Cleaner seas - Erling Dekke Næss (1976-1979)
Erling Dekke Næss succeeded to the Chair of INTERTANKO in February 1976.
The Secretariat, still housed with Norges Rederiforbund (the Norwegian Shipowners’ Association) now consisted of eight staff. General Manager Tormod Rafgård was now assisted by Commander Trygve Meyer, who had joined in 1972 with a brief to handle technical and documentary issues, and economist Herbjørn Hansson.
Erling Næss had been involved in tanker owners’ associations right back to 1930. He had clear views on priorities for INTERTANKO - particularly pollution prevention, and measures to improve the tanker market for owners.
A number of high-profile tanker casualties in the winter of 1976 kept the issue of pollution prevention to the fore.
These included the 23-year-old Argo Merchant stranded off Massachusetts spilling 30,000 tons of oil; the 24-year-old Grand Zenith spilling 32,000 tons off Cape Cod; and the 43-year-old Chester A Poling stranded, again off Massachusetts.
In a short period, 20 tankers were wrecked off the American coast. Ten of these were Liberian flag and eight were over 16 years old. While some of these casualties were attributed to particularly severe winter weather and to poor local aids to navigation - an issue later revisited by INTERTANKO - there was a focus on tanker ages and standards.
A contributory factor in a number of these casualties, INTERTANKO pointed out, was charter party provisions requiring ships to operate at full speed, and not necessarily always permitting speed moderation in heavy weather conditions. Casualties could result from onerous contractual obligations, and particularly in an unbalanced market.
INTERTANKO had noted the age of many of the casualties, and recorded in 1976 that "there is a close relationship between a vessel’s age and casualty record".
Although the objective was to encourage scrapping of older ships, the fact that such a policy would improve economic conditions added force to the case.
Age, and management, did not always characterise tanker casualties. In 1978, the Amoco Cadiz stranded off the North French coast causing a major spill, of the Torrey Canyon scale. A number of lessons - onboard (about the steering gear) and over the clean-up (the damage that chemical dispersants can do) were learned, and more careful attention to securing salvage assistance in time, and response planning, to improve speed and effectiveness in reacting to clean-up needs was called for.
Improvements in safety standards in ship operations were called for by IMCO through the adoption in 1978 of the Standards of Training Certification and Watchkeeping (STCW) Convention, and a number of breakthroughs in navigational aids, such as radar-assisted collision avoidance systems, took place.
Oil pollution to the sea from tankers is of two kinds - accidental, such as a tanker wreck, and operational, from deliberate (permitted) discharges from tankers. Operational pollution in the 1970s was by far the greater polluter and still is. Yet it is preventable. INTERTANKO and Erling Næss focused attention on measures to cut the causes of operational pollution.
Improvements were made to "load on top" procedures by wider adoption of crude oil washing (COW), a system of recirculating the cargo oil during discharge to hose down with high-powered jets of oil the tank tops, sides and frames to maximise outturn of the cargo. This took place not only to reduce the waste oil which would contaminate the ballast water later drawn into the cargo tanks, but also to extract as much as possible of the valuable cargo itself.
A Protocol to the 1973 Marine Pollution Convention MARPOL and the 1974 Safety of Life at Sea Convention SOLAS was passed by the Intergovernmental Maritime Consultative Organisation (IMCO) in 1978. This move was largely initiated by the US delegation. The Protocols addressed conversion of existing tankers and required segregated ballast tanks (SBT) or clean ballast tanks (CBT) to be created, or for COW to be installed, and in that case accompanied by an inert gas system.
The recurring problem of waste reception facility provision was also identified as central to removing operational pollution. So-called Resolution 3 at IMCO following MARPOL 1973, subheaded The Complete Elimination of Oil Pollution from Ships, identified this as the prime objective.
INTERTANKO repeated its call for floating facilities where shore facilities were absent, too costly or considered impossible and the example of Gothenburg port where the tanker Renare Hav (Cleaner Seas) was used for just that purpose. In 1977 INTERTANKO published its Conversion of Tankers to Slop Reception and Emergency Oil Spill Collection Stations study.
In 1976 Erling Næss contacted Thor Heyerdahl, famous for his Kon-Tiki, Ra and Ra II expeditions, to lend his support to the cause, which Heyerdahl did with great enthusiasm at INTERTANKO meetings in Oslo and Athens. INTERTANKO took part in other clean seas conferences including the United Nations Environment Programme (UNEP) Environmental Conservation conference in Paris in 1977.
INTERTANKO could hardly have chosen a worse time, economically, to call on ports to adopt reception facilities, which they saw as non-profit services at best or, more often than not, massive loss-makers.
