update NewS from dNv to the tANker INduStry No 02 2011 - Hays

Energy EfficiencyIntertanko:Seeking a level playing fieldA privilege to be captain on boardLNG/C ARctic Ladytankerupdate Newsfrom DNV to the tanker industry No 02 2011

contents10 12Intertanko: Seeking a levelplaying field››Energy Efficiency››24A privilege to be captain on boardLNG/C Arctic Lady››Front cover: Bjørn NybergCO2 emissions from ships –the latest IMO regulatory developmentsand what they mean for tankers ........................ 4Impact of EEDI and SEEMP .......................................... 8Intertanko and the EEDI:seeking a level playing FIeld .............................. 10DNV’s Fuel Saving Guideline for Tankers ........... 12SEEMP and Energy EfFIciency –DNV offers support ................................................... 14Recent delivery ........................................................... 18Thenamaris FIrst to receiveDNV’s Triple-E rating ................................................ 20DNV wins Innovation Awards ............................... 22A privilege to be captainon board the Arctic Lady ...................................... 24Tanker Week .................................................................. 28RS Platou markets ..................................................... 29What have we learnt from history? ............... 30tankerupdateWe welcome your thoughts!Published by DNV Global Governance,Market Communications.Editorial committee:Jan Koren, Business Director TankersMagne A. Røe, EditorLisbeth Aamodt, ProductionDesign and layout: Coor Media 1111-009Please direct any enquiries to DNVUpdates@dnv.comOnline edition of tanker update:www.dnv.com/tankerupdateDNV (Det Norske Veritas AS)NO-1322 Høvik, NorwayTel: +47 67 57 99 00Fax: +47 67 57 99 11© Det Norske Veritas ASwww.dnv.com2 | Tanker UPDATE NO. 2 2011

eDitOriala challeNgiNg DecaDeJan korenBusiness director tankersJan.Koren@dnv.compiracy and very high bunkerprices are at the topof many tanker owners’agendas right now. thesefactors, combined withdepressed freight rates, aremaking life very challengingfor people in the tankerindustry. with the currentoversupply of tonnage andsignificant volume of deliveriesof additional tankers,there is little chance ofsustainable improvementsin the short term. as aconsequence, we will seemore cases of restructuring.younger vessels than beforeare candidates for scrappingand lay-ups are alsobeing discussed.new rules and regulationsare now being implemented,and this trendwill increase in the yearsto come. significant reductionsin emissions (nOx,sOx and CO2) to air will berequired and ballast watertreatment systems are alsoon the agenda. the implementationof new regulationsis going ahead despitethe general and seriousdepression in the market.Compliance with these regulationsis no “quick fix”.making the right decisionswill require understandingand insight plus the allocationof suitable humanand economic resources toallow serious considerationand planning. those whocan see the new regulationsas opportunities andhave the resources to actaccordingly are, of course,fortunate. some are evenintending to stay ahead ofthe market.in this issue of tankerupdate, we have a specialfocus on energy efficiencyand the new energy efficiencydesign index(eedi), which significantlylimits CO2 emissions. this isbasically about fuel saving.initially, the formal implicationsare limited, butthe ultimate consequence,as we see it today, is thatabout ten-year-old vesselsmay have to compete inthe marketplace with vesselswhich are at least 30%more fuel efficient. somewill consider such competitionto be quite dramatic,particularly with the fuelprices we may see in thecoming years. in theirefforts to cut costs and meetcharterers’ expectations,tanker owners in particularmay from now on be lookingfor more fuel efficientvessels when planning neworders. this will drive innovationto a greater extentthan we have seen before,and make it more challengingfor owners to decide ondesign alternatives whenordering ships in the yearsto come. new concepts willbe developed. designers,yards and owners shouldplan for this developmentnow, even ahead of the formaldeadlines. the winnersmay be those that are ableto meet market requirementsand expectationsahead of the majority.we in dnv have in-depthknowledge of existing andnew regulations and theirimplications. dnv does notdesign ships. we will, however,continue to presentour innovative ideas andconcepts to the industryso that anybody who findsthem of interest is free todo the necessary engineeringwork and developdesigns and specifications.the industry feedback hasbeen very positive and wehave won awards for ourwork. we are pleased toshare our ideas and knowledgewith existing andnew clients. we have alsodeveloped and are offeringinformation and servicesthat support the industry inorder to meet the importantchallenges facing usin the coming decade. youwill find more about this onthe following pages.enjoy the read!THEPOWERTOEXCELIN OILAND GASTRANSPORTATIONat dnv, we understand the tankerbusiness and offer services designed toassist owners and management in theirquest for safe, efficient and competitiveoperations.Ship classification • offshore classification •Technology qualification • Winterisation •Ice management • Competence & training• Safety, health & environmental riskmanagementwww.dnv.comit takes strength and agility to excel in the face of demanding transportationmarkets and the maritime safety regime. technical, economical and environmentalissues must be addressed on a day-to-day basis.tANker updAte NO. 2 2011 | 3

CO2 emissions from shipsCO2 emissions from ships– the latest IMO regulatory developmentsand what they mean for tankersThe first formal CO2 control regulations were adopted by IMO at the MEPC 62 in July2011. These comprise the Energy Efficiency Design Index (EEDI) and Ship Energy EfficiencyManagement Plan (SEEMP), both of which will enter into force on 1 January 2013.Text: Tore Longva, DNVA new International Energy EfficiencyCertificate (IEEC) will be introduced forall vessels, and this includes a supplementrecording particulars related to the ship’senergy efficiency, such as the propulsionsystem, the Attained EEDI for new buildsand the presence of a SEEMP.Energy Efficiency Design Index(EEDI) The EEDI requirements will applyto new ships above 400 GT only, where“new ship” means a ship:■■for which the building contract is placedon or after 1 January 2013; or■■in the absence of a building contract,the keel of which is laid or which is at asimilar stage of construction on or after1 July 2013; or■■the delivery of which is on or after 1 July2015The EEDI will be calculated for individualships and basically expressesgrams CO2tonne – nautical mileThe yard, designer or a consultant willhave to develop an EEDI technical filecontaining the necessary documentationand calculations. Verification will be donein two stages: a preliminary verificationat the design stage based on tank tests,manufacturers’ data and design particulars.During the sea trial, the speed willbe measured and the technical file will beupdated, together with engine certificatesand other necessary documentation. TheEEDI technical file will then be verifiedby a flag administration or RecognizedOrganisation and the IEEC will be issued.The regulation differentiates betweenship types which are required to calculateReduction factors (in percentage) for the EEDI relative to the reference line for each ship type.Bulk CarrierGas tankerTanker and combinationcarriersContainer shipGeneral cargo shipsRefrigerated cargocarrier›› Table 1Size Phase 01 Jan 2013–31 Dec 2014>20,000 DWT10-20,000 DWT>10,000 DWT2-10,000 DWT>20,000 DWT4-20,000 DWT>15,000 DWT10-15,000 DWT>15,000 DWT3-15,000 DWT>5,000 DWT3-5,000 DWT0%n/a0n/a0%n/a0%n/a0%n/a0%n/aPhase 11 Jan 2015–31 Dec 2019100-10%*100-10%*100-10%*100-10%*100-10%*100-10%*Phase 21 Jan 2020–31 Dec 202420%0-20%*20%0-20%*20%0-20%*20%0-20%*20%0-20%*20%0-20%*Phase 31 Jan 2025 onwards30%0-30%*30%0-30%*30%0-30%*30%0-30%*30%0-30%*30%0-30%** The reduction factor is to be linearly interpolated between the two values depending on the vessel size. The lower value of the reduction factor is to beapplied to the smaller ship size.4 | Tanker UPDATE NO. 2 2011

