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Seawise Giant/Jahre Viking – biggest tanker ever (564,000 dwt) – jumboised in the 1980s
Andreas Ugland (Chairman 92-94), Tormod Rafgård (MD 70-95),Basil Ph. Papachristidis (Chairman 87-89), Seigo Suzuki (Chairman 89-92)
Rådhusgatan 25
Miles Kulukundis (Chairman 94-96)
Filippo Cameli (1st Vice Chairman), Jørgen Jahre (Chairman 73-76),Jan Hudig (1st Chairman 70-73), Erling Dekke Naess (Chairman 76-79)
Carl Rentz-Petersen (Chairman 82-84)James Rand (Chairman 84-87)
INTERTANKO – 40 Years Leading the way
The Six Day War (Israel/Egypt) and the first Arab oil embargo, the closure of the Suez Canal and the wreckof the Torrey Canyon were dramatic events in 1967 with huge significance for the world and for tankershipping. They brought about a massive size increase in tankers; they changed tanker shippingregulation; they changed some of the tanker operating fundamentals. But they all in different waysemphasised the need for stronger and more effective international cooperation between tanker ownersas well as between tanker industry players; for a body that would provide a forum for the exchange ofviews; for an association that would take active steps towards the promotion and protection of theinterests of independent tanker owners.
Three years later, in 1970, INTERTANKO, the International Association of Independent Tanker Owners,was established in Oslo, as the 35 year-old, London-based International Tanker Owners’ Associationclosed its doors.
Its first Chairman was Jan Hudig. Its first Vice Chairmen were Jørgen Jahre and Filippo Cameli. The rest ofits first Executive Committee were Erling Dekke Naess, John Kulukundis and Maersk Mc-Kinney Møller.
1970-1990INTERTANKO’s first 20 years started with its establishment as a two-man operation in Oslo’s Rådhusgatan25, setting out to provide safe transport, cleaner seas and free competition. It grew incredibly fast, risingto maturity and to the status of a non-governmental organisation (NGO) at the IMO. It steadily built upits membership and gained recognition as the authority and spokesman for the tanker industry.
1990-2010Its second 20 years started with the Exxon Valdez casualty, which became a significant tanker industrywatershed between one era and the next. The tanker industry rethought its priorities as it stepped outfrom a decade and a half of depression into a period of growth and generally increasing – though notsteady – profitability.
These two decades saw a complete and massive rethink of the Association’s priorities too. It became trulyinternational, setting up offices in London, Washington DC, Singapore and Brussels. It has developed intoa very proactive, open, dynamic and responsive association. It is today one of the few NGOs at the IMOwhich is proactively proposing rule changes to improve safety and environmental protection.
INTERTANKO has become a well-respected representative and spokesman for the oil tanker owners. Ithas gained in confidence over the years – enough to see its Council unanimously embrace the ambitiousgoals of zero pollution, zero deaths and zero detentions.
GENESISINTERTANKO came into being in 1970 out of a dramatic series of events in the late
1960s which changed the world of oil tanker transportation for ever.
INTERTANKO – GENESIS
INTERTANKO – 40 Years Leading the way
INTERTANKO – THROUGH THE YEARS
1. Tanker seaborne crude oil trade over four decadesbn tonne-miles
1970s 1980s 1990s 2000s
90,000
80,000
70,000
60,000
50,000
40,000
30,000
20,000
10,000
Source: INTERTANKO, based on data from Fearnleys
0
Boomand bust
Lay up anddemolition
Growthand
structuralchanges
China, theemergingmarkets
andprofitability
2. Oil consumption & production in the 1970s and 2000s
OthersChinaMiddle EastOther AsiaJapanEurope(inc Eurasia)
US
Oil consumption1970s
Oil consumption2000s
Oil production1970s
Oil production2000s
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
Source: BP
07.2mbd
16.8mbd
24.2mbd
22.7mbd
7.2mbd
10.5mbd
10.9mbd
20.0mbd
12.7mbd
20.0mbd
20.0mbd
5.3mbd
20.0mbd
12.1mbd
6.6mbd
5.4mbd
11.7mbd
17.0mbd
22.3mbd
4.7mbd
3.0mbd
6.1mbd
3. Crude oil seaborne trade 1973
Source: Fearnleys
4. Crude oil seaborne trade 2002
Source: Fearnleys
THROUGH THE YEARSFour decades of INTERTANKO and the oil tanker industry – huge changes in the way theindustry is structured, how it goes about its business, how it thinks, how it performs.
