Forum No_3_2003

ForumTHE CORPORATE MAGAZINE OF DET NORSKE VERITAS NO.3/2003

Managing riskin a complex world

2 DNV FORUM NO. 3/2003

DNV Forum is the corporate magazine of Det Norske Veritas

PUBLISHED BYCorporate Relations andCommunicationsN-1322 Høvik, NorwayTel: +47 67 57 99 00Fax: +47 67 57 91 60

EDITORStuart D. BrewerTel: +47 67 57 85 11Mobile: +47 915 22 [email protected]

ADMINISTRATIONGro HusebyTel. +47 67 57 86 [email protected]

DESIGNDRD DM, Reklame & Design as

PRINTStens Trykkeri

COVER PHOTOCourtesy of Stone/Bruce Ayres

No responsibility is accepted by the publishers for statements made by authors, nor for attributable comment.Reproduction permitted with acknowledgement of source.

© Det Norske Veritas 2003

DNV (Det Norske Veritas) is an independent, autonomous Foundationworking to safeguard life, property andthe environment. DNV comprises 300 offices in 100 countries, with 5,500 employees.

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MANAGING RISK

3 Editorial: Building trust and confidence

4 EU pushing for a greener, cleaner environment

6 Lafarge meeting new regulations head on

9 Farchioni taking quality management to new lengths

12 Risk management in the healthcare sector

16 Gassco: Raising the stakes, not the risks

18 Placer Dome: Going for gold

20 Statoil safeguarding the pioneering spirit

22 Windpower set for offshore boom

24 China building for the future

27 NITC: Making waves in China

28 Graig: The Chinese connection

29 Viewpoints on China

30 DNV managing cold-climate risks

32 News

34 Last Word: Are Chinese shipbuilders painted in an unfair light?

35 DNV Worldwide

CONTENTS

Photo: European Parliament

3DNV FORUM NO. 3/2003

Building trust and confidence

EDITORIAL

Henrik O. Madsen, DNV´s chief operating officer of DNV´s Business AreaCertification

“In today’s competitive business environment, accountabilityand transparencyare expectedfrom companies.”

SStaying competitive in a rapidly changingbusiness environment places high demandson companies. The need to make organisa-tional changes, enhance cost efficiency andmeet new and increasingly strict laws andregulations are some of the challenges thatcompanies have to address on a day-to-daybasis. From health services to oil tankers,cement factories to olive oil producers,today’s executives face a new challenge:Integrating environmental policy and per-formance into their company’s businessmodel.

“Companies are increasingly called upon tobe responsible and transparent when itcomes to the environmental effects of theiroperations,” says Henrik O. Madsen, chiefoperating officer of DNV’s Business Area,Certification. “As the global communitymoves away from the debate on globalwarming to a concerted effort to developviable solutions, the demand for DNV’sclimate change services is rapidly increasing.”

According to Madsen, DNV’s work in thisfield over the past six years has enabled thecompany to gain experience and developsound methodologies to meet present andfuture demands. “With governments andbusiness anticipating that the Kyoto Protocolwill come into force shortly, some companies,like the multinational Lafarge (see pages 4-8),are moving quickly to implement policies andprogrammes to reduce greenhouse gas emis-sions in a cost-efficient manner,” Madsen says.

“In today’s competitive business environ-ment, accountability and transparency areexpected from companies. Environmentalawareness is just one of the many areas thatcompanies now need to address. From ourpoint of view, having an effective manage-ment system in place is critical to maintain-ing, improving and attaining corporatebusiness objectives.”

In this issue of DNV Forum, we take a closerlook at how DNV is helping its customers tomanage their challenges. DNV, through itscertification, consulting, classification andtechnology services, continues to play a vitalrole in helping its customers and otherorganisations build confidence and integrity,enhance the quality and safety of productsand operations, and manage their environ-mental and social responsibilities.

Says Madsen: “This means that the moreDNV’s activities can be seen to be part ofthe customer’s value-adding chain, the moreimpact DNV’s work to safeguard life, propertyand the environment will have. We can thusboth help to realise DNV’s vision of becomingthe customers’ first choice in providingservices for managing risk and assist ourcustomers in achieving their businessgoals.”

We hope you enjoy this issue of DNV Forum,and that its contents will inspire innovationand help you meet the challenges that lieahead.

Stuart D. BrewerEditor


On the runway to a carbonWith the establishment of the EU Emissions Trading Scheme,Europe is calling for companies to manage their greenhouse gasemissions, meaning that CO2 emissions shortly will have a directimpact on a company’s financial performance.

Managing risk associated with climate changepresents an enormous challenge to all mankind,from the man-in-the-street to business executives.But like many difficult issues, it falls to politiciansto draft the appropriate legislation – a longand complex process. Today, six years afterKyoto, the measure has yet to be ratified byRussia.

The Kyoto Protocol comprises many aspects,for instance trading schemes, and the EU isnow implementing its own Emissions TradingScheme, abbreviated as the EU ETS, regardlessof the Protocol ratification process. Accordingto Alexander de Roo, a Dutch member of theEU Parliament and vice-president of the committeeon the environment, "The climate change issuewill be the significant challenge for the nextgenerations."

De Roo has been engaged in environmentalquestions his whole professional life, and servestoday as Coordinator of the Green Group.Having completed more than ten years of studiesin chemical engineering and political science,de Roo joined the Green Group in 1985 as staffmember. From 1994 to 1999, he was environ-mental advisor to the group, which has sincegrown to 48 deputy members, making up 8 per-cent of the Parliament.

Supported and ratified by the politicians inrecord time, the new trading scheme will gointo effect 1 January 2005.

"It was a very interesting and comprehensiveprocess. Huge pressure was put on the Germans,then on the Parliament. The discussions wentback and forth as we negotiated compromises,before the directive was finally approved thissummer," he explains.

The scheme includes energy activities coveringcombustion activities, mineral oil refineriesand coke ovens, production and processing offerrous metals, mineral industry and the pulpand paper industry.

Companies will be given anannual CO2 emissions capin the form of emission al-lowances. During the period2005-2007, at least 95 per-cent of all allowances willbe issued free of charge. Itis up to the member countryto decide if the remainingallowances will be auctioned.Failing to hand over allow-ances matching their CO2emissions will invoke a penaltyor require companies to buyallowances from other par-ticipants which, under theterms of the scheme, havesurplus allowances.

The Kyoto Protocol allows for the creation oftransferable greenhouse gas emission reduc-tions through investment in mitigation projectsoperated under so-called "flexible mechanisms".One of these is the Clean DevelopmentMechanism (CDM), where industrialised coun-tries or companies are permitted to finance emis-sions-avoiding projects in developing coun-tries and receive credit for doing so. Thus,companies can supplement their commitmentsat home by purchasing lower cost emissions,and thereby contribute to sustainable devel-opment in developing countries.

