the maritime executive sep oct 2012
DESCRIPTION
Magazine for Executives or people interested in the Maritime industryTRANSCRIPT
September/October 2012TH
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EYE ON NOVEMBER
THE CHANGING WORLD OF SALVAGE
SHIPBREAKING REFORMS - TOO LITTLE, TOO LATE?
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Salvage
HABIB
BUSCH
Managing Director, TITAN Salvage
Senior Vice President & General Manager, Technical Services,
Crowley Maritime
Capt. Rich
ToddTITAN
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V. 16, E. 5 :: SEPTEMBER/OCTOBER 2012
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FROM THE BRIDGE
10 BY THE NUMBERS MarEx's social media presence continues to grow.
12 SNAPSHOT Top salvage projects from around the world.
14 PROJECTFlexible PSV design.
16 EXECUTIVE ACHIEVEMENTJohannesNeteland, President & CEO, TTS Group ASA BY NICHOLE WILLIAMSON
18 WASHINGTON INSIDERAll Eyes on the November Elections BY LARRY KIERN
22 EYE ON ENERGY The South China Sea: Awash in Controversy BY MICHAEL ECONOMIDES AND TIM DAISS
26 UPGRADES & DOWNGRADESNorth to Alaska! BY JACK O’CONNELL
44 THE CHANGING WORLD OF SALVAGEBY KATHY A. SMITH
52 HEAVY LIFT MAKES A COMEBACK BY ART GARCIA
58 THE POLITICS OF DREDGINGBY JACK O’CONNELL
64 SHIPBREAKING AT A CROSSROADS BY WENDY LAURSEN
72 DECK MACHINERY / CARGO-HANDLING DIRECTORY
Richard Habib Managing Director, TITAN Salvage
Todd Busch Senior Vice President & General Manager, Technical Services, Crowley MaritimeThe leaders of TITAN Salvage discuss the Costa Concordia and the challenge of running a global salvor. BY TONY MUNOZ
40
30TITAN Salvage Going where few others dare. BY TONY MUNOZ
Case Study:
Executive Interview:
FROM THE PUBLISHER
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ABC Membership Applied For.
The Maritime Executive (ISSN 1096-2751) is published bi-monthly by The Maritime Executive, LLC, 3200 S. Andrews Avenue, Suite 100, Fort Lauderdale, FL, USA 33316, Tel. +1 954 848 9955. SUBSCRIPTIONS: US subscription rates are $30, per year. Non-US subscription rates are $45, per year. For single copies of the magazine or reprints of articles appearing in this magazine, contact The Maritime Executive at (866) 884-9034. COPYRIGHT: © Copyright 1996-2012 by The Maritime Executive. All rights reserved. The Maritime Executive is fully protected by copyright law, and nothing that appears in it may be reproduced, wholly or in part, without written permission. We cannot be responsible for the claims of manufacturers in any of the items. Editorial manuscripts and photos will be handled with care but no liability is assumed for them. POSTMASTER: Please send address changes to The Maritime Executive, 3200 S. Andrews Avenue, Suite 100, Fort Lauderdale, FL, USA 33316. Change of address notices should be sent promptly with old as well as new address and with ZIP code or postal zone. Allow 30 days for change of address.
TITAN SALVAGE WAS ASKED TO BE A PART OF THIS EDITIONlong before the Costa Concordia accident took place in the Mediter-ranean Sea. MarEx had worked with Todd Busch for the Interna-tional Salvage Union edition a few years back and had followed the A Turtle rig salvage led by Rich Habib. The rapid response by TITAN to the Haiti earthquake and Hurricane Katrina are now considered blueprints for responders around the world. MarEx is pleased to have caught up with Busch and Habib for this important edition. So enjoy.
Avid MarEx readers will also enjoy a new section in this edition called “From the Bridge.” It is our goal to offer a more contemporary look in reporting important information. We think you will approve.
It is hard to believe that the four-year presidential election cycle is already upon us, but columnist Larry Kiern provides “Washing-ton Insider” readers an analysis of what the impact on the maritime industry might be. Energy columnist Michael Economides brings his followers closer to the growing conflict in the South China Sea as China challenges regional claims for EEZ rights. Ongoing contributor Wendy Laursen pens one of the most insightful articles in years about shipbreaking in India, Pakistan, and Bangladesh and the potential impact of the Hong Kong Convention on worker safety and environmental protection. We certainly hope there will be speedy ratification of this important measure.
We asked Jack O’Connell to dig into the politics behind dredg-ing in the United States because there are billions of bucks in non-appropriated funds just sitting in the Harbor Maintenance Trust and Inland Waterways Trust funds. Meanwhile, the nation’s sea-ports and waterways are in dire need of assistance. Hey Congress, they are called trust funds for a reason! Do your job and release the monies for their intended use! In “Upgrades & Downgrades,” a pe-rennial favorite of MarEx readers, Jack takes us “North to Alaska.” If you’ve ever thought of going, you have to read this piece.
Kathy Smith and Art Garcia simply keep contributing at the highest level. Smith investigates some of the largest salvage jobs going on around the world. And Garcia reviews the business of heavy lift at ports around the nation. Assistant Editor Nichole Wil-liamson caught up with Johannes Neteland, CEO of TTS Group in Bergen, Norway. The company is growing fast and a leading global purveyor of cargo-handling equipment.
The MarEx Linked-In Group exceeded 30,000 verified and vet-ted members in September, making it one of the most influential social media groups in the industry. You can also join by simply visiting our website. We are also proud to announce readers can now download The Maritime Executive on their iPads and iPhones at the Apple Newsstand. So no matter where you are on the planet, our publication is always with you!
Tony Munoz can be contacted at [email protected] with comments, input and questions on this editorial or any other piece in this magazine. The Maritime Executive welcomes your participation in our editorial content.
The Masters of Salvage
Tony MunozPublisher / Editor-in-Chief
Mar Ex
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FROM THE BRIDGE / BY THE NUMBERS
1,200,000
49%
368
33
$300MILLION
Number of seafarers who will be protected by the Maritime Labour Convention (2006) when it comes into effect next year. In August Russia and the Philippines ratified the convention becoming part of the first 30 International Labour Organisation (ILO) members to do so, thus ensuring ratification. The convention protects seafarers' rights to safe working environments, fair wages and access to medical care and other benefits. Source: International Labour Organisation
Plunge in first-half 2012 Chinese ship orders. An excess of ships have pushed new vessel prices to an eight year low, forcing some of China’s smaller yards into bankruptcy.Source: Bloomberg
Containers that have not been recovered from the MV Rena ship wreck off New Zealand’s coast. Braemer Howells/Unimar and Svitzer have recovered 1,000 of the 1,368 containers that were on the container ship when it ran aground in October 2011. Thirty-two of the containers contained dangerous goods. SOURCE: Maritime New Zealand
Total number of pirate attacks on vessels so far in 2012. Five attacks have resulted in hijackings.Source: EUNAVFOR
Expected cost to salvage the Costa Concordia cruise ship that ran aground off Italy’s Isola del Giglio, putting it on course to be the most expensive salvage operation in history. SOURCE: Costa Crociere
Barack Obama (46%)
Mitt Romney (54%)
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By the NumbersPoll Question
38,441 The Maritime Executive’s total Social Media Presence and counting!Number reflects total number of LinkedIn Members, Facebook Likes and Twitter Followers at time of printing.
We asked the 30,000+ members of The Maritime Executive’s Linkedin group:Which U.S. Presidential candidate will have the most positive impact on the maritime industry?Here are the results:
Log onto The Maritime Executive's LinkedIn group to participate in the next poll!
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FROM THE BRIDGE / SNAPSHOT
Salvage Operations Underway
Wreck Location: Isola del Giglio, Italy Ship’s Tonnage: 114,147Salvors: Smit Salvage & Tito Neri (removal of bunker oil
& pollution control); TITAN Salvage & Micoperi (Tender for Removal)
Salvage Cost: $300 million + (est.)
Salvage Time: 15 Months (estimated)
1 Costa Concordia
Wreck Location: Astrolabe Reef, Tauranga Harbour, New Zealand
Ship’s Tonnage: 37,209Salvors: Svitzer Salvage (Pollution Control, Container &
Hatch Removal, Vessel Stabilization), Braemar Howells & Unimar (container removal & processing and debris removal), RESOLVE (Reducing the bow section to 1 meter below sea level)
Salvage Cost: $200 million + (est.)
Salvage Time: 13 Months (estimated)
2 MV RenaS alvors are known as the “cowboys”
of the maritime industry, taking on some of the most complex and
dangerous jobs in the world. Last year 212 salvage operations were performed, 17 of them wreck removals. This year the numbers look higher. Since this is our annual salvage edition, we thought we’d take a look at some of the more challenging projects.
For more information on these operations, please visit www.maritime-executive.com.
Re
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FROM THE BRIDGE / SNAPSHOT
1
Wreck Location: Nouadhibou Bay, Mauritania Ship’s Tonnage: 74 wrecks ranging from 200 – 1,200 tons eachSalvors: Mammoet Salvage Salvage Cost: $37.8 million
Salvage Time: 22 Months (estimated)
3 Mauretania Ship Graveyard
Wreck Location: Kankesanthurai Harbour, Sri Lanka Ship’s Tonnage: 10 wrecks up to 1,500 tonsSalvors: RESOLVE Salvage and Fire (Asia) Pte Ltd. Salvage Cost: $20 million
Salvage Time: 9 Months (completed)
4 KKS Wreck Removals
Wreck Location: St. Mary’s River, Neebish Island, Michigan Ship’s Tonnage: 36,360Salvors: The Great Lakes Towing Company Salvage Cost: N/ASalvage Time: < 1 day
5 Paul R. Tregurtha
FROM THE BRIDGE / PROJECT
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Flexible PSV Design for Petrobras
D etroit Brasil Shipyard, a subsidiary of Detroit Chile, recently delivered the Starnav Perseus, the first of four platform supply vessels constructed to require-
ments of the Petrobras PSV 4500 series. Designed by Guido Perla & Associates (GPA), the vessel’s hull can be modified to meet the Petrobras-approved PSV 3000 standards as well. All four vessels will utilize Electronic Power Design’s (EPD)modular engine operators station (EOS). EPD has supplied and installed over 150 modularized EOSs on offshore sup-port vessels worldwide.
MarEx caught up with major participants in the project to get their feedback on the new vessel:
C arlos Eduardo Pereira, Logistics Super-intendent, Detroit Brasil: “The Starnav Perseus is an innovation for the Brazilian
offshore market due to its cargo capacity and technology and is the first of four GPA PSVs to be built at the Detroit shipyard in Brazil. Detroit Brasil will deliver a total of 12 PSV 4500s under the brand name Starnav through 2016. With the deliv-ery of the first PSV for Starnav, Detroit Brasil Ltda a major builder brand for Tugs and LH's in Latin America, begins its expansion into the market for OSVs(PSV, AHTS, etc.) Shipbuilding.”
G uido Perla, CEO, GPA: “We developed a modern PSV for the Petrobras 4500 tender with a special hull shape and
deckhouse. The design can be transformed into the Petrobras 3000 series by removing part of the parallel midbody section and making modifica-tions in the tank farm area. This gives shipyards a high degree of flexibility in production by retaining a large portion of the hull for both models.”
J ohn Norwood, President EPD do Brasil: “As a key member of the Detroit/Starnav/GPA newbuild team, EPD designed an EOS
module specifically for the Starnav vessel hulls. The EOS, which is completely interconnected and tested before it leaves the factory, contains switch-boards and transformers as well as the thruster control panels, VMS remote I/O station, control desk and HMI screens. The module is simply lowered into the vessel hull and its power systems connected externally.”
The finished product ready for sea trials.
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EXECUTIVE ACHIEVEMENTS
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By Nichole Williamson
JohannesNetelandPresident & CEO, TTS Group ASA
Bergen, Norway- based TTS is a leading global provider of cargo-handling equipment for the marine and offshore indus-tries. Here is CEO Johannes Neteland on leadership, strate-
gic planning, and his company’s future role in the maritime industry.
In April of this year TTS sold its drilling equipment unit to Cameron International – a sale that pushed the stock price up 31 percent. What was the strategy behind this sale? There were two reasons. The first was the shift toward drilling units with more functionality. TTSneeded a partner in the industry to enable us to deliver complete drilling packages. The second reason was financial. Increasingly larger contracts presented us with financial limitations. Cameron and TTS were a perfect match. Partnering has created a leading player in the drilling industry.
