edit eleven issue 1

edit eleven candidate profile

Skills: Page layout, Sub-editing, Medium-weight design

Mac and PC literate: Strong InDesign and Photoshop ability

Titles: Personnel Today, Utility Week, What Digital Camera, Fairplay shipping magazine

Subject areas: B2B magazines and consumer

Rate: £150 per day, although this may be negotiable for long-term assignments

Qualifications: BA Honours in Management Studies, Leicester University

Courses: Contracts and Copyright at the London College of Communication

Ben Thomas

Ben has been freelancing for two years mainly working on page layout, sub-editing and his previous cleints

include Reed Business Information, Incisive and IPC.

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Edition A guide to magazine

sub-editing and production

1 July 2010 Volume 369 Issue 6589 Price £10.50 www.fairplay.co.uk

INSIGHTS FOR PROFITABLE SHIPPING

INSIDE THIS ISSUE MARKETS: Container shortage COMMERCE: Brokers’ demolition database REGULATION: Maritime laws in fl ux TECHNOLOGY: Under keel under control

POWERHOUSE – Panama: $20Bn infrastructure investment, registry o� blacklist

Shipowners prepare for change of gear in 2014

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Opening Panama’s

Shipowners prepare for Shipowners prepare for Shipowners prepare for Shipowners prepare for change of gear in 2014

Shipowners prepare for

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�    1 July 2010 www.fairplay.co.uk

story of the week

BP spill is tanker  ‘game changer’The environmental catastrophe will dramatically reshape US policy. Tanker owners will face higher liabilities – and more opportunities for those who dare, reports Greg Miller

Tsakos Energy Navigation (TEN) chief financial officer Paul Dur-ham, referring to the still-unfold-ing environmental tragedy in the 

Gulf of Mexico at Marine Money Week, described it as “the nightmare that never seems to end”.

The debate on how the deepwater spill will hit tanker trades took centre stage at the finance conference. No one believed the sector would emerge unscathed, with 

OSG chief executive Morten Arntzen dub-bing the spill a “game changer” akin to the Exxon Valdez disaster. 

Several commentators predicted the silver lining of higher VLCC rates as US domestic production wanes and more imports are required.

A lengthy pause in deepwater drilling is virtually assured, regardless of legal wran-gling over President Obama’s six-month moratorium. Dahlman Rose analyst Omar 

Nokta estimated that current Gulf of Mex-ico production of 1.5M bpd is declining by at least 20%/year. The longer drilling lapses, the less such declines are replaced and the more VLCC cargoes are booked to supplant lost US production.

Cut in productionThe US Energy Information Administration has estimated that the drilling morato-rium will cut production by 2.4M barrels in 4Q10 and 25M barrels in 2011 – equat-ing to an average of one additional VLCC cargo/month.

The more bullish thesis is that a politi-cally protracted drilling delay will bring US production down by at least 300,000bpd by this time next year, necessitating five more VLCC cargoes/month. Several 

‘The longer drilling lapses, the more VLCC cargoes are booked to supplant lost US production’

A controlled burn of crude leaking from the deepwater spill [ Photo: USCG ]

1 July 2010    �www.fairplay.co.uk

story of the week

panellists suggested that future tanker demand upside could be even higher. “The spill could end up being a big, big play on tankers,” asserted Nokta. The US now takes 5-10 VLCC deliveries/month – and whenever America demands additional VLCCs, rates can rise globally.

General Maritime CFO Jeff Pribor re-vealed that in recent conversations with investors for GenMar’s follow-on, the consensus was that the tragedy would be “very beneficial in the long term for the crude tanker business”.

Potential tanker upside goes far beyond Obama’s disputed moratorium. It’s widely believed that Congress will raise or even eliminate the liability cap for deepwater drilling, which should force smaller players from the market. 

“We may reduce companies that can drill – assuming anyone will drill – to Exxon, Shell and Chevron,” warned Seacor chairman Charles Fabrikant.

“It would drive the minnows out of the Gulf and maybe all the independents, leav-ing just the majors,” echoed FBR Capital MD Robert MacKenzie. He pointed out that liability concerns should precipitate a transaction period as smaller companies sell off rights, which will further delay drilling and curb future production.

risks, Arntzen believes some foreign tanker owners will “restrict their activities in the US”. He suggested that heightened risks will favour larger companies that boast the scale and in-house technical manage-ment to convince investors and lenders they can handle post-spill liabilities. The gap between tanker ‘haves and have-nots’ will widen, just as it did post-Exxon Valdez, maintained Arntzen.

The implied best case scenario for tankers from the Gulf catastrophe is for Congress to enact unlimited liability for deepwater drilling but retain a manageable liability regime for tankers. In this case, US offshore production would be sharply constrained, at least some tanker own-ers would stomach the heightened risk of American cargoes, and demand pressure from additional US-bound VLCCs would buoy global freight rates.

The threat to this scenario is that Con-gress might ultimately impose liabilities and regulations for tankers that go be-yond what owners can accept.

“I was recently asked by investors about political risk to our operations in Latin America,” recalled Fabrikant. “My response was: the highest degree of political risk these days is not in Latin America, it’s in the United States.”  F

The big caveat to this bullish tanker demand scenario is that the legislative and judicial firestorm besetting the US offshore industry is likely to suck vessels into the fray.

“There are 14 congressional commit-tees taking testimony on a whole range of legislative responses. They’re not just looking at offshore; they’re also looking at shipping,” said Arntzen.

Unlimited liabilityPanellists unanimously predicted that tankers would face an increase in the OPA’90 liability cap, although opinions diverged on whether the tanker limit will be raised or simply eliminated. Arntzen predicted “unlimited liability”, but Fabri-kant said consequences of unlimited li-ability “would be so extreme that not even Congress will wander there. If Congress removes all liability limits, it would shut down the business.”

Arntzen also cited rising risks on the judicial front, noting that the Department of Justice has already launched a criminal probe of BP. In the wake of future tanker spills in US waters, he predicted that ship-ping CEOs and captains could face similar criminal probes.

Given escalating financial and criminal 

‘If Congress removes all liability limits, it would shut down the business’Seacor chairman Charles Fabrikant

5 Additional VLCC cargoes/month to meet US import demand arising from drilling delay

Spill recovery vessels at site of the BP deepwater spill [ Photo: USCG ]

[ Photo: iStockphoto ]