Linking directive The EU Commission has confirmed that creditsobtained through flexible mechanisms will berecognised as being equivalent to EU emissionallowances from an environmental andeconomic point of view. As a result, a comingdirective (known as the linking directive)proposes that such credits can be converted toEU allowances from 2008 on a one-to-one CO2equivalent basis. It is estimated that mitigationcosts for European companies will be halved bythe possibility to import such credits.

Alexander de Roo, a Dutchmember of the EuropeanParliament, serves as vice-president of the committee onthe environment. He is responsible for the linking directive, which connects theflexible mechanisms of theKyoto Protocol with the EUEmissions Trading Scheme.


restricted future

The Parliament building in Strasbourg.The EU Emissions Trading Scheme was accepted by the politicians in record time, and will start 1. January 2005.

As a member of the EU Parliament, de Roo is re-sponsible for the linking directive, which connectsthe flexible mechanisms with the trading scheme."The EU ETS will be implemented as planned,whether or not the Kyoto Protocol is ratified. We will goahead anyway," de Roo says. "But with regard to thelinking directive, we are facing a problem. This di-rective will not function properly until the Protocolis ratified."

However, de Roo is optimistic about a future ratificationof the Kyoto Protocol. He notes that if Russia ratifies,then the Protocol becomes valid. "I visited the Dumain September. Russian emissions have been dramati-cally reduced since 1990, which is the level the KyotoProtocol defines as the base level. This means thatRussia will have quotas for sale. In addition, Russiawants industrial countries to invest in their country.With the ratification in place, industrial countriesare more likely to invest in flexible mechanismprojects in Russia. So I think we will see this ratificationtake place within a year," de Roo claims.

Developing countries Another aspect of the climate change issue is thedeveloping countries. All signs indicate that energyconsumption in these countries will increase in the

future. The US insists that the developing countriestake part in the effort to reduce climate change emis-sions, as well as the industrial countries, while othercountries are willing to discuss this aspect.

"From my point of view, it would make sense to in-clude the 20-25 biggest developing countries within2020, provided that the US sign up, as well," says deRoo, naming Brazil, China, India and South Africa,as examples of developing countries that might copewith this issue and at the same time, represent a majorpart of the world’s population. De Roo says thatthese countries should not be asked to reduce theirconsumption, but to stabilise it at per capita levels, likefor instance in Russia. Education and new technologywill also be provided by the industrial countries aswell as CDM-projects.

Furthermore, the EU will have to reduce their con-sumption by 30 percent by 2020. However these com-plex issues are resolved, companies are starting to realisethat they are on the runway to a carbon restricted fu-ture.

Eva Halvorsen

Photo: Courtesy Scanpix

THE EUROPEAN UNION EMISSIONS TRADING SCHEME:

• The scheme will cover CO2 emissions from large emitters in the energy, steel and heavy industry sectors, pulp and paper industry sectors, as well as oil and gas related industries. The scheme will affect more than 12,000 installations.

• Each installation covered by the scheme will be allocated an allowance, i.e. a permit to emit a certain amount of CO2-equivalents during a calendar year.

• Each EU member state is expected to allocate emission allowances mostly based on the emitter’s historic emissions and a small amount through auctioning.

• If a company’s greenhouse gas emissions exceed its allocated allowance, it will need to offset the excess emissions. This can be done by either buying allowances from companies who have performed better than their allowance level, or obtaining credits through the flexible mecha-nisms of the Kyoto Protocol.

• If a company performs better than its allocated allowance, the reductions can be reflected into its emissions inventory. These reductions can be used to create allowances that can be sold on the market, or be registered into an emission registry, increasing the company’s allowances for the coming year.

• Failing to comply at the annual deadline will cost companies 40 per tonne of emissions that have not been offset by allowances or credits. From 2008 this penalty will be raised to

100 per tonne.


Emitting 80 million tons of greenhouse gas emission each year – theequivalent to almost twice Switzerland’s total annual emission level– Lafarge, the French, multinational global cement producer, is clampingdown its own activities to create a greener, cleaner environment.

According to Christopher Boyd, general managerfor Lafarge Cement Italy, cement production isone of the most greenhouse gas intensive in-dustries.

"Reducing harmful emissions is a fundamentalissue to our business," he says. "Lafarge is aresponsible company and wants to take action.While the Kyoto Protocol calls for 5 percent re-ductions in emissions, Lafarge’s goal is 20 per-cent, worldwide."

Known as ‘Mr. Environment’ at Lafarge’s head-quarters in Paris, Boyd took up his new positionin Milan six months ago. Prior to joiningLafarge, Boyd worked for the EuropeanUnion’s Commission in Brussels.

Lafarge’s cement plants are often importantbusiness pillars in local communities world-wide. These enormous installations, completewith chimneys, towers and production premises,influence local environments, such as the facilityin Exshaw, in the Canadian province of Alberta,near the Rocky Mountains.

Social and environmental commitmentCentral to Lafarge’s business pledge are twomain goals: To generate healthy profits whilecontinuing to instill social values in its dailyoperations.

Says Boyd: "At Lafarge, we are committed tolooking after our people and the environment.We often play a central role in the neighbour-hoods around our plants. A focus on the environ-ment and social responsibility is a high priorityfor us."

It will be a challenge for Lafarge to reduce itsemissions. Temperatures of up to 1500 degreesare required to convert rocks to cement. Thisrequires a lot of energy, which results in highlevels of CO2 emissions.

"In fact, one ton of cement discharges some750 kilos of CO2," Boyd says, "We also know

that the market priceof cement is less than that of bottled water." In practical terms this means that a future carbon tax would reduceLafarge’s profit margindramatically.

The European Union is currently in the processof establishing the EU Emission Trading Scheme(EU ETS), the world’slargest market for trad-ing of greenhouse gasemissions allowances.This is the union’s answerto the Kyoto Protocol."To meet our commitments, we need to use themechanisms recognised under the Kyoto Protocol.These mechanisms are likely to be recognisedunder the European trading scheme as well,"says Boyd.

Pilot project in MalaysiaTo take advantage of the new measures whenthe trading scheme comes into force, Lafargehas three pilot projects going on at differentplants designed after the Clean DevelopmentMechanism (CDM) criteria.

In principle, the CDM system allows govern-ments or private enterprises to invest in emissionreduction projects in developing countries tomeet their own emission requirements, asstipulated in the Kyoto Protocol. CDM projectsalso promote technological transfer and con-tribute to the host country’s sustainable devel-opment. It is expected that such projects willbe inter-changeable with EU allowances.