The core business of TTS today is ship equipment. In fact, we recently acquired a new com-pany, Neuenfelder Maschinenfabrik GmbH (NMF), which supplies heavy-lift cranes and has 130 employees in Hamburg, Germany. The product range of NMF will complement and strengthen TTS’s market position in marine and offshore cranes.
Are there any plans for additional sell-offs or acquisitions? We do not have any plans to sell, but we continue looking for acquisition opportunities.
In 1999 the TTS Board of Directors adopted a new strategy: Become a leader in the marine cargo-handling market. How was this accomplished? We’ve been very suc-cessful following this strategy, and today we are among the major players in cargo-handling. Insome product segments we are number one; in others we are number two or three. Our success has come from harnessing our nearly 50 years of engineering experience and the expertise of businesses we’ve acquired. Beyond engineering the highest quality products, we continue to
build and maintain relationships by gaining our customers’ trust and consistently developing and delivering products at competitive prices.
Your organization has identified two issues that are key factors in being successful: Instilling confidence in your products and services and providing competitive pricing. Can you elabo-
rate? We try to become a problem-solver for our customers. We focus a lot on competence. Compe-tence is the main driver for confidence. We know that we have to be competitive to survive in this mature
market. Hence we have developed both our manufacturing capacity and sourcing capacity in China.
In 1998 when you joined TTS as President and CEO, the company had 135 employees. Today the company boasts more than 1,300 employees in 14 countries. What has it been like to see
this kind of growth first-hand? It has been very exciting. Sometimes tough, but never dull. I think I have a fantastic and exciting job. After the sale of the drilling equipment business, TTS is again in a position to build the group. In a tough market we expect consolidation opportunities to occur.
Following several years of recession, what direction do you see the shipping industry headed? Ibelieve we won’t see the market revive until 2014. We expect 2013 to be another weak year.
As President and CEO of TTS Group ASA, what do you feel is the most important attribute of a leader? Historically for TTS a clear vision and strategy have always been most important. This is how we have
been able to build the group from a relatively small Norwegian company to a major global player. We believe in a decentralized decision-making model. It works well as motivation for clever people.
Is there anyone who has inspired you in your professional career? Jens P. Heyerdahl, the former CEO of Orkla ASA, known for his strategic investments that helped grow the consumer goods company from a turnover of NOK 300 million a year to NOK 45 billion a year.
What are you most excited about? In the marine market we are looking for opportunities to broaden our prod-uct range and establish a stronger tie between TTS and shipowners. We’re also working to strengthen our position
in the services and after-sales market. Our goal is to expand our product range in a way that enables us to make larger deliveries to individual customers. I’m excited about the future and hope to be able to continue
to build the group to a billion-dollar company.
Nichole Williamson is Assistant Editor of The Maritime Executive.
Mar Ex
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As Washington policy makers flip their calendars forward to the fall months, all eyes are firmly fixed on the November elections. The elections will determine control of the White House and
Congress as they face an impending “fiscal cliff” of automatic tax hikes of approximately $450 billion and spending cuts of approximately $120 billion during 2013 alone, combined with the imperative of raising the national debt limit. The impact on the maritime industry of the policy decisions to be taken is potentially dramatic. While the headlines have highlighted the presidential contest between President Obama and Governor Romney, control of the nation’s most powerful branch, the Congress, will also be determined.
THE PRESIDENTIAL RACEPresidential polls continue to signal a close race. Polls leading up to the Demo-cratic Convention showed Obama and Romney locked in a statistical dead heat. While Obama had maintained a fairly steady lead for months, that lead was consistently only within the margin of error, i.e., four points. After the Republi-can Convention, polls indicated a small “bounce” that put Romney tied or ahead briefly by perhaps a point or two. So as we look back to the period between the end
of the Republican primaries and the con-vention in August, the data show a race hovering within the margin of error.
However, following the Democratic Convention in the first week of Septem-ber, new polls showed Obama opened a six-point lead nationally, exceeding the margin of error. Importantly, similar larger margins also opened in the key swing states of Florida, Ohio and Virginia. The margin is smaller among likely voters, but the data correlate to an electoral vote tally of 307-191 favoring Obama with the
remaining 40 electoral votes undecided. Notwithstanding these post-conven-
tion bounces, history teaches that this election is likely to go down to the wire. At this point in the 2004 campaign between President George W. Bush and Senator John Kerry, polls showed Bush with a similar six-point lead. Yet the election manifested a margin of only 1.6 percent, and a swing of 200,000 votes in key states of the 122.3 million total votes cast would have reversed the result. President Bush’s margin in key swing states like Ohio and Nevada measured only two percent.
October, which features the presi-dential and vice presidential debates, promises to be decisive as early voting will likely comprise 35 percent of ballots cast this year. In addition, a number of swing states, viz., Colorado, North Carolina, and Nevada, exhibit relatively higher early voting rates. Therefore the perceptions of the American electorate during the several weeks leading up to Election Day will likely be more important than before. Advantages in organization and enthusi-asm could take on outsized significance, and both parties are focused on getting their most reliable supporters to vote early
All Eyes on the
Larry Kiern Partner with Winston & Strawn, LLP, named the "Admiralty and Maritime Practice of the Year for 2011-2012," and recipient of the 2012 Burton Award for Distinguished Legal Writing.
WASHINGTON INSIDER
Connect with Larry on LinkedIn
November Elections
WASHINGTON INSIDERS
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or on Election Day. This year’s presidential contest is not
only being played out in the media, where we witness it every night, but also in the trenches with voting occurring now every day. The campaigns of both presidential candidates strongly indicate that this campaign will be a base-turnout election with each party firing-up its base and concentrating on the turnout of reliable voters rather than the small number of re-maining undecided voters. It appears the campaign with the stronger organization and greater enthusiasm will likely prevail on November 6.
THE CONGRESSIONAL ELECTIONThe diverse campaigns for the 435 seats in the House of Representatives and the 33 seats in the Senate present a more complicated picture that is less suscep-
tible to explanation by current national or swing-state trends. While Obama may have opened a lead greater than the margin of error, current polling still shows the Republican Party significantly ahead in House races and the parties locked in a virtual tie in the contest for control of the Senate. This is the case despite polling showing that the American electorate prefers Democrats over Republicans on the generic question of control of Con-gress. Even if such polls suggest a potential victory for Democrats, other factors, e.g., over-representation of sparsely populated states, gerrymandering, the diverse nature of the disparate candidates, and local aspects of campaigns and elections, mean that the congressional outcome will not necessarily reflect a sentiment exhibited in national polls.
In House races, while Republicans enjoy the advantage currently, the margin
is not so large as to prevent Democrats from closing the gap by Election Day. Today, House Republicans enjoy a 241-194 advantage or a 47-seat majority. Experts currently have identified 23 seats as toss-ups. Unless Obama maintains or increases his six-point lead, it seems unlikely the Democrats will capture enough seats to retake control. If these toss-up races split evenly, the Republicans would maintain control by a thin margin of about 230-205 in a chamber that requires a 218-vote ma-jority to function. Speaker John Boehner has struggled repeatedly to maintain discipline with a much larger majority. So if his margin shrinks further he will face an even greater challenge.
In the Senate, where Democrats effec-tively hold a six-seat majority, experts have identified seven races as too close to call at this point. Five are currently occupied by Democrats or a senator who caucuses with
Winners will face the “fiscal cliff” of automatic tax hikes and
spending cuts, among other challenges.
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them. Therefore, Democrats could retain formal control of the Senate by winning only three of the toss-up races provided Obama prevails in the presidential election. In that event, the Senate would be evenly divided, and Vice President Biden could cast the tie-breaking vote. However, if Republicans prevail in five of the seven toss-up races, then formal control will shift. Of course, formal control of the Senate is distinct from ef-fective control, which in most instances requires 60 votes.
These numbers illustrate the most important and enduring aspect of this year’s national election: The nation remains deeply divided politically, just as it has been for at least the past 20 years. In these circumstances, no matter which political party achieves control, it appears the margins will be so close as to restrain decisive initiatives in many respects by either side. This dynamic has been amply illustrated over the past two years, wherein the new conservative agenda of House Republicans has been frustrated by Senate Democrats and President Obama.
THE IMPLICATIONS OF NARROWLY DIVIDED POWERIn this scenario, based on long-term trends and historical lessons, the most likely outcome is that political power will remain tightly balanced. But this does not mean there will be no changes forthcoming.
The current data do not suggest a defining election where one party achieves control of the Presidency and Congress by a wide margin. Of course, that was also the case in mid-September 2008, when Senator John McCain led then-Senator Barack Obama in the polls and the election appeared too close to call. Within a matter of days after the collapse of Lehman Brothers on Sep-tember 15, 2008, the polls shifted and then-Senator Obama opened up a lead that eventually expanded to almost eight percent and resulted in a filibuster-proof margin in the Senate that permitted President Obama to enact into law major legislation that otherwise would not have been possible.
At this juncture it is difficult to envi-sion circumstances likely to produce a similar political earthquake. But that does not mean such events will not oc-
cur, and the only thing certain about the November 6 elections is that they will go a long way toward defining our immediate political future, for better or for worse.
It is possible to foresee how a close vic-tory by either political party could prove very important to achieving key parts of its agenda. For example, if Romney wins the presidency and Republicans main-tain control of the House, even without achieving formal control of the Senate, he would be well positioned to enact the most important plank of his economic plan: tax cuts. This is because such cuts could be enacted by a simple majority through the reconciliation process. More importantly, as presidents of both political parties have repeatedly demonstrated, the enactment into law of tax cuts is perhaps the surest legislative initiative to succeed. This would be particularly the case with the arrival of a new president in a period of high unemployment and weak economic growth, where he could claim a mandate to cut taxes.
On the other hand, if Obama won re-election and the Democrats retained formal control of the Senate while the Republicans continued their control of the House, then the status quo would be preserved. And in these circumstances the status quo provides key political advantages for Obama’s agenda. He will not require any legislative action to end the so-called Bush tax cuts, which will expire on their own. And since preserving them remains the most important politi-cal objective of the Republican Party, the political advantage would likely shift to Obama and his allies. Likewise with respect to “sequestration,” which is sched-uled to cut federal spending automati-cally next year, Obama may also enjoy a political advantage because the cuts will occur automatically, i.e., without further legislative action, and will be visited more heavily on Republican Party constituen-cies, viz., government contractors and the defense industry.
THE MARITIME CONNECTIONMajor changes affecting the maritime industry are likely to result following the elections. Taxes could be hiked or cut and government spending cuts triggered or postponed. These differing outcomes rein-force the importance of these elections for both the industry and the nation.
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Michael J. Economides & Tim DaissEconomides is Editor-in-Chief and Daiss is Asia Correspondent of the Energy Tribune.You can follow Tim on Twitter @tdaiss.
Follow Economides on Twitter
@MJEconomides
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The South China Sea doesn’t get a lot of respect – not until the last few de-
cades, anyway. Now the area that rests between China and its fledgling
Southeast Asian neighbors has become a geopolitical flash point. Tensions
in the area turned into a shooting war in the 1970s and may well do so again.
EYE ON ENERGY
Awash in ControversyThe South China Sea:
EYE ON ENERGY
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Contenders include the Philippines in one corner, a relative lightweight but backed by long-time ally and one-time colonial ruler, the United States, and China in the other. China has few real allies in the region but is a heavyweight with plenty of power to land a knockout punch. China claims most of the sea as well as the disputed Spratly and Paracel Islands.
And in yet another corner is upstart Vietnam, also a partial claimant that is forging new military ties with one-time foe, the U.S., and courting another South Asian heavyweight, India, whose navy has berthing rights in Vietnam. Russia is also inter-ested in naval bases in Vietnam. Other South China Sea claimants include Taiwan, Malaysia and Brunei. How all of this will play out is anybody’s guess.
Standoff at Scarborough Shoal Added to the fray is the recent standoff between China and the Philippines at Scarborough Shoal, which has just entered its fourth month with no resolution in sight. The shoal is rich in fishing resources, but the heart of the issue is control of the sea and its underlying oil and gas reserves. If either country backs down at Scarborough Shoal, it would set a precedent for the rest of the area.
