necessarily those of The Maritime Executive or Marigons.  

By Kathryn Stone

A recent study published in the American Chemical Society indicates that soybean lecithin, a common soy-based food additive, may have possible applications as a dispersant for crude oil spills.

The study published last month by Chemist Ram Gupta and colleagues tested how well soy lecithin in its lipid component form can break down oil in water. The results indicate that the substance worked as well or better than two commercially used dispersants. This is particularly noteworthy because soy lecithin is biodegradable and less toxic than traditional chemical dispersants. The researchers suggest that the substance may have the potential to replace traditional dispersants.

Chemical Dispersants

Currently, chemical dispersants are the most effective way to quickly remove oil from contaminated environments, but their usage has been heavily criticized. Dispersants do not reduce the amount of oil in an environment, instead they reduce the size of oil droplets so that marine animals and ecosystems will be less likely to be coated in oil. Many opponents claim that the addition of chemical dispersants may further contaminate marine environments already damaged by oil.

The Deepwater Horizon Spill in April of 2010 was notable for the amount of Corexit dispersant used to counteract the effect of oil on marine habitats. Over 1.84 million gallons of dispersants were used over the course of BP’s clean-up efforts. This usage came under heavy scrutiny at the time of the disaster resulting in EPA Administrator Lisa P. Jackson and then-Federal On-Scene Coordinator Rear Admiral Mary Landry directing BP to reduce dispersant usage by 75 percent from peak usage.

This month The National Wildlife Foundation released a five year report highlighting the aftermath of the Deepwater Horizon. Cited among the data are studies indicating that dispersants may have caused lesions in crustacean shells and may adversely affect coral larvae. Additionally, dispersant compounds have been found in the eggs of white pelicans as far north as Minnesota and Illinois

Image Courtesy of Princess Cruises

By Kathryn Stone

A CDC report released yesterday confirms that the illness reported aboard Princess Cruises Line’s Coral Princess is norovirus.

The Coral Princess was on a Panama Canal voyage, departing from Fort Lauderdale April 12 and arriving in Los Angeles April 27, when passengers started reporting symptoms of the sickness. In total, 99 passengers and 12 crew members reported being ill aboard the voyage.

The norovirus infection is highly contagious and causes gastrointestinal distress including vomiting and diarrhea. The virus is frequently found in closed conditions such as those aboard cruise ships and can be transmitted by infected people or contaminated food, water and surfaces.

This incident marks the sixth case of widespread sickness on a cruise ship in the US and the fifth confirmed norovirus outbreak on US passenger vessels in 2015. About two weeks prior to this incident, the Legend of the Seas was also hit by an outbreak of norovirus. In 2014 a Time Magazine article detailing the worst norovirus outbreaks cited the Coral Princess for a February 2009 outbreak that infected 271 people. 

Princess Cruises and the Coral Princess crew responded to this most recent outbreak by increasing cleaning and disinfection procedures and by keeping passengers updated on the outbreak status and preventative measures. On April 27, the CDC conducted an environmental health assessment and evaluated the Cruise Line’s response activities.

By Reuters

Update Adds in Iranian and U.S. Response and Vessel Details

Iranian patrol boats intercepted a cargo ship in the Strait of Hormuz on Tuesday and forced it into Iranian territorial waters by firing shots across its bow, prompting the U.S. Navy to send a destroyer and reconnaissance plane to monitor the situation.

Iranian Revolutionary Guard boats confronted the MV Maersk Tigris, a Marshall Islands-flagged vessel, as it was traversing one of the world’s most important oil shipping channels and forced it to divert toward Larak Island near Bandar Abbas, where it was boarded by Iranian forces, U.S. officials said.

The Iranian action occurred amid heightened tensions over the conflict in Yemen, where a Saudi-led coalition supported by Washington has been bombing Iranian backed Houthi rebels, who have seized much of the country and sidelined the U.S.-backed president.

Saudi jets bombed the airport in Yemen’s capital on Tuesday to prevent Iranian planes from landing. The ship seizure also came at a sensitive time as Tehran is inching toward a final deal with major powers on its nuclear program.

The Maersk Tigris, which is managed and crewed by Rickmers Shipmanagement, is on-hire to Maersk Line.

Alerted by a distress call from the Maersk Tigris, the U.S. Navy dispatched the destroyer USS Farragut toward the scene as well as a reconnaissance aircraft, the Pentagon said. Army Colonel Steve Warren said firing shots across the bow of a cargo vessel was “inappropriate” and seemed “provocative.”