One of Lafarge’s three pilot projects is inMalaysia. "Through the Malaysian project we aremeeting our emission quota, and CO2 reductionscan be sold to other businesses in Europe ascredits, as part of the trading scheme," says Boyd.

"One ton of cement dischargessome 750 kilos of CO2. We alsoknow that the market price ofcement is less than that of bot-tled water." Christopher Boyd,general manager of LafargeCement, Italy.

Keeping one step ahead of


The project is pre-validated by DNV, and hasbeen developed over the past three years. Forexample, fibre waste from rice husks is a signifi-cant problem in Malaysia, and Lafarge believesthat by developing methods whereby this wastecan replace coal as fuel will significantly reducethe company’s emissions.

"The end result of these projects may includeimproved revenues and help us establish anedge over our competitors. I would like to seethese three pilot projects expand to 30 in thecourse of the next five years," Boyd says.

When the trading scheme is operational, it willrequire an independent, third party inspectionto validate emission volumes. The validationalso confirms that the projects, as designed anddocumented, are sound and meet all relevantrequirements.

"DNV, and especially the business developmentmanager, Trygve Røed-Larsen, is a leadingauthority within climate change issues. Lafargeand DNV are already doing several projects to-gether," says Boyd.

International EmissionTrading AssociationChris Boyd also serve as vicechairman of the InternationalEmission Trading Association(IETA), a business organizationaimed at promoting a functionalinternational framework for thetrading of greenhouse gasemission reductions. Today,the organization has 70 inter-national members. Both Lafarge

and DNV have been members since IETA wasestablished, in 1999. Boyd is scheduled to be-come chairman in 2004.

So far he is very satisfied with IETA’s accom-plishments: "We have made a lot of progress,and honestly, we can hardly believe how successfulwe’ve been. Five years ago, we expected to havecarbon taxes imposed. Today, we have estab-lished the framework for an effective market-based trading system for greenhouse gas emis-sions that demonstrates fairness, environmentalintegrity, efficiency, accountability and globalconsistency. While we would all prefer not to beforced to change our behaviour, at least we aredeveloping the most efficient option to controlgreenhouse gas emissions." concludes Boyd.

Ellen Kongsnes

• Established in 1833, Lafarge has become a ’multilocal’ business

• Lafarge has 77,000 employees in 75 countries

• Annual turnover is Euro 14.6 billion

Converting rocks to cement requires temperatures of up to 1500 degrees. This requires a lot of energy, resulting in high levels ofCO2 emissions into the atmosphere. The Lafarge plants are huge installations, such as this facility in Exshaw, in the Canadian provinceof Alberta, near the Rocky Mountains.

emission legislation

Photo: Courtesy of Lafarge


Lafarge takes theproactive approach

Gäelle Monteiller, senior vice-president for public affairs andthe environment at the French cement manufacturer Lafarge,is very clear about the challenges facing the company oncethe European Union Emissions Trading Scheme is implemented.

Gäelle Monteiller, senior vicepresident public affairs and environment, Lafarge:"We intend to pursue our ambitious programme of CO2emission reductions."

W“We realised at an early stage that carbonconstraints would soon be a reality, anddecided to be an ‘early mover’ and faceclimate challenge issues right away,” shesays. “We began a programme of CO2emission reductions several years ago.”

According to Monteiller, implementationof the EU ETS brings new challenges.How to seize all the opportunities foundin allowance trading? How to ensure con-sistency between the company’s voluntarycommitment and the level of quotas theywill receive? How should companies avoidbeing penalized for early actions? “Weknow now that many member states are toallocate CO2 allowances on a historicalbasis, with a very recent reference year,between 2000 and 2002. The result of thiswill be that big emitters will receive morecredits than those who have made effortsto reduce their emissions before the refer-ence year.”

Montieller is quick to point out thatLafarge is a multinational company, whichgives it the flexibility to meet all the re-quirements established by the EmissionsTrading Scheme. But she says the company

is still waiting for clarification regardingthe effort that will be required from thecement industry. “We are confident thatthis will take into account our previousvoluntary commitment on a global scaleand in specific countries, such as France,so that we will remain competitive.”

Montieller also says that Lafarge is com-mitted to meeting the Clean DevelopmentMechanism (CDM) requirements. “We in-tend to pursue our ambitious programmeof CO2 emissions reductions, and we willalso develop projects to meet the CDMproposals,” she says. “At the same time, wewill continue our research into reducingCO2 emissions from the production ofcement and concrete.”

Finally, Monteiller stresses the importanceof the linking directive. “The linking di-rective is crucial for the entire industry tointroduce flexibility in meeting emission-re-duction demands,” she says. “The potentialfor greenhouse gas reductions in developingcountries is huge; it would be absurd notto use this flexibility to reach our commonglobal objective of emissions reduction.”

Eva Halvorsen


An Italian traditionsince 1780Farchioni Olii SpA, the Italian Extra Virgin Olive Oil producer,has implemented traceability and quality managementsystems in order to strengthen the Farchioni brand. In agrowing and highly competitive industry, the company iscommitted to further developing consumer confidence intheir product.

Quality and information systemsmanager of Farchioni Olii SpA,Andrea Violetti.

TThe late October evening sun is reflectedin the glossy leaves of the olive trees inthe valley of Umbria. The pouring rainhas finally stopped, allowing AndreaVioletti, quality manager for FarchioniOlii SpA, a chance to sample his product.He reaches for an olive and crushes thedelicate skin in his mouth, sucking outthe pulp. "Just as juicy as only the bestFarchioni olives can be!" he declares.Behind a mask of concentration, Violettismiles and gently rolls the olive betweentwo fingers, looking for damage.

Local ownership This is where Farchioni’s 223 years oftradition and experience make a differ-ence. Farchioni has built its reputationon its knowledge, creating consumerconfidence and trust in the market-place.

Farchioni is located in Umbria, twohours drive north of Rome in centralItaly. With about 800,000 inhabitantsliving mostly in small, agricultural �


villages tucked into rolling hills, Umbria remainsa vital region with its own strong cultural identi-ty. No less than 100,000 farmers supplyFarchioni with olives. About 100 local olivepresses, organized into 50-60 press companies,supply Farchioni with cold pressed, natural oil.Once delivered, the Farchionis complete theprocess of blending, storing, bottling andbranding the oil before distributing it to themarketplace.

Farchioni’s decentralized production supplyrequires a high level of quality assurance to se-cure quality consciousness at every point of theolive oil production chain. This focus embracesboth Farchioni factory and the suppliers.

