Technical Ship Operations:

A Primer

Presented at
Webb Institute of Naval Architecture
Glen Cove, New York

24 October 2004

Presented by
Peter K. Wallace, 93

Outline
Make a few introductory comments.
Review ship types and fleet sizes.
Discuss ships and their operations.
Describe technical operations.
Make a few closing comments.

Shipping has some Impressive

Statistics
Functions in a global environment very smoothly.
90-95% Operational of total life for typical, well
managed ships. The 5-10% of downtime is for
planned maintenance.
Ships handle abusive conditions very well.
Imagine a building the size of the Empire State Building
moving at 20 miles per hour and enduring regular motions of
35 amplitude combined with impact loads

Focus
For this presentation we will focus on tankers as the
case example:

Largest sector of shipping.

Most mature sector.
Most available information.
Generally leads the industry in terms of best practice and
regulatory requirements.
Dry bulk, which is similar in operation, is second largest
sector
For those entering shipping, other than military, will likely be
working with tankers and dry bulk.

Outline
Make a few introductory comments.

Review ship types and fleet sizes.

Discuss ships and their operations.
Describe technical operations.
Make a few closing comments.

Types of Ships

Tankers: Range in size from 2,000 DWT or so to over 500,000 DWT

Crude, clean and dirty petroleum products, chemicals, food products, LNG, LPG, water

Dry Bulk: Range in size from 5,000 DWT or so to 300,000 DWT

Major Bulks: Grain, Iron Ore, Coal

Minor Bulks: Other Agriculture, Cement, Fish Meal, Forest Products, Fertilizers, steel products

Container Ships: Range in size from about 100 TEU to 12,000 TEU

RORO and RO/PAX: Intermodal, passengers, ferries

Passenger and Cruise Ships: Small sector, high profile.

Break bulk: Small ships, common in small ports.

Inland trading ships and barges: Growing sector

Specialized Ships: Include anchor handlers, icebreakers, nuclear, drill ships, heavy lift ships.

Types of Ships

Various Ships--Tankers

Aframax

ULCC

LNG

VLCC

Representative Fleet Sizes

1,000
900
800
700
600
No. of Ships

500
400
300
200
100
0

COSCO

Maersk

NYK

US Nav y

Sources: Company Information, US Navy League, Yahoo Finance

Teekay

OSG

GMC

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World Fleet Breakdown by Number

of Ships

3,165 1,732
5,679

18,150

6,139
11,356

Source: Shipping Facts

General Cargo
Tanker
Dry Bulk
Passenger
Container
Other

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Tanker Fleet Breakdown

by Number of Vessels

Handysize
33%

Panamax
13%

Approximate Total:

Source: Poten & Partners

VL/ULCC
18%
Suezmax
11%

Aframax
25%

2,500 ships in international trade

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Ports--Offshore Buoy

13

Outline
Make a few introductory comments.
Review ship types and fleet sizes.

Discuss ships and their operations.

Describe technical operations.
Make a few closing comments.

14

Major Parties
SHIPOWNER

Owner
CHARTERER
Commercial Manager
Technical Manager
Charterer
CARGO
OWNER
Insurance (Hull and P&I)
Flag States
PORT

Port States
AUTHORITIES
&
TERMINALS
IMO
Class Societies
FLAG STATES
Financial Institutions
Media

CLASS
SOCIETIES

SHIPYARDS

INSURERS

PILOTS

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Tanker industry: Responsibility

Chain
SHIPOWNER
CHARTERER

CLASS
SOCIETIES

SHIPYARDS
CARGO OWNER

PORT
AUTHORITIES &
TERMINALS

INSURERS

FLAG STATES

PILOTS

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Commercial Chain
Cargo Owner
Charterer
Commercial Manager
Technical Manager
Specialty Manager

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Governing Bodies
International Maritime Organization (IMO): UN organization.
Classification Societies (IACS, Class): ABS, LR, DNV and others
Port State: Regulations pertaining to port and country ship is
calling.
Flag State: Regulations pertaining to domicile of the vessel--that is
the country the ship is flagged under.
NGOs: OCIMF, Intertanko, Intercargo, BIMCO and others.
These organizations form the rules, practices and enforce the same.

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Major Operating Codes

ISM/ISO: Operating Documentation and Compliance
STCW: Crew Qualifications
MARPOL: Pollution Prevention
SOLAS: Safety and Life Saving
ISPS: Ship and Port Security
There are many others as well.

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Characteristics of Shipping-Spill/Emergency Response

Spill/Emergency Response is a result of OPA 90 and
other incidents.
Basic Elements include:

Engineering
Salvage
Media Response
Cleanup
Commercial and Liability Response
Some areas require escort tugs in sensitive areas

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Characteristics of Shipping--Media
Companies becoming more media savvy than ever
before.
Media is being courted for commercial, operating,
legal and public relations reasons.

