Compliance and Enforcement a shipowner / operator perspective Comments on 2015 compliance Enforcement What can we expect? Economics of compliance: why comply? Roger Strevens, Wallenius Wilhelmsen Logistics
WWL at a glance
WWL Own fleet 60 ROROs Deep sea, global 153year heritage Factory to dealership 4.3m moves by sea, 6m by land USD3bn Enviro frontrunner 3
The Importance of Strict Enforcement of the Sulphur Regulations Niels Bjørn Mortensen Director, Regulatory Affairs Maersk Maritime Technology EEDI MMT - Regulatory Affairs Slide no. 4
WWL 2015 compliance Except MGO, compliance solutions still maturing Economically, best long-term compliance solutions unclear WWL compliance approach under continuous review Competitive motivation to minimise cost MGO Scrubbers Exploring all compliance possibilities 5
Sulphur Frontrunner Frontrunner philosophy Exceed responsibilities today to reduce risk and cost tomorrow A decade of S innovation Deep tech. & oper. experience Real enviro commitment Cumulative SO x saving French annual SO x 4 Stream Approach
About 4 Stream Approach ULSFO Bunker Oil Distillate Fuels (MGO) Other Energy Sources (LNG) Leveraging low sulphur experience & expertise Working on a broad scale Expect need for more than one solution Best solution for a vessel depends on: Age Size Trading pattern Design specifics Exhaust Gas Cleaning Systems 7
MGO / HFO differential 8
WWL s 2015 ECA perspective USD300/t 40-70t/d USD10-20k/d Per vessel Other issues: Extent Impact Uncertainty Hard hitting regulation Industry game changer 9
Poor enforcement EC study 1/1000 inspection rate Fines inadequate WWL: approx. 1 sulphur inspection Bunker theory / practice mismatch Rumours Some buy no LS HFO BDN s with blank % S? 10
A level playing field? As regulatory cost increases enforcement more than regulation alone drives compliance Enforcement is prime driver of compliance Weak enforcement & high costs creates temptations Bad behaviour rewarded, good punished Inverted regulatory dynamic Negative for environment & health Difficult for compliance solution providers
Enforcement: 2 main issues? Detection Technology Vessels underway Legal standing Jurisdiction Territorial waters Compound infractions Much work to do regarding enforcement on the high seas 12
50 mill. tons of oil out of Primorsk + 25 mill tons out of Ust Luga annually. An Aframax tanker can save USD 120-150,000 on a voyage from the Atlantic to Primorsk and back again by burning HFO instead of MGO. Distance sailed within the ECA: ~3300 NM Slide no. 13 Regulatory 6 November Affairs 2014
Legal uncertainty Can a coastal state issue fines for non-compliance committed outside itswatersof jurisdiction? EU Sulphur Directive states: Sanctions must be: Effective Proportionate Dissuasive If applied to the last 12 NM, but not the first 800 NM, it may still be good business to be non-compliant. Maersk Maritime Technology Slide no. 14 06-11-2014
Why Comply?
So why comply? Contractual requirement Strategy Vessel financing It s the law and it s not optional! Market sentiment Risk mitigation Doing the right thing, even if no one is watching
Customers care Interests Commercial Contractual Strategic Risks Supply chain Brand Business ethics Fair competition Shipping and shippers: bound to compliance 17
It s not personal, it s business Situation will not self-correct, Was getting little attention and more likely to get worse 2020+ Unacceptable business risk 18
Trident Alliance: enlightened self interest Single issue shipping network Sulphur regulation Fair competition through effective enforcement & transparency www.tridentalliance.org Strong message Aligned: environment, health & industry Unexpected, but welcome Now a regular headline issue
We are the Trident Alliance 23 Leading shipping companies (so far) Wide range of company sizes Issue applies to all See yourself here?
Approach & Initiatives Communication Awareness The tricks of the trade Collaboration with RO s Enforcement: regular headline issue Innovation Faster, cheaper & more extensive detection Focussing of resources Satellite control of drones, Portable fuel analysis devices Transparency Leading by example Greatest potential for TA Not all regulatory problems need regulatory solution
The tricks of the trade - how to cheat Many scenarios explore two: Feign ignorance False BDN, false allocation tanks Maersk Maritime Technology Slide no. 22 06-11-2014
How to cheat? Ignorance: Never heard about these new rules! Pro: In a low enforcement regime, this could go on for years. If caught, the penalty woudl probably be lower than in case of deliberate noncompliance. Con: If will only work the first time you are caught. PSC could check the ECA history of the ship and issue penalties for previous non-compliant trips in the ECA. Maersk Maritime Technology Slide no. 23 06-11-2014
How to cheat? False Bunker Delivery Notes BDNs state: 3500 t HFO and 1500 t MGO Reality: 4800 t HFO and 200 t MGO False tank allocation 3500 t HFO in dedicated HFO tanks 1300 t HFO in MGO tank (former LSFO tank) 200 t MGO in MGO tank Oil Record Book Recording fuel consumption from MGO tank when inside ECA Shift to real MGO upon entering port Maersk Maritime Technology Slide no. 24 06-11-2014
Bunker Delivery Notes BDN - come in all shapes and formats Maersk Maritime Technology Slide no. 25 06-11-2014
Commercial from a stamp manufacturer: When you need a stamp or seal you need it now, not next week. That s why Walker Companies specializes in delivering customized stamps overnight and creating corporate seals while you wait. Maersk Maritime Technology Slide no. 26 06-11-2014
How to cheat? Tank conversions Maersk Maritime Technology Slide no. 27 06-11-2014
Summary Generally poor enforcement efforts to date How will jurisdictional issues be resolved? S Regulation has unprecedented cost, impact Most will comply, but a temptation exists Weak enforcement bad for new fuels Trident Alliance: fair competition objective, communication focus. Join us! Tricks of the trade sunlight is the best disinfectant! Maersk Maritime Technology Slide no. 28 06-11-2014
Fair competition through robust enforcement and transparency