Traceability"The numerous phases of production are themost important reason to establish a traceabilitysystem," says Andrea Violetti. The traceabilitysystem at Farchioni’s is certified by DNV.

Food safety issues should be met with a systematicapproach designed to minimise the possibilityof unsafe food. The process is most successfullyand effectively implemented when it is integratedwith a quality management system. Farchioni’ssystem is certified by DNV in compliance withthe ISO 9001:2000 standard.

Every bottle of Extra Virgin Olive Oil producedat Farchioni can be traced back step by stepfrom the table to the fields. Printed on the label ofevery bottle of extra virgin olive oil is a number.By punching the number into the olive factory’swebsite, the consumer can obtain informationabout the olive, the farmer and the press.

As of January 1 2005, food chain traceability,the assessment of the entire production chain,will become part of European Union legislation.It works both on a company level, concerningall the food ingredients, as well on a food chainlevel, identifying all the operators involved.Farchioni will implement a declaration whichplaces the threshold of quality far beyond theEuropean Union´s (EU) regulations.


In this italian olive field, near the village of Assisi, Europe's oldest olivetree, dating back to the 12th century, is still bearing fruit.

A second signatureAccording to Pompeo Farchioni, the company’schief executive, "Extra virgin olive oil is a naturalproduct, produced in large volume. The challengeis to achieve qualitative stability. The Farchionibrand should guarantee quality, and DNVconstitutes the second signature."

Farchioni sees DNV as a necessary resource forthe market and customers.

"DNV has developed a range of services in thefood and beverage industry, offering a compre-hensive response to these quality and safetyrequirements in order to increase safety in theproduction process and retain consumer’strust," says Stefano Crea, DNV´s global foodproduct manager.

Tradition and continuity Pompeo Farchioni is committed to maintainingthe traditions established by his family overfour generations. Even his father, Lanfranco,the previous chief executive, still makes frequentvisits to the factory floor. Pompeo notes with

satisfaction that the next generation, two sonsand a daughter, are currently being trained toassume control of the family business when heretires.

In February next year, Farchioni will relocateto new premises. The 22 million euro invest-ment will make Farchioni the largest extra virginolive oil factory in Europe.

"I’m concerned that the amount of customers,not the volume of sales, is getting lower. Theconcentration in the wholesaler’s businessgives them the power to affect product qualityas well as prices," Pompeo says.

"Today, consumers are more demanding andincreasingly aware of food quality and foodsafety issues. Certification is the answer to thisgrowing demand, as well as a helpful tool wecan use to distinguish our products," saysGaetano Trizio, DNV´s global food projectowner and regional manager for South Europecertification.

Ellen Kongsnes


Risky by

Sue Osborn, Joint chief executive, NPSA

“Studies indicate that in Britain, there are 40,000 deaths annually caused by errors.”

I

Why is The National Patient Safety Agencyusing DNV, a risk management company withroots in shipping and the oil and gas industry, asconsultants integrated in NPSA’s leadershipteam? Probably because the NPSA is ratherparticular in its choice of risk managementexpertise.

In their efforts to improve risk management, NPSA has soughtadvice from some of the best organizations in the business,including NASA, British Airways and representatives of thenuclear industry.

“It’s all about a serious and professional approach to one of themost risky businesses in the world,” explains joint chiefexecutive Sue Osborn. Together with Susan Williams, Osbornheads the NPSA, which is a relatively new national organisationwithin the National Health Service (NHS), working to pro-mote patient safety. Sue Osborn illustrates the risks saying that“If you do a comparative risk assessment on health care, youwill find that it is generally as safe as bungee jumping.”


nature 40,000 accidental deaths Even though more than one million patients aretreated safely by the NHS every day, health care isfar more risky than most industries. Osborn illus-trates this with some frightening statistics: “In thewestern world, 10 percent of all patient care is markedby error, of which five percent are fatal. Some 350million patients are treated in Britain each year.Studies indicate that in Britain, there are 40,000deaths annually caused by errors – it is estimatedthat up to half are preventable.”

Treating patients who are ill with potentially harmfuldrugs, increasingly complex technology, and a largenumber of people involved creates an exponentiallyrising risk picture. Fatal accidents, misdiagnosesand mistakes are unavoidable. Indeed, the NHSspends some £450 million on clinical negligenceexpenditure – annually.

“No one likes to think of it on the operating table,but health services are an error trap for staff to fallin and take the patients with them,” says Osborn.Osborn explains, “As health care professionals of-ten literally hold our lives in their hands, we need tothink of them as perfect. At the same time, theyneed the confidence we place in them to work effec-tively.” �

THE NATIONAL PATIENTSAFETY AGENCY

The NPSA is a Special Health Authority created in July2001 to co-ordinate the efforts of the entire countryto report and learn from errors that affect patientsafety.

As well as making sure errors are reported, the NPSAis trying to promote an open and fair culture in theNHS which encourages all healthcare staff to reportincidents without undue fear of personal reprimand.It will then collect reports from throughout the coun-try to develop preventative measures and learningtools that will improve patient care offered by theNHS.

NHS FACTS AND FIGURES

The UK’s National Health Service (NHS) is the world’sthird largest employer. The National Health Servicewas set up in 1948 to provide healthcare for all, re-gardless of their ability to pay. It is made up of a widerange of health professionals, support workers andorganisations. Around one million people work forthe NHS in England, which costs more than £50 billiona year to run. This will rise to £69 billion by 2005.

In a typical week:

• 1.4 million people will receive help in their home from the NHS

• more than 800,000 people will be treated in NHS hospital outpatient clinics

• over 10,000 babies will be delivered by the NHS

• NHS ambulances will make over 50,000 emergency calls

• NHS Direct nurses will receive around 25,000 telephone calls from people seeking medical advice

• pharmacists will dispense approximately 8.5 millionitems on NHS prescriptions

• NHS surgeons will perform around 1,200 hip operations, 3,000 heart operations and 1,050 kidney operations.

Photo: Courtesy of Taxi


Traditionally, medical education usually focuseson how to do things right, and not so much onthe risks and mistakes that are also part of theprofession. In Britain alone, 1,800 million clin-ical decisions are made each year, and systemsmust be developed to manage the unavoidablefact that a certain percent of these decisionsare wrong.

Building a risk culture without fear Working to build a risk - aware culture wherethe risks are quantified, qualified and under-stood is paramount in order to start creating asystem where trust and confidence can be es-tablished. Both patients and staff need to besure everything is done to prevent avoidable ac-cidents. A scientific approach based on experi-ence from high risk industries might help theindividuals’ fear of blame and guilt, whichsometimes gets in the way of adequate report-ing and learning from mistakes.

