Friday, 26 August 2011

Crisis at Vallarpadam: Indian Cabotage Law to be relaxed?

The ongoing crisis at the International Container Transshipment Terminal (ICCT) at Vallarpadam may have prompted the Parliamentary Committee on Transport, Tourism and Culture to recommend relaxing Indian Cabotage Laws, which so far allow only Indian flag vessels to carry cargo between Indian ports. The Committee presented its report to the Rajya Sabha earlier this month, saying, “The Government should immediately undertake a review of the Cabotage Law and take appropriate decision in consultation with all stakeholders involved.” It is learnt that Indian shipping is fiercely defending the law, one that many countries including the US enforce.

Shortage of Indian container ships has meant that Vallarpadam, the country's first ICCT, has been plagued with hundreds of containers held up at the port because of lack of feeder container vessels. Foreign flag ships calling Vallarpadam simply do not have enough Indian feeder vessels to support them. The result is poor productivity, a disincentive to containerise, bad connectivity and bottlenecks. Because of this, major players, including Maersk, Zim and CMA CGM, have gone back to calling Colombo, which is well connected with most Indian ports.

The Vallarpadam ICCT had planned to handle 7.75 lakh TEUs this year, while the 13 Indian feeder vessels available together have a capacity of just 12,156 TEUs- and they do not call Vallarpadam regularly. Trains capacities are extremely low, with just ninety boxes possible per train.

Relaxation of Cabotage, at least for container ships, has been a longstanding Vallarpadam ICTT demand. Some observers say that, unless the government implements the Parliamentary Committee's recommendations, the Rs 1800 crore port, operated by DP World on a 30-year lease, will find it very difficult to function effectively as a transhipment hub for containers. A worried Chairman of the Port Mr Paul Antony had told reporters earlier this month, “The productivity at the terminal is world class, but few ships are calling at the port.”  

The port has been plagued with dredging difficulties right from the beginning, adding to its woes. Antony was confident, however, that the port would be able to cater to vessels with a 14-metre draft well before the end of the year. He said that the main issue was Cabotage. “Unless the terminal is exempted from the Cabotage Laws, it will not be able to attract mother vessels,'' he said.

The government has yet to announce its final decision on Cabotage; no doubt, Indian shipping companies will object strongly to any proposed relaxation. Meanwhile, it is believed that the Directorate General of Shipping is leaning towards a relaxation of Cabotage for container operations, especially since Indian companies do not have the tonnage to operate feeder vessels to any satisfactory degree.

Vallarpadam, at the time of its commissioning, was supposed to give Colombo a good run for its money. This crisis could have been well averted- and major embarrassment avoided- if only the authorities had thought the transhipment requirements through and had put in place the required infrastructure and legislation to support the ICTT at Vallarpadam before permission to build was given. As things stand now, there seem to be few options available if Vallarpadam is to survive as a container transhipment terminal.

Thursday, 25 August 2011

Anchoring under the influence

His lawyer thinks that Rick Ehlert is guilty of “felony stupidity” but does not think this should be considered a federal crime. Nevertheless, the 45-year-old Ehlert is facing 20 years in jail- and a $250,000 fine- in the United States. His crime? Dropping a cruise ship's anchor at sea when drunk. The incident occurred last November and has now come to trial in Florida.

Ehlert, a California resident, has recently pleaded guilty to one count of attempting to damage a maritime facility.  Federal prosecutors in Tampa say that Ehlert was a passenger on a Holland America cruise ship, the MS Ryndham, when he broke into a 'control room area' and let go the 18 tonne anchor into the Gulf of Mexico. The Ryndham was underway on a passage from Costa Maya, Mexico back to Tampa, Florida, at the time. Ehlert was drunk when he broke into the area and let go the anchor; a security camera on the ship caught and recorded the entire incident. 

Ehlert and the Ryndham were very lucky on at least two counts: For one, the water was too deep and the anchor did not reach the seabed. Also because there was no major damage to the cruise ship as a consequence of his stupidity.

When the Ryndham's officers confronted Ehlert after the incident, all he had to say is that he was drunk and that the anchor on the cruise ship was similar to the system on his 50-foot recreational boat.

Rowers set Indian Ocean record after deadly shipwreck at finish

                                             James Adair (L) and Ben Stenning - pic BBC

James Adair and Ben Stenning are two British nationals who rowed for almost four months from Australia to Mauritius in a 23-foot boat. They are the first to make the punishing 3200-mile voyage across the Indian Ocean unsupported, and the third to do so, ever. The two subjected themselves to a gruelling daily routine where each man rowed for 3 hours and took 3 hours off, round the clock. The 116-day odyssey ended in high drama that almost cost them their lives on August 14 when their boat capsized within sight of shore, and huge waves threatened to smash them against a coral reef.

