Technical Ship Operations: A Primer

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Technical Ship OperationsA Primer

• Presented at
• Webb Institute of Naval Architecture
• Glen Cove, New York
• 24 October 2004
• Presented by
• Peter K. Wallace, 93

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Outline

• Make a few introductory comments.
• Review ship types and fleet sizes.
• Discuss ships and their operations.
• Describe technical operations.
• Make a few closing comments.

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Shipping has some Impressive Statistics

• Functions in a global environment very smoothly.
• 90-95 Operational of total life for typical,
  well managed ships. The 5-10 of downtime is for
  planned maintenance.
• Ships handle abusive conditions very well.
• Imagine a building the size of the Empire State
  Building moving at 20 miles per hour and enduring
  regular motions of 35 amplitude combined with
  impact loads

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Focus

• For this presentation we will focus on tankers as
  the case example
• Largest sector of shipping.
• Most mature sector.
• Most available information.
• Generally leads the industry in terms of best
  practice and regulatory requirements.
• Dry bulk, which is similar in operation, is
  second largest sector
• For those entering shipping, other than military,
  will likely be working with tankers and dry bulk.

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Outline

• Make a few introductory comments.
• Review ship types and fleet sizes.
• Discuss ships and their operations.
• Describe technical operations.
• Make a few closing comments.

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Types of Ships

• Tankers Range in size from 2,000 DWT or so to
  over 500,000 DWT
• Crude, clean and dirty petroleum products,
  chemicals, food products, LNG, LPG, water
• Dry Bulk Range in size from 5,000 DWT or so to
  300,000 DWT
• Major Bulks Grain, Iron Ore, Coal
• Minor Bulks Other Agriculture, Cement, Fish
  Meal, Forest Products, Fertilizers, steel
  products
• Container Ships Range in size from about 100
  TEU to 12,000 TEU
• RORO and RO/PAX Intermodal, passengers, ferries
• Passenger and Cruise Ships Small sector, high
  profile.
• Break bulk Small ships, common in small ports.
• Inland trading ships and barges Growing sector
• Specialized Ships Include anchor handlers,
  icebreakers, nuclear, drill ships, heavy lift
  ships.

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Types of Ships
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Various Ships--Tankers
Aframax
LNG
ULCC
VLCC
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Sources Company Information, US Navy League,
Yahoo Finance
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World Fleet Breakdown by Number of Ships
Source Shipping Facts
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Approximate Total 2,500 ships in
international trade
Source Poten Partners
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Ports--Offshore Buoy
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Outline

• Make a few introductory comments.
• Review ship types and fleet sizes.
• Discuss ships and their operations.
• Describe technical operations.
• Make a few closing comments.

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Major Parties
SHIPOWNER
CLASS SOCIETIES

• Owner
• Commercial Manager
• Technical Manager
• Charterer
• Insurance (Hull and PI)
• Flag States
• Port States
• IMO
• Class Societies
• Financial Institutions
• Media

CHARTERER
SHIPYARDS
CARGO OWNER
INSURERS
PORT AUTHORITIES TERMINALS
FLAG STATES
PILOTS
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Tanker industry Responsibility Chain
SHIPOWNER
CLASS SOCIETIES
CHARTERER
SHIPYARDS
CARGO OWNER
INSURERS
PORT AUTHORITIES TERMINALS
FLAG STATES
PILOTS
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Commercial Chain
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Governing Bodies

• International Maritime Organization (IMO) UN
  organization.
• Classification Societies (IACS, Class) ABS, LR,
  DNV and others
• Port State Regulations pertaining to port and
  country ship is calling.
• Flag State Regulations pertaining to domicile
  of the vessel--that is the country the ship is
  flagged under.
• NGOs OCIMF, Intertanko, Intercargo, BIMCO and
  others.
• These organizations form the rules, practices and
  enforce the same.

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Major Operating Codes

• ISM/ISO Operating Documentation and Compliance
• STCW Crew Qualifications
• MARPOL Pollution Prevention
• SOLAS Safety and Life Saving
• ISPS Ship and Port Security
• There are many others as well.

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Characteristics of Shipping--Spill/Emergency
Response

• Spill/Emergency Response is a result of OPA 90
  and other incidents.
• Basic Elements include
• Engineering
• Salvage
• Media Response
• Cleanup
• Commercial and Liability Response
• Some areas require escort tugs in sensitive areas

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Characteristics of Shipping--Media

• Companies becoming more media savvy than ever
  before.
• Media is being courted for commercial, operating,
  legal and public relations reasons.
• Shipping is no longer the closed club that is
  beyond the site of the public.

