The tanker industry's move to improve its safety record, after a rash of casualties during the past 5 years, has triggered increases in operating costs that are expected to continue until the end of the decade.
Increases are expected mainly in repair and maintenance (R&M) and insurance and manning costs, says Drewry Shipping Consultants Ltd., London.
R&M costs have risen 10-30%/year during 1991-93, Drewry said, and are likely to increase another 5-20%/year between now and 2000.
Enhanced survey requirements of the International Association of Classification Societies, increasingly widespread and stringent port controls, and closer attention by insurers to their liabilities are expected by Drewry to keep upward pressure on maintenance costs.
"This trend is likely to be compounded by the aging nature of the world fleet and the lack of long term preventive maintenance in the depressionary years of the 1980s," Drewry said.
Average increases in hull and machinery insurance for tanker operators with good track records were estimated at 30-40%/year in 1990-92. Insurance premiums have risen 25-30% in 1994, while another 20%/year increase is expected in 1995 and 1996.
Insurers were said to be taking the view that tanker owners have been buying cover "on the cheap" for too long. Institute of London Underwriters figures showed that premiums were outweighed by claims during 1989-91.
Large protection and indemnity (P&I) insurance groups, called clubs, were said to believe continuation of unlimited liability is an anachronism in a world that is becoming more dangerous for liability underwriters.
Drewry said some clubs are likely to continue to offer unlimited coverage while others set a limit, with a preferred limit of $2 billion. A two tier system is expected in time for February 1995 insurance renewals.
CREWS, NEW SHIPS
A combination of a shortage of skilled seafarers and the campaign to improve standards is expected to raise manning costs. Drewry said there will be a deficit of 150,000 trained officers in the shipping industry as a whole by 2000 and a similar deficit in ratings.
An International Maritime Organization training convention is expected to be approved in mid-1995 for implementation in 1997. This is expected to hike manning costs, along with P&I clubs' insistence on minimum manning operating standards in a move to curb the recent explosion in claims.
Buying new ships also is likely to burden tanker owners still further in the second half of the 1990s, Drewry said, as the increasingly aged fleet requires renewal.
Drewry said, "With nearly 60% of the world tanker fleet over 15 years of age at the end of June 1993, it is forecast that the price of a double hull very large crude carrier could reach $150 million by 1997-98, although much will depend on the stringency of new inspection procedures and there being no substantial increases in Far East shipbuilding capacity."
Copyright 1994 Oil & Gas Journal. All Rights Reserved.