The incident came just four days after Iranian patrol boats surrounded a U.S.-flagged vessel, the Maersk Kensington, and followed as it was in the same area, a U.S. official said. No warning shots were fired in that incident.

Iranian officials sought to play down the ship seizure, saying it was a civil matter with no military or political dimension.

U.S. officials said they were concerned and monitoring the situation, but an initial review indicated the United States did not have a legal obligation in a maritime environment to defend a Marshall Islands-flagged ship with no American crew.

Reuters tracking data showed the Maersk Tigris, a 65,000-tonne container ship, anchored off the Iranian coast between the islands of Qeshm and Hormuz. It had been listed as sailing from Saudi Arabia’s Red Sea port of Jeddah, bound for the United Arab Emirates port of Jebel Ali in the Gulf.

Iran’s state news agency, IRNA, quoted a source in the Islamic Revolutionary Guards Corps (IRGC) as saying the guard had seized the vessel and 34 crew. Rickmers said there were 24 crew, mostly from eastern Europe and Asia.

The IRGC is Iran’s elite military force and operates its own land, naval and air forces under a command chain separate from the regular armed forces.

Mohammad Saidnejad, head of Iran’s Ports and Maritime Organization, said a court in Tehran had given the order to seize the ship. “A legal complaint from an Iranian private company resulted in the seizure of a Marshall Islands-flagged ship in Iranian waters,” Saidnejad was quoted as saying by IRNA.

NUCLEAR ACCORD

The incident was unlikely to derail efforts by the United States and five other powers to secure a final nuclear deal with Iran, even though it was likely to stoke further opposition in the U.S. Congress, risk consultancy Eurasia group said.

Under the proposed nuclear accord, Tehran, which denies seeking to build nuclear weapons, would win sanctions relief in return for slashing the number of its uranium enrichment centrifuges and accepting intrusive international inspections.

“We believe the U.S.’s and Iran’s top priority, by far, is to secure a deal on the nuclear issue, and that the sides will likely resolve this issue quickly,” Eurasia’s Cliff Kupchan said. The seizure may have been a response to the U.S. placement of ships off Yemen to prevent Tehran from sending arms to Yemeni Houthi fighters, he added. Iran denies arming the Houthis.

A spokesman for the Singapore-based Rickmers Shipmanagement, Cor Radings, said he did not know why Iran had acted. He said Iranian forces fired warning shots near the container ship and boarded it. He said the company was concerned for the crew.

The vessel had been following a normal commercial route between Saudi Arabia and the United Arab Emirates, he said.

A U.S. government official said the ship was intercepted at 0905 GMT. The closest U.S. warship, the USS Farragut, was more than 60 miles (100km) away, he said.

Some 17 million barrels per day (bpd), or about 30 percent of all seaborne-traded oil, passed through the Strait of Hormuz in 2013, according to the U.S. Energy Information Administration (EIA).

Iran has in the past sometimes threatened to block the strait to advance its opposition to sanctions imposed over its nuclear program.

The channel is a narrow strip of water separating Oman and Iran. It connects the biggest Gulf oil producers, such as Saudi Arabia, with the Gulf of Oman and the Arabian Sea.

At its narrowest point, the strait is 33km (21 miles) across and consists of two-mile-wide navigable channels for inbound and outbound shipping and a two-mile-wide buffer zone.

By Kathryn Stone

The United States is on track to saturate the global energy market with liquefied natural gas (LNG) exports by as early as this year putting itself on course to become one of the world’s largest LNG suppliers.

According to US Energy Secretary Ernest Moniz, four LNG export terminals are currently under construction in the lower 48 states and shipments from these terminals may start late 2015 or early 2016. At present the US only exports LNG from a single terminal on Kenai Peninsula in Alaska, but it is looking to expand operations amid rising international demand. 

Between 2010 and 2040 the market for LNG is predicted to triple, with most new demand coming from existing and emerging markets in Asia Pacific and the Middle East. Approximately 80% of new LNG supplies are expected to come from North America, Australia and East Africa. Furthermore, the US Energy Department has stated that in a decade the United States could be on par with top exporters such as Qatar, which processes over 100 billion cubic meters of LNG per year through its terminals.

