Hawaii Superferries to become US Navy Property

From Marine Log
19 December 2011

As widely predicted, the two AustalUSA built former Hawaii Superferries, Huakai, and Alaka, are at last going to wind up under Navy control. Shipbuilding guru Tim Colton has found the following tucked away in the Defense Authorization Act of 2012:

SEC. 1026. TRANSFER OF CERTAIN HIGH-SPEED FERRIES TO THE NAVY.

(a) TRANSFER FROM MARAD AUTHORIZED.—The Secretary of the Navy may, subject to appropriations, from funds available for the Department of Defense for fiscal year 2012, provide to the Maritime Administration of the Department of Transportation an amount not to exceed $35,000,000 for the transfer by the Maritime Administration to the Department of the Navy of jurisdiction and control over the vessels as follows:

(1) M/V HUAKAI.

(2) M/V ALAKAI.

(b) USE AS DEPARTMENT OF DEFENSE SEALIFT VESSELS.—Each vessel transferred to the Department of the Navy under subsection (a) shall be administered as a Department of Defense sealift vessel (as such term is defined in section 2218(k)(2) of title 10, United States Code).

KVH Receives Innovation Award for The TracPhone V3

Press Release from KVH Industries

30 November 2011

 

MIDDLETOWN, RI — The TracPhone® V3 from KVH Industries, Inc., (Nasdaq: KVHI) created a stir in the maritime communications market when it was introduced in February 2011 due to its small size, fast data rates, and affordable service. Now it's been honored with two prestigious awards for those same features — the product was chosen for the "Spotlight on New Technology" at the Louisiana Gulf Coast Oil Expedition (LAGCOE) and received the Providence Business News' 2011 Innovation of the Year award at a ceremony in Rhode Island, where KVH's world headquarters is located.

"For years, mariners using satellite communications services at sea have struggled to avoid prohibitively high airtime bills. Several years ago, we saw an opportunity to help resolve this issue with modern technology that would reduce the size and cost of maritime satellite communications equipment, and we built our own spread spectrum satellite network to offer fast, affordable service on a global basis using a 24" antenna. In February of this year, we introduced the next generation of this unique, end-to-end hardware and service solution with the 14.5" TracPhone V3 antenna, bringing reliable satellite communications to a whole new population of mariners," explains Martin Kits van Heyningen, KVH's chief executive officer. "We're delighted that the benefits of our new product are being recognized with state and national awards."

KVH is known for its innovative approach to technology, especially in the maritime market. The mini-VSAT Broadband network's popularity with commercial mariners, like those who work in the oil and gas industry and attended KVH's Spotlight on Technology presentation at LAGCOE, is based on a long history of reliability and quality in all of KVH's products, from digital compasses to satellite TV systems to its global satellite communications service. That reputation has been good for business worldwide and for the economy in Rhode Island, where KVH got its start and where its world headquarters is located.

"Over the past several years, KVH has remained a bright spot in the Rhode Island economy," said Mark S. Murphy, editor of Providence Business News, as he presented the Innovation of the Year award. "KVH's innovative products mean that we can check e-mail, call home, manage our businesses, and even watch the Red Sox right from our boats."

The TracPhone V3 is licensed by the U.S. Federal Communications Commission (FCC) and includes a fully stabilized, 14.5" (37 cm) antenna that weighs just 25 pounds, a powerful ViaSat ArcLight® spread spectrum modem, and a sleek antenna control unit that are all fully integrated and configured for easy installation. ArcLight spread spectrum technology enables very small antennas like KVH's TracPhone V3 to receive satellite transmissions with the speed and reliability of older, 1-meter VSAT antennas that use the TDMA transmission schemes originally designed for terrestrial use. KVH's high-efficiency RingFire™ antenna design and dielectric feed rod technology combine to help the TracPhone V3 offer great performance, even in poor weather, and its rugged, lightweight design is perfect for use on leisure and commercial vessels as small as 30 feet.

With more than 1,500 antenna systems shipped and global coverage, KVH's mini-VSAT BroadbandSM network is the world's largest and fastest growing maritime Ku-band satellite communications network. A managed airtime network solution, it equips vessels with true broadband connections as well as Voice over IP (VoIP) telephone lines with optimized service and prioritization of applications.

About KVH Industries, Inc.

KVH Industries, Inc., is the leading provider of in-motion satellite TV and communication systems, having designed, manufactured, and sold more than 150,000 mobile satellite antennas for applications on vessels, vehicles, and aircraft. KVH's mission is to connect mobile customers around the globe with the same digital television entertainment, communications, and Internet services that they enjoy in their homes and offices. The company is based in Middletown, RI, with facilities in Illinois, Denmark, Norway, and Singapore.

___

This release may contain certain forward-looking statements that involve risks and uncertainties. Forward-looking statements include, for example, the functionality, characteristics, quality and performance of KVH's products and technology; anticipated innovation and product development; and customer preferences, requirements and expectations. The actual results could differ materially. Factors that may cause such differences include, among others, those discussed in KVH's most recent Form 10-Q filed with the SEC. KVH does not assume any obligation to update its forward-looking statements to reflect new information or developments. KVH, TracPhone, and RingFire are trademarks of KVH Industries, Inc. "mini-VSAT Broadband" is a service mark of KVH Industries, Inc. All other trademarks are the property of their respective companies.