Shipping is no longer the closed club that is beyond the

site of the public.
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Characteristics of Shipping-Classification
Purpose: Independent verification of vessel construction and
operation
Organizations: Class Societies
Basic Services: Plan Review, Surveys
Enhanced Services: ISM/ISO, CAP/CAS
Additional Services: Planned Maintenance, Spill Response,
Additional Analyses

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Characteristics of Shipping-Financial Markets

Growing number of publicly traded companies.
Mergers and acquisitions have been strong for the
past few decades.
Forcing more accountability and transparency.
Shipping is entering age of being an open and accessible industry.
Shippings operating practices reflect this maturing into modern
market dynamics.

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Characteristics of Shipping-Insurance
Protection and Indemnity (P&I)club arrangement
(self insurance)
Hull and Machinerymore traditional, but somewhat
self insured
Cargotraditional insurance.
COFR and other large lines: Disaster insurance.
Large coverage on small asset base.
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Characteristics of Shipping--Flags
Flags of Convenience (non-ITF)
Open Registry (ITFno other restrictions)
National Flag(tight citizenship/build/trade restrictions)
Paris MOU List shows relative ranking of flag states (US no. 17
behind PRC, Bermuda and Liberia from 2004 list)

Flag State is important for corporate, crewing and trading reasons.

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Outline
Make a few introductory comments.
Review ship types and fleet sizes.
Discuss ships and their operations.

Describe technical operations.

Make a few closing comments.

29

Owners, Operators and Managers

Shipowners
Operators
Commercial Managers
Technical Managers
Specialty Managers--Crew Managers
All varieties of operating models are common. Many firms use a
variety of models on a case-by-case basis.

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Commercial Chain
Cargo Owner
Charterer
Commercial Manager

Focus on the Technical Management

Technical Manager
Specialty Manager

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Short, Medium and Long Term

Activities
Short Term--Daily Concerns
Daily operations to keep the ship moving.

Medium Term--Occurring in a frame of 3-12 months

Planning, development and closing of various projects, programs or
efforts that happen periodically or specific events.
Predominantly foreseeable, but somewhat larger in scope or size
than daily operations can realistically handle.

Long Term--Anything beyond 12 months

Business development, long term strategic and tactical efforts.

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Typical Short Term Activities

Arranging crew changes

Arranging crew training
Approving purchase requisitions and placing purchase orders
Coordinating with charterer the details of port calls and voyage
characteristics
Coordinating with service technicians, agents or others that are
visiting the vessel
Coordinating with suppliers and agents for materials

Occurring within the time frame of the next port call or is

otherwise an immediate action item.

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Typical Medium Term Activities

Preparing for drydockings, Special Survey

Other Maintenance and Repair planning
Establishing or reconfirming purchasing frame contracts
Establishing or reconfirming service contracts
Arranging charter cover for vessels coming off long term charter
Planning for phase in of new regulations and charterer
requirements
Execution of acquiring and disposing of vessels

Occurring in a frame of 3-12 months

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Typical Long Term Activities

Market shifts
Crewing contracts
Influence legislation
Influence operating practice
Business Development
Researching and gauging market shifts
Typically strategic and certain tactical activities, including business
development, liaison activities, corporate planning and arranging long term
contracts.

And almost anything else beyond a 12 month window.

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Ports--F(P)SO/FSU

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Role of Technical Manager

Technical Manager has concerns of all technical and
operational aspects of ship management.

Maintenance and Repair

Crewing
Procurement
Operations
ISM/ISO/Environment and Reporting
Insurance
Engineering
Accounting

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Technical Operations

Outside Parties
Owner
Commercial Manager
Charterer

Ship Manager
Executive

Strategic, Tactical and

Operational Communications

Port Agents
Suppliers/Service
Providers
Financial Institutions

Maintenance and
Repair

Shipyards

Operations

Class/Regulatory

Crewing

NGO/Trade
Organizations

Procurement

Insurance

ISM/ISO/Reporting

Ships

Media Response

Engineering

Operations

Sea Staff (shore side)

Accounting

Maintenance and Repair

Class/Regulatory
Crewing
Procurement
ISM/ISO/Reporting

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Technical Ship Management-Responsibility Lines

Maintenance and Repair

Ensure all maintenance and repair requirements are carried out

Records
Planning for hull and machinery
Coordination with crew, suppliers, technicians, engineering, Class,
Flag State and others

Crewing

Arrange crew changes and scheduling

Arrange crew training
Arrange crew documentation
Manage crew payroll with accounting and crewing agents

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Technical Ship Management-Responsibility Lines

Procurement

Ensure requisitions are complete and accurate

Coordinates with M&R and others
Orders materials
Arranges material deliveries to meet the ship
Coordinates with ship and accounting for payments

Operations
Coordinates with post fixture team (charterer/commercial) for ship routing,
including bunker calls.
Coordinates with all departments that have business with ship during voyage
and in port.
Coordinates customs, port state agents, vetting inspections and others.
Arranges and coordinates ship agents.
Main point of contact for all outside parties relating to daily operation of the ship.