Since April, Chinese and Filipino accusations and innuendos over the shoal have abounded. Ships have come and gone and re-turned again. Saber-rattling has intensified, and ambassadors and diplomats have met, disagreed, and disagreed some more. And on July 31, adding to the tension, the Philippines disclosed that it will offer more service contracts in areas with overlapping claims
in the South China Sea for oil and gas exploration. The sites off southwestern Palawan province in the Philippines, represented by service contracts 3, 4 and 5, are near the Malampaya and Sampa-guita natural gas discoveries. Sampaguita is located near the Reed Bank, an area claimed by China.
Oil reserve estimates for the South China Sea vary. One Chinese estimate places potential oil resources as high as 213 billion barrels of oil. A 1993/1994 U.S. Geological Survey (USGS) report estimated the sum total of discovered reserves and undiscovered resources in the offshore basins of the South China Sea at 28 billion bbl. Natural gas, according to the USGS, is more abundant in the area than oil. The USGS estimates that about 60-70 percent of the area's hydrocarbon resources are natural gas and has placed the sum total of discovered reserves and undiscovered resources in the offshore basins of the South China Sea at 266 trillion cubic feet (Tcf).
Overlapping Claims As Chinese and Philippine diplomats spar over the standoff, poli-ticians in Manila continue to press for an international solution, trying to force Beijing into accepting widely recognized Exclu-sive Economic Zone (EEZ) definitions. The Philippines claims Scarborough Shoal as part of its 200-nautical-mile EEZ, while China rejects that claim and counters that the area was mapped as Chinese territory as early as the 13th century.
Stein Tønnesson, Director of the East Asian Peace Program at Uppsala University in Sweden, shed light on the standoff. Speaking by telephone, Tønnesson said that Scarborough Shoal
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EYE ON ENERGY
does not qualify as an island with a right to a 200-nautical-mile (EEZ): “It is so small that it cannot sustain human habitation or an economic life of its own. These are the criteria that, according to the United Nations Convention on the Law of the Sea (UN-CLOS), must be met in order for a shoal or reef or other feature to constitute an island with a right to its own EEZ.”
Tønnesson stated that the Philippines should propose to China an agreement to the effect that the disputed Scarborough Shoal can have only a 12-nautical-mile-territorial sea around it and that this 12-mile limit should be subject to a permanent fishing ban enforced by both countries. In that way, he argued, future conflicts would be prevented, and it would open up the prospect of negotiations concerning the maritime boundary between the EEZs of the Philippines and China.
Carlyle Thayer, a Professor at the Australian Defence Force Academy, doesn’t think the answer is so simple. “I have been grappling with this question,” he said by email. “China is claim-ing sovereignty over the rocks at Scarborough Shoal even though it does not physically occupy them. On the basis of this, China claims a 12-nautical-mile territorial sea that rocks are entitled to under UNCLOS. Under this interpretation, China is then able to claim sovereign rights over the resources in the water column (the fish) and seabed. If we assume that the only thing the Philippines is claiming is its EEZ extending from its baseline around Luzon, then the area of overlap would be the only area in dispute. But the Philippines is claiming sovereignty over the shoal on the basis of continual administration and what I would call ‘intermittent oc-cupation’ over the years since independence,” he added.
According to Thayer, the Philippines once had a lighthouse on Scarborough Shoal. The Philippines' EEZ overlaps the rocks, and thus the Philippines claims sovereign rights over all the resources in the water column and seabed. He also said that possession is “nine-tenths of the law” in such cases and neither Vietnam nor the Philippines is going to relinquish islands and rocks that they currently occupy. “Sovereignty over territory – whether rocks or islands – is a matter for China and the Philippines to decide. There is no instant remedy to settle this matter,” he added. Ac-cording to UNCLOS, nations with conflicting claims should work out disagreements among themselves.
Thayer also commented on the military build-up in the region, stating that most of the countries involved are modernizing their armed forces and equipping them with a variety of sophisticated anti-ship missiles: “There is also something of a mini-arms race going on with the proliferation of conventional submarines in the fleets of southeast Asian navies as well as China. In sum, the South China Sea is contested; it will become increasingly congested, and it will only be a matter of time before there is an incident in which armed force is used,” he added.
The WikiLeaks Cable and Alleged “Little Tricks”China’s 13th century mapping claim, however, took a hit a few months ago. In April, news broke of a message sent to Washington by the U.S. Embassy in Beijing on September 9, 2008 and later un-covered by WikiLeaks. Cable 08BEIJING3499 stated that a Chinese Ministry of Foreign Affairs official and a local scholar could not identify specific historical records to justify China's claim that cov-ers the entire Spratly Islands and areas within other countries' EEZs.
Beijing, naturally, sees things differently. A July 26 editorial in the People’s Daily, an organ of the Central Committee of the
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EYE ON ENERGY
Communist Party, lambastes the Philippines for bidding out oil-and-gas exploration areas in “China’s territorial waters” and for sending warships to “harass Chinese fishermen in the Huangyan Island [Scarborough Shoal] waters.” It also condemns “joint military drills with the United States involving the exercise of retaking petroleum drilling platform[s]” and bemoans Philippine “threats to invite U.S. reconnaissance aircraft to patrol disputed areas in the South China Sea.” The editorial added that the Philip-pines was trying to take advantage of the South China Sea issue to “kidnap” the Association of Southeast Asian Nations (ASEAN). “The South China Sea would have been much more peaceful without the successive little tricks of the Philippines,” it added.
Speaking on condition of anonymity, a U.S. Navy commander who was part of a recent National War College delegation sent to China to dialogue with their counterparts at the PLA National Defense University said that the subject of the South China Sea was raised repeatedly during the talks. He said a Funan Univer-sity professor stated that the Chinese position on freedom of navi-gation in international waters would probably evolve to mirror the American position after China develops a blue-water navy like the U.S.’s. The officer also noted the interesting differences between what he called “the old guard” at the talks and “twenty-somethings who literally banged their heads on the table while a senior went on an extended tirade reiterating longstanding Chinese government positions.”
At the time of this writing the maritime standoff at Scar-borough Shoal continues to play out. But with hydrocarbons in the balance and national pride at stake – primarily deep-seated Chinese nationalism – this could turn into one of the defining energy-geopolitical stories of the decade.
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Your favorite columnist took a break this summer and, following the time-honored Wall Street adage of “Sell in May and go away,” did just that. Well, he didn’t sell in May (good thing, too, since the market has been up quite
nicely since then), but he did go away. And not for the whole summer, but just a couple of weeks. It was a bucket list item, after all, something my wife and I have always wanted to do. So we packed our bags and set off on a memorable land-and-sea adventure to the 49th state. We had high hopes. Everybody said how awesome Alaska was. Nobody said, “Gee, I wish I hadn’t gone there.”
Summer is the right time to go. The days are long – up to 20 hours of daylight. It’s “the land of the midnight sun,” after all. The weather is mild: It averaged 60˚ F during our trip with a high of 73˚ F in Anchorage. And amazingly, it didn’t rain once – almost unheard-of for a two-week sojourn in Alaska where, in Ket-chikan, for example, it rains roughly 250 days of the year.
Winters, of course, are different. There are 20 hours of dark-ness then with the sun (or light, rather) appearing around noon and fading by four. Couple that with temperatures averaging about 10o F, and you can see why summer is the time to go. Alas-kans literally hibernate in winter. The cruise season lasts from May to September, and they make all their money then, and that has to get them through the winter months. That and the Perma-nent Fund check, which arrives in October and last year totaled roughly $1,100 for every man, woman and child in the state.
It was the trip of a lifetime.
“THERE’S GOLD IN THEM THAR HILLS!”Gold, of course, is what first attracted people to Alaska. But it was not until Joe Juneau’s discovery in 1880 of large nuggets near the city that now bears his name that the first real Alaskan gold rush began. There were actually several gold rushes, the biggest of which came in the 1890s with the Klondike discovery, and
Seattle became the favored jumping-off point for fortune seekers. Those who could afford it travelled by steamer from Seattle to the mouth of the Yukon River on the Bering Sea and then down river to the gold fields in the Yukon Territory. Those who couldn’t travelled overland, a grueling 1,000-mile journey that could only be accomplished during certain months of the year and at great risk to life and limb.
The Arctic Club in Seattle, now a Hilton hotel, stands as a lasting monument to those who made their fortune panning for gold. It’s a beautiful structure, designed by A. Warren Gould and completed in 1916 with walrus-head sculptures adorning the terra cotta exterior and portraits of the original members inside. It is said that the mayor of Seattle, upon hearing of the discovery of gold in the Yukon (he was in San Francisco at the time), imme-diately resigned his position and took the next steamer north.
We panned for gold on a small creek outside Juneau, not far from Joe Juneau’s original find. “Diggin’ Dave” was our guide, and he acted and dressed the part. Gold is heavier than sand or gravel and, using a back-and-forth or side-to-side motion, it even-tually settles to the bottom of the pan. Diggin’ showed us how to do it. If you were patient, you could get a few flakes and secure them in a small vial using a pincers. I wasn’t patient. My wife was and was duly rewarded.
North to Alaska!
Jack O’ConnellSenior Editor of this magazine, former maritime executive, and private investor who may own shares in some of the companies mentioned in his columns. The views expressed are his and his alone and are not in any way to be construed as investment advice.
Connect with Jack on LinkedIn
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FACTS & FIGURESAnchorage is home to half the Alaskan population of 700,000. Another 100,000 or so live in Fairbanks. The remainder live largely on the Alaskan panhandle, a long stretch of land running from Seward in the north to Ketchikan in the south. Alaska is so big it has its own time zone – Alaska Time. One hour earlier than Pacific Time. Its 586,000 square miles are twice the size of Texas and about one-fifth the size of the continental U.S. Its westernmost point is farther west than Hawaii. Purchased in 1867 from Russia at a cost of $7.2 million (“Seward’s Folly”), it was the greatest real estate bargain in history, with the possible exception of Manhattan Island.
There are no roads in Alaska. Well, I take that back. There are about 1,000 miles of what we would call divided highway. You can drive from Seward on the Kenai Peninsula to Fairbanks in the far interior. You can also reach Fairbanks via the Alcan Highway from Canada. But that’s about it. There are roads in all the cities and towns, but most of them don’t connect with anything else. You can’t drive from Juneau to Ketchikan, say, or Seward to Skagway. As one wag said during our stay, “We don’t worry about the price of gasoline in Alaska. There’s nowhere to go.”
The favored mode of transportation is what the natives call “bush plane,” and one in five Alaskan adults is a bush pilot. If you need to go to Juneau to lobby on some critical issue, you arrive by “float plane,” pull up to the dock, and walk to your appointment. If you need to visit the oilfields in Prudhoe Bay or travel to Bar-row, you fly. There are more private planes in Alaska than any other state.
“THE GREAT ONE”We had flown from Seattle to Anchorage on Alaska Air. In Anchorage, a down-to-earth city with zero pretensions, we boarded the “McKinley Explorer,” a
domed train that took you the 237 miles north to Denali National Park. “Denali” is the Athabascan name for Mount McKinley, meaning “the great one.” It rises 20,320 feet above sea level, the highest peak in North America and one of the tallest in the world. In fact, it is the tallest when measured base to summit – approximately 18,000 feet. By compari-son, Mount Everest, the world’s tallest peak at 29,029 feet, rises “only” 12,000 feet from base to top.
Denali is so big it creates its own weather and is usually shrouded in clouds. But as our tour director on the train said, “See that cloud over there? That’s not a cloud. That’s Denali.” And so it was.
The park itself comprises over six million acres – that’s three times the size of Yellowstone. Everything is big in Alaska: the mountains, the rivers, the grizzlies, the salmon, gold, oil, the weather, you name it. Since we only had a day, we decided to see as much as we could by helicopter. There were five of us in an AS 350 plus the young pilot. We took off and headed south and the next thing you knew we were climbing up the sides of mountains and thundering over their peaks and descending into the valleys (glaciers, really) beyond. It was awe-inspiring and breathtaking. We saw caribou feeding near the summit of one peak that looked close to a 90o angle. We saw Dall sheep high up on the permafrost feeding off who knows what. And we landed on a glacier and got out and walked around. It was about 40o and right in front of us was a wall of ice. Walking on a glacier is like walking in
“The Last Frontier” is the perfect summer vacation. Don’t miss it.