Wärtsilä completes unique conversion of vessel to LNG operation

We recently published an article on the conversion of Washington State Ferries to LNG propulsion. This seemed like an appropriate follow up for that article which was based on a study by the Glosten Associates.

Wärtsilä Corporation, Trade & Technical Press release, 23 November 2011

The product tanker ‘Bit Viking’ was the first vessel ever to undergo a conversion by Wärtsilä from heavy fuel oil to liquefied natural gas (LNG) operation. The conversion enables the ‘Bit Viking’ to qualify for lower nitrogen oxide (NOX) emission taxes under the Norwegian NOX fund scheme.

The unique fuel conversion of the product tanker ‘Bit Viking’, from heavy fuel oil to gas operation, has been finalised and in October the vessel was handed over to the customer, Tarbit Shipping. The re-commissioned vessel is operated by Statoil along the Norwegian coastline, and the conversion carried out by Wärtsilä enables it to qualify for lower NOX emission taxes under the Norwegian NOX fund scheme. The fund is a cooperative effort whereby participating companies may apply for financial support in return for introducing NOX reducing measures. Furthermore, liquefied natural gas (LNG) operation means lower carbon oxide emissions, and virtually no sulphur oxide or particle emissions whatsoever.

First marine dual fuel (DF) conversion

This is the first marine installation in the world to involve converting Wärtsilä 46 engines to Wärtsilä 50DF engines, and the first 50DF marine installation with mechanical propulsion. By operating on LNG, the ‘Bit Viking’ becomes one of the most environmental friendly product tankers in the world.

In August 2010, Wärtsilä announced that it had signed a turnkey project with Tarbit Shipping to convert the ‘Bit Viking’ to LNG operation. The scope of the conversion package from Wärtsilä included deck-mounted gas fuel systems, piping, two six-cylinder Wärtsilä 46 engines converted to Wärtsilä 50DF units with related control systems and all adjustments to the ship’s systems necessitated by the conversion. The vessel’s classification certificate was also updated. The engines are connected directly to the propeller shafts through a reduction gearbox, thus avoiding the electrical losses that are an unavoidable feature of diesel-electric configurations. This enables a significant improvement in propulsion efficiency, reduced fuel consumption, and corresponding reductions in emissions. This is the first LNG fuelled vessel to be classified by Germanischer Lloyd.

New LNG storage system

The ‘Bit Viking’ utilises Wärtsilä’s new LNGPac system, which enables the safe and convenient onboard storage of LNG. The two 500 cubic metre LNG storage tanks are mounted on the deck to facilitate bunkering operations and permit the bunkering of LNG at a rate of 430 cubic metres per hour. The storage tanks provide the vessel with 12 days of autonomous operation at 80 per cent load, with the option to switch to marine gas oil if an extended range is required. When visiting EU ports, which have a 0.1 per cent limit on sulphur emissions, the vessel operates on gas.

“Wärtsilä’s unique expertise and experience with dual fuel technology, as well as with fuel conversion projects, were the main reasons for us choosing them. We appreciate the technological efficiency of the Wärtsilä solutions and the expert way in which this conversion project has been handled. We are proud that the ‘Bit Viking’ is now one of the world’s most environmentally sustainable tankers in operation,” says Anders Hermansson, Technical Manager, Tarbit Shipping.

“This is a major step for Wärtsilä in consolidating its market leading position in LNG solutions for the shipping industry. The successful sea trials with this vessel provide yet further validation of the viability of LNG as the marine fuel of the future. We anticipate that this development will rapidly accelerate during the coming few years,” says Sören Karlsson, General Manager, Gas Applications, Ship Power Technology

Priority for standard private armed guards contract

From the Baltic and International Maritime Council (BIMCO)
21 November 2011


With the increasing use of armed guards on ships and the fear that second-rate security firms may take advantage of the piracy situation, BIMCO is forging ahead with the development of a standard contract for the employment of armed guards. The new contract, which will be drafted by a team of experts of shipowners, lawyers and underwriters, and with the assistance of the International Group of P&I Clubs, will require private security firms offering armed guards to follow the IMO Guidelines for owners on the used privately contracted armed security personnel on board ships (MSC Circular 1405). Of major importance is ensuring that security contractors have in place proper and sufficient public and employers’ liability insurance – which is a concern recently raised by the International Group of P&I Clubs. While much of the new BIMCO contract will deal with operational aspects of employing armed security guards, issues of liability and responsibility will be of prime importance.
New private maritime security firms are springing up almost daily to meet shipowners’ growing demands for their services for vessels operating in high risk areas. It is very important that this new sector is regulated and that harmonised terms are developed and agreed. BIMCO has given this project the highest priority so that the standard contract can be published as soon as possible – most likely within the next two months.