Helen Hughes, director of operations at theNPSA is responsible for developing a nationalreporting and learning system: “We havelearned from high-risk industries that a steadyincrease in the number of reported incidentsusually results in a decrease in the number of se-rious accidents that occur. Understanding whatgoes wrong, combined with systematic learningfrom such incidents is at the core of a good risk- aware culture. Implementing a culture where itis natural and safe to report incidents withoutfear takes time. Therefore, we will enable staff toreport anonymously if that is the only way theywill report to us, so that we can use this informa-tion to learn about the most difficult issues in thehealthcare system.”

The NPSA was established in 2001 to co-ordinatethe efforts of reporting, and more importantly,to learn from mistakes and problems that affectpatient safety. From the start, it was clear that

the NPSA wanted to pioneer a different, some-what unusual approach. “We couldn’t havedone this work without the risk assessmentexpertise from the industry,” says Osborn.Following a strong drive from the two JointExecutives to learn risk management from thebest, the NPSA tendered for a risk managementconsultancy. DNV Consulting was chosen.

“By including DNV Consulting on the team, wehave been able to identify and quantify therisks, creating an overview before we start work-ing on solutions. And DNV Consulting alsotakes part when we work out solutions,” ex-plains Osborn. Changing a big organisationsuch as the NHS is a risk in itself, one that callsfor risk assessment and cost benefit analyses tofind ways of making things work. “We don’twant to just send out directives telling everyonewhat to do. When we find good solutions wewant to make sure they work, and this meansactive support and co-operation with everyoneinvolved.”

A risk approach versus an alphabetical oneIn practice, this means close co-operation withhealthcare professionals in order to find the riskareas that demand attention. For instance,medication errors account for 25 percent ofall the errors. Medicines are often stored al-phabetically, which means that harmless medi-cines are placed next to lethal doses of medi-cine with almost identical names. This illus-trates how one system might actually facilitateerrors. Such errors can easily be avoided by usinga system that is based on risk categories.

Improved methods of labelling, packaging andstoring medicines can reduce risks so that hos-pital staff have one less trap to fall in during abusy day. “Making the right thing the easything to do is what this is all about,” saysOsborn.

“Things can bechanged withoutadditional costs,save thousands oflives and improvesafety at the sametime.”

Helen Hughes, Director of operations at the NPSA


As in all industries, new rules and regulationscan add to the risks. The convention for drugnames is changing to a common naming sys-tem for the whole of the European Union.Many generic drug names will change. Thismay result in confusion among doctors andpharmacists in prescribing and dispensingdrugs, and could result in potential adverse ef-fects for patients using drugs. DNV is thereforesupporting the NPSA’s assessment of risks dur-ing the period when drug names change.

When Mrs. Smith is treated as Mrs. Brown To manage the risk of misidentification, theNPSA is leading a project to develop ways of re-ducing the risks of wrongsite surgery patient in-cidents. DNV has supported this work byprocess mapping the activities before, duringand after an operation, facilitating a risk assess-ment of the process and providing human fac-tors expertise into the process.

Health Care Associated Infections (HCAIs) areresulting in increased stays for patients in hos-pitals, and in extreme cases, patient fatalities.The estimated cost to the NHS of HCAIs is onebillion pounds a year. The NPSA is leading aprogramme to roll out the use of alcohol handrubs in NHS hospitals, to improve the handhygiene of staff and to reduce the incidents ofinfection. DNV has supported this programmeby leading a risk assessment of the usage ofalcohol hand rubs and a risk assessment of theproposed test phase of the rollout.

Standardisation of equipment As is the case with decentralised and big organisa-tions, the various needs and lack of co-ordinationacross the organisation at some point leads toinefficient solutions. For instance, the NHS’ infu-sion pumps (used to give liquid and medicine in-travenously) come in many different varieties and

from different vendors. “If we can rationalise,standardise and centralise the purchase anduse of these, there is a far better chance thatproper training can be given to those whoneed to operate them. It is just one example ofhow things can be changed without additionalcosts, save thousands of lives, and improvesafety at the same time,” says Helen Hughes.

Shaping an organisation DNV Consulting’s scope of work is general riskmanagement support on a day-to-day basis.This has included participation in the manage-ment meetings, risk management advice to theJoint Chief Executives, Directors and NPSA’sstaff and support and training. Supporting therisk assessments and development of theNPSA’s risk management systems and organisa-tion has been an important task.

At the same time, an enterprise risk assessmenthas been carried out to assess the risks to theNPSA and its ability to reach its goals. TheNPSA is a young and fast growing organisationeager to establish a safety culture that can setthe standard and support the rest of the NHSin its work to improve patient safety. Joint ChiefExecutive Sue Osborn is well aware that therewill be setbacks and obstacles. Still, she sees thiswork in a ten-year perspective and is confidentthat the changes brought about in the firstthree to five years will give further momentumto this work.

Kristian Lindøe

“If you do something wrong ona process plant, damage is likelyto be to the equipment and escalation is needed to impactthe general public. In health-care, the risk is more direct. It’s been great to see the NPSApicking techniques from otherindustries and to successfullyadapt and apply them to theirown circumstances,” says DNVConsulting´s project managerMark Boult.

In a typical week over 10,000 babies will be delivered by the UK´s National Health Service

Photo: Courtesy of Stone

Photo: Courtesy of Taxi

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Raising the stakes, not the risks Expanding the world's third largest producer ofliquefied petroleum gases is a complex and demandingprocess. Plant production must go forward as normalwhile the construction work, such as installation ofnew equipment, welding and tie-ins continues.

While the Kårstø facility is usually operated byabout 75 people on site, the expansion projectwill flood the plant with up to 1200 workers. Asthe number of workers on the site increases, sodoes the risk potential. “The sheer size of theproject has implications on the overall risk pictureat Kårstø,” says Statoil’s staff engineer FinnRoar Berg.

The Kårstø complex, locatednorth of Stavanger on the westcoast of Norway, plays a keyrole in the transport and pro-cessing of gas and condensate(light oil) from the Norwegiancontinental shelf. It receivesand refines gas from fields inthe North Sea via the Statpipetrunk line system and from theNorwegian Sea via the ÅsgardTransport pipeline.

However, Kårstø is currentlybeing equipped to take on evenbigger tasks. A project called theKårstø Expansion Project 2005(KEP 2005) is now in place andthe construction phase has al-

ready begun. With a budget of NOK 5.75 billion,KEP 2005 is Norway's second largest industrialproject on land after the Snøhvit development,another Statoil project currently underway innorthern Norway.

