Basic of Maritime Industry

Familiarisation to the Maritime Industry

Great Eastern Shipping

Marine Transportation and Logistics SectorMarine Transportation and Logistics Sector

Shipping

Liner service

PassengerFerry

Cruise

Freight

Containers/Reefersand others

Freight

Dry bulk Wet bulk

Tramp service

Cross -section of a cargo carrying ship

..hull types..Factors affecting tradeability of ships

Double Hull

After Grounding

Single Hull

After Grounding

CLASSINSURANCE/P&I COVER

SPECIFICATIONS

CHARTERER

AGE/HULLTYPE

OIL MAJORAPPROVALS

OWNER

FLAG

STATE

Factors affecting tradability of ships

..global nature of industry..India

MEG

CHARTERER

P& I CLUB

UK

KOREA

INDIA

UK USA

BANK

UK

Concepts• Draft: Depth upto which the ship is immersed in water• Load Line: The maximum draft to which the vessel may load• Bunker: Fuel for vessels

• Deadweight Tonnage (DWT): The weight of cargo, water, bunkers andaccommodation that may be carried when a vessel is down to her loadline marks

• Net Registered Tonnage (NRT):The internal capacity of a vesselmeasured in units of 100 cubic feet less the space occupied by boilers,engines, shaft alleys, chain lockers, officer's and crew quarters and otherspaces not available for carrying passengers or freight

• Classification Society: The professional organizations which vet andcertify the strength and seaworthiness of vessel

• Flag of Convenience: A flag of convenience ship is one that flies the flagof a country other than the country of ownership

DWT based classification - Crude oil carriers

• Panamax - 50,001 DWT to 80,000 DWT

• Aframax - 80,001 DWT to 120,000 DWT

• Suezmax - 120,001 DWT to 200,000 DWT

• VLCC (Very Large Crude Carrier) - 200,001 DWT to 350,000 DWT

• ULCC (Ultra Large Crude Carrier) - 350,001 DWT and Larger

• Small - 3,001 DWT to 10,000 DWT

• Handy - 19,001 DWT to 25,000 DWT

• Medium Range - 25,001 DWT to 45,000 DWT

• Long Range One - 45,001 DWT to 70,000 DWT

• Long Range Two - 70,001 DWT to 100,000 DWT

DWT based classification - Product carriers

DWT based classification - Dry Bulk

• Handy Size - 10,000 DWT to 30,000 DWT

• Handy Max - 30,001 DWT to 50,000 DWT

• Panamax - 50,001 DWT to 80,000 DWT

• Capesize - 80,000 DWT and above

Surveys and drydocking

• Class Survey– Carried out by Classification Society

– Certifies the construction of Hull and Machinery of ships

• Statutory Survey– Carried out by classification societies on behalf of Government/

Flag administration through their own surveyor’s

– Requires ship to be dry docked twice in five years with gap notexceeding three years

– Without valid Statutory survey certificate a ship is notconsidered seaworthy restricting sailing from port

• Baltic Dry Index: It is a combination of three induces: Baltic

Capesize Index, Baltic Panamax Index and Baltic Handymax

Index. The indices are based on assessments of the cost of

transporting various dry bulk cargoes (e.g. coal and iron ore), made

by leading shipbroking houses located around the world

• World scale : The standard to express market levels of freight for

tankers in terms of % of scale rates published annually

Revenue Concepts: Shipping

•Time Charter - employment for a fixed period

•Voyage Charter - employment for a voyage

Deployment of ships

Time Charter Yield (TCY)Time charter Voyage charter

Fixed for a period of time Fixed for a route

Rate is $/day Rate is $/ton

Calculation of Time charter Yield

($/day) * No. of op. days Gross Income ($/ton) * Qty. of cargoLess

Commission, bunker cost, lighthouse charges,canal dues, port dues

Commission/brokerage Operating Expenses

Net Freight

Net Freight/No. of op. days

Net Freight/ No. of op. days

TCY $/day

Oil field servicesOil field services

Drilling:Exploratory & Development

Seismic Studies

Production

•Support Services:

-Logistics Support -Well Testing -Casing -Mud Engineering -Well Logging -Directional Drilling -Cementing

Offshore Activities

Offshore activities include:– carriage of passengers, goods and other materials

– supporting or performing activities like i) port relatedservices ii) oil field services

– dredging services, diving support, maintenance supports,towage, anchor handling, cable laying, survey, pipe laying,marine construction etc.

