Three Day Masterclass in Petroleum Loss Control

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July 28, 2014

India Eases Foreign Flag Restriction

By Wendy Laursen

The Indian government has announced a new shipping category that will have priority over foreign flag vessels in the country’s coastal shipping sector.

The new category “Indian controlled tonnage” enables Indian shipowners to take advantage of low cost foreign flags. After Indian flagged vessels, this new category will have the right of first refusal of cargo over non-Indian ships. The policy change is expected to help local lines increase their share of the coastal trade market which is currently less than 10 percent. 

At least 50 percent of the crew, both officers and ratings, must be Indian, and the ship should also be used for training cadets. Additionally, the tonnage acquired under the new category cannot exceed a company’s Indian flag vessels. Shipowners must maintain their Indian tonnage at the level it was at April 1, 2014.

“The most important aspect of this news is that finally the government feels the shipping industry is important. It also recognizes that they need to give some relief to shipowners,” says Captain Rohit Bhatia, managing director of Wade Maritime Consultants in India. 

“It’s definitely good news for the Indian shipowning fraternity who has been pleading for relief for the past few years. I believe it is a step in the right direction to help Indian shipowners and to have them carry more Indian cargo. They would have to maintain their existing fleet under the Indian flag, but any new ships can be flagged out. 

“The requirement to maintain at least 50 percent Indian crew on these vessels means cost, union rules/regulations, training of cadets etc. Most shipowners would have preferred to employ foreign crews which are possibly cheaper and come with lesser regulation,” says Bhatia.

“Remember, it’s never a free lunch, the government will also benefit from additional revenues coming in to the country (read “more tax dollars”) instead of just dividends from foreign subsidiaries of Indian companies. It also means additional security for Indian trade viz-a-viz a larger percentage of cargo being carried by Indian ships.”

http://www.maritime-executive.com/article/India-Eases-Foreign-Flag-Restriction-2014-07-28

The New Indian Government Must Act Quickly

By MarEx

Captain Rohit Bhatia, based in India and managing director of Wade Maritime Consultants, analyses the challenges ahead for India’s new government:

This is the biggest opportunity that India has had in a long time. It is a chance to set course again on to a higher growth path. The new prime minister, Narendra Modi, and his government must work quickly and diligently to bring all the stakeholders together, frame the right policies with insight from industry leaders and ensure they are implemented without delay. 

Greater investor confidence is the biggest plus for the economy because of the new government. There is a wave of euphoria in the country now with Mr. Modi being elected, and it is coming from all sections of industry and society in general. This huge mandate should drive him to look at all sectors of Indian industry, including shipping, to bring higher economic growth to the country again.

It remains to be seen how successful Mr Modi will be in translating this huge support and confidence into actual positive change. There will be challenges. On the economic front, he has to tackle the country’s runaway inflation, faltering exports and imports, supply-side bottlenecks and the prediction of a weak monsoon season this year due to the “El Nino” effect which could derail any of his good intentions to prop up the economy. India is mainly an agrarian economy and with agriculture forming 17 per cent of the GDP and employing over 50 per cent of the workforce. Monsoons play a very important role in cultivation of crops and if the monsoon is weak, agri output would be weak and as such it will directly affect the GDP growth figure. 

There are global pressures too with the US Federal Reserve still in a ‘tapering’ mood which could result in rising interest rates in the US. This could cause Foreign Institutional Investors to pull funds from emerging markets including India and park them in more secure western markets.

For the maritime industry, a lot needs to be done on the political and regulatory front. Whether it is policy related to land acquisition, environment, tariff, taxation, customs, coastal shipping, dedicated freight corridors or investment, clear-cut policies must be put in place and then implemented. A stronger and more independent Ministry of Shipping is the need of the hour to ensure such policies are made and implemented without undue delay.

Port development is already underway in India and crucial to its economic development, but the government must act here as well. In India, the major ports come under the jurisdiction of the central government, the non-major ports under their respective state governments. Major ports are not growing due to paucity of land and poor hinterland connectivity. Therefore, their first and last mile connectivity suffers. Moreover, central and state governments mostly do not work in tandem resulting in delayed action, or no action, on development projects. 

The non-major ports have huge potential, as they do not have these constraints. The current challenge is that Indian state governments (other than Gujrat) do not currently have a clear-cut maritime policy. Neither do they have maritime boards (except a few states) to implement their policies, develop the non-major ports and take care of maritime affairs. 

Most of the investment we currently see in these ports is private investment. The states need to develop non-major ports with good hinterland connectivity, port and marine infrastructure. They need to support port developers in getting finance, acquring land and developing hinterland road and rail networks. Policy inaction, political and environmental hindrances have delayed the formation of dedicated freight corridors and the award of infrastructure projects, and all of these have contributed to bottlenecks at ports.

The new government has majority in the parliament on its own accord, but for this whole development exercise to be successful, it will have to take its regional partners along. Some of them control coastal states and so are well aware of the need to develop all aspects of maritime infrastructure, not just ports. Their mandates should address better hinterland connectivity, land acquisition policy, coastal and inland water transportation policy, tariff regulations, customs, income tax policy and more so that they earn the on-going support of Indian industry.