INTERTANKO – 40 Years Leading the way
INTERTANKO – THROUGH THE YEARS
1970s – Boom and bust � Suez Canal closure in 1967 saw tanker freight rates rocket and
the beginning of a tanker building boom of larger and larger tankers built to trade round the Cape of Good Hope.
� 1973 saw orders for 105m dwt of new tankers, representing 55% of the existing fleet.
� Torrey Canyon wrecked off the UK in 1967 – 120,000 tonnes of crude oil lost. This incident brought about: Civil Liability Convention of 1969 (CLC) and Fund Convention; introduction of Tovalop and Cristal spill compensation funding system as an industry voluntary interim move pending universal ratification of CLC; International Convention for the Prevention of Pollution from Ships of 1973 (which became MARPOL and brought in segregated ballast (SBT)).
� SOLAS Convention of 1974 brought in inert gas systems (IGS) to prevent tank explosions.
� Arab-Israel war 1973 and Arab oil embargo 1973/4 cut oil exports and hiked oil prices. Tanker demand collapsed.
� Oil price increased from $2/bbl in the early 1970s to $30/bbl by the end of the decade after the 1979 oil price shock.
� With the oil and tanker shipping worlds in turmoil, INTERTANKO was a steadying hand as it looked at issues from currency instability to uses for idle tankers, from flag discrimination to clean ballast tanks, from the casualty record to slow steaming.
� Oil majors lost the control of large chunks of the world’s oil – nationalisation of oil production in Latin America, North Africa and the Middle East.
� In the 1970s the Middle East was supplying more than one third of world oil production. Today it is just under one third (see graph2 opposite).
� Main tanker trades were between Middle East and Europe/U.S. which together represented 70% of world oil demand. Today lessthan 50% of world oil production is consumed by U.S. and EU.(See graphs 2, 3 and 4 opposite)
� Suez Canal reopened in 1975, decimating tanker tonne-miles andleaving a large, modern tanker fleet, which increased by 250% during the 1970s, locked into chronic oversupply and flounderingeven before oil production started to decline in 1979.
� Nevertheless despite the poor rewards, the VLCC moved to centre stage and by 1977 roughly 60% of crude oil was carried by VLCCs.
� Amoco Cadiz lost off France in 1978 – 223,000 tonnes of crude oil lost. The incident hastened the amendments to, and the ratification of, MARPOL 73/78 which brought in Crude Oil Washing (COW) and protectively-located ballast (SBT-PL).
� Tankers contributed to 28% of oil pollution at sea (compared to 7-10% in 2000s and still declining) – exceeded only by sump oil (poured down town drains) contributing 29.4%.
� A 1970s-built steam turbine powered VLCC burned 180 tonnes of heavy fuel a day (compared to 65 tonnes of intermediatefuel today).
1970sBOOM AND BUST
The first ever VLCC – Idemitsu Maru – 206,106 dwt, built in 1966
INTERTANKO – 40 Years Leading the way
INTERTANKO – THROUGH THE YEARS
1980s – Lay-up and demolition� Oil prices now up to $32/bbl.
� In 1981, 41 VLCCs went for demolition including 15 oil company vessels. In 1982/3 another 126 VLCCs were scrapped.
� 1982 alone saw an 18% drop in tanker tonne-miles. VLCC rates hit a WS14 low point. A 10 year-old VLCC was worth $3m.
� 71.4m dwt of tankers were laid up in 1982 – 20% of the fleet. By1985 half the VLCC fleet was surplus tonnage – over 130 were laid up. Even oil company tankers were laid up.
� Tonne-mile trade figures declined by 155% from the peak in 1976 to a low in 1985, according to Fearnleys. Overall tonne-miledemand was down by 38% this decade compared to the 70s.
� Main tanker trades still Middle East/West but eastbound shipments growing and trade diversification accelerating.