Chevron Assumes Responsibility For Oil Spill. (What Spill?)

The article below from the Dow Jones Newswires  caught my attention this morning. I have actually been following this story for a couple of days now and realized I haven't seen this anywhere in the mainstream media. Why not? Granted this isn't the same as the horrific Deepwater Horizon spill in the Gulf of Mexico, however it is a spill nonetheless. Chevron is taking responsibility for it which is commendable. BP took responsibility for Deepwater Horizon, but they are vilified still today. (This is despite the fact several other companies have been found  to share the blame - which we don't hear about either.)

RIO DE JANEIRO (Dow Jones)–The Brazilian unit of major U.S. oil company Chevron Corp. (CVX) takes “full responsibility” for a leaking well bore that left a sheen of crude staining the Atlantic Ocean, a company official said Sunday.
“Any oil on the surface of the ocean is unacceptable to Chevron,” said George Buck, president of Chevron Brasil.
Chevron has plugged the appraisal well that was the primary source of the leaking crude, which traveled to the surface through a hole in the well bore after the rock wall of the well failed, Buck said.
Brazil’s National Petroleum Agency, or ANP, estimated the leak at between 200 and 330 barrels of crude per day, which was “in the ballpark,” Buck said. Another government estimate put the total volume of the spill at 5,000 to 8,000 barrels. Buck said that estimate was also “in the ballpark, perhaps high.”
Chevron has not used any chemical dispersants on the oil slick on the ocean’s surface, using only mechanical dispersion and collection, Buck said. He denied that Chevron was using sand on the sheen.
-By Jeff Fick, Dow Jones Newswires

Does anybody have any theories on why this environmental disaster isn't being covered? I would love to hear any input or theories.

Pacific Drilling Raises $46 Million in IPO

LUXEMBOURG--(BUSINESS WIRE)-- Pacific Drilling S.A. (NYSE:PACD - News) (NOTC:PDSA) (“Pacific Drilling” or the “Company”) announced that yesterday it closed its previously announced initial public offering of shares of common stock at a price of $8.25 per share. Pacific Drilling sold a total of 6,000,000 shares, resulting in net proceeds of approximately $46 million after deducting underwriting discounts and commissions. The underwriters have been granted a 30-day over-allotment option to purchase up to an additional 900,000 common shares.
Morgan Stanley and Deutsche Bank Securities acted as joint book-running managers for the offering. DnB NOR Markets, Howard Weil Incorporated, Pareto Securities AS and Simmons & Company International acted as co-managers.
This offering was made solely by means of a prospectus, copies of which may be obtained by contacting: Morgan Stanley & Co. LLC, Attention: Prospectus Department, 180 Varick Street, New York, NY 10014, telephone 1-866-718-1649 or by emailing prospectus@morganstanley.com or Deutsche Bank Securities Inc., Prospectus Department, Harborside Financial Center, 100 Plaza One, Jersey City, NJ 07311-3988, telephone 1-800-503-4611 or by emailing prospectus.cpdg@db.com.
A registration statement relating to this offering was declared effective by the Securities and Exchange Commission (“SEC”) on November 10, 2011. This press release shall not constitute an offer to sell or a solicitation of an offer to buy, nor shall there be any sale of these securities in any state or jurisdiction in which such an offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state or jurisdiction.
About Pacific Drilling
Pacific Drilling is an international ultra-deepwater offshore drilling company. Pacific Drilling’s fleet consists of six ultra-deepwater drillships. The Company currently operates three recently delivered drillships, expects delivery of its fourth drillship by end of 2011, and has two additional drillships on order at Samsung to be delivered in 2013.

Contact:

Pacific Drilling S.A.
Amy Roddy, Director, Investor Relations, 1-832-255-0502
Investor@pacificdrilling.com

Hornbeck Executes Contracts for Newbuilds, $720 Million

From Marine Log
17 November 2011

Hornbeck Offshore Services, Inc. (NYSE: HOS) says it has executed definitive contracts for the construction of sixteen high-specification offshore supply vessels. Deliveries will take place between the second quarter of 2013 and fourth quarter of 2014.

VT Halter Marine, Inc. of Pascagoula, Mississippi and Eastern Shipbuilding Group, Inc. of Panama City, Fla, will each build eight 300 class vessels, with options to build additional vessels. Hornbeck's first decision with respect to the exercise of options will need to be made in September 2012. Delivery dates for option vessels will be approximately 26 months following the option exercise.

The total cost of the first sixteen vessels under this program is expected to be approximately $720 million, excluding construction period interest. Construction costs will be funded with cash on-hand (including the net proceeds of a recently completed equity offering), projected free cash flow from operations and, if necessary, available capacity under the Hornbeck currently undrawn and recently expanded $300 million revolving credit facility.

