My charge is to trace the evolution of the tanker industry and of Intertanko. I will expand on that mandate somewhat and take a look at certain issues facing the oil tanking industry and the challenges for Intertanko in the years ahead.
Early challenges
When I became chairman of Intertanko in 1987, it had come to represent 85% of the world's independently owned tanker fleet. And its respectability and industry following were contributed to by solid work on the various technical, commercial, legal, political, and regulatory fronts in which the industry was engaged.
The early success of Intertanko is even more remarkable when set against the backdrop of the political and economic problems that had rocked the tanker industry during the association's early years. These events included the oil embargo of October 1973, the Iranian crisis of 1979, and the Iran-Iraq war of the 1980s.
When Intertanko was founded in 1970, demand for oil was growing at an annual rate approaching 10%. The Suez Canal was closed, and newly built shipyards in Japan and Europe were starting to disgorge large numbers of VLCCs [very large crude carriers]. These were to lead to a doubling of the world's tanker fleet over the ensuing 5 years.
Coinciding with this was the dramatic increase in the price of oil that occurred in October 1973. This would devastate consumption, both directly and through the profound economic slowdown it induced.
To put it mildly, the newly built tanker fleet received a cold reception when it was delivered, and the opening of the Suez Canal in 1975 did not warm the hearts of the world's proud new VLCC owners.
In addition to having to deal with a tonnage surplus of unprecedented magnitude, the industry was having to stave off assaults from other quarters. Among the most significant distractions were cargo preference, shipbuilding subsidies, and interference with the free clearing of international maritime labor markets.
And the International Maritime Organization (IMO) was gathering momentum as a regulatory force requiring active monitoring and support. Intertanko brought reason to bear to the evolution of maritime policy.
Despite the turbulence of those early years, the organization in 1987 was a quiet, close-knit, hard working group of professionals. The executive committee dealt with such thorny issues as:
- The attacks on innocent shipping in the Persian Gulf.
- The need for a statutory regime for sharing liability for pollution.
- The urgency of diverting IMO focus from new regulations to enforcing existing conventions.
In 1989, my term as chairman of Intertanko expired and, later in the year, the Exxon Valdez ran aground off the shores of Alaska. The tanker industry was about to embark on a period of unprecedented political attention culminating in a far-reaching transformation of the regulatory framework within which it carries out its work.
Eye of the storm
In those days, people understood very little about shipping and were none too concerned about how petrol found its way to their local pumps.
But the Exxon Valdez provided rich new fodder for the media, the environmentalists, and politicians.
All of a sudden, tanker owners acquired a whole new public image-that of arch polluters of the world's oceans and, therefore, enemies of all law abiding, God-fearing, clean-living, family people with wholesome values and rosy-cheeked children.
It is thus that the tanker industry not only came under the microscope, but it was also forced to engage in intense introspection and self-criticism. Hand in hand with the draconian measures imposed on the industry came a need for orthodoxy of doctrine within our industry.
For ship owners to express reservations about the virtues of double-hulled ships or of the need for multitudinous vessel-response plans (depending on what state you were trading to) was a heresy frowned upon by all up-standing adherents of the new ideology.
As an industry, we cheerfully embraced the double hull, unlimited liability, vessel-response plans, management-response plans, spill advisors, spill contractors, responsible persons, increased COFR [certificates of financial responsibility] costs, quality assurance, quality management, and a host of other measures that did more for the whiter-than-white (or greener-than-green) appearance of politicians than for safety or protection of the environment.
And in the process, we had to articulate explicitly (as if they had never existed before) all policies and procedures that had until then been fundamental to the conduct of our business and the running of our ships.
Now while all this was happening to the shipping industry, what was the oil industry up to? (Remember that it was the oil industry that had dropped us into this with the two most notorious oil spills in recollection.)
[Intertanko says that in 1989 the Exxon Valdez spilled 36,426 tonnes in 1989; the Khark V spilled 76,398 tonnes.]
The oil companies were among the most severe and self-righteous critics of shipping. Individual oil-company requirements proliferated and often conflicted with one another.
Vetting [the practice of using only vessels whose risks have been deemed acceptable to a company] became tighter and ship inspections cascaded upon one another and with port, state, and class inspections to the point of endangering cargo operations.