� INTERTANKO developed on the world political stage, gaining inter alia a consultative seat at IMCO in 1982. Inthe same year IMCO was reborn as the IMO.
� In 1985 30m dwt of tanker tonnage was sold for demolition.
� Iraq / Iran wars through the early 1980s. 1984 Iraq attacked the aframax Filkon L loaded with Kuwaiti crude oil. The ‘tanker war’ became a key strategic element. Over the four years, INTERTANKO recorded 324 attacks on tankers. In 1987, 144 tankers were attacked and 64 seafarers killed. Twelve 500 pound parachute bombs extensively damaged the world’s largest tanker, the 564,000 dwt Seawise Giant.
� This decade saw INTERTANKO becoming involved in port state control, oil pollution compensation and disputes over open registries; dealing with lay-up, scrapping, and the ‘dangers’ of low building prices with tempting finance packages; taking a fresh look at tanker quality, and also pushing for fair port dues for SBT tankers.
� Fundamental changes in the ownership patterns of oil, of oil refineries and of oil tankers started in the 1970s, accelerated in the 1980s and continued through the 1990s. In the 1970s about 80% of oil production was in the hands of the oil companies. Today that share has fallen to about 25% of oil production and about 15% of oil reserves. In 1988 it was noted that state companies had taken over the lead position in controlling oil production and reserves with companies such as Aramco, KPC, NIOC, PDV, Pemex, Petrobras, Sonatrach holding the reins.
� This period also saw the growth of the independent tanker owner as oil companies and state companies reduced their tanker ownership. INTERTANKO’s prompt reactions to the growing importance of independent ownership helped boost its membership in the 1980s and 1990s.
� Exxon Valdez grounded in Alaska in 1989 – 37,000 tonnes of crude oil lost. This watershed incident changed the tanker world as it brought in OPA 90 and double-hull legislation.
1980sLAY-UP AND DEMOLITION
INTERTANKO – 40 Years Leading the way
INTERTANKO – THROUGH THE YEARS
1990sGROWTH AND STRUCTURAL CHANGES
1990s – Growth and structural changes� Tonne-mile demand increased by 36% in the 90s compared to
the 80s.
� Periods with good freight rates, but strong volatility in the marketdue to incidents such as the 1990-1991 Iraq-Kuwait war, stronglyincreasing Middle East oil production (1992 – highest level in more than a decade), unrest in Nigeria.
� Increasing talk of an ageing tanker fleet saw INTERTANKO rediscussing the definition of substandard ships, and stressing that proper maintenance was a bigger safety factor than age. INTERTANKO was the first shipping association to introduce quality criteria for membership.
� Exxon Valdez, Oil Pollution Act of 1990 (OPA 90) and the IMO’s adoption of the double hull in March 1992 meant that as from mid 1996 all new tankers were double hulled.
� INTERTANKO called OPA 90 ‘a hundred pages of uncertainty’ as Congress removed charterer liability from the Act, and as this Act brought in compensation for damage to natural resources along with contingent valuation methodology.
� INTERTANKO involved itself increasingly in criminal liability issues, unlimited liability, drug and alcohol abuse measures, charterer responsibility for quality, pressing for tougherclass surveys.
� The 1992 Protocols to CLC and Fund Conventions (eif 1996) broadened the scope of these Conventions and raised financial limits of liability.
� INTERTANKO and its Members found themselves looking at the cost to them of the poor image of the tanker industry, and at the same time starting to reach out to the environmental groups.
� OCIMF’s Ship Inspection Reports Programme (Sire) started in 1994. INTERTANKO had suggested the concept and assisted inits development.
� INTERTANKO started to call for support from industry partners to improve the industry’s infrastructureand thereby increase safety, calling it ‘Preventionthrough Partnership.’
� Through the 1990s the idea took root and grew that responsibility for safe and sound shipping is shared between all those elements which are involved in its execution. This gave rise to the concept of the ‘chain of responsibility’, which emphasises joint responsibility as well as the fact that a chain is only as strongas its weakest link.
� Erika broke up off France in December 1999 – 20,000 tonnes of heavy fuel oil lost. This incident brought in IMO’s amendments to Marpol 73/78 with a tougher single-hull phase-out timetable and brought the EU into the regulatory front line. It also signalled the start of the two-tier tanker market.