CO2 emissions from shipsShip type Capacity a cEEDI reference lineslarger tankersBulk carrier dwt 961.79 0.47710Gas tanker dwt 1120.00 0.456Tanker dwt 1218.80 0.488Container 70% – dwt 174.22 0.201General cargo dwt 107.48 0.216Reefer dwt 227.01 0.244EEDI (g CO2/tonne-nm)EEDI (g CO2/tonne-nm)98765432140353025201510500 10000 20000 30000 40000 50000050000 150000250000 350000 450000Combination dwt 1218.80 0.488›› Table 2DwtDwtTanker and combinationGas tankerTanker and combinationGas tanker›› Figure 1 EEDI reference lines based on average for tankers built during last ten years.›› Tore Longva, Business Development ManagerInternational Affairs.wan Attained EEDI and those that musthave an Attained EEDI below a certainRequired EEDI. Ship types needing tocomply with a specific Required EEDI levelto obtain the IEEC are listed in Table 1,which also indicates the time line for thetightening of the requirement levels.A ship’s reference line value is calculatedbased on the following formula:a · Capacity –cwhere the a and c parameters are given inTable 2 above.Photo: DNVA ship which can load 100% deadweightwith both liquid and dry cargo is consideredto be a combination carrier and canuse the same reference line as tankers. Gastankers have a separate reference line. Thereference lines for tanker and combinationcarriers as well as for gas tankers areshown in Figure 1. The lines stop at thelower cut off lines for the ship types, belowwhich the required EEDI does not apply.In order to address concerns raisedby developing countries, the regulationsinclude a clause allowing any Administrationto waive the EEDI requirements forships flying its flag for a period of up tofour years (linked to the contract date),or six years and six months (linked to thedelivery date) after 1 January 2013. However,the preliminary indications are thatthe major flag states will be reluctant toinvoke the waiver clause.Ship Energy Efficiency ManagementPlan (SEEMP) No changes weremade to the SEEMP at MEPC 62, butits inclusion in the MARPOL Annex VIamendments makes it mandatory forall ships– both new and existing – afterit enters into force. The presence of aSEEMP onboard will be checked duringthe first intermediate or renewal surveyfor the IAPP certificate, at which point theIEEC will be issued. The EEDI will not becalculated for existing vessels and thus notincluded in the IEEC.Future CO2 regulations The adoptionof the amendments is a significantstep by IMO towards the regulation ofGHG emissions. Nevertheless, the EU islikely to consider it insufficient in lightof its own ambitions. The EU processfor establishing a regional CO2 emissionreduction mechanism for shipping istherefore expected to continue.Other parts of the international communityalso consider these regulationsinsufficient. There is therefore a strongpolitical drive to regulate shipping further,e.g. through regional or international MarketBased Measures (MBMs). Proposalsunder review range from a contribution orlevy on CO2 emissions from shipping, viaemission trading systems to schemes basedon ship efficiency. If agreed, MBMs mayappear towards the end of this decade.Commercial energy efficiency requirementsare becoming increasingly important.The creation of various voluntaryschemes for rating environmental performance,including CO2 performance, isproviding tools that allow charterers andcargo owners to use only ships that satisfytheir environmental requirements. Theserating schemes must be based on robustmethods and verifiable data in order toTanker update NO. 2 2011 | 5

CO2 emissions from shipsMf( ∏ f) nME P ME (1) C FME (1) SFC( ∑ME (1)f=1f=1Main engine. . PAux, engine Shaft motor Energy efficienttechnology (electrical)Mf f f( ∏PTI effeff+ ( .AE C FAE. SFC AE- ) + . ∑ P PTI (1) – ∑ eff (1) P AEeff (f) C FAE SFC AEf=1f=1f=1–) (f=1f . Capacity . V .) )freff wEnergy efficienttechnology (mechanical)∑ ). . f eff (1). P eff (1). C FME. SFC MECorrection factors›› Figure 2: IMO’s formula for calculation of EEDI (g CO2 / tonne-mile)Transport workMethod Measures Parameter affectedReduce the main engine installedpowerLower the specific fuelconsumptionIncrease the speed (withoutincreasing the installed power)Use fuel/an energy source with alower carbon contentInnovative mechanical energyefficient tehnologyInnovative electrical energyefficient technologyImproved hull and propellerefficiency Speed reduction/de-rate engineSwitch to a more efficient engine.Engine control tuning.Improved hull and propellerefficiency (i.e. Mewis duct,propeller boss cap fin, or otherflow devices).I.e. LNG biofuel (no guideline yet)I.e. kites (no guideline yet)I.e. waste heat recoveryIncrease the capacity Larger ships Capacity›› Table 3: Alternatives to improve EEDIP MESFC ME, SFC AEV refC FME, C FAEP effP AEeffcreate a level playing field for the shipowner.Reducing the EEDI Any measure consideredfor reducing the EEDI must affectone or more of the parameters in Figure 2and Table 3.In addition, there will be compensationwhen using shaft generators (PPTO) andapplying ice strengthening (fj). Othercorrection factors, for example for voluntarystructural enhancement, are underdevelopment.Some proposed measures, such as kitesor solar panels, cannot provide power allthe time and will not enable the mainengine power and thus the EEDI to bereduced. At the moment, there are noguidelines for how such measures can beapplied to reduce the EEDI, but theseare expected to be developed at a laterstage, most likely through the Peff parameter.Propulsion efficiency devices, suchas Mewis ducts or propeller boss cap finscan either reduce the main engine power(Pme), or enable the ship to obtain a higherspeed (Vref).Further, the use of biofuels is not coveredby the current framework as their6 | Tanker UPDATE NO. 2 2011

CO2 emissions from shipsPhoto: Geostockcarbon content cannot easily be determined.There are no indications regardingif and when guidelines for biofuelswill be developed.Further work A number of guidelinesare going to be developed during the nextfew years, with the most important beingissued before the EEDI and SEEMP enterinto force in 2013:■■February 2012 – MEPC 63: Guidelinesfor minimum propulsion power■■■■■■October 2012 – MEPC 64: Guidelines onvoluntary structural enhancementJuly 2013 – MEPC 65: Guidelines forCO2 abatement technologiesMarch 2014 – MEPC 66: Guidelines forcalculation of EEDI for roro, passenger,diesel-electric and hybrid propulsionshipsThe requirements and dates are subjectto two reviews: the first is on the requirementsfor small ships and large bulkersand tankers and is due in July 2013. Thesecond review allows for a discussion ofboth the requirements and the time linefor when Phases 2 and 3 are to enter intoforce, and is due in January 2015. Tanker update NO. 2 2011 | 7

Impact of EEDI and SEEMPImpact of EEDI and SEEMPThe amendments to MARPOL Annex VI on CO2 emissions were adopted by IMOin July 2011 and will enter into force in 2013. IMO commissioned a joint study byLloyd’s Register and DNV to estimate the impact of the new requirements.Text: Tore Longva, DNVThe results from the study show that, asnew ships are built, the EEDI will graduallyreduce the emissions from the world fleetby 3% in 2020, 13% in 2030 and 30% in2050. The SEEMP will not directly mandatean emission reduction but, due toincreased awareness of costs and reductionpotentials, the study estimated the reductionto be 5-10% from 2015 onwards.Effect of a Ship Energy EfficiencyManagement Plan (SEEMP) The EEDIwill mandate improvements in hull designand machinery, while the SEEMP willrequire ship owners to develop a plan fortheir ships. Operational measures havesignificant reduction potentials that, basedon current fuel prices, are cost-effective.However, there seems to be limited uptakeof these measures caused by non-financialbarriers, such as lack of competence, lackof cooperation between players and splitincentives. Higher fuel prices will onlylead to a limited extra implementationof measures, but over time they will drivetechnology development and innovation.Other incentives will have to be in placeto implement the existing set of measures.The SEEMP will initiate monitoring andtarget setting as well as the examinationof concrete measures to be implementedfor each vessel. Awareness of the potentialsavings is expected to increase the uptakeof measures.Photo: DNVWaiver clause In the final negotiations,a clause was inserted in the regulations8 | Tanker UPDATE NO. 2 2011