VT Halter Marine will construct eight vessels based on the Super 320 design that it has developed for Hornbeck Offshore. These DP2 OSVs are designed to have 6,200 long tons of deadweight capacity, approximately 20,900 bbls of liquid mud carrying capability, 11,863 sq. ft. of deck area and a fire-fighting class notation. The Super 320 design is based on a larger version of the HOS Coral, an existing 290 class DP-2 OSV which the company has successfully operated since her delivery in early 2009. The Super 320 design has been developed with particular attention to environmental regulations, including a double-hull that eliminates any fuel storage adjacent to the sideshell, and propulsion machinery that meets the requirements of EPA Tier 3 for stack emissions.

The eight OSVs to be constructed by Eastern Shipbuilding Group will be DP-2 classed. Four vessels will be based on the STX Marine SV 300 design and four will be based on the STX Marine SV 310 design. Features of the STX design include over 20,000 bbls of liquid mud carrying capacity and a fire-fighting class notation. The SV 300 design calls for 5,500 long tons of deadweight capacity and 10,976 sq. ft. of deck space, while the SV 310 design calls for 6,144 long tons of deadweight capacity and 11,536 sq. ft. of deck space. The STX designs meet the same environmental standards as the Super 320 design and will also carry the ENVIRO class notation by the American Bureau of Shipping.


November 17, 2011

General Maritime files for Chapter 11

From Marine Log

17 November 2011

 

Tanker operator General Maritime Corporation (NYSE: GMR) says it has filed for relief under Chapter 11 of the United States Bankruptcy Code in the U.S. Bankruptcy Court for the Southern District of New York. Substantially all of the company's subsidiaries – with the exception of those in Portugal, Russia and Singapore as well as certain inactive subsidiaries– have also commenced Chapter 11 cases.

The company says the bankruptcy filing is necessary to implement a restructuring agreement reached with its key senior lenders, including its bank group, led by Nordea Bank Finland plc, New York Branch as administrative agent, as well as affiliates of Oaktree Capital Management, L.P.

General Maritime says the restructuring agreement and related equity commitment letter have the support of over two thirds of the company's obligations from its banks and Oaktree. Under terms of the agreements, Oaktree will provide a $175 million new equity investment in General Maritime and convert its prepetition secured debt to equity. Under the terms of the agreement, General Maritime expects to substantially reduce its funded indebtedness and enhance its liquidity profile. It says that operations are expected to continue without interruption.

In conjunction with the filing, General Maritime has received a commitment for up to $100 million in new debtor-in-possession (DIP) financing from a group of lenders led by Nordea as administrative agent. The initial amount of the DIP is $75 million, however, the credit facility contemplates that, if needed, the company will have access to another $25 million of future financing, subject to the applicable lenders' agreement, certain other conditions and further order of the Bankruptcy Court.

November 17, 2011

Tonnage Numbers Steady at U.S. Ports

 

From Marine link:

Great Lakes-St. Lawrence Seaway

Wednesday, November 16, 2011, 10:44 AM

U.S. ports continued to post positive tonnage numbers in October. The Seaway’s year-to-date total cargo shipments from March 22 to October 31 were 29 million metric tons, up 2 percent from the same period last year.

“With just two months left in the 2011 navigation season, the Seaway is on track to meet its projected seven percent improvement over last year’s tonnage performance,” says Rebecca Spruill, Director of Trade Development for the Saint Lawrence Seaway Development Corporation. “General cargoes like steel slabs and coils and wind turbine components are posting solid increases, while we’re moving nearly a million tons more of petroleum products than last season.”

In early October, 18,000 metric tons of hot-rolled steel coils produced at ArcelorMittal’s Burns Harbor facility in Indiana were delivered to the Republic of Macedonia. “Northwest Indiana is the richest steel-producing region in the world and being able to access world markets through our port is vital for ArcelorMittal and many other companies,” said Peter Laman, port director of the Port of Indiana-Burns Harbor.

He added, “This is the first substantial steel export from the port since 2008. Year-to-date steel shipments through the port are up more than 20 percent over last year, with 2011 on target for having the highest steel shipments since 2007. Whether it’s bringing in raw materials or shipping out finished products, steel companies can substantially reduce their logistics costs by shipping through our port.”

The Toledo Port Authority was another Great Lakes port registering tonnage increases. “Through the month of October, seaport cargo tonnage remained nearly 4 percent ahead of the same period in 2010 with increases in all major cargo categories (petroleum products, general cargo, and iron ore), with the exception of coal and grain. Through October, the port handled 9.2 million short tons and 13 more vessels than at the same point in 2010. The month finished strong as grain began to pick up due to the fall harvest,” explained Joseph Cappel, director of cargo development at the Port.

Diversification has been a critical component to growing port commerce during difficult economic times. “The Port of Green Bay has historically been a leading indicator of regional fiscal conditions in Wisconsin,” said Dean R. Haen, port manager.  “The fact that the port has seen a 26 percent increase in tonnage from 2010 to 2011 is a positive sign for the port and our regional economy.” One port tenant, US Venture, continues to be the main driver in increased tonnage and ship arrivals in 2011. They teamed with Wisconsin’s Department of Transportation and invested in opening an inactive port terminal last year which, amidst tough economic conditions, is now paying dividends. October tonnage increases for coal for power generation were up 15 percent year-to-date, while the construction industry demand for cement rose 11 percent from the same time last year. The 69 percent year-to-date increase in gypsum handled by the port was for industrial use.