Londoner James Adair later told the BBC, "It was a wall of water. It just seemed to black out the sky. Our oars were gone, we were thrown overboard, everything was ripped apart. We just thought we were going to die." James was paralysed for a month by Guillain-Barre syndrome when he was 14; the voyage was to raise money to research the disease.

"I was bleeding a lot from cuts on my leg so Ben kept looking underwater for sharks," James added. "Every time a wave sent us under we would cling to each other." The two had tried to set off parachute flares that were on hand to celebrate their arrival when they were hit by a massive wave.

In Mauritius, the alarm was sounded after the two lost radio contact with shore. A rescue helicopter could not see the duo in darkness, who had abandoned the boat dressed just in shorts and struggled to swim to the coral reef, where they were badly lacerated all over their bodies.

Many local boats sped out to the site to help; one of them finally spotted an oar close to the two shipwrecked rowers, who whistled and shouted until they were eventually located. They were, by that time, shivering with shock, cold, exhaustion and dehydration.

Ben Stenning says they were very lucky to be rescued. "We knew we had to get out of there," said the 31 year old. "We had to get away from those rocks or it would be game over."

Race organiser Simon Clark confirmed that it was the first time in history that a pair has rowed across the Indian Ocean without a support boat. That boat- the £15,000 'Indian Runner'- is smashed, but their mascot, 'Paddington Bear', has survived intact, lashed to the prow and missing just one Wellington boot after 3,200 miles, says the BBC.

Is this the right time for Ultra Large Containerships?

About five years ago, Maersk was the first to start what Paris based maritime consultants Alphaliner said last week has now become a “race for ultra-large containerships.”  The Maersk E-Class vessels- each with a capacity of 15,550 TEU- were just the beginning for the Danish giant: it later introduced the EEE Class, ordering twenty of these 18,000 TEU behemoths for delivery between 2013 and 2015. Some analysts are viewing these moves- and those of several other ship owners who seem to be on a mega-ship ordering or capacity enhancement spree- with some concern, as overcapacity is one of the biggest problems looming large over the industry today. Recent dread about a global double dip recession will only add to their fears.

Interestingly, Maersk Group CEO Nils Andersen says that shipping lines have been engaged in “reckless ordering” and are putting their businesses at risk by joining the race.

Owners are clearly planning to take advantage of economies of scale, but they are not stopping at just ordering new giant box ships. Maersk recently commenced a 'capacity boost' plan that will increase the carrying capacity of each of its ten existing S Class container ships by approximately 15 percent, from 8,200-8,600 TEU to about 9,600 TEU each. The accommodation on each of these vessels will be raised to allow an extra two tiers of containers to be loaded. This will not increase tonnage, though it will allow Maersk to increase capacity for empty or light containers considerably.

Many other ship owners have upgraded the size of container ships that have been ordered recently. Hapag-Lloyd’s upgrade of six 8,750 TEU units to 13,100 TEU each is a case in point. CMA CGM’s boosting the capacity of three 13,830 TEU ships to 16,000 TEU each, NOL’s renegotiations of ten 8,400 TEU ships on order to 9,200 TEU each and NYK’s upgrade of two 6,350 TEU vessels to 8,000 TEU each are some of the others.

Thursday, 11 August 2011

Three largest Flag States join to document pirate violence against mariners

The three largest flag states- the Republic of Panama, the Republic of Liberia and the Republic of the Marshall Islands have together signed a declaration affirming their commitment to supply information provided to them following acts of piracy or armed robbery on ships to the International Maritime Bureau (IMB). The declaration was signed at a ceremony at the National Press Club in Washington, DC in the presence of IMB and 'Oceans Beyond Piracy' (OBP) officials; the initiative is a result of OBP's working group. The US State Department, intelligence and naval investigation officials were also present.

It is hoped that this declaration by flag states responsible, between themselves, for 40% of global tonnage will do much to better gauge the “human cost of piracy.” The plan, which is being funded by OBP and the TK foundation, will see the IMB collecting statements from seafarers who have been subjected to mistreatment and torture at the hands of pirates or because of pirate attacks. The three States will give the IMB “sanitised” statements that will exclude personal, ship or company details while sticking to the narrative of the incident- similar to maritime accident reports that are circulated today.