INTERTANKO – 40 Years Leading the way
INTERTANKO – THROUGH THE YEARS
2000s – China, the emerging markets, andprofitability� The decade started with the global dot.com crisis and ended with
the global financial crisis.
� 2000 saw INTERTANKO’s landmark legal victory in Washington when five years of fighting through the U.S. courts resulted in INTERTANKO winning its argument that individual U.S. states had no constitutional right to regulatematters of vessel design, construction, maintenance, operation, equipping and manning.
� Tanker trade growth lower than the 90s, but the decade started with relatively tight market balance and a limited shipbuilding capacity, which helped boost earnings.
� For a large part of the 2000s shipping experienced a super boom,with all shipping sectors enjoying unprecedented simultaneous profitability for a time.
� With closer supply/demand balance and increased employment came greater market volatility, with VLCC spot rates swinging from$10,000 to $100,000 a day in six months, then from $15,000 to a peak of close to $250,000 a day in another 6-12 months.
� Prestige broke up off Spain in 2002 – 70,000 tonnes of fuel oil lost. This incident brought in EU phase-out regulation and a further tightening of the international phase-out regime.
� INTERTANKO’s role this decade has become increasingly political, with an emphasis on regulation at the IMO, in Washington and in Brussels, as well as emphasis on the environment, and on the industry’s image.
� With the industry cooperating to produce a compensation regimethat balances the interests of all stakeholders, the limits of liabilityunder the 1992 CLC/Fund regime were raised by 50% in 2000, and in 2003 the Supplementary Fund provided a third tier of compensation up to $1.2bn.
� The tanker trades have become diversified, with getting on for twice as much oil now going Middle East/East as goes Middle East/West. U.S. and EU now consume less than 50% of world oil production (was over 70% in 1970).
� China’s oil consumption increased by 77% over the decade, pushing its oil imports up 250% and becoming one of the main drivers of the tanker market.
� Tankers contributed to less than 10% of global oil pollution at sea(less than 2% in the U.S.) – down from 28% in 1970s.
� As top quality officers and crew become harder to recruit and retain, and as accident statistics point to high human causative factors, INTERTANKO has been focusing on the human element in much of what it does.
� A modern motor powered VLCC consumes about 65 tonnes of intermediate fuel a day. It uses 1 litre of fuel to move 1 tonne of cargo 2,500 km – more than twice as far as the steam turbine powered VLCCs in the 1970s. �
Reducing tanker spills through 80s, 90s and into 00s000 tonnes Average age
1970 1979 1989 20091999
600 16
14
12
10
8
6
4
500
400
300
200
100
Source: INTERTANKO, based on data from ITOPF
0
50,000
99,00082,000
Figures show average size of tanker (dwt)
2000sCHINA, THE EMERGING MARKETS, AND PROFITABILITY
INTERTANKO – 40 Years Leading the way
INTERTANKO – THROUGH THE YEARS
Co
nn
y W
ickb
erg
INTERTANKO – 40 Years Leading the way
FORTY YEAR OVERVIEW
FORTY YEAR OVERVIEWOil prices and tanker freight rates, mixed with stock markets and tonne-mile demand, andalso with tanker fleet and productivity, make an interesting juxtaposition of 40-year graphs.