At last week’s IHS CERAWeek ’15 Andy Brown, Upsteam International Director of Royal Dutch Shell, reiterated the importance of LNG resources amid increasing global energy demand. Brown pointed out that natural gas has proven to be an efficient and cost-effective alternative to traditional fossil fuels. Additionally, natural gas is the cleanest burning conventional fuel, with emissions up to 60 percent less than coal. 

According to a February 2015 report by the President’s Council of Economic Advisors, rising LNG exports from the United States would increase the country’s GDP while creating more domestic jobs.  

Also, European LNG importers are largely dependent on Russia for gas supplies. Because of the conflict with neighboring Ukraine, Russian gas transportation bypasses the Ukraine, often resulting in higher prices for importers. A rise in US LNG could dramatically reduce Russia’s dominance in the European gas market.

By Thomas Bennett, L.L.B.

Somalia remains a failed state. Poverty, the absence of enforced law, and psychopathy masquerading as a just cause foment an environment where money for gain, or money to finance terror, means that piracy in the Indian Ocean has not gone away. What started in the Somalian North as a tax on shipping is a continuing threat to global trade.

Still, piracy has abated. Nation states have acted. Armed guards have helped. The threat has been contained, or has it? It is a brave shipping company that sends an unprotected crew through the high risk area of the Indian Ocean. And if the rationale for piracy remains, then piracy remains. Somalia, lawless as it is, will wait.

Western powers will not finance armed forces to patrol the Indian Ocean indefinitely. The maritime industry will price the risk according to the threat. The probability of piracy has diminished. The business of maritime security must adjust. As the perception of threat falls, so will the cost of protection. Competition will force prices down and many armed security companies will not survive. Some will merge. Consolidation is inevitable. Or so it seems.

Maritime security is still big business. We estimate that total revenue in the Indian Ocean is $400 million a year. The supply chain ranges from nation states to former servicemen, maritime agents and legitimate dealers in arms. All vested interests. All of whom take their piece of the whole. Today, prices for transits on vanilla routes are so low that it is hard to discern how a profit is achieved. If there is no more profit to be had, then competitive tension is designed to push all but a few players in this market to mutually assured destruction.

Regulation? Not Really

Gifting weapons to non-state actors is not without precedent. This gift does, however, breach most political theory as to who should have the right to bear arms. Regulation is and was inevitable. Law only works when it is applied to all; and regulation – the benchmark against which the use of lethal weapons is measured – should have the force of law. It does not.

ISO 28007 has not worked. Some have it; some do not. There are many buyers who do not require it. There are many sellers who do not bother. BIMCO’s recent endorsement of ISO 28007 may help. It may be too late. Buying patterns are entrenched. Too many stand outside Anglo-centric regulatory initiatives. It is easy to do so, legally and practically. As former Royal Marines increasingly price themselves out of the market for guards, a once Anglo-centric market along with its regulatory attire becomes increasingly irrelevant.

ISO 28007 may remain the standard for some. Edicts from the UK may be the benchmark for others. But economics is forcing this marketplace to change. There is a very long tail of buyers who have little time for edict, and an equally long tail of sellers who go along.

Who does, who can, police this market? Flag states perhaps. Yet the paradox of policing a market that pays well usually results in piecemeal regulation at best. After all, piracy is a diminishing threat – no vessels have been taken within corporate memory. So why change? Qui bono?

What of littoral states – those adjacent to High Risk Areas? Again, there are economic imperatives at work. Nation states and their agents do well out of maritime security. There is no overwhelming rationale for change.

What of Sri Lanka, the UAE and Oman? Sri Lanka’s place in maritime security is channelled through Avant Garde Maritime Services (AGMS) under a public private partnership with RALL, a government-owned business. AGMS is being critically evaluated by the new government. The suggestion is that the Srisena government will change the way it regulates how weapons and men are distributed to passing vessels, in which case AGMS may lose control. But Sri Lanka will not. Pre-AGMS, weapons were held on land and disseminated by the Sri Lankan Navy. Fees were paid. The state took control then; it may do so again.

As to Oman, or the UAE, or indeed any of the littoral states adjacent to the outflow of the Red Sea, there seems to be little real appetite to manage the risks attached to having floating armories within sight. Floating armories are, of course, in international waters, and the UN Convention on the Law of the Sea makes a fist of keeping these states away. However, one need only ask what Her Majesty’s government might do if there was a floating armory bobbing about within sight of Plymouth.