Juneau, AK: Panning for gold with "Diggin' Dave."
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slush, but you have to watch out for the fissures, which are deep and dangerous. We wandered around for a while, took some pictures, and headed back – satisfied that the small fortune we had paid for the ride was worth every penny.
From Denali we took a 10-hour bus ride to Seward, which was made bearable by the spec-tacular scenery and our knowledgeable tour guide, who seemed to know everyone who lived in every dwelling along the way (there weren’t many). We stopped in Wasilla for lunch. Yes, that Wasilla, where you can see Russia from your backyard. Wasilla is the Scarsdale of Anchorage. It’s got upscale shopping centers and nice houses and fancy cars and restaurants. Our guide even pointed out where the former governor and vice-presidential candidate lives, down a quiet street off the main drag we were on.
VOYAGE OF DISCOVERYSeward is a quaint fishing village on the Kenai Peninsula where the seaborne portion of our journey began. The port had no vis-ible security, and our vessel, the MS Zaandam, looked completely out of place among the scores of small fishing vessels. What passed for the passenger terminal looked like an old airplane hangar – a far cry from the soaring structures of Vancouver or Miami. And yet inside it had a quaint charm, reminiscent of those old photos of immigrants standing in long lines and board-ing vessels headed for the New World.
We sailed the Gulf of Alaska for a day, where the water depth was more than 10,000 feet in parts, and on the second day entered Glacier Bay, which is surrounded by mountains and virgin forests and, yes, glaciers. The water was calm and cold – about 38˚ F. The air temp was 50˚ F. There was silence all around. No sign of any living thing, aside from the occasional sea otter that would float on its back alongside the ship. We could have been the first humans to ever visit this part of the world, and I had visions of
Captain Cook and other ex-plorers and what they must have felt when they first discovered it. Glacier Bay alone was worth the price of the trip.
I became fascinated by latitude and longitude. The TV in our stateroom had a channel that showed it,
along with the ship’s heading and speed, the water depth, and the wind speed and direction. Like the flight map on some airplane TVs, only better, much better. Long ago I had learned about lati-tude and longitude from my father, who was a navigator in World War II. There are 90 degrees of north and south latitude, and 180 degrees of east and west longitude. Each degree is roughly 60 miles. If you do the math that comes out to 10,800 miles from pole to pole and 21,600 miles at the equator. Degrees are divided into minutes and seconds – 60 minutes equals one degree and 60 sec-onds equals one minute. A minute of latitude or longitude is about a mile and a second is roughly 90 feet (5,280 feet divided by 60). Our average cruising speed was 12 knots, or 20 feet per second. So after a hard day of sightseeing I’d sit and watch the coordinates on the screen change every four and a half seconds.
The farthest north we got was Denali which, according to my phone’s GPS, is located at 63.4˚ N latitude and 148.5˚ W longi-tude. The Arctic Circle begins at 67.5˚ N latitude, so we were 4.1 degrees or 241 miles south of the Arctic Circle! When we arrived in Vancouver our coordinates, according to the ship’s much more detailed GPS, were 49˚ 17.32’ N and 123˚ 06.79 W. So we were 863 miles south of Denali and 1,544 miles east. Why did we dock in Vancouver and not Seattle? Because of the Jones Act. The Zaandam is Dutch-flagged and cannot transit from one U.S. port to another without first stopping at a foreign port.
I could write a whole book about this trip, and maybe I will some day. But I’ve taken up enough of your time and hope you enjoyed the ride. We will resume our regular programming with the next column.
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SALVTITAN FOUNDEDTITAN SALVAGE:
AT A GLANCEACQUIRED BY CROWLEY
1980 2005
TITAN responded to a laden product carrier on fire off the coast of the United Arab Emirates.
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VAGEBY TONY MUNOZ
SALVAGE OF RIG A TURTLEIN SOUTH ATLANTIC.
"FIRST RESPONDER" TOEARTHQUAKE IN HAITI.
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2007 2010 2012
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On January 13, 2012, Captain Francesco Schettino changed the navigational course of the 935-foot cruise ship Costa Concordia in order to do a near-shore sail-by of the Isola del Giglio, but the vessel struck a known reef. With 4,252 frantic people onboard, the ship began taking on water and drifted for more than an hour before running aground at Punta del Gabbianara in about 20 meters of water.
The human tragedy can be measured in 32 dead, 34 injured, and two missing and presumed dead. The cruise industry, which had been enjoying record profits and robust passenger growth from a series of new multigenera-tional ships that some considered mini-cities, witnessed a complete breakdown of the evacuation procedures and crew-training techniques mandated by the International Convention on the Safety of Life at Sea.
While the lawsuits against Carnival Corporation and Costa Cruises, as well as the potential criminalization of Captain Schettino, may continue for years, those are not the concerns of this article. The salvaging of shipwrecks around the world and the provision of assistance after natural disas-ters strike are subject enough.
REFLOATING IN SPRING 2013On April 21, 2012 TITAN Salvage and its Italian partner, Mi-coperi Marine, successfully won the contract to refloat and salvage the Costa Concordia liner off the coast of Tuscany.
According to Todd Busch, Senior Vice President and General Manager of Technical Services at Crowley Corporation, which bought TITAN in 2005, and Richard Habib, Manag-ing Director of TITAN, the consortium’s plan emphasizes environmental concerns due to the ship’s being in a specially protected area of the Mediterranean Sea. A technical com-mittee comprised of experts from the Italian Navy, Min-istry of Environment, Academia, Costa Cruises, Carnival Corporation, London Offshore Consultants and Standard P&I Club, in collaboration with RINA and Fincantieri and in accordance with requirements and recommendations of the Italian authorities, signed off on the TITAN-Micoperi plan this last spring. With a workforce approaching 400 salvors, mariners and technicians on site, the management team is crucial. TITAN has reached across the industry to provide a world class team of salvage masters, financial managers, logistics managers, environmental consultants and specialist technicians. Top companies in their fields have been engaged from shipbuilders to drillers. The plan has four key stages:
1 First, we will complete stabilizing the ship. Six underwater platforms are being fabricated, as well as 16 watertight boxes, or sponsons, each of which contains nearly 4,000 cubic meters of volume. Eight will be attached to the side of the ship that is above water. Very large holdback chains will be run from the high side around the bottom of the ship to
“This is the largest wreck removal in history. The size and scale of the project will dictate the timeline. It is just a massive endeavor.”
A TITAN dive team works on the wreck removal of the New Flame off the coast of Gibraltar.
TITAN cuts the stern section and engine room from the No. 5 cargo hold of the sunken freighter New Flame.
In 2009, TITAN Salvage lifts the 2,660-ton stern
section of the New Flamewith the crane barge Rambiz
and places it aboard the barge Giant II I for transport
to a scrapping facility.
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anchors on the inshore side. Finally, more than 10,000 cubic meters of cement installed via “grout bags” will be put beneath the ship to support it. The “grout bags” allow us to pick it all up afterwards.
2 36 pulling machines installed on the sponsons will be attached to the platforms and the ship will be rolled upright coming to rest.
3 Once the ship is upright, resting on the platforms and “grout bags,” the other eight sponsons will be attached to the other side.
4 Finally, the sponsons on both sides will be emptied in a very controlled way to minimize stresses on the damaged ship. The external buoyancy we’ve installed will refloat the ship.
Once the ship is refloated, it will be towed to an Italian port. Meanwhile, under the direction of authorities, the salvage team will begin to remediate the seabed and habi-tats surrounding the area of the casualty, “The total scale of the project is massive,” said Habib. “This is the largest wreck removal in history. The size and scale of the project will dictate the timeline. It is just a massive endeavor.”
LEADERSHIP TEAMTodd Busch and Richard Habib are recognized leaders in the commercial salvage industry. Busch began working for Crowley on tugs in Valdez, Alaska, in 1987. He has since held key positions in the company and today is responsible for Jensen Maritime, Crowley Solutions, Crowley Ship Management, Crowley Government Services as well as TITAN Salvage. In 2002 he received the Thomas B. Crowley Trophy, the company’s highest honor, which recognizes employees whose outstanding performance, dedica-tion and leadership most clearly reflect those of the company founder.
Habib is a U.S. Coast Guard Academy graduate who left the service in 1984 and has since traveled the world, building a reputation as a salvage master with extraordinary skills. He is overseeing the refloating and salvage of the Costa Concordia, which will undoubtedly be the most complex and sophisticated salvage in history.
It is no accident that TITAN got the job.
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CASE STUDY TITAN SALVAGES
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For TITAN and Micoperi, the ship’s refloating and removal will be played out on the world stage, and this in-credible project will be the subject of numerous case studies and analyses for future generations of engineers, mariners and salvors.
“NO CURE, NO PAY”It is no accident that TITAN got the job. Founded in 1980 by David Parrot and based in Pompano Beach, Florida, TI-TAN has global reach with offices in the United Kingdom, Singapore, Brazil and Australia. While being a division of Crowley provides the company with financial stability and solidifies its presence in the Western Hemisphere, at TITAN it is not about maintaining a huge fleet of vessels but more about the logistics surrounding a marine casualty or environmental catastrophe. The company prides itself on being nimble and “asset light,” chartering in vessels and cranes and flying in highly skilled salvors and specialized portable salvage equipment that varies with the nature of the assignment and can be moved very quickly from one place to another.
It is also one of the few salvage companies willing to work on a “No Cure, No Pay” basis. The company is willing to take big risks for big rewards, an approach that could bankrupt most salvors if something went wrong. In this regard it is unique within the Crowley organization and can
be a source of outsized profits. Why does it do this? Because it has the expertise and the personnel and the confidence to know it can get the job done, even where others have failed.
In 2006, for example, TITAN accepted a “No Cure, No Pay” contract for a salvage in one of the most remote places on the planet, the island of Tristan da Cunha in the South Atlantic Ocean, a World Heritage-protected site. The ATurtle, a 10,500-ton semisubmersible rig, was being towed from Brazil to Singapore when the tow broke and the rig ended up on the steep and rugged coastline of the island, a British territory and home to about 272 expats. It doesn’t have an airport and is only accessible by a seven-day trip by water from Cape Town, South Africa. Another company had tried to salvage the rig but was unsuccessful.
On December 22 the advance team for TITAN arrived on the island in Trypot Bay after a 1,743-mile trip on a chartered vessel. The remaining 20-person salvage team arrived about a week later. Over the next fifty days the team repaired the extensive damage to the pontoons and legs of the rig caused by the grounding and subsequent extreme weather.
The A Turtle had been beaten by weather and terrain, and Habib and his team discovered numerous stress fractures. More than 800 tons of the rig had to be removed and disposed of at an approved site. The Governor of St. Helena, who has executive authority for Tristan da Cunha, issued a
TITAN salvors were some of the first on the scene in Haiti when that island nation was hit by a 7.0 magnitude earthquake in January 2010, which killed more than 300,000 people.
TITAN GOES WHERE FEW COMPANIES CAN OR DARE.
Part of the engine room machinery is removed from the New Carissa
off the coast of Oregon.
Jack-up barges Karlissa A and Karlissa B are used during the wreck removal of the grounded New Carissa in 2008.
permit allowing the rig to be disposed of at sea while observing all necessary environ-mental requirements.
“After a great deal of work in treacherous conditions, driving rain and winds in ex-cess of 70 miles per hour at times, we were able to refloat the rig and get it to the dump site,” Habib said. “It took only a few hours for the rig to go down. It was a close call and we weren’t sure we would succeed until the hours just before she came off. . There was a lot of money at stake, but in the end we were successful.”
AN ELITE BREED Marine salvors are an elite breed with skills ranging from dive master and engineer to crane operator, welder and master mariner. They are largely freelancers, who hire them-selves out to the highest bidder and don’t work for just one company, although some do work exclusively for TITAN. And the jobs themselves are not limited to accidents or wreck-removals.
For example, TITAN salvors were some of the first on the scene in Haiti when that island nation was hit by a 7.0 magnitude earthquake in January 2010, which killed more than 300,000 people. Busch said TITAN surveyed the damage to Port-au-Prince harbor and determined a way to bring in relief supplies and other assets. The company established a temporary docking structure on the beach using a Crowley 400-foot-long by 100-foot-wide flat deck barge, thus providing a bridge for the flow of cargo and heavy equipment and much-needed food, water and shelter.