19881989
19871986
19781977
19761975
19741973
19721971
19701979
19801981
19821983
19841985
$ per barrel
100
80
60
40
20
0
Real price Arab Light Real freight rate AG-West
275
250
225
200
175
150
125
100
75
50
25
Fleet Tonne miles Tonnes Average distance Productivity – t-m/dwt
FTSE All Share Price Index 1970-January 2010 and Average VLCC Spot Rate
Oil price and freight rates 1970-2009
Main crude oil tanker indices– fleet, trade and productivity
3500
3000
2500
2000
1500
1000
500
0
FTSE All share price index
INTERTANKO – 40 Years Leading the way
FORTY YEAR OVERVIEW
19921990
19911993
19941995
19961997
19981999
20002001
20022003
20042005
20062007
20082009
Source: INTERTANKO, based on data from Fearnleys
Source: INTERTANKO, based on data from Fearnleys
Source: Thompson Datastream0
10
20
30
40
50
60
70
80
90TT 265,000 dwt mid 70s MT 300,000 dwt 1990s
WS
VLCC Spot rate source: R S Platou Shipbrokers
INTERTANKO – 40 Years Leading the way
INTERTANKO MEMBERS
CMM
INTERTANKO MEMBERSSupporting the publishing of this booklet commemoratingthe Association’s 40th anniversary
INTERTANKO – 40 Years Leading the way
OLYMPIC SHIPPING AND MANAGEMENT S.A.ONASSIS GROUP
INTERTANKO MEMBERS
INTERTANKO – 40 Years Leading the way
INTERTANKO ASSOCIATE MEMBERS
Bulk Shipping & Trading (Pvt) Ltd
Karachi – Pakistan
Tel: +(92-21) 32851406-7Fax: +(92-21) 32851400Email: [email protected]
INTERTANKO ASSOCIATE MEMBERSSupporting the publishing of this booklet commemoratingthe Association’s 40th anniversary
INTERTANKO – 40 Years Leading the way
INTERTANKO ASSOCIATE MEMBERS
INTERTANKO – 40 Years Leading the way
YEARS OF CHANGE
Tanker safetyThere have been tremendous improvements in tanker safety overthe last four decades.
For the first time since 1970 when ITOPF started to record oil spills,there was a year with no major oil spill (major = above 700 tonnes)in 2009.
Nor was this a one-off. Already accidental oil spills from tankers hadhit a record low in 2008.
This forms part of a trend whereby oil pollution from tankers was85% lower in the 2000s than it was in the 1980s, while over thesame period the volume of oil transported by tankers increased byover 50%.
Accidental spills over the whole 40 year period reduced in the2000s to just 6% of what they were in the 1970s.
Tanker productivity – capacity utilisationThe productivity of the fleet measured in tonne-miles per dwt wasthe lowest in 2009 since 1989 when the tanker industry wasemerging from the depressed 1980s.
Taking 1970 as the starting point at 100 on the productivity index,the high point was in 1973/4 at 114 and the low point was 1983 at35. 2009 in comparison stands at 57.5.
More time spent in port, many tankers used for storage, andreduced speed all took a great deal of capacity out of the marketin 2009.
The general belief is that storage will continue to tighten the tankermarket in 2010, albeit in reduced volumes, at least until interestrates begin to rise.
YEARS OF CHANGEThe last 40 years have brought about changes in how tanker business is done in terms ofsafety as well as in terms of tanker usage.
Accidental oil spills from tankers and tanker tradem ts spilled m ts transported
1970s 1980s 1990s 2000s
5
4
3
2
1
Source: INTERTANKO, based on data from ITOPF
0
1000 ts spilled
-63% -3%
-82%
m ts transported Main crude oil tanker indices – fleet and productivity
275
250
225
200
175
150
125
100
75
50
25
Source: INTERTANKO, based on data from Fearnleys
Fleet Productivity – t-m/dwt
19901975
19701980
19851995
20002005
2009
INTERTANKO – 40 Years Leading the way
Tanker employment The way that tankers are employed has changed out of allrecognition since the 1970s.
� Then, more than one third (36%) of tanker tonnage was oil company- or state-owned; today it is less than one seventh (14%).
� Then, more than half (52%) of tankers were employed under period contracts; today it is just over one quarter (27%).
� Then, only just over one tenth (12%) of tankers were trading on the spot market; today it is getting on for two thirds (59%). �
YEARS OF CHANGE
Tanker employment 1974-2010%
1974 1980 19901984 1994 2000 2002 2010
100
90
80
60
70
50
40
30
20
10
Source: Based on data from Gibsons and others
0
Spot Independent contracts Oil/state owned
Capt Panagiotis Tsakos bidding farewell to one of the Tsakos Group newbuildings in Korea in April 2009.
Capt Panagiotis founded Tsakos Shipping & Trading in 1970, the same year as INTERTANKO was established. 40 years on he is still actively involved in
the family shipping operation which is now headed up by his son Nikos, who is an INTERTANKO Executive Committee Member.