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Technical Ship Management-Responsibility Lines

ISM/ISO/Environment and Reporting

Relatively new department (<10 years)
Coordinates and manages all ISM and ISO documentation, training, audits
and reporting.
Coordinates and manages all elements related to environmental and quality
records that may or may not be addressed within ISM/ISO.
Coordinates with the myriad of reports required for owners, charterers, vetting
organizations and others.

Insurance
Technical ship managers very often only handle Hull and miscellaneous
insurance such as crew or professional liability.
Technical ship managers coordinate with Owners and others on P&I claims,
cargo insurance, COFRs and other lines directly worked with Owner or
Commercial Manager.

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Technical Ship Management-Responsibility Lines

Engineering

Very often the Special Projects group.

Supports all groups, particularly M&R and Executives.
Typically leads new build programs.
Typically leads on major refurbishment or conversion efforts.
Very often involved in business processes and business development.

Accounting

Typically one of the larger departments.

Coordinates flow of monies through the appropriate ships and accounts.
Coordinates cash management.
Handles crew payroll, material and service invoices, and other fees.

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Outline
Make a few introductory comments.
Review ship types and fleet sizes.
Discuss ships and their operations.
Describe technical operations.

Make a few closing comments.

44

Trends in Design and Operation

Move towards larger containerships. Parcel carriers such as DHL, FedEx and UPS moving
into 3PL shipping.

Move towards smaller tankers and more product over crude carriers. Partially influenced by
more upstream processing and smaller fields.

Short sea and inland shipping is expected to grow worldwide.

Rapid fleet build of LNG.

More automation--impending crew shortages, particularly of officers

More planned maintenance and monitoring systems.

Movement towards heavier scantlings, IACS Joint Projects underway.

Growing world trade is good for shipping.

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Comment on Design

Both were snubbed by the

general community:
Icebreaking tankers are
currently in vogue.
Return of nuclear in the next
decade?

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Trends in Regulation
Environment--Genesis with Amoco Cadiz and Torrey Canyon
Safety and Quality--Highlighted with Titanic
Accountability--Highlighted with Exxon Valdez
Security is much smaller than overall trends above and has
largely been incorporated within operating practice. Still in
implementation and refinement stages.

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Trends in Regulation-Environmental Regulations

MARPOL 73/78 to Segregated Ballast tankes

MARPOL/OPA 90 to Double Hull
Clean Air Emissions
Antifouling Coatings
Ballast Water Treatment/Exchange
Enforced by Port States, Flag States very aggressively

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Trends in Regulation--Quality and

Safety
Increasing use of and expansion of:
Vetting: Charterer inspection and approval of vessels.
CAP: Condition Assessment Program is based on actual
condition of vessel and compares to as-built for structural
and machinery items.
Transparency: Corporate commercial and operational
responsibility lines clearly defined and documented.

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Trends in Regulation--Accountability
ISM and ISO. Sarbanes-Oxley for publicly traded firms.
COFRs and other large lines of policy coverage.
Aggressive enforcement by Port States and Flag States. Many
previous infractions are now criminal where before they were
considered minor.
Classification Surveys are increasingly more stringent,
particularly from third special onwards.

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Strengths of Shipping
Multinational
Mature
Physical
World market with real currency/trading
When goods dont cross borders, armies do.
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Weaknesses of Shipping

Perceived to be a Black Art

Low Returns (volatile and cyclical industry)

High Risk

Large Liability

The problem is that shipping is like the larger world in which it operates
an inherently disorderly affair, existing mostly beyond the reach of
nations and their laws, beyond the dikes and coastal horizons, and out
across the open seas. It is not exactly a criminal industry, but it is an
amoral and stubbornly anarchic one. And it admits as much about
itself--William Langewiesche

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Recommended Reading
The Prize, Daniel Yergin and Joseph Stanislaw
Commanding Heights, Daniel Yergin
Maritime Economics, Martin Stopford
The Invisible Billionaire, Jerry Shields
The Shipbreakers (Atlantic Monthly, August 2000),
William Langewiesche
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The End

Questions?

Peter K. Wallace
e-mail: peter.wallace@knickerbocker-maritime.com
presentation available on www.knickerbocker-maritime.com

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