As a “first responder” to incidents like the earthquake in Haiti, Hurricane Katrina or the tsunami in Japan, TITAN leads the way so that Crowley can bring in a more struc-tured presence to mitigate the situation. Busch points out that TITAN, like all salvage operators, is unique in not having a cohesive business plan built on predictable revenues but is instead dependent on the ebb and flow of maritime accidents and related natural disasters. This can make for sharp swings in revenue from one year to the next, a fact of life in the salvage industry.
Marine salvors are an elite breed with skills ranging from dive master and engineer to crane operator, welder and master mariner.
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RESPONDER IMMUNITYIn an increasingly litigious world, the liabilities involved in rescue and salvage operations become greater and greater, and the increasing trend toward the criminalization of mariners is affecting salvors as well. Busch points out that if the trend continues, salvage masters will be put in the uncomfortable position of having to think more about what course of action will be least likely to result in litigation than what course of action is best suited to resolve a dif-ficult situation. The answer to this dilemma, says Busch, is responder immunity.
In the end, salvage compa-nies must operate in hazardous situations that pose a danger to personnel, property and the environment. They handle the challenge through a combination
of the right equipment and the right people. As the Costa Concordia is refloated and disposed of, the world will be watching and second-guessing every move and decision by the TITAN and Micoperi team. The salvage will become the topic of numerous stories and future case studies. With Busch and Habib leading the effort, we have every confi-dence that this one-of-a-kind mission will achieve its chal-lenging goals.
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CASE STUDY TITAN SALVAGE
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EXECUTIVE INTERVIEW HABIB / BUSCH&BY TONY MUNOZ
The salvage of the Costa Concordia is the largest in history. Please explain the decision to delay the project till spring 2013. BUSCH: When you consider all the necessary components required, when you take those things and the time required to manufacture those components and the delivery schedule as well as how to best protect the environment into consideration, it be-hooved us to reschedule and that’s the schedule you see out there today. The decision was made jointly with our customer and the other stakeholders.
Was the weather a factor?HABIB: Yes, weather will always be a factor in any salvage or wreck-removal job, but the weather there is less severe than many places, say, the North Sea.
What are some of the logistical issues holding it up?HABIB: I don’t really want to go into this too much because our
client has asked us not to. We are refloating the ship with external buoyancy structures. Whichever way you look at it, whether you are
talking about – the weight of the ship, the high center of gravity, the vessel construction, the topography of the seabed, the damage – all of those things just drive the size of the project. It’s just a massive endeavor. And the size and scale of the project are what’s determining the timeline.
Will there be mission-specific equipment constructed? HABIB: We have a partner, Micoperi, so of course TITAN and Micoperi’s assets are heavily invested in this project. I think the headcount on site will soon be ap-proaching 400. The main characteristics are the massive fabrication components. For instance, the external buoyancy structures require approximately 12,000 tons of steel. The platforms that the ship is going to be rolled onto in order to preserve the seabed habitat is another 3,000 tons or so of steel that has to be designed, built and installed on the seabed. The support of the middle section – I think everyone is aware now that the ship is suspended; it is supported near the bow and stern but the
midbody is not supported. It requires approximately 15,000 cubic meters of cement installed via bags. That’s equivalent to about 30,000 tons of cement. Every component, every way you look at this project, you’re talking about massive numbers.
HabibBusch
Managing Director, TITAN Salvage
Senior Vice President & General Manager, Technical Services,
Crowley Maritime
Capt. Rich
Todd
BUSCH
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EXECUTIVE INTERVIEW HABIB / BUSCH&Has TITAN Salvage worked with Micoperi before? BUSCH: We were aware of each other. This is the first project that we’ve worked on together. Their engineering and our engineering were a nice fit, so it has made for a cohesive team.
Was there a requirement to use an Italian company?BUSCH: No, there was not.
TITAN was founded in 1980 and purchased by Crowley in 2005. What was the strategic value in purchasing TITAN? BUSCH: Crowley always had a salvage component within the corpora-tion – you’ve got to be able to take care of your own equipment when things happen. In addition, we’ve held the U.S. Navy salvage (SUPSALV) contract for more than 30 years. As we looked at that business, we felt it was time to grow it either organically or through acquisition. One of the things Crow-ley is very particular about with acquisitions is the right mix and the right melding of culture. We had a lot of knowledge of TITAN. We had worked with them on a couple of projects. From a strategic value point of view, this was a way to strengthen our service diversification and remain centered around the marine core.
How big is TITAN within the Crowley organization? Is it one of the larger businesses?BUSCH: That’s difficult to measure because obviously, from year to year, TITAN’s revenue goes up or down depending on the number of projects it has. In some years TITAN can be 10 percent of Crowley, in good years better than that with outsized profits. In the grand scheme of Crowley on a day-to-day basis, TITAN is a small compo-nent, but it fills an important niche because it adds diversification and provides a risk/reward ratio that differs from our other core businesses.
MarEx: Todd, you have been with Crowley since the 1980s. Tell us about your career with the company and the various divisions you manage.BUSCH: I started with Crowley as an ordinary seaman onboard the tugs. After about eight years on tugs in the Alaska, Puget Sound and California, and trips to the Pacific Islands, I came ashore as a tug dispatcher, which was a good way to learn all the components of the company. From there I went to customer service on the ship-assist side and then to the commercial portion of that business and then to offshore special projects. I managed all of our special projects, includ-ing emergency response, and eventually all the tugs and barges and services on the West Coast. Part of that was the salvage component. So when we looked at TITAN, I got very involved with the acquisition and I got to go over and manage that business and do the transition into Crowley.
From there I moved into my current role, which is Senior VP and General Manager of Technical Services, encompassing TITAN, Jensen, our naval architecture business based out of Seattle, and ship management.
The leaders of TITAN Salvage talk about the Costa Concordia and the challenge of running a global salvor in a liability-conscious world.
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EXECUTIVE INTERVIEW HABIB / BUSCH
Richard, you graduated from the U.S. Coast Guard Academy in 1977 and held various posts before leaving your command in 1984. Tell us about your background and how you came to work at TITAN.HABIB: I left the Coast Guard in 1984 and started in shipping, working my way up to master. Primarily I worked in the heavy-lift industry. From 1995 to 2000 I was a self-employed project manager and port captain doing mostly heavy-lifts around the world. In 2001 I stopped in at TITAN, having followed them in trade magazines, and we hit it off. Shortly thereafter I was on a plane to Venezuela to a gasoline barge that had exploded. Although I was a Master Mariner, salvage is a different world. I worked as a salvor – one of the guys. Then I took over the super-vision and running of TITAN’s jack-up barge, the Karlissa-B. I did that for a while and then I got an opportunity. I happened to be on the West Coast and was asked to take a look at a derelict drydock that had broken loose during a storm and had wrecked on the rocks of Yerba Buena Island in San Francisco Bay. I went and did that and – lo and behold! – I won the job. That was my first job as a salvage master. After that I worked my way up to senior salvage master, and then Todd appointed me Director of Salvage. Then I took a little break and went to work for another salvor. Then Todd gave me a call and asked me to come back as Managing Director and I accepted, so here I am. I’ve been back at TITAN just shy of two years.
How are salvors trained?HABIB: Let me tell you about our people. Most salvors are divers, and they’re multi-skilled. Salvage divers are an elite subset of the diving community as a whole. Our divers are heavy-equipment operators, EMTs, crane operators, welder fabricators, and so on and so forth. And the reason is we need to be able to bring a fairly small number of people on a job with a wide range of skills. We can’t specialize like you might in other parts of the marine indus-try. We also have salvage engineers. We bring all the equipment necessary to perform and the salvage engineers not only concern themselves with all of the ship’s systems but run and maintain the all the salvage equipment. And naturally there are also the Salvage Masters, Naval Architects and Project Managers who provide management for the jobs.
The other characteristic of salvage that makes training difficult is that the major international salvors – of which there are only a few – use a great deal of freelance labor. So our divers are not full-time employees, although many of them don’t work for anyone besides TITAN. That does make formal training a challenge. I do think the industry is changing and more formal training is going to play a larger role in the future.
Todd, could you please explain your involvement in industry organizations such as the International Salvage Union, the Marine Response Alliance, and Clean Pacific Alliance? How do these activities help with your work at Crowley?BUSCH: Being part of those organizations keeps you close to the industry and all the players involved, both on the competitive side and the regulatory side. The International Salvage Union and the American Salvage Association work closely with the regulatory bodies and the insurance companies that are ultimately paying for most salvage operations. It allows you to have discussions with
them in regards to contracts, terms and conditions, insurance remuneration, risk/reward sharing. It provides an insight that, if you’re not part of it, you can’t participate in at that level. The same goes for the Marine Response Alliance and the former Clean Pacific Alliance. The major customers there are the shipping com-panies, a lot of them petroleum carriers. So again you’re able to be in close with them and understand what’s important to them. You’re able to craft services and solutions better to suit customer requirements as well as regulatory requirements.
What are some of the major issues confronting the global salvage industry?BUSCH: The politics – there’s a lot of cross-jurisdiction involved in salvage jobs. Sometimes it’s wholly within a country, but very often you’re dealing with the laws and politics of one country and a contract written in another country’s laws. Then there’s the whole risk/reward thing. Are the responsible parties willing to pay what the salvors need to get paid to take all that risk, or do they want to move that into more shared risk? The whole issue around responder immunity is out there and the training issues too. Remember a company like TITAN, all we are is salvage and wreck-removal, so we don’t do a side business or a bread-and-butter business to keep the doors open and the lights on and keep people trained. Are the responsible parties out there going to continue to support companies like TITAN, or are they going to allow people that are opportunists into the business when they think it is going well and they can make money? Those are some of the issues. The environment is another huge one that will con-tinue to grow and that ties back into the risk-sharing, the politics, the jurisdictional issues and all that.
Is it the contract and the way it is written that protects the salvor?BUSCH: Yes, it’s the contract and the terms and conditions and the way it’s written, but ultimately it goes back to the liability and the risk/reward sharing. If the responsible party insists that the salvor take all the liability for the wreck, the environment, and all the risk that goes along with that, then they need to be able to pay for that to keep the company alive and whole. When you have an opportunist that comes in and doesn’t take into account all those things and doesn’t price them in and figures “Hey, if this doesn’t work out I’ll walk away,” that’s a very different world.
What does the future hold for TITAN? Where do you see the company in five years?HABIB: We’ll continue to look at ways to leverage the innovation around TITAN and the skills of its people to support other Crow-ley businesses. We’re in a great position here. For 30 years we’ve been one of the main contenders in the world for wreck removal. Our emergency response business is less well-known. Emergency response is going to those vessels in acute need in order to protect as much value as possible while protecting the environment. While we conduct emergency response worldwide, primarily that business has been focused around the Americas just because of the origins of TITAN, and so obviously we see huge potential in growing that business geographically. Since 2009, we’ve added offices and facilities in Singapore and Australia. I think you’ll see TITAN in five years as a much stronger company.
Mar Ex
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For more than a decade, Lloyd’s Open Form (LOF) emergency response contracts averaged 200 plus per year, but in the last three years they’ve dropped to between 80 and 100. Once the
bread and butter of the industry, the focus is now on the growing num-ber of wreck-removal contracts which, on the surface at least, seems to have levelled things out.
Why the change? The International Sal-vage Union’s (ISU) newly appointed Gen-eral Manager, Mark Hoddinott, explains: “Many shipowners and marine underwrit-
ers have a dislike of Lloyd’s Form as they consider it expensive. Many will hold out for an alternative contract, such as lump sum or daily rate, which has been a major
contributory factor to the decline in the number of LOF cases. The main benefit of Lloyd’s Form is that it can be quickly agreed and an emergency response can commence without the need for protracted contract negotiations which, in some cases, can put lives, the environment, and the ship and cargo at greater risk.”
LOF awards and wreck-removal con-tract values are not really comparable, says Hoddinott, who adds: “The largest LOF award ever made was on the APL Panama,
The Changing World
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which was reported as being close to $50 million. The Costa Concordia wreck-removal contract is reported to be in the region of $350 million, although it is a general fact that contractors’ (i.e., salvors’) costs associated with wreck-removal contracts are much higher than with LOF. In other words, the margins are smaller.” The most commonly used wreck-removal contracts are the BIMCO contracts – Wreckhire, Wreckstage and Wreckfixed – which refer to daily rate, stage payment,
and lump sum, respectively.