Captain Bhatia is a well-known maritime transportation industry expert with over 25 years of operational and commercial experience including organizational turnaround, business strategy, operational risk management, legal and regulatory matters. He has in-depth technical, commercial and operations expertise gained by serving at sea for over 15 years and later on ashore in the maritime management consulting field. His work ashore has included working as a risk management and loss prevention consultant, maritime business advisor and managing director of a leading international maritime management consulting firm.

He has worked on numerous projects over the last decade in operational risk management, business strategy, organizational design, human capital management, strategic investment advice and regulatory compliance for leading shipowners, charterers, traders, oil majors, ports and private equity firms. He is a specialist in shipping operations, maritime economics, transportation strategies and operational risk management as well as being a key note speaker on various advanced training programs and seminars in the shipping industry. He is a master mariner with an MSc in International Shipping (UK) and a member of the International Association of Maritime Economists.http://www.maritime-executive.com/article/The-New-Indian-Government-Must-Act-Quickly-2014-05-23

Asian ECAs may drive up LNG demand

01 Oct 2012

LNG fuelled ship bunkering from a small LNG tanker (picture: Kogas)

LNG as bunker fuel is becoming more than just talk in Asia: Wendy Laursen looks at developments in Singapore and other Asian ports, where sulphur limits are likely to make gas fuelled ships a ‘2020 vision’.

As the world’s largest marine fuel bunkering port, proponents of LNG bunkers believe it is strategically important for Singapore to offer LNG bunkering in the near future if it wants to stay in the game. Given that the global SOx cap of 0.5% is not due until 2020 (subject to review in 2018), it is the designation and location of more Emission Control Areas (ECAs) that might set the timetable for action, as the amount of time a vessel spends in ECAs features strongly in the financial case for burning LNG as bunker rather than low sulphur diesel. The oil industry has expressed no interest in refining heavy fuel oil to provide a lower sulphur content in order to meet the 2020 market.

There is talk within the industry of an ECA being established in the Strait of Malacca but this would have a big impact on world trade and Singapore may not get the required support from Indonesia or Malaysia to implement it. Rumours abound about a Japanese ECA too despite past resistance from Japanese shipowners. The Pearl River delta including Hong Kong is another possibility being discussed and some see Korea, Australia and New Zealand as potential ECA candidates. China has already started with a process of emissions caps and the introduction of LNG bunkering in the Yangtze River.

Captain Rohit Bhatia, managing director of Wade Maritime Consultants in India, agrees that development of the required regulatory schemes will be important. “The ports providing LNG bunkering facilities will do so in partnership with third parties or bunker suppliers. Maritime regulators like the Maritime and Port Authority of Singapore and the Directorate General of Shipping in India would have to develop regulations for both shore-based and ship-to-ship bunkering. In countries like India, customs rules are very archaic and wrapped around with a lot of red tape. This is one of the reasons why India has not grown as a bunkering destination.”

Captain Bhatia’s predictions for the first major LNG bunkering hubs are: Singapore, Hong Kong, Busan, Tokyo Bay and Shanghai. Key challenges will be the introduction of local regulations, the cost of conversion, the availability of tank space on board existing ships and the price of LNG compared to heavy fuel oil, but, even more importantly, Captain Bhatia sees the development of efficient logistics and the exportable surplus of LNG around the world as crucial to the fuel’s future potential. Currently, Singapore is the most advanced Asian country in this endeavour, he says, and like Europe and North America, he believes the designation of more ECAs will play an important role in generating demand for LNG. “LNG bunkering in Asia is likely to be a 2020 vision.”

Singapore has been the first Asian country to take definite action on international LNG bunkering for ocean going vessels. A joint industry project was established earlier this year to investigate the operational feasibility of LNG bunkering in Singapore and Captain M. Segar, group director of the Maritime and Port Authority of Singapore, described the country’s ability to bunker LNG as in line with its commitment to clean and green shipping. “Singapore is taking it very seriously,” says Tim Wilkins, Singapore-based environmental manager for Intertanko. “The Norwegians have been pushing it and we’ve got some key owners and operators in this area involved both in production and in transporting LNG around.” I. M Skaugen’s Norgas Carriers, for example, has a strong presence in Singapore.

In Asia, LNG is three times the price charged in the US and twice that in Europe, but it is the price advantage of LNG over low sulphur diesel fuels that is really the market to watch, says James Ashworth, lead consultant for Singapore-based business consultancy TRI-ZEN, as it is the only qualifying fuel alternative to LNG outside nuclear to achieve the required sulphur levels post 2020.

Significant investment has been made in LNG infrastructure for land-based applications in Asia, but financing has been traditionally secured against long term supply contracts with gas distributors or power generators. “The market for LNG bunkers will be less predictable and thus more challenging as a basis for investment security. While the means exist for larger players to establish facilities and initiate a market, it could prove difficult for smaller players to secure financing until the LNG bunker market becomes established and understood,” Mr Ashworth says.

Without immediate demand from shipping, Asian ports are not yet investing in LNG infrastructure. “It might take somebody like Maersk to team up with a big storage company such as Vitol. They could then afford to install strategic bunker stations around the world to service the main liner routes,” says Mr Ashworth.

“There are technical challenges associated with LNG bunkering, but these are all well known and understood. What is less well understood and even less defined are the rules and protocols needed for custody transfer of LNG,” he says. The complete avoidance of methane venting to the atmosphere during fuelling operations is imperative and this means that bunker barges will probably require sophisticated reliquefaction equipment or at least pressurised storage tanks dedicated to the management of excess boil off gas.

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