Asian Regional Panel

6 March 2008

Singapore

Peter M. Swift

MD report

INTERTANKOInternational Association of Independent Tanker Owners

2008 Dates

April ISTANBUL

20 Golf tournamentAssociate Members’ meeting

21 ExCom, CouncilFocus sessions

22-23 Tanker Event22 Poseidon Challenge

AGM23 Oil & Market session

22 Tanker Chartering seminar

Nov LONDON

17-18 ExCom/Council, London

Future for Single Hulls

Options today

• Conversion to

- DH Tanker

- FSU/FPSO

- Bulk Carrier

• Recycling

• Continued Trading

Continued Trading

• Subject to (i) Flag state and (ii) Coastal state acceptability after 2010

• But now uncertainty over- Korea- Japan- China- India- Others

Load lines South Africa

16 Apr – 15 Oct = WINTER16 Oct – 15 Apr = SUMMER

20 NM

Load Line Chart Zone

Blue Sky Thinking

• Business Environment• Industry Developments• Regulatory and Governance Environment• Environmental and Social Pressures• Human Element (Personnel) & Operational

Challenges• Other

Blue Sky Thinking

Business Environment• Cyclical business• Rising costs• Tanker accident• ……………………….

Blue Sky Thinking

Industry Developments• Consolidation• New business opportunities• ……………

Blue Sky Thinking

Regulatory and Governance Environment• Weaker/stronger IMO• More/less regional

pressures/legislation• Role of flag states• Role of class• Higher standards set by… ?• Challenges to Limitation of Liability • …………….

INTERNATIONALCONVENTIONS

WHO GOVERNS SHIPPING ?

COMMUNITY INTERESTS- LOCAL LAWS / REGULATIONS

REGIONALREGULATIONS

INTERNATIONAL SHIPPING

INTERNATIONALCONVENTIONS

MARPOL Annex VI

Who governs Shipping ?- Environmental pressures

COMMUNITY INTERESTS

-LOCAL LAWS / REGULATIONS

California,West Coast/Canadian

Ports,Rotterdam, Antwerp,

Helsinborg,Other

REGIONALREGULATIONSEU / USA (EPA)

INTERNATIONAL SHIPPING

Blue Sky Thinking

Environmental and Social Pressures• Climate change / global warming and air

pollution pressures on shipping industries• Development of (zero emission) eco-ships• Tankers singled out – not cold ironing, large

ballast water transporters, difficult recycling • “Green legislation” grows – higher entry

barriers, knowledge and experience more valued

• Corporate Social Responsibility practices and programmes are the “norm”

• ……………..

Blue Sky Thinking

Human Element (Personnel) & Operational Challenges• Availability and quality of officer pool will get worse

before it gets better• Solutions will be

- through regulatory changes and/or market mechanisms- at both macro and micro level ?

• Sourcing will be even more from “new” Asian countries• Greater participation of women• Tanker industry could lose out to other sectors• Standards in some sectors will slide• More activity by management companies• ……………

Blue Sky Thinking

Other

?

Blue Sky Thinking

BLUE SKIES

or

STORM CLOUDS

?

Update on the revision of MARPOL ANNEX VI

& GHG reduction

Asian Regional Panel

6 March 2008

Singapore

IMO Annex VI Revision Process

• End 2007 Group of Experts Report published

• February - BLG finalised its contributions

• April - MEPC 57 to develop and approve the revision

• October - MEPC 58 to adopt the revision

• Enforcement (tacit agreement) – earliest February 2010

Outcome from IMO BLG 12

Hybrid Solutions starting to emerge

Green House Gas Reductions

IMO/Internationally• Not part of Annex VI• IMO 2000 study – continuing correspondence

group• Shipping not covered within Kyoto• Now all changing – IMO 2009 deadline?

EU - ?• 20% reduction by 2020 (Baseline 1990) ?• Shipping included ?

US ?

Green House Gas Reductions

Many issues• Fleet growth as economies and trade grows• Post Kyoto• IMO or other• External pressures – charterers, shippers,

society, politicians• Focus is already on Aviation• Existing ships / new ships• Indexing of units, fleets, industry• CO2 trade-offs ?• Emission trading scheme – Europe/international• ??