Which brings us back to regulation and market forces. Consolidation in the maritime security sector is inevitable. Or is it? It should be. Any standard business textbook on strategy will tell you that a market with multiple competitors will shrink to but a few. In a shrinking market, consolidation pressures are more intense. Companies will merge in order to marshal forces. Bankruptcy will emerge where sale, merger or deep pockets are absent.

Consolidation? What Consolidation?

Consolidation has not happened. Why? Some have tried to diversify (PGI). Some have gone bump (GOAGT). Some have divested then gone bump (Drum Cussac). Some are grabbing market share (Ambrey). Others do what they do well (Diapolous). The long tail? All are out there, with shrinking margins, taking risks, fighting to the death.

And it is, perhaps, in this last phrase that the clue to this market is apparent. We have seen at first hand how former soldiers start companies in the space and trade their fighting spirit from the military to the commercial. The enemy bears a different name. And absent commercial experience (which most do not have) the strategic confusion amongst alpha males in charge of such companies leads to a community of egos who cannot see the benefits of cooperation in a disparate market. Who, after all, if two companies merge, is going to step down and be subservient to the other? Better to die trying than take orders from someone else.

This is dangerous. In a poorly policed market, where the trade is civilians offering protection through resort to lethal force, a race to the bottom will result in cut corners. From four to three, from two to one guard on a vessel – a poorly trained guard at that. Economics and ego will force lip service to safety and the very reason guards are on vessels in the first place. Lose (no profit). Lose (no safety).

A Solution? What Solution?

Is there a solution that offers shipowners respite from this worst of all worlds and offers the maritime security community respite from itself? There is. The answer lies in economies of scale. It lies in better logistics. It lies in cooperation and, sometimes, in merger or sale. The market has already found the answer. Unfortunately, in its present guise it is illegal and politically untenable.

The model is this: Put a cheap guard on a salary, put him on vessel after vessel with a kit box, and float him around the Indian Ocean for a couple of months. Avoid land, make fleeting visits to floating armories, and you have a highly efficient business with very high gross margins.  Once a guard’s salary and costs are paid, the additional revenue is all gravy.

There is value in this (idealized) model. Most maritime companies do not have the infrastructure or the client base to support it. Instead, margins are decimated as a result of flights, agents’ fees, weapons’ storage costs, floating armory charges, transfers, daily accommodation costs and hotels. If the next transit is a week away, profit may be lost altogether trying to keep guards in theatre. Profit will be lost sending them home. Weapons could be in the wrong place. Kit may be travelling in the wrong direction. Clever logistics management may help. But, fundamentally, a maritime security business trading on increasingly paper thin margins has to find efficiencies to survive.

Unless, of course, it has that critical mass of men, equipment and transit volume. If it has, then clever logistics and financial modelling are key. Critical mass is an absolute. And if critical mass is not an option, common sense, clear strategic thinking and sound commercial management should force decent maritime security companies to find partners to buy or merge with.

Get it right and profit will increase as logistics, financial modelling, economies of scale and buying power combine to force gross and net margins up. Get it wrong and bankruptcy or closure looms. Many maritime security companies understand decent logistics, efficiencies and the bottom line. But they have not the client base to action it. Instead, it is actioned in a piecemeal way. It is actioned in an illegal manner. This has led to the sharing of men and, in particular, weapons. Sharing weapons is illegal, it is politically charged, it is extremely dangerous.

Weapons for Hire – The Beginning of the End

Although no one has an absolutely precise figure to hand, we believe that there are at least 40,000 licensed weapons floating about or stored, ready for use, in the Indian Ocean. They sit on floating armories, adjacent land or are in theatre under use. These weapons are not tracked on a real-time basis. Companies are only put to proof when asked. In other words, regulation requires the sector to know what weapons they have and where they got them from.

Under UK law, weapons cannot be leased, or licensed, or ‘lent.’ Heavy sanctions wait for those companies that do. But the congruence of economic necessity and piecemeal regulation (many maritime security companies have nothing to do with the UK) means that weapons are passed between companies and used on a mate’s basis. For some, if weapons are not shared, the efficiencies that the smaller companies need to survive through sharing will be lost. It is beg, borrow or go bust.