St. Lawrence Seaway shipments of petroleum products and salt continued up at 90 percent and 33 percent respectively compared to October 2010. Coal shipments totaled 62,000 metric tons in October, a two percent increase from the same month last year. Year-to-date scrap metal and coke shipments saw double digit increases for October 2011. Other general cargo like wind turbine components, increased 31 percent over last year.

The Great Lakes-St. Lawrence Seaway maritime industry supports 227,000 jobs in the U.S. and Canada, and annually generates $14.1 billion in salary and wages, $33.5 billion in business revenue, and $4.6 billion in federal, state/provincial and local taxes. North American farmers, steel producers, construction firms, food manufacturers, and power generators depend on the 164 million metric tons of essential raw materials and finished products that are moved annually on the system. This vital trade corridor saves companies $3.6 billion per year in transportation costs compared to the next least-costly land-based alternative.

Cracks found in year-old Chetzemoka's propellers

M/V Chetzemoka has problems. Supposedly it is just out of the manufacturer's warranty period.Hopefully Vigor does right by the State of Washington. The ship was actually built by Todd Shipyards which was acquired by Vigor.

 

From KOMO News: 

By Ray Lane Published: Nov 9, 2011 at 5:26 PM PST Last Updated: Nov 9, 2011 at 6:49 PM PST

 

»Play Video

SEATTLE -- Thousands of dollars in repairs are in the works after cracks were found on the propellers of Washington state's newest and most expensive ferry boat.

The ferry Chetzemoka was built by Vigor Industrial, which was formally known as Todd Pacific Shipyards.But the propellers were built by Rolls-Royce Marine.

Both businesses say they're trying to figure out what happened.

The Chetzemoka is running with patched-up propellers. Washington State Ferries says the ferry had been in dry dock in Anacortes for scheduled repairs for more than three weeks, during which time inspectors found hairline cracks on one of the 8,000-pound propellers.

Additional tests showed that each of the five blades on both propellers had cracked near the hub. The ferry system says it appears that improperly cast stainless steel is to blame for the problems. Officials believe a high-carbon content made the metal too porous and too brittle.

"These are big ships plowing the waters of Puget Sound in salt water. Stuff happens," said David Moseley of WSF. "That's why we are diligent about the maintenance of these boats, and that's why we're diligent every time we take them out of the water."

Vigor Industrial says two other new ferries of the same class - the Salish and Kennewick - have different, variable-pitch bronze propellers, and therefore should not have the same problems.

One year ago, when the $77 million Chetzemoka made its inaugural run from Whidbey Island to Port Townsend, it was heralded as a new lifeline that could handle the rough waters of Puget Sound.

Transportation officials defended the cost, and the companies that constructed it.

"We have tremendous builders in Washington state and they will help us maintain and preserve these boats for the 60-plus years they're in life," said Transportation Secretary Paula Hammond.

Replacement propellers are now being made for the Chetzemoka, but they won't be ready until April.

The state says it'll file a warranty claim against Vigor Industrial to pay for the new props, which cost $70,000 per piece.

Horizon Lines hit by third quarter losses.

Here's a follow up to an article from IFW talking about Horizon.

Source: IFW

Kizzi Nkwocha | Tue, 8 Nov 2011

Company hopes refinancing and exit from the trans-Pacific market will 

bring stability

 

Horizon Lines, the US’s busiest domestic ocean shipping company, sustained considerable losses of $126.5 million from continuing operations in the third quarter, the company has revealed.









The huge losses compared with a $8.2 million net profit a year earlier. In a defiant statement issued yesterday Horizon said it expects its recent refinancing and exit from the trans-Pacific market to stabilize future results despite “challenging” economic conditions.

Last month , as the US’s largest shipping line announced its decision to discontinue its Five Star Express (FSX) transpacific container shipping service between the US west coast, Guam and China, President and CEO Stephen Fraser said: “Our decision to exit this highly volatile market will allow Horizon to focus on our core domestic ocean shipping services, and provide the opportunity to produce a more profitable and stable financial performance over time.”

The results, announced yesterday included a $117.5 million goodwill impairment charge stemming mainly from the shutdown of the trans-Pacific service and deteriorating earnings.
Horizon said the amount of the goodwill impairment is an estimate that may be adjusted during the fourth quarter.

The company said it expects the shutdown of the trans-Pacific service to produce a pretax restructuring charge of $105 million to $110 million in the fourth quarter, following negative adjusted earnings before interest, taxes, depreciation and amortization of approximately $43.7 million for the year’s first nine months.

Horizon launched the trans-Pacific service last December after Maersk Line did not renew a take-or-pay agreement for eastbound capacity on the backhaul of Horizon’s service from the U.S. mainland to Guam. Horizon is laying up the service’s five chartered ships, each with capacities of 2,824 20-foot-equivalent units, and seeking to subcharter them.