Impact of EEDI and SEEMPWorld fleet – Average scenario: A1B-4 and B2-135003000CO2 [mill tonnes]250020001500100050002010 20152020 2025 2030 2035 2040 2045 2050allowing flag states to waive the EEDIrequirements for their fleets for up to fouryears after entry into force. It is still uncertainhow many flag states will apply thiswaiver clause. Complying with the requirementsin Phases 0 and 1 is expected to comeat low cost. There is no commercial reasonto order a ship without a calculated EEDI,as the second-hand value may be lower andthe ability to get a charter may be reducedas charterers will prefer ships with a low(and thus calculated) EEDI. If only the threeflag states opposing the amendments waivethe requirements, 5% of the fleet will beexempted.VLCC case The new regulations wereapplied to a VLCC to see the developmentsin its fuel consumption and cost.The baseline case was a tanker using 23000 tonnes of fuel per year, which at presentfuel prices would cost around USD10 million. The first figure shows how anew vessel would perform year by yearup to 2050. A ship built according to therequirements in 2030 would use about 14000 tonnes per year in 2030. The figuresbelow show the fuel consumption of a newbuildVLCC. The fuel cost calculations inthe second chart are based on a scenariowhere the sulphur regulations being introducedin 2020 will significantly increasefuel prices, but the increase in energyefficiency will reduce the expected costfrom USD 50 million to USD 30 millionper year. Annual fuel consumption [tonnes]Fuel cost [mill USD]250002000015000100005000605040302010EEDI reductionBusiness as usual02010 201502010 2015SEEMP reductionNew emission levelShip type: VLCC – scenario: A1B-4Fuel: High, SEEMP uptake: High, No waiverAnnual fuel cost for new built VLCC – Scenario A1B-4Fuel price: High, SEEMP uptake: High, No waiverEEDI reductionBusiness as usual2020 2025 2030 2035 2040 2045 2050EEDI reduction SEEMP reduction New fuel consumption2020 2025 2030 2035 2040 2045 2050SEEMP reductionNew emission levelTanker update NO. 2 2011 | 9

Intertanko and the EEDIIntertanko and the EEDI:seeking a level playing fieldIntertanko fully supported IMO’s adoption of mandatory measures to reduce theindustry’s contribution to greenhouse gases (GHG) this summer. But with someissues yet to be settled, Intertanko insists that Energy Efficiency Design Index (EEDI)requirements should apply equally to all ships on the same effective date.Interview by Jan Koren and Alexander Wardwell›› Graham Westgarth, Chairman of IntertankoEEDI – reducing carbon emissions,one vessel at a timeThe EEDI applies to all vessels built after 2013. Bysome estimates, the measure will help remove 45to 50 million tonnes of CO2 from the atmosphereannually by 2020, depending on the growthin world trade. For 2030, the reduction will bebetween 180 and 240 million tonnes annually sincethe introduction of the EEDI.Photo: DNV/Nina E. RangøyThis summer, the IMO’s Marine ProtectionCommittee (MEPC) introducedmandatory measures to reduce GHG andthese measures have been adopted by theparties to Marpol. The amendments toMarpol Annex VI regulations on energyefficiency include the EEDI, which appliesto new ships built after 2013. Over the pastfour years, IMO has worked with a broadrange of industry stakeholders to develop aframework for the EEDI. These stakeholdersinclude Intertanko, which providedtechnical support to the project.According to Graham Westgarth, theChairman of Intertanko, the organisation’smembers welcomed the introduction ofthe EEDI. “We recognise that shippingaccounts for about three per cent of globalcarbon emissions, and have long supportedsmart and fair measures to reducegreenhouse gases,” he says. “Our activeparticipation with the IMO in the developmentof EEDI for new ships is a clear demonstrationof our shared commitment tomanaging this issue more effectively.”Mr Westgarth notes that while marinetransportation is generally recognisedas the most fuel-efficient mode of bulktransportation, a 2009 IMO GHG studyconcluded that improvements in energyefficiency, mainly through the use ofalready existing technologies, can achievesignificant reductions in fuel consumptionand corresponding emissions. “At thesame time, the rising cost of bunkering hasincreased the industry focus on fuel efficiency,”he says. “The relationship betweengrowing environmental concerns and thedesire to reduce fuel costs has createdstrong incentives for the industry to worktogether, a cooperative spirit which has thefull support of our membership.”Indeed, while the EEDI is likely beamended over time, the initiative enjoysthe widespread support of governments,industry organisations, owners, operatorsand the public and has included inputfrom politicians, naval architects, classsocieties, shipyards and equipment manufacturers,among other stakeholders. “Foran industry not always known for concertedaction, the broad-based support forthese measures is encouraging,” says MrWestgarth. “And while some issues remainunresolved, we are confident the EEDI willmake a genuine difference.”In brief, the EEDI requires a minimumenergy efficiency level for new vesselsentering the world fleet through technicaland design-based measures, such asmore efficient engines and propulsionsystems, improved hull designs and largerships, which transport more cargo usingproportionally less fuel. At present, the10 | Tanker UPDATE NO. 2 2011

Intertanko and the EEDIEEDI covers the industry’s most energyintensivesegments, including oil andgas tankers, bulk carriers, general cargoships, refrigerated cargo carriers andcontainer ships. However, the EEDI is notapplicable to all ship types or propulsionsystems (such as hybrid or diesel electricengines). IMO has indicated that theMarine Environment Protection Committee(MEPC) will consider ship types notcovered by the EEDI at future sessions,focusing on the most carbon-intensiveship types first.An issue of concern to INTERTANKOis the four-year waiver provision includedin the newly adopted regulations. Thisprovision allows flag states to waive the2013 implementation date until 2017. JoeAngelo, Intertanko’s Managing Director,believes that any regulation must apply tothe whole industry equally. “In our view,there should be a level playing field. TheEEDI requirements should apply equally toall new ships that are built between 2013and 2017,” he says. “Carving out exceptionsundermines the spirit and intent ofthe initiative.”Another critical issue to INTERTANKOis compliance with the EEDI. Reducing thedesign speed on new ships is an easy way tocomply with the EEDI requirements, butINTERTANKO believes that complianceshould be achieved through other means.“Our position is that compliance shouldfocus on improved hull design, propulsionefficiency and energy optimisation,rather than predominantly on reduceddesign speeds,” says Mr Angelo. “The EEDIshould not jeopardise or have an adverseeffect on the vessel’s safety.”While more work clearly needs to bedone, both Mr Westgarth and Mr Angeloagree this is a good start. “For the firsttime in our industry’s history, ships willhave to meet a minimum energy efficiencystandard , and these standards will bestrengthened,” says Mr Westgarth. “It willtake some time before the existing globalfleet is replaced by EEDI-compliant vessels,but we are confident that this is the rightthing to do.” “Our active participation with the IMOin the development of EEDI for newships is a clear demonstration of ourshared commitment to this issue,”says Graham Westgarth, Chairman ofIntertanko.›› Graham Westgarth and Joseph Angelo, Managing Director of Intertanko.Photo: DNV/Nina E. RangøyTanker update NO. 2 2011 | 11

Fuel Saving GuidelineDNV’s Fuel SavingGuideline for TankersIn order to help designers and owners navigate the jungle of measures availableto improve fuel efficiency, DNV has recently issued a Fuel Saving Guideline forTankers, prepared in cooperation with Hamburg Ship Model Basin HSVA.Text: Vidar Ådnegård, DNV›› Wake Equalizing Duct›› Becker Mewis Duct ® ›› Contra rotating propellerThe aim is to provide an independentoverview of different fuel saving measuresfeasible for both newbuilds and retrofit onships in operation, meeting the needs ofand requests from ship owners, charterers,designers and yards. The Guideline mayserve as decision support.Additionally, a tool for calculating thereturn on an investment has been developedfor the project in cooperation withDNV ProNavis.With fuel costs for oil carriers normallyin the range of more than 60% of the totaloperating costs, reducing fuel costs is amajor issue, particularly when the freightmarket is as low as it is nowadays.A variety of individual measures andstrategies for optimising fuel consumption12 | Tanker UPDATE NO. 2 2011

