conclusions
by the conference chairman
Michael Grey

mare forum 2004

Maritime Transportation of Energy from Russia and Central Asia.
Challenges and Opportunities
- From Russia with love -

This conference focused on the problems and solutions attached to the maritime delivery of energy from Russia and Central Asia, the challenges and opportunities of its title given equal prominence. It was held against a background of spiralling oil prices, rapidly increasing energy exports from Russia and a growing realisation that these sources were likely to be as important as the Middle East in the mid-term future. Nor was it possible to forget that the economic renaissance and prosperity of Russia was closely bound up with the
development of its energy industry and moreover, the development of an infrastructure that would carry that energy into world markets; the
ships, ports and pipelines necessary for that exploitation and delivery.

Essential energy

“Without Russia and its oil, the world would be facing a crisis” was a
statement in the “setting the scene” inaugural session that seemed to
sum up the importance of this resource, with the corollary that most of this energy will have to be sea-delivered, due to the absence of pipelines, their colossal cost and the fact that many would have to be
routed over countries other than Russia. And sea delivery brought with
it no ordinary problems, as geography, topography and meteorology conspired to ensure that there was no “easy” route from any Russian
coast to the deep waters of the international sea routes. The alternatives of seasonal ice, extreme weather, shallow water and the
choke points of the Baltic sounds and Turkish Straits ensured that the
delivery system has to be both sophisticated and of high quality.

Moreover, this huge expansion in energy exports from Russia was accompanied by a growing global intolerance of any form of marine
pollution, along with a new militancy among coastal states, which felt
unable to countenance the unchallenged transit of potential pollutants
along their coasts. The coastal states and regions, where transit traffic included large numbers of tankers, now demanded reassurance about the risks that were being taken by others with “their” coastal environment . Moreover, coastal states now felt justified in intervening , almost regardless of the traditional dictates of international law of the sea, which seemed curiously impotent in the circumstances.

Perceptions and reality

Political perceptions also cast a shadow over the proceedings , with cnoises of concern emanating from Brussels at the quality of shipping
being employed for the transport of Russian oil around the European
coastline. The statistical decline in accidents and the modernisation
of the Russian tanker fleet , along with the increase in ice strengthened tonnage available might be reality, but political and public concerns could not be left unaddressed. “Policy is determined” it was rightly said “ by politicians and politicians react to public opinion”.

Challenges of political perception will require to be addressed, but addressed they must be, if the world’s second largest oil producer is to be able to realise its true potential. But no less daunting are the physical challenges, with no ports able to accommodate VLCCs and the
problems of winter and constricted accesses requiring expensive alternative solutions.

Capacity questions

Thus there were practical issues over ship capacity, with the requirement that only ice strengthened tankers could hope to carry
Russian cargoes year round out of the Baltic and far north ports, while
the capacity of the Turkish Straits was limited and also affected by
delays in bad weather , not to mention the Turkish alarm at the unrestricted expansion of water-hauled oil passing through the congested waterway which divides their country and its largest city.

It was true that capacity was being addressed with the shipping industry building large numbers of ice-class tankers (although not all
were the highest class) with the emphasis shifting to the Baltic and
its principal oil export port of Primorsk, which was expanding from a 12m tonne capacity in 2002 to 62.5m from next year. Much of the oil was short haul to European destinations, (which obviously helped) , but there was still some alarm at the number of laden tankers passing through the sounds and other navigational choke points, and the problems of ice , which was not helped by the restricted capabilities
of Russian icebreakers, the only ones permitted to work in Russian waters , and which were too small to effectively break channels for
Suezmax and Aframax tankers.

Continuing controversies between the Baltic states over the criteria
for ice-class notation , and which had surfaced during the 2002-2003
winter season (described as “average”, rather than severe) have not
been completely addressed, while there have been worries about the use of inexperienced crews from warm weather routes in Baltic winters.
There is thus some enthusiasm for the common tanker rules currently
being rolled out by the classification societies , which will eventually, (it is hoped) consider the diversities in ice classes.
Thus it might be suggested that the export of Russian energy remains in a developmental stage, albeit with huge strides being made in Russia
and with the tanker sector which must carry the oil, but with substantial investment needs still required to deepen and develop ports
and terminals, and renew the icebreaker fleet.

Coastal state fears

From other Baltic states came expressions of concern at the overnight
increase of some 75% in the tonnage of oil being shipped along this
route. There is concern as a result of recent accidents in the Baltic,
mostly human element related, with an increase in the number of ships
grounding and colliding. There is downright alarm in Danish circles
about the growth in ship to ship transfers close to busy traffic routes
and at the number of ships which fail to supplement their navigational
strength with the employment of a pilot. There is an underlying threat
that a serious pollution incident in the Baltic or its approaches could
cause all manner of undesirable political consequences.

Similarly , if there is to be safe and effective expansion of the northern sea routes from the Barents and Kara seas , there is a need for even more infrastructural investment. The huge nuclear icebreakers built for the Arctic operations are still operational , but are old and only one large replacement breaker is presently under construction. And there is a need, it is stressed by those who have experienced it, to properly appreciate the awesome winter weather conditions, with perpetual darkness, extreme temperatures and icing conditions that can lead to ships accreting thousands of tonnes of ice on their decks. It could be that a de-icing facility could be an important element in a ship’s cold weather capabilities.

Here, even more than the Baltic, was there a need for real specialists
in ice navigation along with the special ships , while the prospect of
laden tankers moving around the North Cape and down the Arctic
Norwegian coast in severe winter weather brought demands for reassurances about the probable increase in risks. The consequences of pollution in cold, northern waters , and boulder strewn coasts of great environmental sensitivity were, it was stressed far worse than
accidents in warmer climes.