– all other services to which above mentioned functions aresubsidiary like production platforms, floating structures,floating storage etc.

Drilling Rig

Jack-up Floaters

Drilling Rig

Jack-up

Independent leg Mat supported

Cantilever Slot

Drilling Rig

Floaters

Drill Ships Semi submersibles Barges

Offshore Support Vessels• Offshore Support Vessels: Vessels that support offshore production

activities e.g.– Offshore Supply Vessels: Vessels engaged in carrying fuel, fresh water and

other provisions between shore base and offshore installations.

– Platform Supply Vessel: Vessel specially designed for providing supportservices viz. transporting fuel , fresh water and other materials such aspipes, cement, tools and provisions to offshore oil and gas platforms anddrilling rigs.

– Anchor Handling Tug: A vessel specially designed to handleanchoring/ mooring of offshore rigs and work barges.

Also used for maritime towage and salvage.

– Anchor Handling Tug Supply Vessel: A hybrid between anchor handling tug and supply vessel. This vessel is specially designed to supply various cargo between shore-base and offshore installations along with handling maritime towage and anchor handling activities.

Barge

A floating vessel , propelled or otherwise which is used for

storing purposes, offshore construction and pipe laying.

Barge

Flat top Construction Pipe laying

Jacket launchingand storage

Offshore hook upand maintenance

Laying sub seapipeline and hook up

to sub sea plems

Port/Terminal support services

Harbour Tug

A vessel available at a port/terminal to give assistance to

ships entering or departing from their berth or moorings.

Harbour tug

Azimuthal Cycloidal

Revenue Concepts: Offshore

• Operating Day Rate: The daily charter rate paid for a vessel/ rig

operations.

• Non- operating Day rate: Rate payable when the vessel is on

charter but is not operating due to repairs, or breakdown or

maintenance within contractual terms or due to some fault of the

charterer.

• Moving day rate: Applicable to rigs when they move from onelocation to another for further drilling within the same contract

Acts governing Indian Maritime Industry

• Coasting Vessels Act, 1838

• Inland Vessels Act, 1917

• Merchant Shipping Act, 1958

Merchant Shipping Act, 1958

Some of the salient features of the Act

• Flag administration

• Registration of Ships

• Certification of officers & crew

• Liability related issues

• Investigation and Enforcement

• Cabotage Guidelines

• Penalties and Procedures

Types of risk & coverage :

– H & M Risks ( asset coverage)

– Third party Risks ( liability coverage)

– War Risk

Following are the basic coverage requirements for ships

Hull and Machinery Insurance• Insures physical asset: hull of ship, machinery and equipment installed

in the ship• Agreed Value Policy• Governed by wording of Institute Time Clauses (ITC) Hull• Covers asset against perils, new for old , pollution hazards, 3/4th

collision liability and others• Indian shipping companies to insure H&M in India only• 4 nationalised insurance companies write H&M risks in India• The policy issued is identical to London market w.r.t. cover• The insurance is taken for market value of the ship• Premium rates is based on tariff devised by IRDA• Policy deductibles• In India underwriter is sovereign risk• Generally issued in Indian Rupees however, policies can be issued in

USD if the borrowing is in USD

Third Party Risks

• Covered by P&I Clubs, which are non profit making bodies

• Covers liability like cargo liability, liability towards employees on

ship, damage to fixed and floating objects, oil pollution etc.

• Covers 1/4th collision liability

• Limit of club cover

• Covers liability for oil pollution upto USD 1bn

War Risk Insurance• All Indian companies insure their ships against war risk with GOI

• It is a package policy covering H&M and Third Party liability

• Nationalised insurance companies act as agents

• Original cover is a peace time cover

• In case of war or war like situation “notice of termination of warcover” in relation to excluded area but automatic “reinstatement” withadditional premium

• GOI scheme liberal on exclusions

• Any liability exceeding GOI war risk scheme is insured by P&Iinsurance upto USD 400 mn

• Also covers terrorist attack