Many ports were moving away from being managed as port trusts by shipowner boards towards municipalisation (passing control to local or state authorities) and the ethos of generating a local revenue and positive income, rather than serving shipping.
INTERTANKO pressed for enforcement of all outstanding clean seas conventions of which the provision of reception facilities was a key part. The conventions in question already dated back to the 1954 Prevention of Pollution of the Sea by Oil Convention, and a further Convention of 1962.
Erling Næss’ other great target for INTERTANKO was to move it to the centre of the economic debate about tanker shipping. At the start of 1976 there was an estimated tanker surplus of 100 million tons of cargo carrying capacity. Urgent measures were required to disperse this surplus and by 1978, 30 million tons of tankers, some 10% of the fleet, were in lay-up, earning nothing.
Economic activity had, in fact, risen and seaborne oil trade topped the 1973 levels at 1,650 million tons. Oil production rose another 3.6% in 1977, but a lot of new oil was coming from Mexico and Alaska, which came on stream in July 1977 and by 1978 was running at 1.2 million barrels a day.
Demand for tanker employment is expressed in ton-miles - tons of oil transported multiplied by the miles the oil is carried. The ton-mile figure was threatened by this ‘short-haul’ oil and by plans and developments of pipelines cutting down voyage distances. In 1977 the Suez-Mediterranean pipeline - SUMED - alongside the Suez Canal in Egypt opened and began to run oil at 20 million tons a year - a quarter of its full capacity.
The employment pattern of the independent tanker fleet also changed. In 1976, 311 million tons of oil was shipped on voyage charters - double the 1975 figure. By 1978, voyage chartering accounted for over 25%of the tanker trade, compared with just 13% in 1973.
Although a net increase in tanker tonnage on period charter (in excess of one year) of 6.8 million tons was recorded in 1976, the trend among the oil company customers was for reduced term commitments and increased spot chartering.
Much of the surplus continued to be absorbed in slow steaming. The bigger the tanker, an INTERTANKO study showed, the greater the speed reduction. Very Large Crude Carriers (VLCCs), were sailing 16% below full speed in 1976 and 23.6% below in 1978. Owners’ and oil companies’ fleets were setting speed policies using slow steaming formula studies. The sum saved overall on a reduced bunker bill outweighed the extra cost of time on voyage both for the ship and for the oil.
The Worldscale index showed the growth in importance in the bunker element in voyage costs. Each Worldscale voyage consists of a time element (notional time charter hire), a bunker element and the port costs. The bunker element rose from 20% of the costs in 1970 to 60% in 1976. Port charges rose from 3% to 7%, leaving the time element down from 72% to 33%.
The Worldscale index was now published twice a year to accommodate the volatility of port costs, and bunker prices were now adjusted twice a year based on 31 March and 30 September postings. The oil companies once again raised bunker prices in October and INTERTANKO exploded that "for the fourth consecutive year bunker prices were again increased by the oil companies in October, just after the elapse of the registration period for the bunker element in next year’s Worldscale. Fixtures based on Worldscale ‘as amended’ are seriously deteriorating because of this policy".
Despite the poor reward it was receiving, the VLCC had moved centre stage in crude oil carriage. By 1977, 60% of crude oil was carried by VLCCs, compared with 42.6% in 1973.
International Maritime Industries Forum
The seeds of the International Maritime Industries Forum (IMIF) had been sown by Erling Næss and Jørgen Jahre in 1975, and in 1976 it blossomed into a formal body. Retired British civil servant Sir James ‘Ned’ Dunnett GCB CMG, past Permanent Secretary to the Ministry of Defence, was recruited as Chairman. IMIF’s role was "to think the unthinkable" and in particular to investigate options and means to tackle the tanker surplus that other bodies, like INTERTANKO, were debarred for doing for fear of accusations of anti-competitive activity.
IMIF drew together tanker owners, European oil companies, shipbuilders and bankers. Its own existence merits a history. Dunnett was succeeded in 1979 as Chairman by an oil company man, Ronald Ilian from British Petroleum. He was succeeded in 1980 by Dr Helmut Sohmen, shipowner, from Sir Yue-Kong Pao’s Worldwide group, and in 1981 he was followed by banker James Gresham Davis CBE, of Kleinwort Benson, whose term of office came to an end after the IMIF’s 40th anniversary dinner in November 2015.
IMIF and INTERTANKO worked together with the objective of cutting the oversupply of tankers by increasing scrapping and restricting new shipbuilding. Conversions of tankers were encouraged. They became livestock carriers, firefighting ships, reception facilities, offshore loading installations and engaged in a variety of other non-transportation employment.