INTERTANKO – 40 Years Leading the way
INTERTANKO has become something of a bridge builder within theindustry, helping into existence a significant number of cooperativeindustry relationships:
� the Round Table of international shipping associations (BIMCO, ICS-ISF, INTERCARGO and INTERTANKO);
� the Tripartite discussions between ship owners, shipbuildersand class;
� a healthy, active and productive oil company/tanker owner relationship between OCIMF (also established in 1970) and INTERTANKO on a number of fronts;
� good cooperation between the ITF (International Transport Workers Federation) and INTERTANKO, and between IMPA (International Maritime Pilots Association) and INTERTANKO, has resulted in MoUs between the parties;
� there is an active and successful formal partnership agreement with the U.S. Coast Guard;
� relationships with the International Association of Classification Societies (IACS), the International Group of P&I Clubs (IG) andthe Worldscale Association have never been closer and are extremely constructive;
� links with the Paris MoU, while informal, nevertheless involve a closeness and trust that benefits both parties.
The shipping industry is best represented when it is united anddelivering a unified message. Its effectiveness comes from beingproactive, from working with partners to build coalitions, fromengaging globally, and from being prepared to lead – and not justtake a lead, but to lead by example and actually walk the talk. Bydoing that it really can make a difference.
INTERTANKO will continue to pursue the continuous improvementand human awareness principles of Poseidon Challenge and the‘zero goals’ embraced unanimously by its Council in a landmarkdecision to try to raise the quality bar even further – zero deaths,zero pollution, zero detentions.
The Association’s Strategic Objectives are:
� to develop and promote best practices,
� to be a positive and proactive influence,
� to profile and promote the tanker industry,
� to provide key services to Members.
These will form the basis of the Association’s work in the futureas it pursues its Mission...‘to provide leadership to the tanker industry in serving theworld with safe, environmentally sound and efficientseaborne transportation of oil, gas and chemical products’
and its Vision for the tanker industry...‘as a responsible, sustainable, respected tanker industry,committed to continuous improvement and constructivelyinfluencing its future.’
INTERTANKO is up front in the tanker sector as well as in theshipping industry as a whole, leading the way with clear vision andobjectives, and making a real difference in the daily business of ourMembers and of the industry as a whole. But it is the ability toforge relationships and work together with others to the benefit ofour Members and of the industry, that lays the real foundations forthe future. Together as an association of tanker owners, andtogether as an industry, we will be stronger, more respected, andmore clearly heard. �
THE WAY FORWARDThe value of an international shipping association is in its engagement in the differentfacets of operation and regulation around the world, giving its members a strong voice.This requires the cooperation of, and the development of, coalitions among like-mindedpartners in order to strengthen the industry’s influence.
THE WAY FORWARD
Lars Carlsson (Chairman 01-04)
Gange-Rolvs gate 5
Stephen Van Dyck (Chairman 04-07)Westye Hoegh (Chairman 99-01)
Richard du Moulin (Chairman 96-99)Nicholas Fistes (Chairman 07-09), Peter Swift (MD 2001 to date),Graham Westgarth (Chairman 2009 to date)
Dagfinn Lunde (MD 95-01)
Sir Yue-Kong Pao (Chairman 79-82) with Margaret Thatcher
Desig
n: d
esign
@th
eclub
b.co
.ukINTERTANKO London
St Clare House30-33 MinoriesLondon EC3N 1DDUnited KingdomTel: +44 20 7977 7010Fax: +44 20 7977 [email protected]
INTERTANKO OsloNedre Vollgate 4 5th floorPO Box 761 Sentrum N-0106 Oslo Norway Tel: +47 22 12 26 40Fax: +47 22 12 26 [email protected]
INTERTANKO Asia 5 Temasek Boulevard,#12-07 Suntec City Tower 5 Singapore 038985Tel: +65 6333 4007Fax: +65 6333 [email protected]
INTERTANKO North America801 North Quincy Street – Suite 200Arlington, VA 22203USATel: +1 703 373 2269Fax: +1 703 841 [email protected]
INTERTANKO Brussels Rue du Congrès 37-41B-1000 BrusselsBelgium Tel: +32 2 609 54 40Fax: +32 2 609 54 [email protected]
www.intertanko.com