Outcome from BLG 12 SOx and PM emissions

• Three options

• Option 1 – Global Sulphur cap– 4.50% – 1.00% as from 1 January 201[2]– 0.50% as from 1 January 201[5]– Prior to 1 January 201[2] only:

• SECAs provision will apply with a S cap of 1.50%• Procedures for fuel change over should be

available and the timing recorded • Scrubbers/abatement technologies could be used

as a means of compliance

Outcome from BLG 12 SOx and PM emissions

• Option 2 – Global/Regional – Global S cap 4.50%– SECA S cap

• 1.50%• 0.10% as from 1 January 201[2]

– Scrubbers/abatement technologies allowed with the limits:

• 6.0 g SOx/kWh• 0.4 g SOx/kWh as from 1 January 201[2]• waste streams cannot be discharged in ports

unless documented it would not have an adverse impact on the local eco-systems (IMO issues guidelines with criteria for such an assessment)

Outcome from BLG 12 SOx and PM emissions

• Option 3 – Global/Regional with Micro-Emissions Control Areas– Global S cap

• 4.50%• 3.0% from 1 January 201[2]

– SECA S cap• 1.50%• 1.00% from 1 January 201[0]• 0.50% from 1 January 201[5]

– Scrubbers/abatement technologies allowed with the limits:• 6.0 g SOx/kWh• 4.0 g SOx/kWh as from 1 January 201[0]• 2.0 g SOx/kWh as from 1 January 201[5]• waste streams cannot be discharged in ports unless documented

it would not have an adverse impact on the local eco-systems (IMO issues guidelines with criteria for such an assessment)

Outcome from BLG 12 SOx and PM emissions

• Option 3 – Global/Regional with Micro-Emissions Control Areas

• Micro-Emission Control Areas– up to [24] nm off the coast; better definition yet to

be developed– conditions for declaring a Micro - ECA yet to be

developed– S cap 0.10% (no date given so far) – scrubbers/abatement technologies allowed with the

limit at 0.4 g SOx/kWh– waste streams cannot be discharged in ports unless

documented it would not have an adverse impact on the local eco-systems (IMO issues guidelines with criteria for such an assessment)

Opinions submitted to MEPC 57 SOx and PM emissions

• INTERTANKO supports Option 1• INTERTANKO also suggests that as from 1

January 201[5], Annex VI should also add limitiations to lower the PM emissions such as– carbon residue content in the fuel used by ships– ash content in the fuel used by ships

• OCIMF, ICS and BIMCO support Option 3• IPIECA supports Option 2 but with a S cap in

SECA set at 1.00%• Governments we believe support Option 1:

Norway, Germany, Sweden, Finland, Italy, Ireland, Greece, European Commission.

Possible outcome from MEPC 57? SOx and PM emissions

• Possible agreement on a hybrid solution

• It starts with Option 2

• It then translates into Option 1

• Other comments:– Greece indicated at BLG 12 they disagree

that scrubbers are identified as a specific alternative compliance

– Marshall Islands seem to share that opinion– Australia and Canada seem also to support

Option 1

Outcome from BLG 12 NOx emissions – Pre-2000 engines

• Measures on engines installed onboard ships constructed between 1 January 1990 and 31 December 1999

• The NOx emissions at Tier I level• Applicaton date

– at the first intermediate or renewal survey; or– [1 January 2010], which one occurs later

• Compliance through:– in engine modification (MEPC 57 has to

choose between two options); or– abatement technologies

Outcome from BLG 12 NOx emissions – Pre-2000 engines

• Option 1– applies to all (i.e. 1990 – 1999) engines– if compliance through in-engine

modifications not possible, a Port State could:

• require the ship to use distillate fuel; or• deny port entry

• Option 2– applies to larger (1990 – 1999) engines only

([displacement of and over [30/60/90] liters] or [power output of > 5000 kW])

– use of a certified ”upgrade kit”

Outcome from BLG 12 NOx emissions – Tier II (new engines)

• Tier II standards (emission reductions related to Tier I limits):– 15.5% reduction (engines with n<130 rpm)

(i.e. 14.36 g/kWh)– reductions between 15.5% and 21.8%

depending on the engine’s rpm (engines with 130 rpm < n < 2000 rpm)

– 21.8% reduction (engines n > 2000 rpm) (i.e. 7.66 g/kWh)

• Applies to engines installed on ships constructed on and after 1 January 2011

Outcome from BLG 12 NOx emissions-Tier III (new engines)

• Tier III standards – 80% emission reductions from Tier I limits

• Tier III limits apply ONLY to engines installed on ships constructed on & after 1 January 2016

• (a Party to Annex VI can apply the above limits to new engines of 130 kW and above)

• Tier III limits in ECAs only• Outside ECAs - Tier II limits • Emission levels for Tier III are as follows:

– 3.40 g/kWh (engines with n<130 rpm)– 9*n(-0.2) g/kWh (engines with 130 rpm < n < 2000

rpm)– 1.96 g/kWh (engines n > 2000 rpm

Outcome from BLG 12Fuel Oil Quality

• Small but important changes and pending discusions

• The fuels required to be ”fit for purpose”• MEPC 57 to clarify the meaning of ”fit for

purpose” from a quality point of view• IMO to invite ISO to revise marine fuels

specifications in ISO 8217• Define fuel specification for a Global solution• Possible inclusion of limitations of other

parameters to reduce PM emissions• BLG developed a standard procedure to

interpret the actual test results of the sulphur content of the MARPOL sample

CONCLUSIONS

• Possible hybrid solution for SOx and PM emissions– starting with Option 2 (with a higher S cap in

SECAs, say 1.00% from say 201[2])– followed by Option 1

CONCLUSIONS

• NOx limits for existing engines - not an easy task• Use of MDO would give an easy NOx reduction by 10%

to 15%. BUT without a global use of MDO, the penalty on old ships would be too high

• NOx Tier II - possible and rests with manufacturers• NOx Tier III implies use of SCRs/abatement

technologies• Prudent that new ships consider compliance with Tier

III and install SCRs/abatement technology prior to 2016• Still to be assessed

– SCRs - the only technology to give an 80% reduction; . . . BUT– existing SCR technology not efficient at low engine loads– can compliance be achieved in ECAs irrespective the engine

load (close to port, through estuaries and straits ships slow down)?

Move to Double Hulls

• More than USD 500 billion invested since 2000 with the result that ~95% of tanker fleet double hulled in 2010

622

5159

67 68 73 78 84 91 9694

78

4941

33 32 27 22 16 9 4

0

20

40

60

80

100

1991

1997

End

02

End

03

End

04

End

05

End

06

End

07

End

08

End

09

End

10

SH/DB/DS

DH

% dwt share:

Assumed all SH tankers phased out by 2010

Average age tankers above 10,000 dwt(1970-2007)

Years

6

8

10

12

14

16

197019731976 197919821985 1988199119941997 200020032006

Tanker incidents 2007 by type and accidental pollution

1000 ts oil pollutionNo. incidents

0

200

400

600

800

1000

78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07

0

100

200

300

400

500

600

700

War

Hull & Machinery

Fire/Expl

Grounded

Coll/Contact

Misc.

Pollution - bars

Source: INTERTANKO/LMIU/ITOPF/various

Accidental oil pollution into the sea

Source: ITOPF/Fearnleys

10001000ts spiltts spilt

bn bn tonne-mtonne-m

0.0

0.7

1.4

2.1

2.8

3.5

1970s 1980s 1990s PR00s

0

26

52

78

104

130

1000 ts spilt

'0000 bntonne-miles

- 63% -6% -78%

-45% -33% -82%-45% -33% -82%Reduction per tonne milesReduction per tonne miles

Reported tanker incidents

Number

0

200

400

600

800

1000

78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07

0

84

168

252

336

420

00 01 02 03 04 05 06 07

War

H & M

F & E

Grounding

Collis.

M isc

Source: INTERTANKO/LMIU/various

Tanker incidents 2007 by type

Source: INTERTANKO/LMIU/various

1%

27%

13%

29%

9%

20%

Collision/contact

Grounding

Fire/Explosion

Hull & machinery

Misc/unknown

Hostilties

Collision Grounding

Hull & Machinery 95 of which 56 engine related

Misc.

Fire & Expl.

Reported tanker 325

incidents 2007

Tanker incidents 2007 by size

24%

17%

15%

44%

>10,000

10-29,999

30-99,999

<100,000 dwt

325 incidents

Tanker incidents 2007 by age

Built 1970s -

Built 1980s

Built 1990s

Built 2000s

Incidents/no tankers:

0.000 0.200

Built1970s

Built1980s

Built1990s

Built2000s

325 incidents

13%

21%

33%

33%

Incidents 2007 by type tanker

Number

0 10 20 30 40 50 60 70 80 90

Other

OBO

Non specific

Gas

Chemical

Crude oil

Chem/oil

Product

Source: INTERTANKO/LMIU/various

Tanker engine related incidents

No

Source: INTERTANKO/LMIU/various

0 10 20 30 40 50 60

2002

2003

2004

2005

2006

2007

Below 10,000

10-29,999 dwt

30-99,999 dwt

Above 100,000 dwt

2007 incidents by

% of fleet per 000 dwt category:

0.0% 0.2% 0.4% 0.6%

<10

10-30

30 -100

>100

Tanker incidents: engine related

No

Source: INTERTANKO/LMIU/various

0 10 20 30 40 50 60

2002

2003

2004

2005

2006

2007

1970s1980s1990s2000s

NK

Built:

0.0% 0.2% 0.4% 0.6%

1970s

1980s

1990s

2000s

2007 incidents by

% of fleet per decade of build:

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