Fuel Saving Guidelineare known and partly applied in the industry.Some of the alternatives are applicableto newbuilds, while others may be appliedto existing ships too. Up to now, however,there has been no systematic and impartialsummary of the most relevant measuresand assessment of their savings potential.The Guideline contains four main categoriesof measures – those which:■■■■■■■■Reduce the hull resistanceImprove the propulsion efficiencyImprove the power plant efficiencyImprove the operational efficiencyIts content covers the following scope:■■Description of each measure■■Compatibility of measures with eachother■■Complexity of manufacturing■■Range of expected fuel savings■■Expected maintenance needs■■Indication of price range■■Class requirementsThe market jungle There is a varietyof different fuel saving measures inthe market today, and selecting the mostappropriate ones is challenging. Forinstance, there are several options forimproving propeller efficiency. Stators,ducts and fins are some of the possibledevices installed pre- or post-swirl in orderto save energy.The machinery suppliers deliver solutionsthat increase the flexibility andoptimise the efficiency of the engine. Andthen there are all the measures associatedwith the operation and management ofthe vessel, for example should you optimisethe trimming of the vessel to reduceresistance? Do you route the vessel accordingto the forecasted weather, speed andcontracted time of arrival in order to optimisethe operation?A matter of cost and savings. Themeasures described in the Guideline spanfrom easily implemented low-cost solutionsto more complex and technologically challengingsystems, all presented togetherwith an indicative return on investmentassessment.Some of the presented measures arerather complex and need to be consideredand decided upon during the designprocess. Others can be retrofit but requiredry docking. However, in many cases fuelsaving does not need to be that comprehensiveat all. The Guideline includes anumber of measures with a short paybacktime which are rather easy to implement.Examples are:■■■■■■Trim Optimisation: by changing the trimof the vessel, the wave pattern aroundthe vessel will also change. Optimisingthe trim by minimising the wave resistanceleads to a reduction in the powerneeded, which again means lower fuelconsumption. The most favourable trimmay be found by CFD analysis.Propeller Polishing: cleaning the propellerwill help avoid an increase in thepropeller’s friction losses due to marinegrowth. The cleaning itself is rathersimple and may be carried out when theship is anchored or berthing.Engine Tuning: the engine performancegradually worsens. By tuning the enginesto maintain a low SFOC, this trend maybe interrupted. A diesel engine analysistool is necessary in order to continuouslyoptimise the maximum combustion pressureand mean indicated pressure, leadingto an optimised SFOC.The net fuel saving The expectedfuel savings are given as ranges in theGuideline, as the net effect will vary fromcase to case. The best way of validatinga fuel saving measure is to compare twoidentical vessels trading the same route,one with and one without the respectivemeasure deployed. However, there arealternatives to full-scale results. Measuresrelated to resistance and propulsion maybe validated through model tests in a towingtank and by CFD calculations. ›› Vidar Ådnegård, Project TeamMember, Senior EngineerShip Hydronynamics and Stability›› Etienne Gernez, Project LeaderDNV SERVING THE MARITIME INDUSTRYDNV Fuel Saving Guideline – For TankersDNV Fuel Saving Guideline– For TankersJOINT PROJECT BETWEEN HSVA AND DNVTanker update NO. 2 2011 | 13

SEEMPSEEMP and Energy Efficiency– DNV offers supportThe required Ship Energy Efficiency Management Plan (SEEMP) is a potential tool for owners to reducethe fuel billl. While the requirement of having SEEMP on board vessels is still a year or more away, DNVis already making great efforts to help shipping companies get this right. This builds on a long traditionof working on energy efficiency with owners/operators around the globe in most ship segments.Text: Sverre Alvik, DNVDNV has been assisting shipping companiesto improve energy efficiency for manyyears. The two main areas DNV are workingon are:■■■■Ship design, where we are working closelywith yards, designers and owners toimprove hull design, hull and propelleroptimisation and other resistance-relatedissues.Ship operation, where we are workingwith shipowners and charterers toreduce fuel consumption during operation,focusing on all areas from voyagemanagement and the culture on boardto ship and machinery performance.At DNV’s headquarters at Høvik, a groupof 10 people is working exclusively on theenergy efficiency of operations and providingexperience and expertise to supportDNV personnel in this area around theglobe.When the focus on operational energyefficiency started in DNV five years ago,the price of fuel was lower and slowsteamingwas not a priority in the industry.Since then and 50 projects later, energyefficiency has forced its way higher andhigher up our customers’ agendas. Andwhile the first projects were undertakenfor companies paying high fuel bills themselves,current projects are equally oftenundertaken for the offshore, gas or tankerindustry, where the charterers are oftenpaying for the fuel.›› Sverre Alvik, Head of Section Environment andEnergy EfficiencyThe incentives are different for thesecompanies. However, generally speaking,improved energy efficiency means lowermaintenance costs, improved brand positioningand meeting stakeholders’ expectations.And someone is always paying forthe fuel, making the projects and companyinitiatives an excellent business case intheir own right!A snapshot of DNV’s experiences –where do we find fuel savings?Although energy efficiency is onPhoto: DNV/Nina E. Rangøyeverybody’s agenda, DNV’s experiencessuggest that large improvements can beachieved in all companies – even thoseconsidered to be ‘leading’ or ‘best practice’.Initial savings typically represent a5-15% reduction in fuel consumption,fuel costs and emissions, and are mostcommonly achieved by measures such aspropeller polishing, trim calculations andengine performance tools. Further savingsare identified in relation to companyculturecampaigns that aim to improve theawareness and ownership of fuel savingprogrammes, as well as improved ownercharterercooperation on joint initiatives.The measures identified by DNV are seldomnew to the companies we work with,but what is not so common are the systematicsof an energy efficiency programme,the clear business cases it presents and thefocus all the way from idea to implementationin order to ensure tangible results.SEEMP When IMO resolved to make aShip Energy Efficiency Management Plan(SEEMP) mandatory earlier this year, itforcefully pushed energy efficiency evenhigher up the shipping agenda. Within15-40 months (depending on each vessel’ssurvey schedule), all 70,000+ vessels in theworld fleet will need to have a SEEMP inplace. Unlike the traditional energy efficiencyinitiatives often run by the shoreorganisation, a SEEMP must be ship-specificrather than company-specific.14 | Tanker UPDATE NO. 2 2011

SEEMP›› Energy Efficiency – scope of DNV services.There is a lot of freedom regardingthe way in which the plans are to bemade, and although the current IMOSEEMP guideline provides a good startingpoint, DNV’s experience is that theaverage owner/operator needs somethingthat places more attention ondeveloping a tailored solution that suitsits operations as well as an implementationplan.When working on SEEMP, DNV looksat the intention behind the new regulation.A rubber-stamped document copyinga template will only serve the ‘ticket-totrade’mission and not deliver any actualimprovement in energy efficiency. A moreclosely defined SEEMP, on the other hand,will save costs as well as emissions, and withrelatively little effort will deliver an excellentbusiness case for the owner.For companies that want to develop aSEEMP themselves, DNV Maritime Advisoryhas developed a free SEEMP guidelineexplaining DNV’s experiences and adviceon current best practice. In addition, manyDNV advisory units worldwide are alreadyworking closely with a number of customersto provide help in developing shipspecificplans.Later, DNV will also verify that companieshave a SEEMP as a part of theMARPOL Annex 6, International EnergyEfficiency Certificate – and this verificationwill be carried out by DNV Class.SEEMP has put energy efficiency nearthe top of companies’ agendas and DNV’sextensive experience in this area suggeststhat this is a sound development for theindustry. The increased focus will producemonetary as well as environmental benefits,and DNV is happy to contribute tothis development. SEEMP (Ship Energy EfficiencyManagement Plan)At the IMO MEPC 62nd session in July 2011,amid mounting pressure from the industry andother authorities, the SEEMP was adopted andwill become mandatory for all vessels at their firstrenewal or intermediary survey after 1 January2013.• Under the proposed amendments to MARPOLAnnex 6, Regulation 22, all ships will haveto have an International Energy EfficiencyCertificate (IEEC)• The IEEC requires, amongst other things, thepresence of a SEEMP on boardVISITIMO Guidelinewww.dnv.com/SEEMPCONTACTSEEMP@dnv.comenvironmentandenergyefficiency@dnv.comsverre.alvik@dnv.comjonathan.abrahams@dnv.comTanker update NO. 2 2011 | 15