“We have long heard anecdotal accounts of brutality visited upon mariners by pirates,” said William Watson, vice president and governor of the Maritime Security Council and a member of the OBP working group. “Hopefully, this agreement will help quantify the mistreatment and help focus attention on this crisis.”

Surge in West African Piracy

A new spate of pirate attacks in the Gulf of Guinea off the West African coast have seen warnings issued by shipping interests, analysts and insurance clubs. Heavily armed gangs, believed to be Nigerian, are boarding tankers with impunity off the coast of Benin, hijacking ships for up to four days as they loot personal belongings and stores- and, most importantly fuel, which is pumped out into smaller tankers and then sold in the thriving black market. Although no ship has been held for ransom so far, analysts fear that Somali style piracy may be a strong possibility in the future if this menace is left unchecked. Crewmembers are often beaten. One was reported missing in May after an attack; his body was found later.

Additional pirate activity seems to be focused on the coast of Benin, a small country that is Nigeria's neighbour. A dozen attacks have been reported off Benin since March. Although pirate attacks on ships and oil interests in the Niger Delta and off the Nigerian coast are nothing new, the surge in attacks in the last few months has the industry worried also because the numbers of similar incidents off Nigeria- notorious for underreporting pirate attacks- have remained unchanged, clearly indicating an escalation in piracy.

There have been fifteen incidents reported off Benin already this year; last year there were none. Maritime security agencies say that the gangs involved are almost certainly Nigerian, and they seem to be better organised than ever before. Nigeria is Africa's largest oil producer where some high profile citizens have been earlier accused of involvement in the black market for oil.

"It's almost certainly Nigerian pirates that are responsible for the attacks," said Peter Sharwood-Smith of the consultancy firm Drum Cussac. "This is piracy on a fairly organised scale, where they're targeting oil tankers and the like and they're stealing the fuel."

Norwegian firm Bergen Risk Solutions agreed with this view in an independent finding. "Our investigations indicate that the organised group responsible is based in Nigeria and has high-level patronage in that country," it said, adding that pirates seem to have tied up with local criminals in Benin and are increasingly involved in robberies as well as the huge theft of oil and fuel. Michael Howlett of the International Maritime Bureau says that the pirates are well organised, "because you have to have the system in place to receive this (hijacked) tanker." Crews of hijacked tankers are beaten and forced to sail to nearby locations where oil from their ship is pumped out to smaller tankers controlled by the pirates. Bergen Risk says the stolen cargo has been sold in "several West African ports, possibly including Abidjan in Cote d'Ivoire and Port Gentil in Gabon."

Somali piracy expanded from domestic waters to infest huge chunks of the Indian Ocean, Arabian Sea and parts of the Red Sea. Piracy off Africa's opposite coastline seems to be following a similar pattern as gangs expand their area of operations, following tankers who moved away from dangerous waters off Lagos to transfer oil elsewhere.  No doubt, these gangs have learnt from Somali pirate tactics. The ineffective global response to Somali piracy will continue to encourage other criminals unless the international community does something substantial to ensure that crews and ships are not perceived as soft targets any longer.

Cocaine worth $180 million recovered from scuttled 'Narco-Submarine'

Details are emerging on the U.S. Coast Guard operation off the Honduran coast last month that saw a “narco submarine” being scuttled by its crew who were later arrested. The sub has now apparently been refloated. These mini-subs have long been a popular way for drug cartels to transport cocaine into the United States.

The USCG cutter Seneca had interdicted the drug-smuggling self-propelled semi-submersible (SPSS) last month in the Caribbean; USCG sources had said that the submarine was scuttled during the interdiction. The recovery of the SPSS- whose position was found on July 26- was a joint operation between the USCG, the FBI and the Honduran Navy, and has led to the recovery of nearly 7.5 tons of cocaine worth roughly $180 million. The USCG says the drugs have now been unloaded in Florida.

“The U.S. Coast Guard greatly appreciates the support and cooperation of the Honduran authorities as we worked together to recover the drugs from the sunken SPSS,” said Capt. Brendan McPherson, Seventh Coast Guard District chief of enforcement. “In addition, the technical expertise of the FBI dive team was instrumental in the success of this unique operation in international waters, far from U.S. shores, that ultimately prevented tons of cocaine from reaching our streets and neighbourhoods.”

