Vetting Feasibility Study

March 2010 Bob Frankland 1

Vetting Feasibility Study – Two Tier Fleets

• The Study was limited to the Gulf of Guinea but is applicable to other regions of ARA influence.

• Two separate fleets of product tankers, operate in the Gulf of Guinea.

• An international fleet which is:

Young

Well covered by vetting inspections

Suitable for worldwide trading

Often used for product import

Predominantly owned/operated by international companies

• A Coastal Fleet which is:

Old

Mainly un-inspected

Restricted to the Gulf of Guinea area

About 50% owned/operated by or flagged with indigenous Gulf of Guinea countries

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Comparative age profiles

Coastal Fleet Inspections

Vetting Feasibility Study – Why?

• Gulf of Guinea tanker standards will deteriorate as Oil Major vetting influence declines.

• Options for ARA members are:

DO NOTHING !!

DO SOMETHING !!

• Consequences of “DOING NOTHING” are increased risk of:

Environmental incidents

Serious public, contractor and employee safety incidents

Deterioration in international and national reputation

Liability and negligence prosecutions

Damage to assets

Decreased operational efficiency

Commercial disadvantage (quality double standards)

The region becoming a “safe haven” for sub-standard tankers.

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“Voge Trust” Mombassa

“Golden Lucy” Port Harcourt

“Elli” Suez

Vetting Feasibility Study – Challenges

• “Doing Something” has challenges!

• Obstacles

No industry accredited vetting inspectors resident in the Gulf of Guinea

Poor level of coastal fleet vetting inspection data

Low level of industry vetting awareness among coastal vessel operators

• Concerns

Disruption to product and crude supply

Costs ?

Reluctance of ship owners to participate

Current level of coastal tanker standards

Corruption

How to encourage accredited inspectors to the region?

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Vetting Feasibility Study - Recommendations

• Contract a recognised Third Party Vetting Service (TPVS) to provide and manage a complete vetting package including regionally based accredited inspectors, internet vetting system and administration services.

Four TPVS companies are keen to tender:

RightShip - Large Australian based ship vetting company with worldwide offices and inspection agreement with PacMarine)

Atlantic Technical Management –Small US based ship vetting and inspection company.

Duke Austin – Medium sized UK based ship vetting and inspection company.

SGS NL Ship Vetting – Dutch based ship vetting group within the large international SGS network.

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Duke Austin & Co.

Vetting Feasibility Study - Recommendations

• ARA to join the Oil Companies International Marine Forum (OCIMF) and the Chemical Distribution Institute (CDI)

• Use a “Phased” approach to vetting implementation in order to:

Establish a regional inspector base

Populate inspection data on coastal tankers

Promote vetting awareness

Allow for gradual improvement of coastal tanker standards

Avoid trade disruption to ARA members

December 2009 Bob Frankland 6

Vetting Feasibility Study – Cost Recovery

• Implementation and operation of a vetting system isn’t cheap! The main cost areas are:

Ship inspections – inspector fees and travel expenses

Third Party Vetting Services (TPVS) -normally a flat fee per vessel assessment (“screening or vetting”)

Inspection report withdrawal fees

OCIMF/CDI Membership fees

• In common with industry practice the ARA can opt to recover inspection and associated administration costs from the ship owner.

• Remaining costs can be recovered from ARA members paying a flat fee per vetting request.

• Approximate cost split between ARA members and ship owners is a defendable 50/50.

March 2010 Bob Frankland 7

Vetting Feasibility Study – Inspections and Vetting

• Inspections A ship inspection is an onboard technical evaluation

of a vessel and its operational management.

Ship inspections can only be conducted by OCIMF or CDI accredited inspectors using defined questionnaire formats.

Vessels are normally inspected every 12 months or every 6 months if over 20 years old.

A typical ship inspection will take about 8 hours and should be conducted onboard while the vessel is either loading or discharging.

• Vetting (Screening) A vetting (or screening) is the process whereby

vetting experts conduct a risk evaluation on the basis of all the data on the vessel and its management.

Inspection data is critical but the vetting should also take into account the client’s risk exposure and analysis of vessel operator performance, incidents, casualties, class reports, terminal feedback and Port State data.

Vetting (and hence the term “screening”) is normally processed with the aid of proprietary computer database software.

Normal vetting output will be recommended “Approved” or “Not Approved”

A vetting (or screening) can be conducted for each voyage, terminal call or for a period of time if the vessel is in continuous service.

December 2009 Bob Frankland 8

Vetting Feasibility Study – Opportunities

• ARA Opportunities

This African initiative to address an African problem will be supported and encouraged by the international marine industry.

Chance to “Do Something” that will make a real and substantive difference to the quality of Gulf of Guinea tankers.

Promotion of wider ARA membership through the opportunity for allmembers to participate in a recognised vetting system.

Recognition of the ARA as an active African association with ability to influence leading international oil company forums such OCIMF.

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Vetting Feasibility Study – Recommended Next Steps

• Establish an ARA Vetting Project

Steering Committee

• Develop and launch a TPVS tender package

• Join OCIMF and CDI

• Develop phased vetting implementation timelines and vessel operator strategies

• Implement phased approach and populate OCIMF/CDI inspection database with coastal vessels

• Commence ARA Vetting Service

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March 2010 Bob Frankland

Vetting Feasibility Study Back-Up Slides

Vetting Feasibility Study – Costs

• Vetting doesn’t come cheap, the main cost components are:

Membership Fees for OCIMF and CDI

OCIMF $30,000 a year

CDI $1,000 a year

Inspection Costs for an estimated 200 Coastal Tanker inspections each year

$600 per day for inspectors (3 days per inspection)

Inspector travel expenses

Report Fees charged by OCIMF and CDI for access to inspection reports

OCIMF charges £50 per report

CDI charges $100 per report

Vetting Service Fees estimated at $350 per vetting request to TPVS

ARA members can request a vetting for each voyage/port call or can elect to request periodic approval for vessels in regular use (e.g. once a month)

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0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

Estimated Annual Costs in US$

Note that inspection costs are approximately

50% of the total cost.

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ARA Decisions on Completion of the Study

Establish an ARA Vetting WG to review report

Proceed with vetting

initiative?

END

Review Tenders and Select TPVS

Provider

ARA Membership of OCIMF and CDI

Develop System Phased Implementation

timelines and Vessel Operator

Communication strategies

No

Yes

START

Develop TPVS Bid package

Implement Phased Approach and populate OCIMF/CDI Inspection

Databases

Commence ARA Vetting Service

Vetting Feasibility Study – Backup Graphs

March 2010 Bob Frankland 14