BIGGER SHIPS, BIGGER CHALLENGESThe sheer scale of salvage required on ships like the Costa Concordia and Renaare signs of the times: Mega-ships are defi-nitely posing new challenges. “You've got container ships carrying more chemicals in their containers than chemical tankers carry,” says Joe Farrell, Jr., President and CEO of Resolve Marine Group in Ft.
Lauderdale, Florida, whose company is salvaging the container ship Rena. “As for cruise ships, it’s a real challenge because they make these ships for comfort, and a lot of things would probably be done differently if they weren’t. We understand the trend to build bigger, but from our perspective, something is starting to get lost. The economics work, but we believe safety is compromised in the event of a casualty on these huge vessels.”
Resolve is currently working on reduc-ing the bow section of the Rena, which wrecked in late 2011 on New Zealand’s Astrolabe Reef, to one meter below low tide sea level. “The ship is at 34 degrees list, and some days you have three-to-six-
Reduced use of Lloyd’s Open Form, challenges posed by mega-sized ships, and a shortage of skilled workers are just some of today’s salvage industry concerns.
By Kathy A. Smithof Salvage
Cutting the prow illustrates the removal of side shell sections and the constructed helipad behind the technician. The helicopter above and out of the frame has a line attached to the piece being cut.
Resolve team standing by as deck section of container ship Renais cut in preparation for airlift by helicopter. The bow lies at a 34-degree angle atop the Astrolabe Reef.
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meter seas hitting the side of the wreck,” Farrell explains. “You’ve got the decks being cut off and our people are trying to walk sideways like Spiderman on the ship’s internal bulkheads on a ship that shivers every once in a while when a series of waves hits. Not only are you cutting it up, but you’ve got a helicopter flying in,
attaching to the piece you’re cutting. We're moving 3,000-to-4,000-pound pieces. This is a challenging job and it’s really the most effective way to get this done given current sea conditions, and it eliminates the risk of further damage to the reef.”
Then you have the problem of the containers. Hoddinott explains: “Not only
is there more at stake when trying to figure out how to refloat a large grounded con-tainer ship, but also what to do with 15,000 to 18,000 containers. There aren’t many places that can take them. Plus there are very few cranes in the world able to handle them. These are large mobilization jobs that take a great deal of time and skill.”
WORLD OF SALVAGE
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WORLD OF SALVAGE
The international salvage community is engaging with shipowners and insurers to find a way to speed up the process of ob-taining salvage security for containerized cargoes, particularly in large container ship casualties. Currently, contacting the owners of all the cargoes aboard a modest-sized container ship to demand salvage
security becomes a lengthy and expensive logistical nightmare for both salvors and cargo owners.
REMOVING CONTAMINANTSIn 2011, ISU member companies salved nearly half a million tons of pollutants. Hot-tapping (drilling with hydraulic
or pneumatic drills) remains one of the main methods used to get at the fuel and oil when a ship‘s pollutants cannot be pumped out normally.
Michigan-headquartered Marine Pol-lution Control (MPC) recently pumped oil off a dredge that had sunk in heavy weather in Lake Huron – the operation
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Panoramic view of Rena wreck. Salvage team member stands atop the constructed helipad on the bow.
WORLD OF SALVAGE
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took almost a month to complete. MPC’s Founder and President, David Usher, plans to present a paper to the IMO’s Technical Group in October on the tech-nique used, which goes beyond traditional methods and vastly improves how oil/wa-ter mixtures can be separated. “Nothing but water goes back into the water, and no extra vessels will be needed to transport water to shore,” says Usher. “It has to be done. This system will save millions of dollars in spill cleaning.”
Another new method of removing oil from ships, notes Ulf Teske, Svitzer Sal-vage’s Head of Salvage Academy & Public Relations, is the FOR (Fast Oil Recovery) System, a passive onboard safety device (tanks are accessed by emergency connec-tors from the ship’s upper deck) developed by France’s JLMD Ecologic Group. “They now have vessels which have a system onboard that has a second way to get oil off the ship.”
FEWER JOBS?John A. Witte, Jr., Executive Vice President of Donjon Marine Co., Inc., a
New Jersey-based salvage company that recently completed the refloating of a 277-foot New York car ferry, forecasts that teamwork, consolidation and dedication will be the buzzwords of the future as he observes the number of casualty jobs decreasing each year. “The practical cost of a casualty, from the perspective of both dollars lost and the potential for civil and criminal penalties for crew and owners, has resulted in shipowners utilizing better trained crews, newer vessels, and the best available technologies,” he explained. “The end result has been fewer casualties on a global basis.”
For U.S. salvage companies, Tim Beaver, President of the American Salvage Associa-tion, says progress continues on proposed legislation on responder immunity issues that have long plagued the salvage industry as well as other U.S. first-responder orga-nizations. It’s hoped the legislation will be added to the Coast Guard Authorization Bill passed last year, which is currently under Senate review, or to the Coast Guard Authorization Bill of 2012.
On the international front, an antici-
pated forthcoming change to the IMO’s Wreck Removal Convention will extend a coastal state’s authority for wreck removal from its current 12-mile limit to its Exclu-sive Economic Zone, usually a 200-mile limit. This could produce more work for salvors when it becomes law, likely a few years away yet.
CONTINUING EDUCATIONSvitzer’s Salvage Academy, located in the Netherlands, offers specialized salvage training through its DNV-certified courses given worldwide and at the client’s pre-ferred location – all with a maximum of 14 participants. The “Salvage Experience Mas-ter Class” teaches participants operational and legal/commercial aspects of handling emergency situations at sea through a unique combination of theoretical learning and real-life simulation. Participants deal with salvage challenges and take part in the resolution of a salvage crisis as leaders, managers or subject matter experts.
Other courses include “Salvage for Non-Salvors,” which reviews aspects of salvage through interactive presentations about
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WORLD OF SALVAGE
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50 Svitzer Salvage works to refloat a damaged container ship utilizing two 600-ton shore cranes to assist in the par-buckle operation. Photo courtesy Svitzer Salvage.
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WORLD OF SALVAGE
real-life cases supported by pictures and films of actual salvage operations. “Fundamentals of Marine Salvage” offers practical, hands-on training for those onboard ships. “Damage Control Kit Training” provides practice in using the contents of the Svitzer Damage Control Kit during simulated emergencies.
Not to be outdone, Resolve has opened a new simulation training facility at its Ft. Lauderdale location to train cruise lines’ personnel and the offshore industry. The center offers courses on diverse subjects such as “Bridge Resource Management” and “ECDIS.” Coincidentally, Resolve’s ship’s bridge simulator, touted as the largest in the world, opened just a month after the sinking of the Costa Concordia.
COMPETING FOR WORKERSSalvage companies are also competing with other maritime organizations for personnel. “In order to recruit the best workers, we have to offer good remuneration packages and a good career path, which we do,” says the ISU’s Hoddinott. Resolve’s Farrell notes the industry is starting to focus on finding younger work-ers because it’s hard to get people who don’t mind working 12-to-16-hour days, 16 being the norm, for months on end.
Long hours on the job highlight the fact that safety will always take priority above all else. “Our head of safety is a salvage diver,” says David Grecho, President of Inland Salvage, Inc., based in Louisiana. “The experience of salvage is really important to keeping it safe. You need someone who knows how to check that everyone is okay, as at any given time there is so much going on between equipment, pumps, welding machines, divers and cranes, etc.” In July, Inland Salvage, despite dealing with tropical storm Debby, successfully refloated a stranded 2,500-ton drill barge. The vessel had suffered side-shell damage and loss of wa-tertight integrity after coming into contact with a support barge in rough seas near Caillou Island Field in the Gulf of Mexico.
BUSINESS AS USUAL?When all is said and done, Hoddinott believes the salvage industry, in general terms, has successfully coped with its many challenges, demonstrating the flexibility and ingenuity that go with the territory. Svitzer’s Teske adds: “No grounding, collision or explosion is the same. Every time out, there is some different aspect to encounter.” But this special breed of responders would have it no other way. Says Resolve’s Farrell, “There’s no other job like it on the planet.”
Kathy Smith writes from Victoria, British Columbia.
Mar Ex
Wind tower blades are offloaded by the Port of Vancouver USA's two Liebherr LHM 500S mobile harbor cranes. Each is capable of lifting 140 metric tons or 210 metric tons in tandem.
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An often overlooked measure of the U. S. economy is the pace of business at the nation’s more than 350 ports. Many are keeping up with and reflecting the recovering national economy, posting
improved inbound and outbound volumes for cargos of all kinds, including heavy lift. At the Port of New Orleans on the Mississippi River in Louisiana, “Heavy lift is our bread and butter,” said port spokesman Matt Gresham. “It’s what we do best. We hang our hat on break-bulk.”
There’s more to cargo-handling than containers.
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Heavy Lift Makes aCOMEBACK
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New Orleans, added Robert Landry, the port’s Chief Commer-cial Officer, “has always been a good heavy-lift port. We’ve always had the capability to work not only project cargo but some of the over-sized, over-dimensional cargo.” Much of that is attributed to the port’s location and its use of both land-based cranes and wa-ter derricks, which increases lift capacity and provides flexibility.
“That’s not going to change,” assured Landry, who said the port has “some really big plans” for expanding its container operations but not at the expense of any existing break-bulk or heavy-lift cargo facilities. “They all will remain intact. In fact, some are being improved because we believe there’s going to be a solid market in the future for this cargo,” he said. “We’re very optimistic we’re going to be a big player in the market and that we’re going to see more break-bulk and heavy-lift cargo.”
GROWING ENTHUSIASM & INCREASING CARGOSThere’s similar enthusiasm for the future of heavy-lift cargo at the Port of Philadelphia, which is both a container and break-bulk port. “It’s what we know here, break-bulk. It’s what we excel at. It’s a very important commodity type, and we hope it continues to grow,” said Sean Mahoney, the port’s Marketing Director. The port has a 375 short tons’ crane at its Packer Avenue terminal and a mobile crane capable of lifting 100 metric tons.
Break-bulk and heavy-lift cargos are primarily machinery, rail cars, wind turbines, aircraft parts, mining equipment, and industrial staples such as generators and transformers for mills and plants. Unlike textiles, toys and other consumer items, these oversized and irregularly shaped cargos cannot be put in contain-ers for shipment and require specialized handling.
Like other ports, Philadelphia is racing to complete the deep-ening of its shipping channel to 45 feet from 40 feet to coincide with the expansion of the Panama Canal, a $5.25 billion project that will allow movement of a new generation of larger ships. The canal dig is targeted for completion by the end of 2014. When expansion is complete, new-generation vessels with a maximum draft of 50 feet and width of 160 feet will be able to sail through the canal. Currently, the draft limit is 39.5 feet and the maximum width 106 feet.
Mahoney called the deepening of the port’s 103-mile channel on the Delaware River “very, very exciting.” The $300 million project, funded by the federal and state governments, is well un-derway with about 20-25 miles completed. There are no plans to purchase additional cranes. “We have a heavy-lift capacity at both of our major container terminals, and we’re pretty well situated
for project cargo at both the Packer Avenue and Tioga marine ter-minals,” he said. The port is served by three Class 1 railroads and sits within a quarter mile of Interstate 95, the major north-south highway along the U.S. East Coast, which provides ease of truck access to both main terminals.
With 3.99 million metric tons of cargo in 2011 compared with
Panama Canal expansion.
Modules of a nuclear reactor are off-loaded from a Rickmers Line vessel at the Port of New Orleans.
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3.62 million tons in 2010, the Port of Philadelphia recorded a 10 percent increase in volume. Combined with the 17 percent in-crease in 2010, the port has surpassed pre-recession cargo levels. Projections indicate continued growth in break-bulk in 2012.
At the Port of Baltimore, not far from Philadelphia, all cargo categories are posting strong growth numbers. Through the middle of 2012, general cargo was up just over 11 percent. Ro-ro cargo increased almost 33 percent. Break-bulk cargo rose ap-proximately 22 percent, paper and pulp more than 20 percent, and auto shipments about 25 percent. “Across each commodity, we’ve been successful,” commented Dave Thomas, the port’s Director of Operations. Only “marginal” growth had been logged over the previous five years. The 15 percent increase in cargo in 2011 was the biggest jump in growth of any major U.S. port. The total dollar value of that cargo was more than $51.4 billion, the port’s highest ever and a 24 percent improvement over 2010.