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Characteristics of Shipping--Classification

• Purpose Independent verification of vessel
  construction and operation
• Organizations Class Societies
• Basic Services Plan Review, Surveys
• Enhanced Services ISM/ISO, CAP/CAS
• Additional Services Planned Maintenance, Spill
  Response, Additional Analyses

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Characteristics of Shipping--Financial Markets

• Growing number of publicly traded companies.
• Mergers and acquisitions have been strong for the
  past few decades.
• Forcing more accountability and transparency.
• Shipping is entering age of being an open and
  accessible industry. Shippings operating
  practices reflect this maturing into modern
  market dynamics.

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Characteristics of Shipping--Insurance

• Protection and Indemnity (PI)club arrangement
  (self insurance)
• Hull and Machinerymore traditional, but somewhat
  self insured
• Cargotraditional insurance.
• COFR and other large lines Disaster insurance.
  Large coverage on small asset base.

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Characteristics of Shipping--Flags

• Flags of Convenience (non-ITF)
• Open Registry (ITFno other restrictions)
• National Flag(tight citizenship/build/trade
  restrictions)
• Paris MOU List shows relative ranking of flag
  states (US no. 17 behind PRC, Bermuda and Liberia
  from 2004 list)
• Flag State is important for corporate, crewing
  and trading reasons.

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Outline

• Make a few introductory comments.
• Review ship types and fleet sizes.
• Discuss ships and their operations.
• Describe technical operations.
• Make a few closing comments.

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Owners, Operators and Managers

• Shipowners
• Operators
• Commercial Managers
• Technical Managers
• Specialty Managers--Crew Managers
• All varieties of operating models are common.
  Many firms use a variety of models on a
  case-by-case basis.

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Commercial Chain
Focus on the Technical Management
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Short, Medium and Long Term Activities

• Short Term--Daily Concerns
• Daily operations to keep the ship moving.
• Medium Term--Occurring in a frame of 3-12 months
• Planning, development and closing of various
  projects, programs or efforts that happen
  periodically or specific events.
• Predominantly foreseeable, but somewhat larger in
  scope or size than daily operations can
  realistically handle.
• Long Term--Anything beyond 12 months
• Business development, long term strategic and
  tactical efforts.

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Typical Short Term Activities

• Arranging crew changes
• Arranging crew training
• Approving purchase requisitions and placing
  purchase orders
• Coordinating with charterer the details of port
  calls and voyage characteristics
• Coordinating with service technicians, agents or
  others that are visiting the vessel
• Coordinating with suppliers and agents for
  materials
• Occurring within the time frame of the next port
  call or is otherwise an immediate action item.

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Typical Medium Term Activities

• Preparing for drydockings, Special Survey
• Other Maintenance and Repair planning
• Establishing or reconfirming purchasing frame
  contracts
• Establishing or reconfirming service contracts
• Arranging charter cover for vessels coming off
  long term charter
• Planning for phase in of new regulations and
  charterer requirements
• Execution of acquiring and disposing of vessels
• Occurring in a frame of 3-12 months

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Typical Long Term Activities

• Market shifts
• Crewing contracts
• Influence legislation
• Influence operating practice
• Business Development
• Researching and gauging market shifts
• Typically strategic and certain tactical
  activities, including business development,
  liaison activities, corporate planning and
  arranging long term contracts.
• And almost anything else beyond a 12 month window.

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Ports--F(P)SO/FSU
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Role of Technical Manager

• Technical Manager has concerns of all technical
  and operational aspects of ship management.
• Maintenance and Repair
• Crewing
• Procurement
• Operations
• ISM/ISO/Environment and Reporting
• Insurance
• Engineering
• Accounting

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Technical Operations
Strategic, Tactical and Operational Communications
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Technical Ship Management--Responsibility Lines

• Maintenance and Repair
• Ensure all maintenance and repair requirements
  are carried out
• Records
• Planning for hull and machinery
• Coordination with crew, suppliers, technicians,
  engineering, Class, Flag State and others
• Crewing
• Arrange crew changes and scheduling
• Arrange crew training
• Arrange crew documentation
• Manage crew payroll with accounting and crewing
  agents

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Technical Ship Management--Responsibility Lines

• Procurement
• Ensure requisitions are complete and accurate
• Coordinates with MR and others
• Orders materials
• Arranges material deliveries to meet the ship
• Coordinates with ship and accounting for payments
• Operations
• Coordinates with post fixture team
  (charterer/commercial) for ship routing,
  including bunker calls.
• Coordinates with all departments that have
  business with ship during voyage and in port.
• Coordinates customs, port state agents, vetting
  inspections and others.
• Arranges and coordinates ship agents.
• Main point of contact for all outside parties
  relating to daily operation of the ship.