Weapons swapping, sharing, hiring and licensing – it all leads to the same thing. It is not politically sustainable for enough arms to service a third world army to be bobbing about the sea with little idea as to who has what. The UN has taken notice, the U.S. State Department has taken notice, the EU has worked it out and the British Foreign Office has been briefed.

Unless the gift of allowing private citizens to bear arms is to be taken away (or managed) by nation states once again, sensible actors within the maritime security space need to consider how best to service their shareholders and maximize profit in a highly responsible manner – merge, consolidate, sell. Choose economies of scale, clever logistics, astute modelling and commercial cooperation. There really is no alternative.

Weapons cannot and should not be traded at armories or elsewhere. It is the beginning of the end. Equally, shipowners and charterers need to utilize their power and refuse to partake in this race to the bottom. It is, after all, the preservation of the safety of their men that is the end-game. And those that advise the maritime sector – its trade associations and the professional services who have done so well over the last five years, have to stand up for corporate social responsibility.

We live in dangerous times. Somalia remains a failed state. Terrorism is prevalent in theatre. Meaningful regulation is piecemeal. Profit is being decimated. Corners are being cut. Weapons may start to go missing. There is a choice, a viable commercial solution for maritime security companies facing home truths. They must take it before it is too late. – MarEx  

Thomas Bennett LLB MSc (Oxon) is the owner of VHenry & Co. and VHenry & Co. Limited. The former is a legal practice, the latter an advisory business, each specializing in the needs of the security sector. thomas.bennett@vhenryltd.comwww.vhenryco.com

The opinions expressed herein are the author’s and not necessarily those of Marigon.

By Reuters

Four Petrobras oil platforms off the northeast coast of Brazil have halted production after a leak of about 7,000 liters of oil was detected coming from a pipeline linking them, a local oil workers union head said on Friday.

Brazil’s oil regulator, ANP, confirmed the leak in the Camorim field, 16 kilometers (10 miles) off the coast of the city of Aracajú, and said it had been contained by Petrobras.

Stoessel Chagas, director of the Sindipetro-ES, which represents Petrobras offshore oil workers in Brazil’s Alagoas and Sergipe state, said the leak was detected coming from a pipeline linking the PCM-5 and PCM-6 production platforms.

Petrobras confirmed the spill in a statement, adding that even though nearly all of the oil had been collected or dispersed, the company expects some small particles to reach shore.

Petrobras said it expects to complete repairs of the leak on Friday.

The four platforms that halted output are PCM-5, PCM-6, PCM-8 and PCM-9, which together produce 400 barrels of oil and 60,000 cubic meters of natural gas a day, according to ANP data.

Chagas, who confirmed that the leak had been contained, said production from the platforms was expected to resume by Saturday.

“The little leaks from these platforms are constant due to the lack of maintenance,” said Chagas, who added that Petrobras has been using clamps to plug the leaks. “We joke that there is more clamp than pipeline” in the system, he said.

The ANP said it was in contact with the Brazilian navy, which is monitoring the dispersion of the oil slick. It added that it may open an investigation of the incident and will continue to monitor the situation.

By Shane McCarthy

The tanker industry has always been very volatile, but few swings in history can match what the industry has dealt with this past year. New fuel regulations, slumped global demand, fear of overproduction and uncertainty of oil futures have dominated headlines the past 12 months. For ship owners and managers, the silver lining here is that the low price of oil has meant significantly lower bunker costs resulting in good spot returns. Still the questions remains, just how long will that last?

Oil prices slumped nearly 60 percent between June 2014 and January 2015 and while some in the industry are optimistic following a recent surge, others see a long road ahead before we see $100 a barrel again(1)_.

Current market conditions have caused industry leaders like BP’s Bob Dudley to liken the current glut to that of the 1980s where it took 4 years for prices to recover. Oil companies seem to be bracing for the long haul as we have seen drastic cuts in company spending, most notably Royal Dutch Shell Plc who announced more than $15 billion in spending cuts(2). Drewry Shipping Consultants predicts a positive short term outlook for tanker rates, due in large part to strong cargo demand fueled by floating storage and a modest fleet supply growth for 2015, owners and operators will need to capitalize now before another unexpected swing changes everything.

For the short and medium term, owners and operators have the difficult task of capitalizing on a favorable market, while simultaneously positioning themselves for the future. Keeping costs down, while remaining ahead of the curve – easier said than done right?

Capitalizing on today’s market

The price of oil has fallen nearly 60% from June to January(3). This drop in price has given owners and operators the option to defer on retrofitting their tankers, a major concern in 2014 through the start of the New Year.