Baltimore, which already has a 50-foot channel, has a single 250-ton Manitowoc heavy-lift crane purchased for $2.1 million in 1994. A year ago, the port had no plans to acquire another crane, “But that’s not our position now,” Thomas said. The present crane, called “Big Red,” has been getting a lot of work. At this writing, there were about 240 workdays so far this year and the massive crane was employed on 96 of those days, completing about 320 heavy lifts.
“We’re just now beginning to acquire funds for our capital-spending program to possibly purchase another 250-ton crane
and possibly another 150-ton crane,” Thomas added. In late June, the port saw delivery of four massive container cranes made in China that are being installed at the newly constructed 50-foot container berth at the 200-acre Seagirt Marine Terminal. The cranes, the largest of their kind in the industry and known as super-post-Panamax, are 400 feet tall, can lift 187,300 pounds of cargo, and weigh about 1,550 metric tons. Seagirt, the port’s primary container facility, previously had seven post-Panamax cranes. All of Baltimore’s cranes can be used for heavy-lift cargo. The four new cranes cost $40 million.
CRANES ARE LOOKING UPWhile some ports are having record years, sales of heavy-lift cranes, if not at all-time highs, are showing an uptick as well, said Brian Spain, Liebherr USA’s Sales Manager for mobile harbor cranes in Miami: “My experience is that the heavy-lift crane busi-ness is picking up.” Pacific Northwest and Gulf Coast ports have shown the most activity, particularly in the heavy-lift category, he noted, while over the past six to 12 months “There’s been more in-terest popping up in the Northeast.” The wind-energy market that had sparked interest in heavy-lift cranes has died down a little bit and is not as busy as three or four years ago, Spain added, stating “It’s just starting now to recover a little bit with the economy.”
The least expensive Liebherr crane for heavy-lift use is priced at about $3.5 million, rising to close to $6 million. The lower-priced crane will provide about 100 metric tons of lift, and $6
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million or so buys 200 tons of lift. Spur-ring some of the ports’ purchasing activity has been federal money made available for transportation infrastructure as part of the 2009 American Recovery & Reinvest-ment Act, which provided Transportation Investment Generating Economic Recovery (TIGER) grants.
Crane manufacturer Terex Corporation, based in Westport, CT, in June introduced Terex Port Solutions. As part of the Terex Material Handling and Port Solutions segment of the company, the group will unite Terex and Gottwald Port Technology as a single source for port customers. Both companies sell heavy-duty cranes in the global market. As part of the new arrange-ment, Gottwald Port Technology products will be branded Terex Gottwald. “Both Terex and Gottwald are well recognized as significant suppliers to the port industry,” said Klaus Peter Hoffman, head of Terex Port Solutions. “We can best serve customers as a unified organization committed to a single purpose and identity.”
Pasha Stevedoring Terminals in Wilmington, CA, a provider of vessel-loading and unloading services at the busy ports of Los An-geles and Long Beach, has seen activity rise. “Business is definitely
moving north,” said Senior Vice President Jeff Burgin. “The bone-crushing year was 2009. 2010 came back a little bit. 2011 came back a lot better than 2010, and 2012 is turning out to be better than 2011. From 2009, we’re back to probably 70 percent of where we should be.” He said Pasha is not seeing as many windmill projects as it did over the past five years but added, “However, we are starting to get inquiries about big coke drums again, and from
A component of a major art exhibit arrives as heavy-lift project cargo at the Port of Philadelphia's Packer Avenue Marine Terminal.
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HEAVY LIFT
time to time we move those for oil refin-eries. We get inquiries about a few project cargos here and there, but it’s going to be a while before project cargo really starts to come back and hit full throttle.”
Container movements remain the priority at the ports of Los Angeles, Long Beach and Oakland, three of the busiest in the world, while the smaller Port of San Francisco focuses on bulk cargo with containers accounting for less than one percent of its cargo. There’s been a spurt of new oversized and heavy-lift cargo at San Francisco, including racing yachts from around the world as the city gears up for next summer’s America’s Cup competition.
BLOWIN’ IN THE WINDUp in the far northwest corner of the U.S., 2011 was the best year the Port of Vancouver in Washington State has had for project-type cargo. “We exceeded 100,000 tons of wind energy, about 3,300 components, which was quite a bit better than our previous best in 2009, when we handled about 2,700 components,” said Alastair Smith, Senior Director of Marketing and Operations. Components include wind turbine nacelles, towers and blades. Inbound shipments were mostly from China with some from Vietnam and South Korea, and outbound move-ments were primarily to Australia.
The Vancouver port in 2007 pur-chased a Liebherr 500S crane with a lift of 140 metric tons, the largest mobile crane in the U.S. at the time. In 2008, another Liebherr 500S with a similar 140-ton lift capability was acquired. “We haven’t purchased any new heavy-lift cranes, and we don’t really see the need to do so,” Smith said. “We’ve positioned ourselves very well. We’re actually ahead of most of our competitors in equip-ment.” Two stevedore companies at the port have specialized equipment for handling heavy cargo.
To catch the pulse of the U.S. economy, government and private business would do well to include among its statistics-gathering methods checking with America’s ports to see how their cargo volume, including heavy lift, is perform-ing. The economic winds may shift, but ports reflect the direction.
Art Garcia is a regular contributor to The Maritime Executive.
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Dredging is a topic I really hadn’t given too much thought to until my editor asked me to write an article about it. Oh sure, the beach near my home in
South Florida is dredged from time to time and the sand re-plenished to combat the relentless erosion of wind and seas. There is the usual hue-and-cry over the cost and whether the dredging is really necessary and why should people who don’t use the beach have to pay to support those who do and those homeowners whose properties may be threat-ened by rising tides.
By Jack O’Connell
The Politics of DredgingAs it turns out, those two issues – “Do we really
need it?” and “Who’s going to pay for it?” – are at the top of the list when it comes to dredging projects worldwide, and particularly here in the United States.
Years of UnderinvestmentThere is no question about the need. A recent re-port by the U.S. Army Corps of Engineers, which is responsible for maintaining the nation’s harbors and waterways, states unequivocally that “there is currently a lack of post-Panamax capacity at U.S. Gulf and South Atlantic ports.” Post-Panamax capacity refers to the giant new containerships that
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It’s more complicated than you think.
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will be transiting the Panama Canal after its expansion is com-pleted in late 2014 or early 2015. They require 50 feet of draft for safe navigation. The U.S. currently has only two East Coast ports capable of handling these vessels – Baltimore and Norfolk. The race is on in New York/New Jersey, Charleston, Savannah, Jack-sonville, Port Everglades (Fort Lauderdale), Miami and Houston to get their harbors and channels dredged to the required depth.
Post-Panamax vessels currently comprise 16 percent of the worldwide container fleet and 45 percent of container capacity. By 2030 they will represent 62 percent of container capacity. If the U.S. wants to stay in the game, it has to get its harbors ready. Yet, as Senators Brown and Portman of Ohio stated recently in a letter to the Acting Director of the Office of Management & Budget, “Top-priority harbors, those that handle 90 percent of the commercial traffic, are dredged to their authorized depths and widths only 35 percent of the time.”
The situation is no different on the Great Lakes where, accord-ing to the Lake Carriers Association (LCA), years of inadequate funding have left an estimated 17-plus million cubic yards of sediment clogging its waterways. Low water levels further aggra-vate the problem, as they have this year. As a result, carriers are forced to “light load” – carry less than their full capacity – and leave both cargo and revenue behind. The LCA estimates that three of every four cargoes on the Lakes this year are less than full load. The largest “lakers” forfeit almost 3,200 tons of cargo for every foot of draft lost.
“It’s a major issue,” says LCA spokesman Glen Nekvasil, who
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adds that the Lakes carry roughly 10 percent of the na-tion’s domestic cargo. He cites the August coal report, which shows shipments down from a year ago and 25 percent below the five-year average due in part to low water levels and the fact that only 17 of the 63 federally maintained ports are being dredged this year: “The largest coal cargo in August was 65,000 tons versus the record of 71,000 tons in 1997.” He mentions the port of Dunkirk, south of Buffalo on Lake Erie, having to close in 2006 due to inadequate maintenance: “Half a million tons of coal used to go through there.”
$250 million is needed to fix the Lakes and up to $5 billion to get America’s harbors ready for post-Panamax ships. Where will the money come from?
The Harbor Maintenance Trust Fund The 1986 Water Resources Development Act established the Harbor Maintenance Trust Fund (HMTF) to pay for construction and maintenance of harbor and navigation channels. Up till then the government had paid 100 percent of the cost of such projects. The HMTF is funded by a user fee – the Harbor Maintenance Tax – of one-eighth of a percent of the value of a ship’s cargo, so $1,000
worth of goods would pay a tax of $1.25, $100,000 would pay $125, and so forth. For the average container the amount is $109 (pop quiz: What’s the value of an average container?).
The idea was to make users pay their fair share of the cost of infrastructure, much like the federal tax on gasoline that goes into the Highway Trust Fund and helps pay for construction
and maintenance of the nation’s interstate highway system. But here’s where it gets tricky. The HMTF takes in about $1.5
billion a year, but only $800 million or so is spent annually on its intended purpose. The remainder is used to – theoretically, at least – offset the federal deficit. The result is a surplus that, accord-ing to Senators Brown and Portman, amounts to $8.1 billion. “The money is there,” says the LCA’s Nekvasil, “we just need to get our hands on it.”
About $1.3-$1.5 billion is needed annually for maintenance dredging, according to the Army Corps of Engineers, roughly equal to the amount that comes in. So a simple “pass through” process seems to be in order. But for reasons alluded to above and despite the current Administration’s insistence on the importance of infrastructure spending, this is not happening. It is no wonder that the American Association of Port Authorities, among others,
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That much sediment would blanket the state of Ohio to a depth of two and a half inches.
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is calling for legislation that would require the full amount of annual harbor tax revenue be made available to the Corps for maintenance dredging and related uses.
Other VoicesBut there’s more to it. Not everyone likes the tax. Advocates of America’s Marine Highway say it discourages the use of the na-tion’s inland waterways in favor of more congested roads and rails and acts as an unnecessary burden on those small shippers who cannot afford it. Particularly when it comes to domestic con-tainer shipments, which constitute only a small portion of the tax (less than five percent), there have been calls for an exemption. Remember, one barge equals about 70 truckloads, and a nine or twelve-barge tow can take a lot of trucks off the road. Relieving congestion and pollution have a value too.
There’s another issue. As opposed to their East and Gulf Coast brethren, West Coast ports don’t need deepening. They already have 50-foot channels and require little or no dredging because of their naturally deep harbors. Ports like Los Angeles/Long Beach, Seattle/Tacoma and Oakland – three of the nation’s largest con-tainer ports – routinely receive post-Panamax vessels. Moreover, these ports contribute about 30 percent of HMTF revenues but get less than five percent back. About a penny per dollar. They don’t like subsidizing ports in other parts of the country, and they may lose some business as a result of the Canal expansion.
Additionally, West Coast ports face the prospect of increased competition for Asian cargos from both Canada and Mexico. In Canada, the Fairview Container Terminal at Prince Rupert, B.C. is expanding rapidly from its current base of about 500,000 units a year. Much of that cargo is destined for the American Midwest via rail. In Mexico, massive new container terminals are being built at the port of Lazaro Cardenas and may soon pose a threat to West Coast traffic. Lazaro Cardenas is also connected to the U.S. heartland by rail. These ports pay no harbor maintenance tax and may offer other advantages as well.
In July a report from the Federal Maritime Commission titled “Study of U.S. Inland Containerized Cargo Moving Through Canadian and Mexican Seaports” concluded that “While the Commission recognizes that funds are necessary to ensure adequate facilities to maintain international trade, the fact that each container requires, on average, a $109/FEU fee to use a U.S. port places those ports at a competitive disadvantage before the container has even been offloaded.”