“Statoil is committed to zero tolerance for acci-dents at Kårstø. So far, we have succeeded,” saysBerg. “In order for us to continue to operatesafely during the expansion project, we musthave a clear and quantifiable risk overview. DNVhas carried out several risk assessments, en-abling us to project how our methods to man-age and minimize the risks affects the overallsafety level.”

“By using DNV’s risk assessment methods, wecan calculate how many people can be at thesite at the same time and what type of work theycan carry out at certain stages without exceedingthe accepted risk levels. This allows us to care-fully plan how and when to do the necessaryconstruction work during operation,” says Berg.

The benefits of careful planning According to Arild Samuelsberg, sector managerof processing technology in the Natural GasBusiness Area, Statoil spent a lot of time andenergy on the concept design phase. “Withstrict safety criteria, often demanding up tothree safety barriers, the solutions andworkarounds are carefully analysed and com-pared to other solutions,” he says. “By basingour planning on risk calculations, we havebeen able to identify risks that we can manageby going for optional solutions, such as prefab-rication of parts. This reduces the amount ofwork that actually takes place at the site.”

“A brown field development is never as easy as agreen field development,” agree Finn Roar Berg and Arild Samuelsberg, referring to the development ofan existing plant to higher capacity, compared tobuilding a whole new plant from scratch.

During construction, some parts of the facilitywill be shut down and in the summer of 2004,the entire plant will be shut down for 22 days.Shutting down such a complex facility is a com-plicated and expensive solution, one that Statoilseeks to avoid. But Samuelsberg explains that,“There are certain things that can only be carriedout safely when the plant is shut down. In suchcases, we don’t hesitate to do it, but we make surethat the work is well planned, well executed andmoves forward without any surprises.”

Simulating and calculating scenarios “The ability to simulate many different scenariosfor the work progress allows us to be up frontin planning the project,” says Berg. “With projectsas big and complex as these, no one can affordto go for a solution and then decide to abandon itwhen the project is underway. Every solutionmust be verified in advance according to thevariables that might occur.”

Through a frame agreement, DNV carries outa number of various risk management work forStatoil at Kårstø, from risk assessments to theday-to-day planning and execution of RiskBased Inspection. Berg says there are severalbenefits to working with DNV. “First, they arefamiliar with our work processes and systems.Second, they provide excellent services, andwe appreciate their continuity and stability.Knowledge and competence is dependent on

the expertise of individuals, and we recognizethe advantages of working with the same peopleon a long term basis.”

The KEP 2005 development project has beendesigned to equip the Kårstø processing com-plex with the capacity to handle gas fromStatoil's Kristin project in the Halten Bank areaof the Norwegian Sea. Rich gas from this fieldwill be piped to the complex through the exist-ing Åsgard Transport trunk line. By late 2005,the processing capacity for rich gas at Kårstøwill be expanded by 44 percent. KEP 2005 willalso increase annual ethane recovery capacityfrom 620,000 to 950,000 tonnes. After commis-sioning and start-up, the new facilities willcome into operation on 1 October 2005.

Kristian Lindøe


FACTS ABOUT KÅRSTØ: The state-owned company Gassco AS is the operator for the Gassled partnership, which owns both Kårstø and the KEP 2005 project. Gassled comprises ConocoPhillips, Eni Norge, Esso Exploration andProduction Norway/Mobil Development Norway, Norsea Gas, NorskAgip, Norsk Hydro Produksjon, Petoro, Shell International Pipelines,Statoil and Total E&P Norway. Statoil is the technical services provider at Kårstø, and is implementing KEP 2005 on behalf of Gassco.

Photo: Courtesy of Øyvind Hagen, Statoil


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The processes required to mine precious metals dictate themanagement of a variety of major accident hazards.Consequently, the successful delivery of a robust andcomprehensive risk management programme is acritical business performance indicator.

As the fifth largest gold mining company in theworld, the Placer Dome Mining Corporation iscommitted to delivering world-class perform-ance in the areas of managing health, safety,the environment, community-care and employeewelfare.

To assist Placer Dome in achieving their corporateobjectives, DNV consultants have conductedcomprehensive management systems reviewsfor the company in Canada, South Africa, theUSA and Chile. These system reviews have beensupported by Leadership Risk Managementworkshops and training courses for seniormanagers throughout the Placer Dome organi-sation. Further comprehensive system reviewsare planned this year for mines in Australiaand Papua New Guinea.

Placer Dome’s safety directors Tony Andersonand John Scott have a long association withDNV. As early as 1997, they both recognisedthe benefits of DNV’s International SafetyRating System (ISRS) and the InternationalEnvironmental Rating System (IERS). Thesesafety management and rating systems weretaken on board by the Asia Pacific region ofPlacer Dome in 1997 after a thorough evalu-ation of other system audit tools available inthe region.

Drop in injury numbers"We felt that the ISRS and IERS were a betterchoice to meet our needs because they allow usto control the programme. Also, they come withintroductory training and support, provide uswith a map that assists with identifying the wayforward, and help us identify our priorities andareas for management attention," says TonyAnderson.

He continues: "Starting at safety levels aroundzero and one, the Asia Pacific sites have sinceprogressed to rating levels five and six. Withthis progression there has been a consequentdrop in injury numbers, resulting in a decisionin 2002 to use the ISRS and IERS as the measure-ment tool across all of Placer Dome’s sitesworldwide. We have noticed that sites whichhave used other audit tools, or have not beenaudited before, are returning levels at zero orone. Typically the same as sites in Asia Pacificwhen the protocols were first introduced."

Going for Gold

Placer Dome’s Walter Benko (far left) and Tony Anderson (third from left)working together with DNV consultants to develop a risk based customisedaudit/improvement protocol.


Good collaborationThe use of these systems has significantimpact on the operations and overall sitesafety. "Now sites are actively using theISRS and IERS audit reports and documentsto assist the development of their pro-grammes. Internal auditors find the proto-cols simple to use and report that theextended guidelines are of invaluableassistance," adds Tony Anderson.

Keith Ferguson, Placer Dome’s vice presidentfor safety and sustainability, underlinesthe benefits of cooperation with the DNVconsultants, saying: "DNV made a signifi-cant contribution to improving the safetymanagement systems in Placer Dome in thelast year. The ISRS audits were well-managedand helped us prioritise our improvementplans. We look forward to working with DNVthroughout 2003 to complete the reviews atour operations worldwide."

Tony Anderson adds: "We are very happywith the assistance, support and level ofexpertise provided by DNV in the area ofsystems auditing, coaching and develop-ment."