With low sulfur bunker prices as low as they might ever be, owners are not interested in undertaking a $5-10 million per vessel investment when low sulfur fuels are lower than what high sulfur fuels were 8 months ago.

This month Platts’ survey of dirty tanker and dry bulk ship owners showed that they are holding back from installing this technology on their vessels due in large part to bunker prices being so inexpensive(4).And while scrubber technology companies are optimistic that the market will recover and the sense of urgency to invest in scrubbers will buoy, some forecasts from the world’s leading analysts do not support the idea of a quick comeback. Optimistic forecasts like Bloomberg’s at $74 and $75 a barrel for 2016 and 2017 respectively are only 70% of its price in June where it reached $107 a barrel(5).

Greenships’ ECA retrofit study released in 2012 estimated that the payback time for a retrofitted vessel operating in 50% ECA is approximately 6 years and 8 years for 25% ECA operation(6). You can expect those payback periods to be longer than first expected due to the extreme low price of oil, while the price of scrubbers has remained constant. And while it is true that the payback period of the scrubber is primarily sensitive to the price spread between HFO and MGO, CAPEX and absolute HFO price have more of an impact than first estimated with fuel costs being this low. So if not in scrubbers, where do owners and operators invest?

Positioning for the future

While today’s market doesn’t resemble pre-2008, there is still room for owners and operators to use favorable rates to position themselves for future success.

With existing concern over an influx of new buildings scheduled for 2016, a trend to look out for is owners and operators investing more in technology and innovation, pivoting from the idea of technology as a “nice to have” to a critical business system that could propel them to the next level.

This industry has long been criticized for lagging on tech innovation. Recently there has been a small surge in the industry’s adoption of progressive technologies including cutting edge ship simulators, voyage management software, electronic charts, etc., but heavy pushback still exists and advocates of technology and system innovations still remain in the minority. Look for this surge to strengthen and continue with the price of oil down. Unlike investment in new buildings or other traditional shipping investments, software can be purchased and maintained relatively inexpensively, eliminating potential debt, not to mention it won’t inflict additional fear of flooding the market.

Tech projects have never been at the top of the priority list when budget time rolls around for shipping companies. Year after year these projects have been put on the back burner where others have been thrust to the front. We live in a digital age, with smart devices all around us. SaaS software companies in our industry have developed technologies that cater to the perpetual connectedness of our industry and society as a whole. Owners and operators can now search on any particular vessel, whenever, wherever. Chartering and Operations can fix and manage vessels in their voyage management system on their iPhones at the pub or at the pitch. Management has access to real-time advanced KPIs and fleet analytics outside of Excel, in more manageable, readable dashboards on their mobile, tablet or computer. The impact these innovations can have on an organization can be exponential and lasting.

Tech savvy companies also have a leg up on their competitors when trying to attract new talent. This can be all the difference for a company hitting or missing on top talent. Being able to float the latest and greatest, most intuitive and responsive technology to prospective employees reinforces the prospect’s vision of the company as an industry leader, well positioned for the future. This is not only an extremely powerful recruiting tool, but also further promotes morale within an organization.

Strengthening systems and staying ahead of the curve in regards to technology could be the answer that shipping companies may be looking for in the short and medium term. Once perceived as an afterthought in this industry, software and system innovations are gaining steam and expect to see an increased investment. These tools position organizations for both immediate and future success, empowering their employees and partner organizations, while keeping operating costs relatively low in an opportune market.

References

Kennedy, Will, and Ryan Chilcote. “BP Chief: No Hope of $100 Oil for ‘Long Time’.” Bloomberg. 3 Feb. 2015. Web: http://www.bloomberg.com/news/articles/bp-chief-no-hope-of-100-for-a-long-time-as-stocks-build

 Smith, Geoffrey. “Shell slashes spending by $15 billion as oil price bites” Fortune. 29 Jan. 2015. Web: http://fortune.com/2015/01/29/shell-slashes-spending-by-15-billion-as-oil-price-bites/

 3. Brent crude closed at $115.19 a barrel on June 19th. On January 30th Brent crude had fallen to $47.52 a barrel. A 58.75% drop in price. Web: http://ycharts.com/indicators/brent_crude_oil_spot_price

4. Jameson, Nick. “Shipowners Hold Back on Scrubber Investments.” Bunkerworld. 5 Feb. 2015. Web: http://www.bunkerworld.com/news/Shipowners-hold-back-on-scrubber-investments-134540.