Inland Waterways Trust FundWhile the HMTF is used to construct and maintain the nation’s harbors and main navigation channels, the focus of the Inland Waterways Trust Fund (IWTF) is the nation’s locks and dams. It originated in 1978 and is funded through a 20-cents-per-gallon fuel tax on barges plying the inland waterway system – mainly the Mississippi River System and the Great Lakes. More than half a billion tons of freight move on the system annually. There are 191 locks and 238 “lock chambers” that need to be maintained or modernized, and half are more than 50 years old and risk catastrophic failure. The IWTF pays half the cost of upkeep and the federal government the other half.
Unlike the HMTF, however, the IWTF needs more money (I told you this gets complicated). It takes in around $85 million a year, which is matched by General Treasury funds, but the needs
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are far greater. Debra Colbert of the Waterways Council cites the Olmsted Lock & Dam Project on the Ohio River as the “poster child” for what has gone wrong with the process to fund and construct critical projects on time and on budget: “This project was authorized at a cost of $775 million in 1988, has been on-going for 25 years, is nowhere near completion, and the cost has ballooned to $3.1 billion today. Olmsted is depleting all the moneys in the Fund so that only one other project, the Lower Monongahela in Pittsburgh, will be finished, with more than 20 projects not slated for completion until as late as 2090.”
In an effort to move things along, the industry and Corps of Engineers worked together over the course of 18 months to develop a consensus plan of action. Dubbed the Inland Water-ways Capital Development Plan, it calls for prioritizing projects, improving the project management process, and “federalizing” dams (i.e., having government pay 100 percent of the cost of dams in recognition of their multiple public benefits). To pay for all this, the fuel tax would increase from 20 cents a gallon to 26 or 29 cents.
The Plan was converted to stand-alone legislation in late March by Congressmen Ed Whitfield (R-KY) and Jerry Costello
(D-IL) and is known as WAVE 4: Waterways Are Vital for the Economy, Energy, Efficiency, and Environment Act of 2012. It currently has 27 bipartisan co-sponsors.
The Missing IngredientWhat’s clearly missing from all of this is a well-defined national transportation policy that would establish priorities and allocate funds. Both the
Corps of Engineers’ report mentioned earlier and the FMC report recognize this fact. “The United States is a maritime nation,” says the Corps’ report. “A modernization strategy should be part of an overall national intermodal freight transportation strategy.” Adds the FMC: “Currently, many U.S. ports, highways, and bridges are slowly decaying due to lack of investment and strategic long-term planning. Our closest competitors, Mexico and Canada, have national transportation policies that ensure that their ports, highways, and bridges, all of which play important roles in the intermodal transportation of commerce, are sustained.”
There is obviously a crying need for leadership on this issue. Any volunteers?
Jack O’Connell is Senior Editor of The Maritime Executive.
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Workers' camp, Bangladesh. Courtesy: Maro Kouri.
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Shipbreaking at a Crossroads
By Wendy Laursen
Change is coming, but will it be too late?
Ships lined up at a yard in Bangladesh. Courtesy: Maro Kouri.
Credit Paola Tejada-Lalinde.
Shipbreakers in Pakistan. Credit Tomàs Halda.
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Credit Maro Kouri. Half a ship, anyone? Courtesy: Maro Kouri.
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he million-dollar question: Will the IMO’s Hong Kong Convention improve the safety and environmental performance of the shipbreaking industry in India, Pakistan and Ban-gladesh? The question is academic. No states have ratified the convention, and entry into force is anticipated to be 10 years away, after many of the world’s most asbestos-laden ships have already been broken and recycled. There is a Norwegian saying that describes the situation, says Ingvild Jenssen of NGO Shipbreaking Platform, a coalition of environmental, human and labor rights organizations. It is a “sleeping pillow.” It allows everyone to say “We are doing something” without really doing anything.
The 2009 Hong Kong International Convention for the Safe and Environmentally Sound Recycling of Ships addresses con-cerns about environmentally hazardous substances like asbestos and labor conditions at many of the world’s shipbreaking yards. Pending its approval, there are voluntary transitional guidelines that call for shipowners to undertake an Inventory of Hazardous Materials (IHM) and to only use shipbreakers that prepare a ship-specific breaking plan and, ideally, a yard plan that demonstrates they can meet safety and environmental protection goals. Some shipowners follow the guidelines, some do not. Few breaking yards have a yard plan.
The Hong Kong Convention was enacted as a means of provid-ing something more suited to the shipping industry than the United Nations’ Basel Convention, which entered into force in
1992 to prevent the dumping of haz-ardous waste on developing coun-tries. Under the Basel Convention, it is the export-ers’ responsibil-ity to ensure that hazardous wastes are dealt with in an environmen-tally sound and safe manner and ships with toxic waste cannot be imported to a party state, such as
India, from a non-party state, such as the U.S. Following the Basel Convention to the letter would mean that ships would have to be partially dismantled before being towed to a breaking yard.
CASH BUYERSMany shipowners sell vessels ready to be scrapped to cash buyers, who then sell to the breaking yard. These buyers know the market better than most shipowners, who at the same time can divest any responsibility for toxic materials since cash buyers often reflag and rename the vessel for the final voyage. Again, there can be le-gitimate reasons for doing this, such as facilitating a crew change, and some flags offer discounts for final voyages. But it also means that the vessel can be reflagged to a state that is not party to the Basel Convention or not particularly diligent in policing hazard-ous materials’ requirements.
The Hong Kong Convention is considered minimal at best by environmental and labor groups. It doesn’t condemn the disman-tling of ships on beaches as is done in South Asia (Bangladesh, India and Pakistan), a practice not considered safe for the envi-ronment as pollution cannot be contained. From a worker-safety perspective, the use of cranes and ambulances is severely limited. Workers are routinely injured or killed by explosions or exposure to hazardous substances.
“In 2011, 28 workers got killed at Alang beach due to the crim-inal callousness of shipowners, shipbreakers, Gujarat Maritime Board, Gujarat Pollution Control Board, Ministry of Environ-ment and Forests, and other concerned agencies,” says Gopal Krishna, spokesman for Toxics Watch Alliance and the Ban Asbestos Network of India. “The inquiries into such deaths are never made public.” More than 10,000 migrant workers at Alang, where half the world’s ships are scrapped, come from some of India’s poorest and most technologically backward states, includ-
T
Downtime at a yard in Bangladesh. Courtesy: Maro Kouri.
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ing Bihar and Jharkhand. Krishna likens their plight to slavery. “I come from that area and I know exactly the situation they are in,” he says. “They are forced into a dirty, degrading, dangerous job because of poverty.” Shipowners are escaping their decontamina-tion costs by transferring the risk to vulnerable workers, he says.
The workers are not aware of hazardous materials like asbestos and more often than not use primitive tools to dismantle the ships, says Mohit Gupta, Coordinator of the Occupational and Environmental Network of India. “Protective equipment is seldom provided or used. Asbestos fibres removed are either dumped on site or sold in the scrap market.”
However, there have been some attempts at improving health and safety in the industry, he says. The courts have stopped a few ships containing hazardous materials from entering Indian waters.
“Some attempts have also been made to improve the situation on the ground, but not much. During a recent visit to Alang by one of our network members, we could observe separate cabins built for removal of asbestos. One can observe helmets and gloves being used, which is a start, but much more effort needs to be made.”
IMPROVING WORKER SAFETY“There is large-scale adverse publicity without any justification,” says Pravin Nagarseth, President of the Shipbreaking Association of India. “The issue is not environmental but is related to occu-pational hazards. Only to sensationalize has the undue hue-and-cry of environmental pollution been created. In-built hazardous waste is not even one percent of the total weight of the ship and therefore does not merit classification of a scrap ship as being
Credit Maro Kouri.
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hazardous. Even the Basel Convention has not declared ships for demolition as hazardous waste.” The ship recycling industry is not hazardous as claimed by NGOs, he argues: “The issue of PCBs, asbestos and TBT paint are a temporary phenomenon as their use is already banned.”
Nagarseth says the requirements of the 2007 Supreme Court order are being fully complied with, bringing accident rates down substantially. Recent modernization means plate-loading is most-ly being done by cranes rather than manually, and a number of plot holders have installed liquid oxygen tanks to reduce the use of oxygen cylinders. A secured landfill site has been constructed at Alang for the disposal and treatment of hazardous wastes, and
an additional landfill site and bilge-water treatment facility are under construction.
Trade unions have organized over 9,800 workers in India and achieved improved levels of first aid, education, wages and compensation. However, concedes Kan Matsuzaki, spokesman for IndustriALL Global Union, since the industry is heavily labor-intensive, health and safety equipment costs a lot: “When one company or one local region has decided to strengthen the regulations, which costs, the jobs move to other companies or regions where the regulation is relatively low.”
Some cash buyers are trying to make a difference. GMS, the world’s largest, has contributed to the operational improvement
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On November 15th, at the Plaza Hotel in New York City, Marine Money will host its 13th Annual Ship Finance
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and ISO certification of nine ship-recycling facilities in Bangla-desh. Grieg Green of Norway works with yards in China to help them meet Hong Kong Convention requirements as well as the company’s own, more stringent standards. Grieg Green does not support beach-breaking and instead offers shipowners a service where they, as cash buyer, will ensure high levels of safety and en-vironmental performance from the yards they use in Turkey and China. This includes on-site supervision and also inspection of the waste-handling companies that the yard uses. Gearbulk is one shipowner that has taken up this approach with a vessel recently dismantled at Zhongxin Shipbreaking & Steel.
Total global demolition rates are increasing and are expected to triple in the next 25 years. If beach-breaking were stopped, it is unlikely there would be enough breaking capacity. Clarksons’ August report notes court activity in India that could see the entry of ships not complying with the Basel Convention banned but states that any effect is likely to be less severe than feared as vessels are still entering the country: “The situation is fluid and if Indian activity was halted, China, with a self-professed, government-backed policy of promoting green recycling, could stand to benefit.”
INTERIM MEASURESDNV has performed a number of yard assessments in China at the request of shipowners, showing variable results. DNV has also established over 100 hazardous materials’ inventories (IHM) for vessels in operation and vessels ready to be scrapped
and approved hundreds of IHMs for newbuildings. For new-buildings, the IHM is largely a paper exercise based on material declarations, but for existing vessels it involves onboard inspec-tion and material analysis, and there are practical limits to what is identifiable. “Without such documentation as an IHM, there is no way you can do a proper, environmentally sound scrapping. It is certainly a prerequisite but largely depends on whether the yards are using it or not, which is yet unknown in many cases,” says Kjetil Martinsen, principal surveyor and engineer for DNV.
Rather than just being a legacy from ships built in the 1970s and 1980s, asbestos use in the marine industry is still alive and well, says Dr. Patrick Morton, Managing Director of Lucion Envi-ronmental, a specialist in identification and removal of hazardous materials. It is not necessarily high-risk like some pipe insula-tion and spray coatings, but it may not be evident, even from manufacturer documentation, as in some countries a product can contain up to 15 percent asbestos before it needs to be labelled as such. However, products such as fibre gaskets and floor tiles are unlikely to present a serious risk if managed correctly. Sometimes asked to provide an asbestos-free certificate for ships, Morton says it is unlikely that a vessel is going to be totally asbestos-free: “It’s all about a spectrum of risk.”
As well as performing IHM assessments for older vessels, Morton is finding that shipowners are increasingly looking at the risks involved in their in-service vessels. Sometimes the surpris-ing results from an older vessel prompt them to review the safety
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Bangladesh. Courtesy: Maro Kouri. SE
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of the whole fleet. Will IHMs make a difference to breaking yards? Like Martinsen, Morton is not sure: “Unlike the built environment, you can send a ship from one place to another and the seller has the choice of where to send it, so there is that ever-present moral obligation.”
RECYCLECONAs part of interim measures before the Hong Kong Convention enters into force, BIMCO has developed a standard contract for the sale of vessels for green recycling, code-named RECYCLE-CON. A small but growing number of shipowners are looking to dispose of their ships in a safe and environmentally responsible
manner, says the organization. The contract provides shipown-ers and recycling yards with a commercial solution that mirrors many of the features of the Convention.
For Aron Frank Sørensen, BIMCO’s Chief Marine Technical Officer, both the Hong Kong Convention and the Basel Conven-tion have their place: “The best practical solution for us would be that you have the Hong Kong Convention to bring the ship to the yard and then what happens ashore after dismantling of the ship is Basel territory. That is something that the IMO is not able to regulate. IMO normally regulates ships and not what happens at the shore side. Once the vessel is in the yard, it is regulated by the local regulations in the country itself.”
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