The particular policies of any oil company with which one was seeking to do business had to be subscribed to, and whenever market circumstances permitted, outrageous charter-party clauses were shoved down owners' throats.
And to add insult to injury, oil companies did everything in their power not to pay for the improved quality of equipment and service upon which they were insisting.
While oil-company chairmen were extolling their community-mindedness and concern for safety and the environment, they were turning a blind eye to their chartering departments' systematic mauling of tanker owners through onerous and unbalanced charter-party agreements.
The result was that the safety and environmental friendliness of shipping were, in fact, being undermined.
The manipulation of information and distortion of competition by charterers (not to speak of the delays or non-payment of demurrage) were neither unwitting nor benign and did much to prevent the shipping industry from investing in needed equipment and human resources.
Defending the shipping industry's interests required a massive effort not only on substantive issues, but also in public relations.
Intertanko rose to the task with results that exceeded the expectations of its members.
Throughout this tumultuous period, Intertanko:
- Managed to provide a stand-up service to its members through the workings of its [shipping] documentary, Worldscale, insurance, bunker, IT safety, technical, and environmental staff and committees.
- Continued to represent effectively the interests of its constituent industry sectors (whether in chemical, short sea, shuttle tanker, or other trades).
- Succeeded in galvanizing the resources of its members around the world by reaching out to them in regional committees or representation.
- Strove for the preservation of competition, in the face of adverse market circumstances.
- Upheld standards of quality and professionalism.
- Gained the respectability of governments and the community at large through the extremely effective work of its public relations committee.
- Increased its influence over maritime policy through its dialogue with governments and the IMO.
Daunting future
But Intertanko's accomplishments will be dwarfed by the work it will need to undertake in the years ahead if it is to remain as effective over the next 30 years as it has been over the last.
Value system
The first category of problems facing the tanker industry has to do with the value system of the community in which we operate. For some reason, tanker incidents more than anything else bring out the distortions in society's values and priorities.
A single weekend of shooting in the UK, for example, will see the death of thousands more birds than were affected by all the tanker groundings of the last 10 years put together. And all of this is in the name of sport, not in the provision of a vital service affecting our well being.
What is more serious, when it comes to tanker incidents, is that newspapers write and regulators remind us of the Exxon Valdez, of the Braer, and of the Erika, in which no lives were lost. For some reason, no mention is made of the Nagasaki Spirit or of the British Trent in which several mariners perished.
Although we are all fervent proponents of a clean environment, nothing preoccupies shipping people more than the safety of the people who handle our ships. One can't help wondering about the apparent callousness of the press and our politicians, and of how opportunistic is their choice of focus.
The pervasiveness of this attitude is best manifested in the response received recently from a senior oil company official to a serious question on his company's vetting standards and procedures:
"At the end of the day," he said, "we manage perceptions."
That a major custodian of society's interests in safety and pollution prevention should see his duty extending purely to the management of perceptions as opposed to substance is sad testimony to the sincerity the tanker industry brings to its responsibilities.
Abuses of power
The second category of problems consists of the abuses of power.
The first of these is the influence shipbuilders and ship owners exert over classification societies in the furtherance of their respective interests.
The extent to which classification builders have subjugated societies is alarming and has far-reaching implications for the longevity of the ships built today and for the safety of the seamen who will sail in them.
As a group, ship owners must bear the burden of a not overly glorious history of relationships with our classification societies and must recognize we have helped bring on the criticism they are subjected to today.
A dramatic recasting of relationships may be necessary to redress an untenable situation.
The second abuse of power can be found in the market behavior of charterers, as mentioned earlier.
This is a bad moment in the market cycle to be trying to make this point. For every year of good market, however, we seem to experience several years of bad market.
The lengths and depths of the troughs are exacerbated by the market machinations of our customers. Their suppression of information and circumvention of the market through "private fixing" is perhaps symptomatic of the trade-driven world in which oil companies operate today.
Nonetheless, over time, these methods deprive the tanker industry of precious revenues needed to sustain the quality of equipment and service expected by our customers.
But the most outrageous of all abuses of power is found in our elected officials who knowingly subvert the stability of our industry and even the safety of our mariners for their political gain.