Energy efficiency design index30.00EEDI value (g CO2/ tonne*nm)25.0020.0015.0010.005.00Reference line samplesIMO EEDI reference lineCase vessel0.000 50,000 100,000 150,000 200,000 250,000 300,000 350,000 400,000 450,000 500,000Capacity (DWT)Energy Efficiency Design Index- How DNV can assist you to successfully implement the EEDI for your fleetEnergy Efficiency Design Index - EEDIAs a measure to support the objective to reduce emissionsof greenhouse gases from international shipping, IMO’sMarine Environment Protection Committee (MEPC) hasdeveloped the Energy Efficiency Design Index (EEDI).Being a measurable method for determining the energyefficiency of a ship, the EEDI quantifies the amount ofcarbon dioxide a ship emits in relation to its value forsociety.Adopted at MEPC 62 in July 2011 as an amendment toMARPOL Annex VI, the EEDI will enter into force 1January 2013 as a mandatory requirement, requiring aminimum energy efficiency level for new ships. The EEDIwill as such stimulate continuous technical development offuel efficient ships. At the same time it enables acomparison of the energy efficiency of individual ships tosimilar ships of the same size and ship type. The EEDI willbe included in a new International Energy EfficiencyCertificate (IEEC) that will be introduced for all vessels.The EEDI is based on a formula for calculation of shipspecific emissions of CO2. The result for each ship, whichis to be based on design documentation and engineperformance, is expressed in grams of CO2 per capacitymile.Once the EEDI is put into force the attained EEDI fora specific ship must be less or equal to the required EEDI,expressed by reference lines developed by IMO for eachship type. The EEDI reference lines will become morestringent with time as reduction factors are planned to beapplied in different phases starting in 2013.Det Norske Veritas AS16 | Tanker UPDATE NO. 2 2011

Energy efficiency design indexProviding your EEDI Technical Fileto be submitted for verificationDNV Maritime Advisory assist yards, designers, owners and operators to prepare the EEDITechnical File package with necessary documentation ready for verification.Maritime Advisory covers the complete span in the EEDIcalculation process for your vessels:Gap Assessment Review of all design documents required to calculatethe EEDI and identify possible missing data Review design and sea trial procedures for estimatingvessel speed and powerEEDI CalculationEstimate the EEDI based on IMO guidelinesAssess the design speed and power using model test orsea trial dataEEDI ImprovementThe EEDI Technical File developed by Maritime Advisory isreadily prepared to be submitted to a verifier forverification as proof of EEDI assessment. DNV hasprepared EEDI Technical Files and identified EEDIimprovement areas for a number of ship designs to yardsand owners on a world-wide basis.Calculation and verification of the EEDI is performed attwo stages:1) Preliminary assessment of the EEDI at the design stage2) Final assessment of the EEDI at final stage ofconstruction, accounting for the results from sea trialsDNV also offers third party verification services for EEDI,including issuance of EEDI verification statement. Theverification is based upon the EEDI Technical File and asurvey onboard the ship at sea trials.Identify areas which could lead to significant EEDIimprovement with a minimum impact on the basicdesignEEDI Technical FileDeliver a complete technical document package, anEEDI Technical File, to support the EEDI verificationDet Norske Veritas ASMaritime Advisory, Ship Hydrodynamics and StabilityE-mail: ntano362@dnv.comFor further information please contact your local or main DNV office.Tanker update NO. 2 2011 | 17

Recent delivery18 | Tanker UPDATE NO. 2 2011

Recent deliveryAl Riqqa• Owner: Kuwait Oil Tanker Company S.A.K.• Yard: Daewoo Shipbuilding & Marine Engineering Co., Ltd.• Ship Type: Crude oil Carrier• Flag: Kuwait• Class Notations: @1A1 CSR Tanker for Oil ESP SPM COMF-V(3) E0 NAUT-OCVCS-2 HMON(A1,G4) CLEAN PLUS BIS TMON NAUTICUS(Operation)• LOA: 332 m• LBP: 320 m• Breadth: 60 m• Depth: 30.5 m• Design Draught: 21 m• Main Engine: MAN-B&W1 x 7S80ME-C8, 2 Stroke, Single Acting, In-Line (Vertical)7 Cy. 800 x 3200, Mcr: 29,260 kW (39,782 hp) at 78 rpm• Speed: 16.4 knots• Deadweight: 319 704 tdwTanker update NO. 2 2011 | 19

ThenamarisThenamarisfirst to receive DNV’sTriple-E ratingGreek ship operator Thenamaris is the first company to receive DNV’s newTriple-E rating, which was awarded for the Seabravery tanker. The rating,which is designed to demonstrate active environmental management and theenergy efficient transportation of goods, is a voluntary scheme developedin close cooperation with Thenamaris Ship Management in addition toStena RoRo, Seaspan Ship Management and Skaugen Petrotrans.Text: Magne A. Røe, DNVCaptain John M. Mavrides is head ofThenamaris’s safety and quality supportdepartment and he underlines Thenamaris’slong tradition of quality, energyefficiency and operational excellence:“Triple-E is a continuation of our ongoingefforts to improve our energy efficiencyand to focus on this in our daily operations.The crew of Seabravery finds thatTriple-E gives them a measure of how theyperform, and helps them focus on thisduring the daily operations. In today’ssluggish tanker market, we must ensurethe efficiency of our operations.”Triple-E is a voluntary environmentalrating scheme for ships that represent asustainability benchmark for players in themaritime industry, including ship operators,ports and cargo owners. The ratingrepresents the individual ship’s level ofenvironmental performance, and it isdesigned to help shipowners obtain a competitiveadvantage both commercially andwith regard to environmental performanceand efficiency. Triple-E delivers a rating ona scale from four to one where one is best,based on an independent assessment of aship’s environmental performance.“The Seabravery obtained a score ofthree on the Triple-E scale,” continuesCaptain Mavrides. “To us, this is a verygood rating. It underlines the success ofour efforts to focus on environmental performance,which is an important cornerstoneof the Thenamaris company culture.Furthermore, a score of three means thatwe have an implemented environmentalmanagement system in place.”A Triple-E level three means that clearenergy efficiency targets have been setthrough, and established in, the Ship EnergyEfficiency Management Plan (SEEMP)and in the calculation of the Energy EfficiencyOperational Indicator (EEOI). Also,it means that an environmental awarenesssurvey has been completed to identifytraining needs and improvement areas.“Our most important customers arethe oil majors, who have their own vettingsystems as well, in addition to those ofthe port authorities and TMSA. We havea good reputation among the oil majors.In this industry we must be truly transparentin our operations and procedures, asbusiness relationships are based on mutualtrust at all levels. In this equation, wemust also demonstrate very clearly how weoperate, and how we ensure that we arevery sensitive towards the environmentas well. We started out with the GreenAward back in ‘97, then we received ISO14001 and ISO 9000 certification beforemoving into the efficiency aspects of ouroperations and environmental excellence.Our Triple-E certification further underlinesthese commitments to our clientsas well, and this is highly appreciated bythem.”“The issues we focus on through Triple-E are good for the crew as well as it createsawareness. For them, the rating is evidencethat the results they work hard to achievecan be measured. They find this bothinspiring and challenging. Inspiring in thesense that the figures measured are expressionsof a good safety culture. Challengingas there is always room for improvement,but then, to good working crews the challengeis also the inspiration. We have acompany culture of being proactive, andto me that is what Triple-E helps us be. We20 | Tanker UPDATE NO. 2 2011