Authorities say that about a third of all cocaine between the US, Mexico and Colombia is carried by these submarines. Built usually deep in Colombian jungles, some say with the help of ex-Soviet technicians, a typical SPSS has a crew of 4 or 5 and is designed to carry about 10 tonnes of cocaine on a voyage as long as 5000 miles; it can also be scuttled easily. The SPSS does not fully immerse, staying close to the water surface or just above it.

This particular SPSS was spotted by A C-130 fixed-wing aircraft close to the water's surface on 13 July near the Honduran province of Gracias a Dios. The smugglers jumped into life rafts after operating a valve to scuttle the SPSS, the United States Coast Guard had then revealed.

Monday, 8 August 2011

Demolition Days

Shipbreaking activity picks up, but is it enough?

Much of the industry heaves a small sigh of relief as numbers show that shipbreaking activity has picked up this year. A report by Piraeus-based shipbroker Golden Destiny puts this increase at a huge 219% year on year. Many analysts feel, however, that gloomy freight rates will persist unless this trend accelerates; the issue of oversupply of tonnage will not disappear so easily, one says. Others point out that demolition numbers on deadweight scrapped this year are skewed by the fact that larger ships are being scrapped today compared to 2010.

Capesize tonnage seems to be under greater pressure, almost certainly because revenues have been hard hit over the last two years. Thirty eight percent of the scrapped vessels in 2011 have been bulk carriers. “Average time charter Capesize earnings are now hovering at $13,000/day in contrast with July 2009 levels when earnings were averaging $60,000/day," says Golden Destiny, adding that this year alone, "forty seven Capesize units are estimated to have been sent for scrap compared to only five units in a similar period in 2010 and nine units in 2009. The appetite for the scrapping of larger size units in the bulk carrier segment is expected to persist till the end of the year as the outlook in the Capesize segment remains negative due to oversupply issues and fluctuations in Chinese iron ore demand.”

Four hundred vessels- totalling 18.3 million deadweight tonnes- have been scrapped in the first half of 2011. Owners seem to be holding on to tankers and containers for the time being expecting either a reversal of freight fortunes or higher asset prices. However, both segments are under pressure, with some analysts saying that the container sector in particular will not recover to any decent degree for another two years.
India, Bangladesh, China and Pakistan continue to fight for greater market share in the shipbreaking business.

“In terms of scrap prices, there has been softness recently from the high levels paid in May with Bangladesh now offering more than India, $490/ldt for dry and $515/ldt for wet cargo. However, there are some worries about the trend in the coming weeks and it seems that both sellers and buyers are waiting for direction before committing to other deals," says Golden Destiny, adding, "During the year to date, India was won around 229 vessels, down by 18% from a similar period in 2010. Bangladesh is behind with only 49 units reported but there has been an enormous increase of 290% from the first quarter 2011 levels. China is trying to narrow the gap with the Indian subcontinent region but the levels offered are not very attractive, mid $400/ldt for dry and excess mid $400/ldt for wet units, but there are some strong offers for dry units with full spares."  

China has so far been unable to take advantage of the monsoon season to garner greater marketshare, the brokerage says, and Pakistani yards have been sluggish. "Pakistan has the smallest share of the scrapping business this year, only 7% comparing to 13% from China. The significant fall in the tanker scrapping business may be the reason behind Pakistan’s slowdown since it holds a competitive advantage in this segment and bulk carriers, liners and reefers have been the most popular scrap candidates for this year,” said Golden Destiny.

The brokerage house is predicting that shipbreaking activity will continue to be high for bulk carriers for the remainder of the year, with "substantial volumes" being recorded additionally for tankers and liners. In conclusion, it says, "Scrap prices will keep their pace, with India winning the largest share of demolition transactions".

Thursday, 4 August 2011

Shell unveils world's first FLNG

..platform, facility, or the biggest 'ship' on earth?

                                   (click to enlarge graphic)

Energy and petrochemical giant Shell will build a colossal first-of-its-kind floating liquefied natural gas (FLNG) platform. Observers are saying that the massive 600,000-tonne FLNG structure will be the world's biggest "ship" when built; Shell has not used any superlatives in its announcements; it prefers to call the yet unnamed FLNG platform a 'facility.' The FLNG will cost between $8bn and $15bn to build.

The facility will be six times the size of the largest US aircraft carrier, and will be built at the Samsung shipyard on Geoje Island in South Korea. Work is slated to commence in 2012, and the FLNG will be completed by 2017. It will then operate 120 miles off stunningly beautiful Kimberley Coast in Australia, and will tap into the huge natural gas reservoirs from the Shell's Prelude field there. Since the field is in a part of the world known as 'cyclone alley' where storms are severe and frequent, the structure will be strengthened to withstand the worst weather that the area can throw up.

