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Virtual Arrival an Initiative by Shipping to reduce GHG emission Singapore 8 may 2012

Virtual Arrival an Initiative by Shipping to reduce GHG emission Singapore 8 may 2012. Erik.Ranheim@INTERTANKO.com Senior Manager Research & Projects INTERTANKO. Virtual Arrival, an OCIMF - INTERTANKO project to r educe emission. Background

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Virtual Arrival an Initiative by Shipping to reduce GHG emission Singapore 8 may 2012

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  1. Virtual Arrivalan Initiativeby Shipping to reduce GHG emissionSingapore8 may 2012 Erik.Ranheim@INTERTANKO.com Senior Manager Research & Projects INTERTANKO

  2. Virtual Arrival, an OCIMF - INTERTANKO project to reduce emission • Background • Potential emission reduction for existing ships ≈ 5-15%, and • Fuel costs 70% of operation/running costs for owners • What then curbs emission reduction? • Shipowners continuously working to reduce fuel consumption • Many stakeholders involved– chain of responsibility • Several commercial and practical obstacles such as who should pay for the time, who should pay for the bunkers, 3rd party obligations, and contractual implications • Virtual Arrival is a project that involves several stakeholders and implies co-operation and the removal of commercial obstacles Shipowner Charterer Insurer Terminal Chain of responsibility Class Broker Flag Port

  3. Reducing fuel consumption is the most profitable initiative an owner can take today Daily costs fuel VLCC*: ≈ $60,000 per day Daily operation costs**:≈ $12,000 per day i.e. All owners top motivated to reduce emission but Optimal results can only be achieved through co-operation within the industry and within the company $/t 380 cstFujairah * Full operational speed **Operation costs: crew, insurance, lub. oils, maintenance, administration:

  4. Shipping initiative to reduce emissionvirtual arrival - VA • Virtual Arrival is a sure method to reduce emission • Virtual Arrivaltaking advantage of inefficiencies in the market, but does not affect the market • Virtual Arrival reduces port congestions and contribute to improve safety • but • Virtual Arrival also changes the economics and risk of the voyage • Co-operation between OCIMF and INTERTANKO has co-operated to ensure that changes in the risk and economics has been orderly and not biased

  5. Preconditions for Virtual Arrival • A known delay in discharge port • A mutual agreement between the ship operator and charterer to perform a Virtual Arrival voyage. Other parties may also be involved in the decision making process, such as terminals cargo owners • An agreed Charter party Clause that established the terms for Virtual Arrival • An agreement on how to calculate and report the performance and fuel consumption of the ship • An agreement on how to assign the benefits between the parties involved • Operator is compensated for the demurrage he would have received if the voyage had been done at service speed

  6. How Virtual Arrival reduces GHG emission Tonnes CO2 emission Days Voyage length Tonnes CO2 emission at full speed: 2,081 CO2 emission at reduced speed: 1,179 Reduced CO2: 902 Reduced SOx emission 23 Bunker saved 290 (43%) Assumed reduction NOx emission 43% Start Virtual arrival Virtual Actual voyage decision point Arrival Arrivaltime Time

  7. A Weather Analysis Providers can be used as a third party to do the Virtual Arrival calculations • Methods for calculations or the use of a Weather Analysis Providers should be agreed upon in advance to void post fixtures discussions • INTERTANKO has worked out C/P clauses to be used both when using and not using Weather Analysis Providers • If GHG emission trading is implemented in shipping the use of a certified 3rd party to do the Virtual Arrival calculations my be required

  8. Emissions Reduction Clause – Version 1 §§§  1. Charterers may request Owners to reduce speed during the laden voyage to a specified average speed or to arrive at the discharge port not before a specified date. 2. Owners may:   (i) refuse such requests on reasonable grounds, including but not limited to existing contractual obligations, or for operational or safety reasons, or (ii) provide Charterers with estimates of additional steaming time, and reduction in bunker consumption, together with the invoice cost of the last bunkers supplied. If Charterers agree Owners' estimates prior to any commencement time provided by Owners, Owners will instruct the vessel to comply with Charterers’ request.  3. For the avoidance of doubt, Charterers may make further requests in accordance with sub-clause 1 above at any time before or during the course of the voyage. 4. Charterers shall pay for the additional steaming time at the demurrage rate, less 50% of the bunkers saving both as set out in Owners' estimates under sub clause 2. Payment to be made against Owners’ invoice together with freight.  5. Charterers shall incorporate this provision in all Bills of Lading and shall indemnify Owners in respect of all claims against Owners arising from compliance with the Charterers’ requests under sub clause 1. above.

  9. Emissions Reduction Clause – Version 2 • 1. Charterers may instruct Owners to reduce speed during the laden voyage to a specified average speed or to arrive at the discharge port not before a specified date, subject to Owners’ consent, which is not to be unreasonably withheld. It shall be reasonable for Owners to withhold consent due to, inter alia existing contractual obligations, or for operational or safety reasons. •  2. Charterers may instruct Owners to further vary the performing speed (subject to the limit of the vessel’s service speed) at any stage during the voyage. Any further reduction of the speed shall be subject to Owners’ consent in accordance with Sub-clause 1. • 3. Charterers shall compensate the Owners for all extra steaming time at the demurrage rate. Any bunker savings shall be shared 50/50 between Owners and Charterers.  4. The bunker invoice price from the last bunkering shall be used to calculate the bunker savings. Any such savings may be deducted from the compensation payable for extra steaming time or shall be reimbursed by Owners if no such deduction has been made. • 5. Following completion of the voyage, the Master shall calculate the extra steaming time and any bunker savings arising from Charterers’ instructions and present his calculations to Charterers. •  6. If Charterers instruct a Weather Analysis Service Provider (WASP) Owners shall provide the WASP with such information as the WASP may reasonably require for its calculations. •  7. Charterers shall incorporate this provision in all Bills of Lading and shall indemnify* Owners in respect of all claims against Owners arising from compliance with the Charterers’ instructions under this clause. . §§§

  10. Conclusion • Shipping see the need to reduce GHG emission and is actively working to do so • Virtual Arrival is a simple practical concept to reduce GHG emission • Virtual Arrival a robust concept that creates a win-win situation for all parties involved and demonstrate a pro-active industry You can find the Virtual Arrival manual at: http://www.intertanko.com/Topics/Environment/Air-Emission--GHGs1/Air-Emission--GHGs/Virtual-Arrival/

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