ThenamarisTriple-EThe Triple-E environmental rating and energyefficiency rating scheme for ships has been developedto provide ship operators with a well-documentedtool to improve their organisational performance,identify ways to minimise their environmental impactand, ultimately, optimise their fuel consumption andthereby reduce costs.Triple-E has four rating levels – 4, 3, 2 and 1 (where1 is the highest). For each of these levels, thereare requirements within the areas of management,operation and design. To reach a specific level, all therequirements stated for this level and the levels belowit have to be complied with.A Triple-E rating is a verification of a ship’s actualenvironmental performance, and each leveldemonstrates a different level of environmentalcompetence and pro-activeness for a vessel andcompany:Level 4: Heightened environmental performancethrough a company environmental policy andtargets in place Verified compliance with all currentenvironmental rules and regulations Reliableoperation through quality testing of all fuel used.Level 3: Systemised environmental performancethrough an implemented environmentalmanagement system Clear energy efficiency targetsthrough an established Ship Energy EfficiencyManagement Plan (SEEMP) and calculation of theEnergy Efficiency Operational Indicator (EEOI) Anenvironmental awareness survey completed withtraining needs and improvement areas identified.Level 2: Sustained environmental performance andimprovements documented through a certifiedenvironmental management system Minimisedemissions to air and optimal fuel efficiencythrough an implemented Ship Energy EfficiencyManagement Plan (SEEMP) and the EnergyEfficiency Operational Indicator (EEOI) monitoredover time to document performance Verifiable fueloil measurements and an Inventory of HazardousMaterials (IHM).Level 1: Leading environmental performance throughoperational risk assessment and enhanced crewcompetence levels Minimised environmental impactthrough state-of-the-art ship and equipment designA verified Energy Efficiency Design Index (EEDI).›› The Seabravery.Photo: Thenamaris›› Captain John M. Mavrides Head of Thenamaris’s Safety and Quality Support Department receiving theTriple-E Certificate from President Tor E. Svensen, DNV (to the left).feel that we’ve developed Triple-E togetherwith DNV and that this has been time wellspent,” says Captain Mavrides. He addsthat there are indeed many – and enough– safety and environmental regulations,and that regulators should ensure implementationof the existing schemes and notimpose additional requirements.“Thenamaris is currently expandingits fleet to include two Suezmax tankers,four 50,000-ton product tankers and oneVLCC. But we are also expanding intoother ship segments – with four containerships and three LNG carriers. Our strategyis to expand through diversification,” addsCaptain Mavrides.The Triple-E rating is based on theship’s environmental and operational data.The rating focuses on factors such as theship’s environmental management practices,the energy efficiency of its operations,and the verifiable monitoring, measurementand documentation schemes that arein place. Many of these factors can easilybe influenced, either by the ship’s owneralone or with the assistance of third partiessuch as DNV. Triple-E encourages a processof continuous improvement. ThenamarisThenamaris Ship Management is a leading globalprovider of ship management services. The fleetunder management consists of oil tankers for thetransportation of crude oil, oil products and bulkcarriers.• Owned fleet: a modern fleet of 34 tankers, sixbulk carriers and one container carrier.• Under construction: two Suezmax, four producttankers, one VLCC. The company is diversifyinginto container and LNG shipping by having fourcontainer ships and three LNG ships.• Headquarters: Athens• Number of employees in the Group: 2,500• Thenamaris Ship Management manages 41ships, 54 including newbuildings.Tanker update NO. 2 2011 | 21

Innovation AwardsDNV winsInnovation AwardsDuring the months of September through November this year,DNV has received three different innovation awards, as describedbelow. Triality has been an important contributor to this, in additionto DNV’s other innovation projects over the last couple of years.TEXT: JAN KOREN, DNVPhoto: Lloyd’s List›› Lloyd’s List Global Innovation Award,London, 21 September 2011Ioannis Kourmatzis, Chief Operating Officer, DivisionEurope and North Africa, receives the prize on behalfof DNV from Chris Potter, Chief Executive of ASRY.the Lloyd’s List InnovationAward “The DNV Triality project stoodout from the pack because it offered atruly innovative attempt to look into thefuture and address real problems with realsolutions.”This was the reason stated by Lloyd’sList and its nine-member highly skilledand experienced international judgingpanel when the award for the best innovationproject in the global shipping industry2011was presented at a ceremony in Londonin late September.“I was really pleased and honouredto accept the award on behalf of a lot ofskilled, hardworking DNV colleagues,” saidIoannis Kourmatzis, DNV’s COO Europe& North Africa.When the financial crisis hit the shippingindustry in late 2008, DNV decided tomeet the upcoming challenges by focusingeven more on innovation. Triality was oneof several innovation projects initiated,and a group of almost 30 talented, mostlyyoung engineers representing a wide set ofdisciplines was formed to run it. The projectwas completed and presented at thebeginning of December last year.Triality is a VLCC concept that isfuelled by liquefied natural gas (LNG)and has a hull shape that eliminates theneed for ballast water. The very low LNGtemperature is used to recover cargovapours (VOCs) and cool the combustionair supplied to the main engine in orderto increase engine efficiency. All this willreduce emissions to the atmosphere to significantlybelow the level stipulated in anyregulations that are foreseeable today.Lloyd’s List stated that: “DNV won thisyear’s award because they dared to thinkwell beyond the current conservatisminherent in shipping and handed a seriousproblem to a team of talented youngengineers unencumbered by entrenchedthinking.”And the judging panel continued: “Theresulting project was a fascinating seriesof solutions and concepts that ultimatelyproduced a radical design for an LNGpoweredvery large crude oil carrier.”The innovation category presented thejudges with their toughest debate, as noother category had that many candidates– 20 strong entries. All in all, awards weremade in 14 different categories, representingall parts of the extensive, global shippingindustry.Like most other concepts – such asthose created in the car industry – Trialitywill probably never be built exactly as ithas been presented. However, major partsof its solutions and ideas will certainly bepicked up and used.As the tanker shipping industry is facingmajor challenges due to very low freightrates and few newbuilding orders arebeing signed right now, the time should beright to look into new opportunities –suchas those represented by Triality.There was an extensive presentation ofTriality in Tanker Update No 2, 2010.22 | Tanker UPDATE NO. 2 2011

Innovation Awards›› Sea Trade Middle East Innovation Award2011, Dubai, 17 October 2011DNV’s Jörgen Traun receiving DNV’s TechnicalInnovation Award from Mr Mohammed S. Al-Gusaier(President & CEO of Vela International MarineLimited).›› Lloyd’s List Middle East Innovation Award2011, Dubai, 16 November 2011DNV’s Jörgen Traun, here seen together with RichardMeade, the editor of Lloyd’s List.›› Sea Trade Middle East Class Society Award2011, Dubai, 17 October 2011Jörgen Traun receiving DNV’s Classification SocietyAward from Mr Ali Al Yabhouni, President of theUAE Shipping Association.Technical Innovation Award andClassification Society AwardDNV was declared the winner of the TechnicalInnovation Award and ClassificationSociety Award at the Seatrade Middle East& Indian Subcontinent Awards 2011 on 17October 2011Held at the Atlantis The Palm hotelin Dubai, the awards ceremony was wellattended by leading players in the maritimeindustry, and DNV won both thecategories it was nominated for; the ClassificationSociety Award and TechnicalInnovation Award.The Technical Innovation Awardreflects DNV’s innovation efforts, particularlythe VLCC Triality concept and Quantum,an innovative container ship conceptalso developed by DNV.“Winning the Classification SocietyAward for the sixth time and the TechnicalInnovation Award for the first time meansDNV will face high expectations in subsequentyears,” says Jörgen Traun, DNV’sRegional Manager for India and MiddleEast. “We need to continuously evolve,”he declared to his colleagues after theceremony.Lloyd’s List Middle East andIndian Subcontinent InnovationAwards Mr Sultan Al Zaabi, Finance DivisionManager of ADNATCO & NGSCO,handed over the Innovation Award wonby DNV to Mr Jörgen Traun during a galadinner in Dubai on 16 November 2011.DNV’s innovation projects It isimportant to distinguish between an innovationproject developing a concept andone developing a ship design. We entirelyagree with those who claim that classsocieties should not be involved with shipdesign.What DNV has done is, based on itsexpertise, to come up with ideas whichmay bring the shipping industry forwardin compliance with new regulations anddemands. DNV has no patents or proprietaryrights associated with these projects.They have been openly presented to themedia and shipping world. Anybody –designers, yards and owners – is completelyfree to reject these ideas or see them asa commercial business opportunity. In thelatter case, engineering and design workhas to be carried out to prepare specificationsand drawings based on the completeinnovation concepts or part of them. Inthis way, our innovation projects maytrigger new ideas and opportunities fordesigners and yards.Based on the awards described hereand feedback we have received from themedia and shipping community at large,there is strong evidence that this type ofinnovation is highly appreciated. Tanker update NO. 2 2011 | 23