"The traditional way of producing gas offshore was through pipelines. You brought gas up to a platform and piped it to the 'beach'. That is the way it's done in the North Sea," says Scotsman Neil Gilmour, Shell's general manager for FLNG. Instead of this, the new FLNG will tap into 'stranded gas' reservoirs, liquefy the gas on board and store it at -161C after purification, flaring off waste products. A large LNG tanker will dock approximately once a week, load and sail with enough gas aboard to, as the BBC says, "heat a city the size of London for a week."

The inherent advantage of an FLNG platform lies in its concept. With not much fixed infrastructure required, the platform can be stationed elsewhere when tapped reservoirs run out of gas. As analyst Johan Hedstrom says, "You don't need the pipeline or the onshore refinery and when you run out of gas you can just pull up stumps and go to the next field." The Shell FLNG is designed to have a lifespan of fifty years, the first twenty-five of which will be spent at the Prelude field. 

Environmentalists are opposing the Prelude project citing the potential for damage to the environment from oil spills or leaks, especially in an area prone to storms. The WWF says that underwater wellheads will damage the marine environment considerably, adding that the project alone will emit two million tonnes of greenhouse gases annually. However, Australia's Minister for Resources and Energy has welcomed Shell's plans, indicating that its environmental footprint is much smaller when contrasted with a land-based scheme.

Neil Gilmour says that Shell had to overcome a "raft of technical challenges", what with the storm prone area the FLNG would be operating in. The platform, he said, will be built to withstand "category-5 cyclones and even a one-in-10,000-year storm producing 300km/h (185mph) gusts and 20m-high (65ft) waves".

 "FLNG is a neat way of going forward," Johan Hedstrom says. "They could make a lot of money out of it. Shell is positioning itself in an emerging market, not just in China - where gas usage has increased by 20% - but in India, which is also increasing its demand." 

Large reservoirs of natural gas exist across the world, trapped thousands of miles away from land, where pipelines and other infrastructure do not exist. LNG prices have risen sharply as countries rethink nuclear options after the tsunami in Japan. Shell obviously expects the enterprise to be very lucrative for a long time to come.


Monday, 1 August 2011

A first: IMO adopts mandatory measures to reduce emissions of greenhouse gases (GHGs)

Early last month, the  Marine Environment Protection Committee (MEPC) of the International Maritime Organisation (IMO) passed measures at London that formalise the first ever mandatory GHG reduction regime for shipping.  The amendments to MARPOL Annex VI Regulations for the prevention of air pollution from ships add a new chapter 4 to Annex VI on Regulations on energy efficiency for ships to make mandatory the Energy Efficiency Design Index (EEDI) - for new ships- and the Ship Energy Efficiency Management Plan (SEEMP) for all ships. Other amendments cover certification and survey issues in connection. The regulations are expected to come into force on 1 January 2013 and will cover all ships of 400GRT and above, with a waiver given to new ships under construction under certain conditions.

The new chapter includes the promotion of technical co-operation and transfer of technology in matters related to energy efficiency of ships. Flexibility has also been given to owners to decide which energy-efficient system is best for them. The EEDI is a non-prescriptive, performance-based mechanism that leaves the choice of technologies to use in a specific ship design to the industry, the IMO says. The SEEMP, on the other hand, establishes a mechanism for operators to improve the energy efficiency of ships.

Environmental groups are cautiously optimistic about the upcoming regulations, although some have expressed concern about possible loopholes and suspicion that governments may not properly enforce the new laws. Some like Chris Carroll of 'Seas at Risk' fear that the IMO has not thought hard enough about enforcement issues in general and so an opportunity has been missed. A 'closed' system is required, they say, that would allow for full waste accounting and expose illegal dumping. Nevertheless, the regulations are a welcome step. Says Jeroen Dagevos of the North Sea Foundation, a group represented at the IMO, “After years of campaigning for international action on ship waste dumping we applaud the IMO for adopting stronger regulations. Although we are concerned that the current enforcement and compliance system is not working, these revisions are a big step towards ending the problem of ship waste dumping.”

IMO Secretary-General Efthimios E. Mitropoulos was upbeat at the end of the London session. “Although not by consensus – which of course would be the ideal outcome – the Committee has now adopted amendments to MARPOL Annex VI introducing mandatory technical and operational measures for the energy efficiency of ships.  Let us hope that the work to follow on these issues will enable all Members to build the consensus that evaded the Committee this time,” he said.