Whether in America or in Brussels, support of unilateral measures [that is, measures imposed by one nation or a bloc of nations that are at odds with those agreed upon under IMO] represents an act of unabashed political opportunism, undermining the authority of the IMO, and leading to a set of diffuse, inconsistent, and counterproductive regulations that serve no one's interests.
It is perhaps time the self-appointed champions of society's interests be exposed for the opportunists they really are.
Identifying right issues
The third category of problems lies in the choice of issues upon which ship owners and regulators should concentrate their energies. One measure that is urgently needed is a routing and traffic-control regime akin to what exists in civil aviation.
More seafarers have perished because of an absence of vessel routing and traffic control than for any other reason in modern shipping history. Examples of the Nagasaki Spirit and British Trent present only two cases in which lives of mariners could have been saved had such a system existed.
With the technology so readily available and the international legislative framework so easily borrowed from the aviation industry, there is no reason we should be unable to implement in short order a regime that:
- Forbids through traffic in such busy passages like the Straights of Malacca.
- Mandates alternating unidirectional traffic for such narrow waterways as the Bosphorus and Houston Ship Channel.
- Imposes holding patterns for ships entering fog-bound or congested zones.
- Controls the arrival and departure of ships from ports.
- Generally ensures ships are never close enough to one another to have to rely on the judgment of the pilot or officer of the watch, or on the ability of the two ships to communicate, in order to avert a disaster.
Taking ourselves seriously
But before tanker owners can take any issue seriously, they must start by taking themselves seriously. This is the last, and perhaps most challenging, problem the industry will need to address.
It is time they began to recognize what their real purpose is as tanker owners.
For us to admit we only make money by buying and selling ships is a most disturbing revelation of our vision of our role as tanker owners. The act of producing a transportation service is not regarded as an activity capable of yielding profit, but is a mere sideline to the principal focus of our entrepreneurial energy-which is to buy and sell ships.
Recent initiatives towards consolidation in the industry show an awakening of the sense that there is a legitimate business, and money to be made, in performing transportation services according to traditional norms of industrial behavior.
But there is a need for much more progress in changing the mind set of this fragmented industry, and in causing owners to take the business of moving oil by sea as a business in itself, worth taking seriously and worthy of a reasonable profit.
It is only by recognizing the importance of our services that we will aspire to the returns on our investment, enabling us to fulfill our responsibilities as the lifeblood to economic activity around the world.
That responsibility will only be fulfilled if we are able to invest in the necessary equipment, people, and research enabling an evolution in the technology and efficiency in the ocean-borne carriage of oil.
Special role
Intertanko, as the industry's principal unifying body, has a special role to play in this evolution on which depends not only the success of the tanker industry but, more importantly, the well-being and economic development of producing and consuming nations.
Intertanko's leadership has not only benefited the interests of tanker owners, but in working for greater safety, respect of the environment, competition, and efficiency in the ocean carriage of oil, it has rendered an invaluable service to the world community.
Basil Ph. Papachristidis was chairman of the International Association of Independent Tanker Owners (Intertanko) 1987-1989. This article is based on his address in Oslo on Sept. 27, 2000, on the occasion of Intertanko's celebration of the 30th anniversary of its founding.
During his tenure, Papachristidis worked, among other efforts, to secure protection for tankers plying the waters of the Persian Gulf during the Iran-Iraq war, often referred to as the "Tanker War."
Intertanko calls the war "the most intensive assault against neutral shipping since the Second World War" and notes that 250 seafarers were killed and a similar number injured, hull damage was inflicted on approximately 300 tankers from 30 maritime nations, and damage to shipping reached more than $3 billion.
The conflict was only one of the major disruptions to world tanker movements with which Intertanko had to deal during Papachristidis' tenure.
As chairman of Papachristidis Holdings Ltd. and Hellespont Shipping Corp., London, he represents a tanker fleet of VLCCs and Aframax carriers with more than 2 million dwt.
He is a member of the General Committee of Lloyd's Register, London, a council member of the American Bureau of Shipping, and is past chairman of the Hellenic Marine Environment Protection Association.
Papachristidis received his undergraduate education at McGill University, Montreal, and holds a PhD in business administration from Columbia University, New York.