Arctic LadyA privilege to be captainon board the Arctic Lady24 | Tanker UPDATE NO. 2 2011

Arctic LadyThe Arctic Lady and her sister ship the Arctic Princess are Moss-design LNG carriers purposebuilt to serve Statoil’s Melkøya LNG terminal close to the Norwegian city of Hammerfest, thenorthernmost city in the world. The Melkøya LNG terminal is also the northernmost LNG terminalin the world, and the Snøhvit LNG carriers were the first winterized LNG carriers in the world.Text: Magne A. Røe, DNVPhoto: Norvald KjærstadTanker update NO. 2 2011 | 25

Arctic PrincessSvein-Are Gusdal, a captain on board theArctic Lady, has been a sailor since he was22 years old, in the gas trade since 1976and has just turned 60. We recently discussedhis experiences from the specialtrade of braving the North Atlantic, NorwegianSea and Barents Sea close to thenorthern tip of Norway during the winter,when storms can be fierce.“The northern part of the sea route toMelkøya has unpredictable weather as it isat 70 degrees north. Arctic lows (low pressuresystems) often appear suddenly, bringinggale force winds, and the terminal atMelkøya is not the place to be for too longin those weather conditions. To me, quickin and out again is the preferred mode.We have experienced temperatures downto minus 15 to 20 degrees centigrade. Withthe wind chill on top, this trade can beextremely cold and completely differentfrom other worldwide trades.”The Arctic Lady is ‘winterized’. What does thatmean in practical terms?“It means the ship has additional insulationof the accommodation and storagespaces, heating systems in the form ofelectrical coils on walkways and laddersand deicing systems for other areas. Firelines on deck and other piping systemsare also protected against ice formation.This works very well, as does the heatingin the cargo manifold area to prevent icefrom building up. In addition, the bridgeis extended to the enclosed and heatedbridge wings to protect the crew from thebitterly cold weather when entering andleaving the terminal. The biggest problemwith the Winterized class notation is howto explain the difference between ice classand winterized to the many vetting agentsand port authorities. They don’t alwaysknow or understand the difference. Iceclass means a stronger hull when neededto be able to travel through varying typesof ice. There is no ice any time of the yearat Melkøya, just bad weather. So we don’tneed a strengthened hull for this purpose.Winterized is, however, mainly intended tomake the vessel fit for purpose in low temperaturesthrough special features abovethe waterline. The degree of winterizationneeds to be tailormade for different tradesin different parts of the world.Have you personally experienced any problemswith icing?“Actually, we haven’t during the first fouryears of operation. I’ve never had any›› Captain Svein-Are Gusdal onboard the Arctic Lady.26 | Tanker UPDATE NO. 2 2011

Arctic Princessmajor ice forming on the ship, in spite ofsub-zero temperatures and sea spray coveringmost of the ship. The combination ofwind force and direction, wave heights, seaand air temperatures has so far never beenright for major icing. The Snøhvit vesselsare modern state-of-the-art ships and it isreally a privilege to be a captain on boardthe Arctic Lady. It’s like being a captain ofa cruise ship.”So you like the way the ship handles?The ship is strong and with a few exceptionsnormally handles like a dream. Wehave some 9,800 sq m of steel surfaceabove the waterline and can operateat a cruising speed of 19.5 knots. Thenavigation systems are, of course, thebest there are, so yes, it handles like ayacht.”Can you describe the trade you do – once youleave Melkøya?“Our two ships were originally designedto trade the North Atlantic from Melkøyato the US East Coast. However, this haschanged since the shale gas projects weredeveloped in the US, significantly reducingthe need for imported LNG. Today,we sail to different European ports butwe have also done the long haul from theMelkøya terminal to KOGAS’s Incheonterminal outside Seoul in Korea. Thattrip is 15,000 nautical miles one way, eventaking the shortest route through theSuez channel.”Captain Gusdal was off duty when wetalked to him, but in late November heis joining his favourite ship in Singaporewhere she will continue on another voyageto Korea. He captained LPG carriersuntil 2007 when he joined Höegh andstarted to sail on the Arctic Lady. Höegh LNGOslo-based Höegh LNG operates a fleet ofseven LNG carriers, including two shuttle andregasification vessels. Höegh has close to 40 yearsof experience as a carrier of liquefied natural gasfor customers such as Gasnatural, GDF Suez,Statoil, Total and Repsol.›› The loading terminal at Melkøya, Norway, is the northernmost LNG terminal in the world.Photo: Darko Kucic©Wikipedia user: BerkutTanker update NO. 2 2011 | 27

Tanker WeekTanker WeekA practical and extensive training event, called Tanker Week, was heldat the DNV Academy in Gdynia, Poland, on October 17–21.TEXT: Anna Moen, DNV›› Anna Moen, Senior CustomerRelations Management Coordinator›› Image from tanker simulator.The target group consisted of ship owners/shipmanagers of operating tankers,superintendents and ships’ officers.Each of the scheduled sessions wasattended by about 18 participants fromvarious companies, including owner representatives,consultants (independentsurveyors and loss adjusters) and crewingagents. All the sessions combined lectures,discussions, exercises and group work.Virtual ship inspections were also incorporatedinto the course.The week began with a one-day TankerHull Inspection Course. This consisted ofseveral modules, based on the virtual hullinspection of typical tanker spaces. After ashort theoretical introduction in the classroom,participants stepped onto the deck ofa virtual tanker. They conducted a raftinginspection of a cargo oil tank and inspecteda water ballast tank and the main deck.The participants also attended a onedayTMSA & Vetting course. This aimedto provide a sound understanding of theprinciples and objectives behind the vettingprocess and TMSA (Tanker ManagementSelf Assessment) scheme. The course28 | Tanker UPDATE NO. 2 2011