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Technical Ship Management--Responsibility Lines

• ISM/ISO/Environment and Reporting
• Relatively new department (
• Coordinates and manages all ISM and ISO
  documentation, training, audits and reporting.
• Coordinates and manages all elements related to
  environmental and quality records that may or may
  not be addressed within ISM/ISO.
• Coordinates with the myriad of reports required
  for owners, charterers, vetting organizations and
  others.
• Insurance
• Technical ship managers very often only handle
  Hull and miscellaneous insurance such as crew or
  professional liability.
• Technical ship managers coordinate with Owners
  and others on PI claims, cargo insurance, COFRs
  and other lines directly worked with Owner or
  Commercial Manager.

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Technical Ship Management--Responsibility Lines

• Engineering
• Very often the Special Projects group.
• Supports all groups, particularly MR and
  Executives.
• Typically leads new build programs.
• Typically leads on major refurbishment or
  conversion efforts.
• Very often involved in business processes and
  business development.
• Accounting
• Typically one of the larger departments.
• Coordinates flow of monies through the
  appropriate ships and accounts.
• Coordinates cash management.
• Handles crew payroll, material and service
  invoices, and other fees.

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Outline

• Make a few introductory comments.
• Review ship types and fleet sizes.
• Discuss ships and their operations.
• Describe technical operations.
• Make a few closing comments.

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Trends in Design and Operation

• Move towards larger containerships. Parcel
  carriers such as DHL, FedEx and UPS moving into
  3PL shipping.
• Move towards smaller tankers and more product
  over crude carriers. Partially influenced by
  more upstream processing and smaller fields.
• Short sea and inland shipping is expected to grow
  worldwide.
• Rapid fleet build of LNG.
• More automation--impending crew shortages,
  particularly of officers
• More planned maintenance and monitoring systems.
• Movement towards heavier scantlings, IACS Joint
  Projects underway.
• Growing world trade is good for shipping.

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Comment on Design

• Both were snubbed by the general community
• Icebreaking tankers are currently in vogue.
• Return of nuclear in the next decade?

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Trends in Regulation

• Environment--Genesis with Amoco Cadiz and Torrey
  Canyon
• Safety and Quality--Highlighted with Titanic
• Accountability--Highlighted with Exxon Valdez
• Security is much smaller than overall trends
  above and has largely been incorporated within
  operating practice. Still in implementation and
  refinement stages.

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Trends in Regulation--Environmental Regulations

• MARPOL 73/78 to Segregated Ballast tankes
• MARPOL/OPA 90 to Double Hull
• Clean Air Emissions
• Antifouling Coatings
• Ballast Water Treatment/Exchange
• Enforced by Port States, Flag States very
  aggressively

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Trends in Regulation--Quality and Safety

• Increasing use of and expansion of
• Vetting Charterer inspection and approval of
  vessels.
• CAP Condition Assessment Program is based on
  actual condition of vessel and compares to
  as-built for structural and machinery items.
• Transparency Corporate commercial and
  operational responsibility lines clearly defined
  and documented.

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Trends in Regulation--Accountability

• ISM and ISO. Sarbanes-Oxley for publicly traded
  firms.
• COFRs and other large lines of policy coverage.
• Aggressive enforcement by Port States and Flag
  States. Many previous infractions are now
  criminal where before they were considered minor.
• Classification Surveys are increasingly more
  stringent, particularly from third special
  onwards.

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Strengths of Shipping

• Multinational
• Mature
• Physical
• World market with real currency/trading
• When goods dont cross borders, armies do.

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Weaknesses of Shipping

• Perceived to be a Black Art
• Low Returns (volatile and cyclical industry)
• High Risk
• Large Liability
• The problem is that shipping is like the larger
  world in which it operatesan inherently
  disorderly affair, existing mostly beyond the
  reach of nations and their laws, beyond the dikes
  and coastal horizons, and out across the open
  seas. It is not exactly a criminal industry, but
  it is an amoral and stubbornly anarchic one. And
  it admits as much about itself--William
  Langewiesche

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Recommended Reading

• The Prize, Daniel Yergin and Joseph Stanislaw
• Commanding Heights, Daniel Yergin
• Maritime Economics, Martin Stopford
• The Invisible Billionaire, Jerry Shields
• The Shipbreakers (Atlantic Monthly, August 2000),
  William Langewiesche

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The End

• Questions?
• Peter K. Wallace
• e-mail peter.wallace_at_knickerbocker-maritime.com
• presentation available on www.knickerbocker-mariti
  me.com