INTERTANKO, in fact, sought to get an antitrust waiver to allow a tanker scrapping scheme to be developed, but its application to the US administration was turned down.
Although a powerful INTERTANKO publication Employment, Environmental and Economic Impact of Accelerated Ship Scrapping had backed the application, the Japanese government offered assistance to shipyards switching to ship scrapping and efforts to interest other countries to develop scrap industries were pressed ahead. The response in Pakistan was particularly favourable.
Actual levels of scrapping increased encouragingly. In 1975-76 20 million tons of carrying capacity was scrapped or converted, in 1977 10 million deadweight tons was scrapped, and in 1978 15 million tons was scrapped. Before 1974 the annual scrapping rates had been one or two million tons only. Erling Næss encouraged INTERTANKO’s Members to sell their obsolete ships for scrap and not for further trading.
In 1978 an INTERTANKO programme from past years - strategic storage of oil - became reality in Japan where 20 million tons of oil was stored in tankers in a Strategic Petroleum Reserve, with plans to double the capacity.
Parallel pressure was put to cut surplus ship deliveries. In 1976 some 70 to 80 million deadweight tons of tanker orders were cancelled or converted. Taken with the scrapping figures for the year, the result was that the surplus of 100 million deadweight tons at the start of the year was cut to 65 million tons by year end.
However, there was pressure from other corners - local employment needs and the consequent political pressure to preserve jobs - to maintain shipbuilding activity. IMIF tried to encourage yards to follow the Japanese example and switch to scrapping, or to develop ‘scrap and build’ schemes that would avoid increasing the net tanker stock worldwide.
Pressures from IMIF and INTERTANKO to reduce support for shipyards - government subsidies and soft loans - were only patchily successful and the continuance of support for shipbuilding caused INTERTANKO continuing concern.
Despite cancellations, high levels of deliveries left over from the 1972/73 ordering spree meant that in 1977 20.8 million tons of new tanker capacity was delivered. A total of 19.6 million tons was still on order, but by 1978 new ordering had tailed away almost completely and the tanker fleet actually reduced in 1978 for the first time since 1945.
The results of the concerted efforts of INTERTANKO and others to address the tanker surplus were better than might have been expected. For two years - 1977 and 1978 - INTERTANKO?s Annual Report had included a chapter headed Promoting the Recovery, which in 1978 noted that "the major objective of INTERTANKO’s work was related to the tanker market depression".
Flag preference protectionism in America, vetoed in 1974 by President Gerald Ford, was opened again in 1977 under the Presidency of Jimmy Carter. A bill to reserve 4.5% of oil traffic to the American flag, rising at 1% per annum to a ceiling of 9.5%, was introduced in Congress. This was a more modest measure than the 20-30% reservation previously sought but still contravened free trade principles and an impressive line-up of shipowners led by Erling Næss and YKPao, of Hong Kong, the oil companies and foreign governments with maritime interests lobbied against it and it fell in Congress.
Back in the office, INTERTANKO applied in 1978 for consultative status at IMCO, a move not made earlier out of concern not to duplicate the work of other associations. Hitherto INTERTANKO had gained access through the London-based International Chamber of Shipping.
At the time, the International Chamber opposed granting INTERTANKO independent access to IMCO but access to INTERTANKO information was widened by allowing tanker brokers to subscribe to the Association’s publications in 1977; 68 brokers subscribed.
The Documentary Committee, led by Per Gram of the Northern Shipowners’ Defence Club, completed work on a model time charter and worked on current chartering problems, particularly cargo retention clauses - including provisions penalising tankers where oil was detected as remaining on board the ship after discharge was completed.
Another cargo problem was the now anomalous position of the Bill of Lading, historically the essential document of title to the goods on board ship, in cases where the document was not available at the discharge port when the ship arrived, as is normally the case in oil trading. INTANKBILL was produced and was a sales success.
Port Information Office
A Port Information Office was started to provide guidance to INTERTANKO Members on port costs and changes in dues, port conditions and local regulations and requirements. Publication of a Ports and Terminals Circular started in 1977.
All this activity was financed on a small budget. The 1977 budget was $400,000 and the Report recorded that "the framework of INTERTANKO’s activities is limited by its annual budget".
Two new clouds appeared on the shipping horizon towards the end of Erling Næss’ term. The United Nations Conference on Trade and Development (UNCTAD) had started to consider cargo sharing schemes for seaborne transport. And in 1978 the Shah of the oil producing giant of Iran was overthrown in a revolution by Ayatollah Khomeini and his supporters.
At the Annual Meeting of INTERTANKO, held in Kuwait in March 1979, Erling Næss retired as Chairman and Sir Yue-Kong Pao was elected his successor.