Earlier this year Horizon Lines completed a complicated $650 million financial restructure that saved the shipping line from bankruptcy and will left bondholders with most of the company’s stock.

The carrier had struggled to straighten its finances since pleading guilty last March to price-fixing in the Puerto Rico trade.

Horizon operates between the US mainland and Puerto Rico, Alaska, Hawaii and Guam, and between China and the US west coast.

Bad News for the US Shipping Industry.

Source: IFW

Pete Goldin | Wed, 2 Nov 2011

Average US vessel operating costs last year were almost three times higher than their international counterparts, according to a report from MARAD, the US maritime administration body.

The report, Comparison of US and Foreign-Flag Operating Costs, says: “US flag-carriers are at a distinct disadvantage in their ability to compete in international transport markets.”

The comparison used aggregate average total operating costs.

MARAD also found that average operating costs for US-flagged containerships and ro-ro vessels in particular were generally three times higher than foreign-registered ships.

Difference in crew costs were even more noticeable – roughly 5.3 times higher for US-flagged vessels in 2010, even though their average crew size is slightly smaller. Crewing costs on US bulk carriers were 5.7 times higher.

The report attributes the higher operating costs to regulatory requirements on vessel labour, insurance and liability, maintenance and repairs, taxes and expenses associated with environmental compliance, higher wage rates and social benefits.

The report also notes that approximately 110 ships fly the US flag, while more than 540 US-owned vessels are registered in 31 other countries, presumably to reduce costs.

The report also suggests several options MARAD may pursue to encourage participation in the US fleet.

These include promotions and missions to secure additional streams of commercial cargo for US-flagged vessels, encouraging US companies to support domestic industry by using US vessels and providing information on annual cargo preference volumes to assist carriers with business planning.

Shipping Company Pleads Guilty to Pollution Charges

(11/7/2011)

The following is the text of a press release issued by the U.S. Attorney for the District of Oregon: (PORTLAND, Ore.)– U.S. Attorney S. Amanda Marshall and Oregon Attorney General John Kroger jointly announced that the owner and operator of a Cyprus-based ship pleaded guilty today to felony oil pollution charges. A.E. Nomikos Shipping Inv. Ltd. and Lounia Shipping Co. Ltd. pleaded guilty to one count each of violating the Act to Prevent Pollution from Ships, and knowingly making false statements to the U.S. Coast Guard. As part of the plea agreement, the companies agreed to pay a $750,000 fine. Half of the fine – $375,000 – will go to the Oregon Governor’s Fund for the Environment, which is dedicated to local environmental cleanup and restoration efforts focused on preserving and protecting Oregon’s rivers, watersheds, and fish and wildlife. Nomikos was the operator and technical manager of the Arion SB, a bulk carrier that operated under the flag of Cyprus. Nomikos provided management services pursuant to a contract with Lounia, the registered owner of the Arion SB. Nomikos is headquartered in Piraeus, Greece. Lounia is headquartered in Cyprus. Representatives of the companies entered guilty pleas before U.S. District Judge Michael H. Simon today, after which Judge Simon imposed sentence. In addition to the $750,000 fine, Judge Simon sentenced both defendants to three years probation, during which both defendants will be required to fund and implement an Environmental Compliance Plan. An investigation revealed that between at least June 2011 and October 16, 2011, Nomikos and Lounia, acting through their agents and employees, directed subordinate engine room crew to run the Arion SB’s Oil Water Separator improperly. Specifically, the Chief Engineer instructed the Second Engineer to pipe fresh, clean water directly into the Oil Content Meter for the purpose of blinding the Arion SB’s Oil Content Meter, so that it would not function properly to prevent the overboard discharge of oil-contaminated waste in excess of 15 ppm. The Chief Engineer failed to include any entries in the Arion SB’s Oil Record Book relating to the crew’s improper use of fresh water to manipulate the vessel’s Oil Content Meter, and also included inaccurate entries in the Oil Record Book regarding the crew’s use of the vessel’s Waste Oil Incinerator. “The sentences imposed today should send a clear message that the United States will hold vessels responsible for dumping oil in our oceans and for lying to the United States Coast Guard. We are pleased that the court allocated $375,000 of the fine to be used here in Oregon to benefit our environment,” said U.S. Attorney S. Amanda Marshall. “The Oregon Department of Justice is deeply committed to holding polluters accountable when they break the law,” said Attorney General John Kroger. This case came to light after the United States Coast Guard boarded the Arion SB, on or about October 16, 2011, to conduct a Port State Control Safety Exam for the vessel. “This case demonstrates our commitment to ensuring that vessels calling on U.S. ports fully comply with U.S. laws and international treaties,” stated Rear Admiral Keith A. Taylor, Commander, Thirteenth Coast Guard District. The case was jointly investigated and prosecuted by federal and state authorities. The case was investigated by the U.S. Coast Guard, U.S. Coast Guard Investigative Service, and Environmental Protection Agency Criminal Investigation Division. Assistant U.S. Attorney Stacie F. Beckerman and Special Assistant U.S. Attorney Patrick Flanagan of the Oregon Department of Justice’s Environmental Crimes Unit prosecuted the case.