RS Platou marketsShipping Weekly| RS Platou Markets*provides ship operators with a means bywhich to efficiently prepare for vettinginspections and demonstrate a strongcommitment to safety and environmentalexcellence.On two of the days, the participantsattended Maritime Accident Investigationand Analysis sessions. Based on DNV’sM-Scat methodology (Marine SystematicCause Analysis Technique: effective accident/incidentinvestigation and followup),these sessions offered a practicalapproach towards incident investigationand analysis in the marine environment.The Tanker Week ended with a PracticalMarine Risk Assessment session. Participantswere introduced to risk managementterminology, principles and techniquesand, upon completion of the course, wereable to conduct risk assessments bothonshore and on-board.Participants commented that they reallyenjoyed the training and would like DNVto organise similar events in the future.This feedback is very encouraging for theorganisers, who will be organising a similarContainer week and Bulk Carrier week in2012.The sessions run during Tanker Weekwere based on general DNV courses availableworldwide in several DNV Academies.Please contact DNV Gdynia, your nearestDNV office or www.dnv.com to identifythe most conveniently located DNV Academy.Anna Moen (Anna.Moen@dnv.com)will also respond to questions regardingTanker Week. alualuyuyalalellllyyuyaalyShipping WatchMyth-busters: Speed and earningsIn our June 23 rd weekly we compared the difference in speed for ~2,700 vessels travelling onFebruary 15 th and May 15 th 2011 to see if slow steaming had been implemented Data from RSPlatou Economic Research support our thesis that the combination of weak earnings and highbunker prices in fact has led to slow steaming, absorbing some of the over-capacity andlowering bunker expenses which consequently improve earnings for ship owners Equallyweighted, the average speed declined 2 3% from February to May and data from the samesurvey on August 15 th show that since May speed has been reduced by another 2 4%, bringingthe 6 month speed reduction to almost 5%16151413121114.514.013.0Speed in knots Feb-Aug 2011 Speed and Earnings change % Feb-Aug 201113.612.412.812.712.812.3 12.4 12.4Source: RS Platou Economic Research, RS Platou Markets12.711.815.915.8VLCC Suezmax Aframax Capesize Panamax Supramax LNG15-Feb 15-May 15-Aug BDIThe right hand chart shows development in earnings per day based on our speed assumptionsand speed reduction in percentage over the last 6 months based on the RS Platou EconomicResearch data. Findings from the survey show that VLCCs have reduced their average speedby ~7% to 13 knots currently at the same time as average earnings declined 72% from$42,300/day mid February to $11,900/day on August 15 th . The Suezmax segment shows thegreatest speed reduction of ~9% to 12.4 knots as earnings are 35% lower to $10,700/day.Our earnings per day estimate include the assumption of lower speed and hence explain thedifference to Baltic Exchange quotes for tankers suggesting that ship owners are subsidizing oilcompanies in order to transport their crude, not rational in our view. However, the BalticExchange assumes average speed of 14.5 knots, significantly below evidence from RS PlatouEconomic Research indicating 13 knots average currently.Myth-busters: Does ship owners subsidize oil companies?At speed 14.5 knots as assumed by the Baltic Exchange, a VLCC consumes around 100 tons offuel per day laden (with cargo) and 80 tons on ballast (without cargo). Due to contractualspeed on the cargo transportation leg, slow steaming is mainly implemented on the ballast leg.Ship owners are able to reduce their daily bunker consumption to only 30 tons by slowsteaming to ~11 knots on the return voyage. Hence, through reducing speed by 3.5 knots onthe ballast leg ship owners are able to lower their average daily fuel consumption from 90 tonsat 14.5 knots to 65 tons with slow steaming on the return voyage. Consequently, withunchanged bunker prices and rates the implementation of slower speed reduce fuel cost forship owners by almost 30%. 25 tons per day with current Singapore bunker cost of $630/tontranslate into ~$16,000/day, which explain why ignoring slow steaming implies negativeearnings and willingness of ship owners to subsidize oil companies, both very irrational. Shipowners are paid in dollar per ton delivered. The Baltic assumption that a ship will return withthe same speed and fuel consumption without cargo implies that the higher fuel consumptionwill be compensated through higher earnings over the extra days saved by increasing speed.However, current rates do not justify higher ballast bunker cost and consequently rationalreasoning and empirical evidence suggest that ballast bunker consumption is lower and hencealso earnings higher than the Baltic Exchange indicate. Nevertheless, with zero or negativeearnings we would see high laying up activity, which yet has not occurred with magnitudeindicating that ship owners find it more profitable to keep ships in traffic.We believe the myth of negative earnings for tankers are wrong. Rational reasoningsuggests slow steaming to lower fuel cost, supported by empirical evidence. Hence,we stand by our earnings forecasts which include lower speed and explain whylimited lay-ups have occurred.* Printed with the permission of RS Platou Markets..Earnings change in %80%40%0%-40%-80%-6.9%-72%-35%-8.7%Earnings change60%53%-3.9%-2.4%-15%-3.4%Speed change8%-7.0%38%-1.1%5%9%6%3%0%-3%-6%-9%Tanker update NO. 2 2011 | 29

What have we learnt from history?What have we learntfrom history?They say “…you never know where you’re going until you know whereyou’ve come from…”. Everybody seems to know that, yet it is difficult tosee that the oil tanker market may have learnt much from history.Text: Jakub Walenkiewicz, DNVThere is an undeniable parallel betweentoday’s scenario and the problems thatoccurred back in the 1970s, and thisgreatly troubles ship owners. Issues suchas freight rates below operational costs,plummeting asset values and weak demandall paint a gloomy picture of the future. Sowhat went wrong?Back in the 1970s, the Suez Canal closurecombined with rapid growth in UScrude imports initiated growth of 300% inthe oil tanker fleet in just five years (almostentirely due to VLCCs and ULCCs). However,these market conditions did not lastlong as the Canal was re-opened in 1975and, coincidently, US imports started todecline at the same time, leaving vast tonnagewithout employment. Consequently,the fleet shrank drastically and 28 yearspassed before it reached the same volumeas in 1976.In 2002, the fleet development pickedup momentum again. The shippingboom pushed the tanker order book tonearly 180 million DWT and subsequently›› Jakub Walenkiewicz, Senior Market Analystaccelerated the fleet’s growth to over 8%per annum. This time, the sentiment wasmainly fuelled by globalisation and therapid expansion of developing economiessuch as the BRIC countries. There werealso more pragmatic reasons, such as thenecessity of replacing single-hull tonnage.Interestingly enough, even the almost fivefoldincrease in the oil price did not manageto affect the growing demand for oil.When the market crashed in 2008, itbecame clear that the fundamentals werenot as strong as predicted. Oil consumptionis still increasing by around 1% p.a.and is currently at 89.2 mbd (IEA) p.a.Had the average trend prior to the recessioncontinued, consumption would bealmost 3 mbd higher today! Increasinglyavailable natural gas, which is a cleanersource of energy, has begun to replace oil.In addition, the environmental pressuresand declining consumption in the developedcountries have decreased seaborneoil transportation. It is worth mentioningthat high oil prices support increasedproduction from deep-sea fields as wellas from unconventional sources (tightoil, shale oil). In both cases, the US hasabundant reserves. In addition, the US iscatered for by Canada, with its constantlygrowing production from oil sands. Allthese aspects have a negative influenceon oil shipments, particularly to the US,which is still the world’s largest consumer.History is once more repeating itself.30 | Tanker UPDATE NO. 2 2011

What have we learnt from history?450Oil tankers – fleet developmentBased upon DWT. Source: IHS Fairplay400DWT [mill tonnes]35030025020015010028 YEARS!!500197019751980198519901995200020052010Small Handy Panamax Aframax Suezmax VLCCIt is not all bad news though. Emergingeconomies are increasingly hungrier foroil. Refinery capacity is gradually diminishingin Europe and North America whileincreasing in the Middle and Far East, creatingopportunities for product tankers inthe future (tonne-mile effect).The current fleet is capable of transportingforecast volumes over the next fewyears. According to IHS Fairplay, the currentfleet contains over 3,300 ships, correspondingto 402 million DWT (crude andproduct tankers over 10k DWT). Yet another418 ships (72 million DWT) remain inthe order book. Scrapping will not be ableto extinguish the tonnage increase substantially,as the fleet is very young and offerslimited replacement opportunities.The question is, what will happennow? On one hand, we still have stronglong-term fundamentals with incrementaldemand for oil. On the other, there is asubstantial oversupply of ships and weakshort-term forecast for seaborne transport.Are we facing yet another collapse in theoil tanker market? Perhaps not as bad asthe one in the 1980s, but the coming yearswill definitely be challenging. The philosopherGeorge Santayana said: “Those whocannot remember the past are condemnedto repeat it”. Do we remember? Tanker update NO. 2 2011 | 31

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