 “Kennedy, Will, and Ryan Chilcote, loc.cit.

 ECA Retrofit Study. Comparison of Various Abatement Technologies to Meet Emission Levels for ECA’s.” Green Ship of the Future.Web: http://www.greenship.org/lowemissionconceptstudy/ecaretrofitstudy/.

This entry has been created for information and planning purposes. It is not intended to be, nor should it be substituted for, legal advice, which turns on specific facts.

By Wendy Laursen

Around 115 passengers and crew on Royal Caribbean Cruise Line’s Legend of the Seas have reported ill with vomiting and diarrhea.

The ship is coming to port in San Diego, California on April 14, 2015. 

“Royal Caribbean is undertaking direction from the CDC to inhibit the sickness and prevent further outbreaks,” the company said in a blog post.

The news follows that this week of at least 100 people sick on Celebrity Cruises vessel Celebrity Infinity.

The U.S. Centers for Disease Control and Prevention (CDC) reported that 95 of 2,117 passengers and five of 964 crew members were ill during the vessel’s March 29 to April 13 cruise.

The ship returned to San Diego, California on April 13. “At Celebrity Cruises we have high health standards for all our guests and crew,” the company said in a statement.

Norovirus is the most common cause of acute gastroenteritis in the United States, with up to 12 million illnesses each year resulting in up to 71,000 hospitalizations and about 800 deaths, according to health officials.

Earlier outbreaks of gastrointestinal sickness occurred on Celebrity Infinity in 2013 and 2006.

There have now been five outbreaks of sickness this year on cruise ships calling at the U.S. The other outbreaks occurred on Norwegian Pearl, Celebrity Equinox and Grandeur of the Seas.

By MarEx 

Japan on Monday said it hoped to resume its Antarctic whale hunt around the end of this year, after providing further information to win over an international panel that says its whaling plan does not prove the need for killing the animals.

Last year, the International Court of Justice ruled that Japan’s decades-old whale hunt in the Southern Ocean should stop, prompting Tokyo to cancel the bulk of its whaling for the 2014/2015 season and submit a scaled-down plan for future hunts.

Japan has long maintained that most whale species are not endangered and that eating whale is part of its food culture.

On Monday, an expert panel of the International Whaling Commission (IWC), the global body that oversees whales, said it opposed a new Japanese whaling plan that proposed to take 333 minke whales in the Antarctic.

Japan’s commissioner to the IWC, Joji Morishita, said the country would furnish additional material before a May meeting of the IWC’s scientific panel for a final report, adding that Tokyo hoped the new data would win over the panel.

I believe that we’ll move forward with the aim of resuming whaling around the end of the year,” Morishita told a news conference, though he did not rule out the possibility of changes to the proposal.

The IWC’s expert panel said the information in Japan’s latest proposal did not enable it to determine if lethal sampling of whales was necessary.

“The current proposal does not demonstrate the need for lethal sampling to achieve those objectives,” it said, referring to the plan’s key aims.

Japan’s determination to resume whaling remains unchanged, said Morishita, echoing statements by government leaders.

Japan took the panel’s recommendations seriously, he said, but added, “They haven’t unilaterally said that it’s no good, neither have they come out on the other side with, ‘Go ahead, do whatever research you want to do.'”

Japan began what it calls scientific whaling in 1987, a year after an international whaling moratorium took effect, despite growing global opposition.

It also runs a separate whaling program in the Northern Pacific that was unaffected by the international court ruling.

Humane Society: Never Truly Research

Kitty Block, vice president for Humane Society International, has welcomed the outcome from the IWC panel: “It has been clear since Japan first started its scientific whaling hunts due to the number of whales hunted and the marketing of the meat that the purpose was never truly research. 

“Even now, after so many years and great effort on their part, Japan has been unable to convince a panel of experts that they have made a case for lethal take. This needs to also be seen in the context of the ruling from the International Court of Justice that Japan’s previous whaling program was illegal. Japan needs to recognize that its whale hunting defies science and international law.”

Japan proposes to kill 330 minke whales annually for 12 years in what it calls its NEWREP whaling program – a total of 3,996 animals, in addition to the more than 13,000 whales killed under its existing scientific permits since 1987.