The Changing Face of Piracy

From Maritime Reporter & Engineering News, October 2011

 

David Rider

As the NATO and EU NAVFOR operations Ocean Shield and Atalanta continue their work in the Gulf of Aden, Indian Ocean and Red Sea areas, one could easily be forgiven for thinking, well, that’s that. Tough luck, pirates, the world is on to you. Sadly, as anyone involved in international shipping knows, that is very far from the truth.
The fact is that the areas patrolled by the world’s navies are vast and the chance of early interdiction of a pirate skiff or mothership by a naval vessel is small. In the risk versus reward world of the pirate, it’s a virtual no-brainer.
Given that around seven percent1 of the world’s oil supplies and an estimated 22,000 vessels transit the Gulf of Aden (GoA) annually, it would be reasonable to expect that same transit route to be safe and free of incident, but the reality is far from it.
In early August 2011, the International Chamber of Commerce’s Commercial Crime Service reported that there had already been 22 successful hijackings by Somali pirates, while countless others have been approached, attacked and pursued by pirates in high speed skiffs, launched from nearby motherships.
As the methods employed by the world’s navies to combat them have become more sophisticated and organized, so the pirates have changed their tactics to suit, with the first six months of 2011 showing a dramatic rise in attacks over the same period for 2010; some 266 attacks on vessels in the period, compared with 196 for last year2.
This year’s monsoon season has been a stark reminder that pirates are highly motivated to capture their quarry. While normally shipping could breath a sigh of relief at the arrival of the summer monsoon, this year the IMB issued a statement warning seafarers of the continuing danger of pirate attack. The organization said that the movement of pirates to the GoA and Southern Red Sea (SRS) areas, due to monsoon conditions in the Indian Ocean were a, “cause for concern.” IMB Director, Captain Pottengal Mukundan, said: “It may be that these recent Indian Ocean incidents are a sign of desperation by pirates, or that there are many more pirate groups operating now than there were in 2010, particularly outside the Gulf of Aden.”
As a leading supplier of armed security personnel to the maritime community, Neptune Maritime Security continually has Vessel Protection Teams (VPTs) transiting both the IRTC and High Risk Area, and identified a potential trend in pirate tactics during the monsoons.
While July was a quiet month in the SRS region, with only a handful of minor reports, a string of what can only be termed ‘swarm’ attacks took place in August off the coast of Eritrea, possibly due to pirates moving up through Bab el-Mandeb, the ‘Gate of Tears,’ the strait that connects the Red Sea to the Gulf of Aden and Indian Ocean. When the monsoons bring dangerous conditions to the open sea, pirates will retreat here to calmer waters.
It was here that large numbers of pirates were reported to be operating in ‘packs’ and attempting to swarm vessels in large numbers.
The first incident, on August 7, according to the report filed with the IMB’s Live Piracy Reporting Center3, saw 12 skiffs containing between five to eight pirates per skiff pursue and attack a bulk carrier approximately 20nm off the coast of Eritrea. As the skiffs approached to within 300m of the carrier, the Master ordered the armed security guards onboard to fire warning shots at the pirates’ skiffs. While this show of force saw the majority of pirate vessels break off their attack, two skiffs continued in their pursuit for some 30 minutes, returning fire at the armed guards until they, too, aborted their attack. If one believes the report – and there is no reason to doubt the legitimacy of reports filed with the IMB – then even underestimating the number of pirates to just 60 still leaves us with evidence of a worrying trend in pirate tactics.
Following an advisory notice issued by Neptune Maritime Security to both the media and other companies in the industry, we received news of a second ‘swarm’ attack4 on August 10. On this occasion, a Panama-flagged tanker, Golden Topstar, was pursued while underway at 13:08N-043:07E by pirates in 12 skiffs. The vessel evaded the attack by employing evasive maneuvers and firing flares. The site of the incident is just 6.5nm away from the attempted attack three days previously.
A third ‘swarm’ attack occurred5 on August 17. A bulk carrier underway, approximately 22nm off Assab, Eritrea, at 13:16N-043:01E, was approached by seven high speed boats, each containing three to five men, armed with automatic weapons. Again, the attack was repelled thanks to the employment of evasive maneuvers and an increase in speed by the vessel. This attempt occurred just 10.2nm away from the incident on August 10th.
Reports then emerged from the Iranian Navy, concerning a wave of attempted attacks on the bulk carrier ‘SAEI’ at the mouth of the SRS at Bab-el-Mandeb, although exact location information was not provided. According to the Iranian Navy report, the first attack saw four skiffs containing 20 pirates engage the vessel, the second wave featured eight skiffs with a force of 40 pirates and a third and final attempt was said to feature just two skiffs with just 12 pirates on board.
While some sources have questioned the credibility of these reports, the bulk of available data should at least raise concerns in the industry as to the changing and malleable nature of the tactics employed by pirates in the area. The IMB reports6 that (at the time of writing), since May 20, 14 vessels have been attacked in the Southern Red Sea.
Further east, pirates were also changing their MO, choosing to avoid the rough Arabian Seas in favour of daring raids near major shipping hubs.
The successful hijacking of the chemical tanker, Fairchem Bogey7, on August 20, illustrates how pirates have altered tactics in response to pressure from EU NAVFOR, the monsoon and better practice by vessels transiting the HRA. According to reports, the Fairchem Bogey, carrying a cargo of methanol, anchored 4-5 miles off the Omani port of Salalah. Ironically, the armed guards employed by the shipping company to watch over the vessel in transit had disembarked once the ship reached what was thought to be safe anchorage. Then, at approximately 0630 UTC, a group of pirates stealthily boarded the vessel and took its crew of 21 hostage. Did the pirates have someone on shore, advising them of the protection team’s departure, or was this just dumb luck? We may never know.
The attack caused concern not only due to its brazen nature, but also because Oman has a well resourced Coast Guard, who were on the scene within an hour. Unfortunately, by then it was too late, and they were warned off by the hijackers, who later sailed the vessel to Garacad and demanded a $10m dollar ransom for its release8.
The attack shows parallels to the hijacking of the cargo ship, Leopard, which was boarded off the Omani coast on January 12. The freighter had discharged its armed guards and was boarded shortly afterwards. Six crew members are still being held hostage by the pirates involved9. Since the hijacking of the Fairchem Bogey, there have been several other attempts made to attack vessels, which the Omani Coast Guard have rebuffed.
While attacks on vessels off Oman are hardly news, recent weeks have seen an increase in attempted hijackings in the region, which perhaps illustrates the increasing pressure pirate gangs have felt due to local weather conditions, the presence of naval vessels and more recently, the presence of armed security guards onboard vessels. According to EU NAVFOR, 90% of ships surviving a pirate attack in the Gulf of Aden this year have credited a security team for aiding their escape10.
As we reach the end of the monsoon season, international shipping can once again expect Somali pirates to strike out further into the Arabian Sea and Indian Ocean in an attempt to make up for time lost due to the monsoon, utilising hijacked fishing boats and merchant vessels as mother ships. As Captain Keith Blount, Chief of Staff with EU NAVFOR told Reuters: “I think we are going to see a surge in piracy because we always have done at this time when the southwest monsoon abates and the seas become flatter.”
 “Typically the pirates have a really good go in the autumn and winter,” he said on the sidelines of a shipping conference11.
The international battle against piracy continues its cat and mouse game, with no immediate end in sight for either the beleaguered shipping companies who have paid an estimated $95 million in ransoms this year alone, or the estimated 343 seafarers still being held hostage in Somalia12.