Ice expertise

The fact that operating in ice was a specialist business was stressed
at length. Even the operation of tugs in ice required special training, - “you don’t take ice lightly”- but there was a substantial amount of this relevant expertise available in Russia. Human error was seen as the main reason for accidents and this risk was managed with more and better training. Company policies were crucial in this respect. And while the safety of ships in extreme climate was a concern, safety of personnel in severe ice conditions was also of great importance.

In the consideration of the LNG trades developing chiefly in the Russian far east , there was a curious similarity with the operation of LNG carriers being as demanding and unforgiving as those of tankers in low temperature trades. Here too, Russia has to cope with its share in a 500% growth in the seaborne transport of LNG. And with the working
fleet of about 170 LNG carriers being supplemented with 100 more on
order, there were concerns about the supply of expertise and the
possible dilution of the sector’s safety standards. Sakhalin however
requires highly specialist ships capable of working in low temperatures
and ice conditions.

The importance of the political “drivers” was stressed , noting, in
particular the way in which marine accidents affected political opinion
and led to precipitate regulatory changes, before the cause of the
accidents were established , and largely to a political agenda, with
little technical input. These “symptom-based initiatives “ are now
seen to be driving the discussions at IMO, which hitherto have been
technically based. Highly relevant to the export of Russian oil is the
likely issue of a Baltic PSSA , which is likely to ignore the reality
of Baltic pollution, 80% of which is from land sources.

Not for the first time did delegates hear that the key to safety was
not additional regulation, but better implementation of that which was
already available. And on the regulatory front , there was a demand
for governments to strengthen their port state controls , to ensure
that only quality ships and experienced crews were employed in the
carriage of these demanding cargoes. A robust IMO, flag states and port
states doing their respective jobs properly would provide the
reassurance that was needed. And as for the owners, who were at the
heart of safe ship operation, “double hulls were no substitute for good
management, manning and maintenance” Enforcement was seen as an
important key.

Something of the heroic dimensions of the Russian effort to develop its
oil export infrastructure was provided by Russian speakers, who,
however noted the considerable investment under way. This was providing
ice strengthened tanker tonnage, and had been allocated for port
development and the technical innovation which would enable larger
ships to be used, with the use of offshore terminals , sophisticated
training in ice navigation and with private oil companies building
equipment for the state to use.

Research requirements

Again, this also signaled the need for more research, notably to capture operational experience and develop solutions to the special operational problems, notably those which bore upon safety. New engineering solutions were making ice operations safety , such as azimuthing thrusters, but there still remained a requirement for careful planning for all ice and low temperature operations of all kinds, which included attention paid to contingencies. It was necessary to remember that winters were always different and the ice and environment were constantly changing. There had been 63 incidents in the ice during the 2002-3 winter , which suggested that inexperienced people should keep out of these areas. The need to train, to cherish experience and retain expertise were all seen as crucial “human element” requirements. Safety depends upon these.

And it was the safety mandate which , while requiring adequate ability
to respond to accidents and in particular pollution, also demanded
attention be paid to prevention of accidents , especially preventable
human element issues, which constantly arose. Better port state/flag
state links were required, (too much international inconsistency on
port state control remained) while a strong focus upon risk-reduction
tools such as AIS, VTS and routeing was required.

Improvements were being witnessed , notably in the case of ship
quality, although it was noted that tanker tonnage in the Turkish
Straits shared the waterway with a great deal of tonnage which could
be described as “high risk”. Similarly, tanker terminals in the Black
Sea left much to be desired, only two out of 30 being described as
“good”. There was a need to strike balance between maritime safety and economic development.

While the age and capability of the Russian deep sea tanker fleet were
improving fast, there was concern at the age and quality of the short
sea and river fleet, presently the second largest in Europe. A scrap
and invest scheme was recommended. Nevertheless, there was seen to be a reassuring degree of optimism in the Russian shipping sector in a
country which was undoubtedly booming. Tax reforms, better accountancy standards, competent business planning and good security would assist investors in this Russian boom, where there remained a degree of political risk, minimised by competent domestic law practitioners.

Conclusions

A whole range of discussion points emerged from this valuable conference. Six in particular might commend themselves to policy-makers for further study.

1. Capacity problems , while the Russian export build-up continues ,
need to be addressed, with special attention to ship quality, operational capability and the capability of shore infrastructure.

2. Issues of human element need attention, notably the training and
experience of crews operating in extreme conditions , and the need to
provide sufficient expertise as the export fleet grows in size.

3. Issues of traffic density and the capacity of Baltic and Black Sea
routes need attention at the highest level. Routeing, VTS, pilotage, general safety , preparedness and contingency elements need to be
examined to provide a greater degree of reassurance to the coastal
states , which will not tolerate massive environmental damage from oil
carrying vessels. There are political issues to be faced here, notably concerning the Danish soiunds and Turkish Straits, outside the remit of the industry.

4. Perceptions of ship quality need to be crystalised and notably reassurances given on the quality of Russian controlled (as opposed to
owned) tonnage.

5. There are questions to be answered on issues of investment, with
substantial modernisation needed in the Russian icebreaker fleet, dredging provision and Black Sea terminal modernisation.

6. There is important research needed on such matters as ice class
harmonisation, and the development of more robust ships capable of
working in ice.

Thanks to our sponsors who made this conference possible:

Russian Maritime Registry of Shipping - OCIMF -  Concordia Maritime - Stena Bulk - Braemar Seascope - DNV - Moore Stephens -  Dutch Maritime Network - Lloyd' s Register - Royal Association of Netherlands' Shipowners -   Green Award
- Hazardous Cargo Bulletin.
 

Set for the first time in the Russian Federation , the location of this Mare Forum was St. Petersburg, a major energy and shipping centre.

We look forward to welcoming you
in St. Petersburg next year,