The Placer Dome/DNV collaborationhas resulted in a joint working initiativeto develop a risk-based customised audit/improvement protocol for the organisation.DNV consultants and Placer Dome personnelhave formed a development team towork together to ensure that DNV’s majorhazard experience and Placer Dome’s miningexpertise are fully optimised.

Kristian Lindøe

PLACER DOME is the world’s fifth largest gold mining company and largest gold producer in Australia, pursuing quality assets around the world. Its core gold business is strengthened by the contri-butions of its copper and silver assets.

Headquartered in Vancouver, Canada, thePlacer Dome Group (PDG) now has interests in 18 mines employing 12,500 people in six countries around the world.

PDG is also actively involved in major explo-ration and construction activities on a globalscale. With a market capitalisation of US$4.7 billion as of December 31, 2002, Placer Dome is traded on the New York,Toronto and Australian Stock Exchanges, as well as Euronext-Paris.

Placer Dome expects to produce 3.5 millionounces of gold, 427 million pounds of copperand 4 million ounces of silver in 2003.

A spectacular mountain backdropgreets visitors to the Placer DomeCortez Mine in Nevada USA

Photo: Courtesy of Placer Dome

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New projects need new technology. To stay a world-class oil andgas company, Statoil’s executive vice president, technology,Terje Overvik actively encourages the spirit of innovation thathas been a Norwegian tradition for centuries. Statoil’s corporatetechnology strategy has been designed to ensure that Statoilachieves a 40 percent share of international production by 2012.

Safeguarding the pioneeringspirit

Statoil’s recently appointed executive vice president, tech-nology, Terje Overvik, has high ambitions: an oil and gasproduction of one million boe/d in Norway and further0.7 million abroad by 2012. With an annual research anddevelopment budget of one billion NOK, he believes thistarget can be reached.

"I know our goal is ambitious, but we have to set highgoals to have something to reach for," says Overvik. He hasworked for the company for 20 years, gradually working hisway up the ranks to his current position. After having hisdoctorate in stochastic dynamics, he started out as a projectengineer in field development projects such as Haltenbanken,Troll and Zee-pipe. Subsequently, he worked offshore forfive years, including a couple of years as platform manager.He has also led the Statfjord unit for three years before beingappointed to his new positon as executive vice president,technology last year.

"I am a practical person, I like to see things realized andfunctioning," he says, praising Statoil’s platform managerschool. "It improved my ability to make fast decisions andtrust my gut feeling."

DNV Forum met him at the OG21 meeting – Oil and Gasin the 21st century – this autumn. This initiative was estab-lished by the Norwegian Ministry of Petroleum andEnergy to develop a national technology strategy to createadded-value and a competitive advantage for the oil andgas industry. Representatives of both the industry and thegovernment participate, and Terje Overvik is chairman.

Business driven strategyUnder Overvik’s management, Statoil has recently revisedits corporate technology strategy. This strategy focuseson short to medium term efforts to stimulate more business,and addresses medium and long term efforts to createsustainable, profitable growth throughout the company’sentire value chain.

"The Technology Division’s main objective is to buildStatoil’s business," he says. Overvik outlined five centralbusiness challenges, all of them illustrating the diversity andcomplexity of Statoil’s current portfolio: Tail production,subsea IOR, develop assets, finding hydrocarbons and de-veloping new business options. "I expect this strategy willbecome more complex as Statoil expands," he says.

Regarding tail production, Statoil is determined to performas well as the smaller companies which dominate this sector.Statoil must develop advanced recovery methods and findnew ways of imaging and monitoring 100 percent of thereservoirs. Today, Statoil is second largest operator of sub-sea wells. Indeed, half of their production comes from suchwells. "Our goal is to increase the recovery factor from to-day's 40 percent to 55 percent by 2008," Overvik says.

Overvik also stresses the need for Statoil to ‘develop assets’.Statoil remains committed to the utilisation of new tech-nologies which can help them in new areas, such as sub-sea-to-bed and all the new challenges connected to car-bonate reservoirs. "We also need to improve our skills infinding new hydrocarbons," he says referring to seismologyand data interpretation. He hopes that the initiative willreduce the number of dry drilled wells.


Finally, Overvik seeks to develop Statoil’s new businessoptions by creating a long term R&D strategy that willposition Statoil for future growth. "I have not yet identi-fied the issues for this activity, but new projects requirenew technology and I’m sure that new topics will turn upalong the way. My job will be to prioritise."

Six focus technology areas To meet these business challenges, Overvik has identifiedsix focus technology areas: exploration and reservoir man-agement, well construction, sub-sea field developments,cost effective safe and regular operation, gas chain man-agement and environmental technologies.

Overvik notes that several of these technologies are rele-vant for more than one of the business challenges. "Theability understand and adapt technology needs related tothe developing portfolio is vital for our success," Overviksays. Consequently, it is important for Statoil to identifyboth immediate technological needs as well as long termfuture needs, which are more difficult to predict.

Reservoir management will continue to be one of Statoil’sflagship technologies. The company’s skill in this areamay also prove to be an important access tool internation-ally, especially in collaboration with other national oilcompanies.

"We cannot do it all alone. Oil companies are notoriouslyslow to share technologies. But we will search for excel-lence and enter into partnerships to reach our goals andstay competitive," he says.

From an international perspective, Statoil is a leadingprovider of subsea technology, multi-phase flow and float-ing production. "About 80 percent of subsea technologydeliverables are Norwegian," says Overvik. It is likely thatStatoil’s future development portfolio will be dominatedby subsea developments offshore Norway.

"Looking beyond the Snøhvit gas reservoir, subsea devel-opments will be an important tool for accessing hydrocar-bons in the Barents Sea and in deep water developments.Snøhvit is the most challenging field planned today whenit comes to remote operated fields, but I realise that wehave to stretch our technology even further to achieve ourfuture production goals."

Lighthouse projectsTerje Overvik’s plan is to establish six or seven lighthouseprojects which will focus on developing key technologies.The idea is that one person will be responsible for theresults for each project and have the freedom to build upinterdisciplinary core teams. "Traditionally, Statoil hasallocated 65 percent of the budget to such projects, butour goal is to reach a 50/50 level between internal andexternal financing," he says.

"By tradition, Norwegians are innovative, and in Statoil wehave our own tradition for embracing new technologies.We intend to stay that way," says Terje Overvik

Eva Halvorsen

"There is still time andopportunity for optimism, but we’re in ahurry. There’s no time tolose," says Statoil’s executive vice president,technology, Terje Overvik.

Melkøya off the Northern coast of Norway, October 2003: With regard to subsea installations and pipeline transport,Snøhvit is the most challenging field planned today. But Statoil realises that they have to stretch their technologicalcapabilities even further to achieve their future production goals.