Neptune Maritime Security
www.neptunemaritimesecurity.com
Email: info@neptune-ms.com

(As published in the October 2011 edition of Maritime Reporter & Engineering News - www.marinelink.com)

How Significant is One Company?

It is not often that I write about a specific shipping company, however today I feel that this one is worth mentioning. There is more to this article than just one shipping company, there is a more important issue for people to think about. In a time where it is commonplace for companies to be "delisted" by the New York Stock Exchange (NYSE)  or the NASDAQ there is significance to the fact Horizon Lines was delisted from the NYSE.

What is it about Horizon that makes this so significant? The short answer is the Jones Act of 1920. Horizon lines is one of the largest Jones Act cargo carriers in business today. What the Jones Act does is restrict domestic cargo to U.S. manufactured, U.S. owned and U.S. crewed vessels for interstate cargo.

Horizon shares traded (at the time of writing this article) in the .24-.25 range, whereas in January, shares were trading at 52 week highs of 5.95. While I don’t believe this company is in serious trouble, its stock price has put its future in question.

If a foreign company were to come in and purchase this company, it would be one less Jones Act Carrier to become history. (Remember must be U.S. owned) This would mean, assets would be sold or moved and the remaining Jones Act Carriers would pick up the slack. Demand for shipping would go up, because there would be less supply. Prices would go up for shipping, and then eventually tacked on to the products each of us buys.

The government isn't helping either. Refer back to the blog article regarding the implementation of fuel usage fees on October 19, 2011. With the expansion of the definition of U.S. Waterways in the proposed fuel usage fees could in fact change the scope of the Jones Act.

The bottom lie is that if Horizon lines disappears from the list of Jones Act Carriers, it wouldn’t be the end of the shipping industry within the United States. However, there are many overlapping factors that get overlooked. If the operating costs are increased for carriers, companies that are struggling could be forced out of business. Because of the economic crisis, our elected officials are scratching their heads trying to uncover more funding. A fuel usage fee, or expansion of areas covered could give the government more funds to resolve the debt crisis. When a congressman, or senator or even the president says "this will provide millions if not billions" I submit that they have not researched the overarching effect to companies like Horizon who are struggling to come back from the last crisis caused by inappropriate legislation.

I'm thinking about this stuff, are you?

K.Swanson