Tanker owners' expectations on IMO regs and oil demand

At the recent Intertanko conference gathering independent tanker owners in Rome an online vote gave us some insights on the way this industry sees some hot topics (peak oil demand, IMO regs, autonomous shipping, shipbrokers...)

 

An online voting system allowed the panel discussion hosts at the Intertanko annual tanker event in Rome to gather live data through ad hoc polls. The results of these polls gives an insight into independent tanker owners’ attitudes towards a wide range of issues.

Peak oil demand

During a presentation on oil demand, delegates were asked when they thought peak oil would occur, 2035 or 2050?

  • 2035: 71%.
  • 2050: 29%.

Price spread between high and low sulphur fuel

The conference attendees were treated to presentations on the outlook for the 2020 sulphur cap and a report on the experience of fitting scrubbers. Delegates were asked their assumptions on the price spread between low sulphur fuel and high sulphur fuel in 2020. The results were toward the lower end of the price range.

  • US$300/tonne: 65%.
  • US$400/tonne: 26%.
  • US$500/tonne: 9%.

Fitting scrubbers to a fleet

The contentious issue of whether to fit scrubbers or not was very much at the forefront of owners’ minds. Delegates were asked to imagine they owned a small tanker fleet of four Aframax tankers and two VLCCS. Would they fit scrubbers to all tankers, some of the fleet, or none of the fleet?

  • None of the fleet: 61%.
  • Some of the fleet: 30%.
  • All of the fleet: 9%.

Autonomous shipping

A poll on autonomous ships was surprisingly close given that some owners laughed off the suggestion that this was a near-term possibility. Intertanko delegates were asked: are you looking forward to autonomous ships?

  • No: 53%.
  • Yes: 47%.

Shipbrokers

There was a similar result regarding the role of shipbrokers, whose function has been threatened in one form or another since the internet appeared in around 1996. Delegates were asked: do you think shipbrokers will be needed by 2030?

  • Yes: 57%.
  • No: 43%.

http://www.tankershipping.com/news/view,tanker-owners-expectations-revealed-in-ad-hoc-intertanko-polls_53249.htm

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Another interesting question is the issue of retrofitting ships to deal with ballast water.  Traditionally, ships have pumped seawater into their ballast tanks to keep the center of gravity low and resist rolling (and, horrors, capsizing).  In the very old days ballast consisted of river mud dredged up, dewatered, and laboriously placed behind wooden-beam bulwarks on the 'tween decks of some old Liberty ship.  Yup, they actually did that when sailing "in ballast."  Nowadays, various compartments are designated for water ballast when needed and are pumped full (to avoid the effect of rolling, shifting water accentuating the tendency of a top-heavy ship to go over). 

Now the problem with ballast is: what do you do with the water when you arrive in port and want to take on cargo?  The ballast has to be jettisoned.  So, traditionally, the seawater is simply pumped overboard.  And the problem with this practice  is that that seawater contains a vast cornucopia of aquatic life, everything from zebra mussels to various seaweeds and plankton.  SO that big ship becomes a Trojan Horse, invading the host port with some tens of thousands of invasive biologic material - and wrecking the local ecology.

The solution to this is the ballast-water decontamination protocol, designed by bureaucrats (of course) and requiring expensive machinery on board to accomplish that task, or you have to pump the water off into barges and pay to have it treated and decontaminated. And shipowners have a deep aversion to paying money to anybody (including the crew - actually, especially the crew). So if you are going to do that with machinery, then that ship has to have available and free real estate.  Now, ask yourself, does anybody build a ship and add an extra 1500 sq. ft. of space in that engine room so later on some extra machinery can be fitted in there?  No?  Gee, what are we going to do to deal with the ballast water?  

And now with the 2020 Rules for sulfur treatment in exhaust, you are going to need even more real estate on that ship to accommodate that machinery.  So, how do we accommodate all this extra machinery?  One solution, which sounds utterly ridiculous to landlubbers but is taken seriously by mariners, is to cut the ship in half right at the front of the accommodation section, and add say thirty feet of new hull, and stuff all that machinery down in there. And how much coin does this set you back?  And who is going to spend that coin when the boat is old, say over 16 years?  You and your rich uncle? 

So now you see the problems. You have these two mandates, ballast water and exhaust, both hitting at the same time.  And that is why you have the shipowners saying that 61% of the fleet  (and presumably 61% of the shipowners) are going to refuse to spend anything to meet the mandates.  So:  who gets to blink first?

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The new regs could trigger the end of an era for the independent tanker owners.

How many times -- realistically -- could a small independent tanker owner fight criminal prosecutions in the post-2020 era for a vessel burning the incorrect fuel, or a scrubber failure mid-voyage? As one owner said, it may be time to sell the fleet to an oil major. He would be happy to manage the ships for the oil major, and it would let him sleep, knowing he will not become the head of a criminal organisation overnight.

http://www.tankershipping.com/news/view,is-regulation-driving-tanker-owners-out-of-business_53290.htm

Given the financial costs to comply with the regulations we can expect in the coming years a concentration of the tanker fleet in the hands of oil companies or huge shipping companies.

I suspect  the main actors of the shipping industry view the IMO regs as a way to wipe out a share of the world tanker fleet and reduce the overcapacity severely impacting the earnings.

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