Photos: Courtesy of Statoil

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Windpower set forWindpower development is gainingmomentum across Europe – bothon land and at sea. Determined toestablish a strong market position,a British company, Mayflower Energy,has built a special ship for in-stalling wind turbines at sea.

The Mayflower Resolution has been designedprimarily for use in the hostile environment ofthe North Sea around the coast of the UK. Theship will also be used for similar projects underconsideration in other areas of Europe, theUSA and other regions where wind energy canbe utilised. Mayflower Energy’s managingdirector, Keith Runnacles, has great faith inthis ship, which will optimise and enhance theefficiency of the instalment process.

Six legs The six-leg vessel, which uses a hydraulic jackingsystem and is equipped with a 300t crane, hasthe notation DNV class +1A1, Self-Elevating

“The market has enormousgrowth potential,” states KeithRunnacles of Mayflower Energy.

Unit, Crane, Dynpos AUT, E0. This has beenprepared and approved by the DNV designteam in London with support from Norwayand the DNV Nauticus Modelling Centre inPoland. A full and complementary team ofengineers and surveyors from MayflowerEnergy Ltd and DNV China were present inthe shipyard throughout the building andcommissioning period. The vessel is a uniquecombination of known technologies applied ininnovative ways. For DNV, it has been a challengeto apply the DNV Rules to a vessel that has themixed characteristics of a ship, a floatingcrane, a DP and self-elevating unit.

Seizing opportunities“This is a very exciting project,” says Runnacles,who has been working on the project for morethan three years. “If wind energy is to be prof-itable, the offshore installation of wind tur-bines has to be cost-effective. In order for off-shore windpower to succeed, the industry hasto have access to purpose-designed equip-ment.”

According to Runnacles, Mayflower Energyused a total of nine different vessels to install30 turbines at North Hoyle near Rhyle inNorth Wales. The Mayflower Resolution, woulddo the same job with no support vessels and farmore efficiently.

10 wind turbines The ship will carry 10 full sets of turbines andfoundations and whatever else is needed to in-stall the 10 turbines during each 14-day trip. Atthe same time, a ROV will install the cables thatgo between the various turbines and connectthe wind-energy field to the power grid on-shore. The Mayflower Resolution is able to main-tain a speed of 12.5 knots in the water.

“This is faster and more efficient than weexpected,” says Runnacles. As soon as it arrivesat the installation site, the Mayflower Resolutionis manoeuvred into place using dynamic po-sitioning. the vessel is then jacked clear of thewater (one meter a minute) and


offshore boom

turns from a ship into a completely stableworking platform. The Mayflower Resolution hasa regular crew of 34. With the addition of theerection team, the vessel will hold between 60-70 people during the installation process.

From dream to realityRunnacles is clearly proud of what he and hisstaff have achieved. ”The vessel has been de-signed from scratch and is the only one of itskind. Several naval architects were offered thechance, but we chose Knude Hansen inCopenhagen, who impressed us with their re-sponse to the brief we’d prepared. Hansen hasexperience not only designing cruise linersand ferries, but more unusual vessels. And theMayflower Resolution is certainly unusual,” saysRunnacles.

Prior to awarding the contract, Runnacles andhis staff spent a lot of time with various turbinemanufacturers and Wind Farm developers tofind out what was needed – and what difficul-ties they would encounter. They also checked

the market. “The information we gathered wasreduced to what we required to install onewindmill a day. We had to create a productionline approach that was totally self-sufficientwith regard to both installation and sea trans-port and we’ve managed to do that successful-ly,” he says.

Built in China The vessel has been constructed in China’sShanhaiguan shipyard in Qinhuangdao, located300 kilometres east of Beijing. Following itscompletion, the Mayflower Resolution is on itsway to the UK ready to start installing wind tur-bines offshore. The flag of registry is the Isle ofMan and the marine crew will be of Europeanorigin and hold the superior class of compe-tency certification necessary for all marineoperations associated with passage, dynamicpositioning, control and jacking operations.

High growth potentialMayflower Energy is a subsidiary of theMayflower Corporation plc, which has approx-imately 10,000 employees and annual sales ofcirca GBP 700 million. The company wantedto explore renewable energy sources and hasestablished a separate environmentally-friendlyproducts division. With the construction of theMayflower Resolution, the company has a vesselthat is at the forefront of technology competingwith the traditional operators for future contracts.“The market has enormous growth potential,”states Runnacles.

With the second round of offshore wind farmlicence awards under consideration, Mayfloweris more optimistic than ever before. The Britishgovernment wants to have renewable energyand is giving developers large subsidies. GBP260 million has been granted for the comingthree-year period in order to achieve 10 per-cent of the total energy consumption by 2010from renewable energy. A second vessel is cur-rently under consideration by MayflowerEnergy.

Harald Bråthen

The vessel Mayflower Resolution has been designedfrom scratch and is the only one of its kind.


Building for the futureChina is beginning to flex its shipbuilding muscles. The China StateShipbuilding Corporation (CSSC) and China Shipbuilding Industry Corp(CSIC), the conglomerates in charge of most of the country´s shipyards,plan to reach the summit of world shipbuilding by 2015 through ship-yard modernisation and increased efficiency and rationalisation.

CChina’s leaders are confident that the countrycan overtake Asian shipbuilding rivals Koreaand Japan by 2015. Indicating the explosivegrowth of Chinese shipbuilding, its output hasmore than doubled in the past three years, andthe number of ships ordered from China so far in2003 is twice the number ordered last year.Chinese-built vessels are today sold to 40 coun-tries on all five continents, with Germany,Greece, Canada and Hong Kong as the majorcustomers.

“There is ongoing development and funda-mental change at most Chinese shipyards and Ifirmly believe they will expand their capacityand win the confidence of even more overseasowners in the future,” said DNV maritime’sregional manager for Greater China, AndyWestwood.

DNV IN CHINADNV is one of the leading classificationsocieties in China´s rapidly expanding ship-building industry, accounting for 24 per-cent of all new vessels currently on order. Itopened its first permanent office in Chinain 1981. Today, from its principal offices inthe cities of Shanghai, Hong Kong, Dalian,Guanzhou and Shenzhen, as well as numer-ous site offices, 285 staff deliver DNV´s ma-rine, industrial, offshore and certificationservices.


Improved qualityAccording to Westwood, those overseas ship-owners who have invested appropriate new-building supervision for projects in China,have come away with good quality ships at verycompetitive overall cost. He used the NITCVLCC orders as an example: “Whilst the buildtime for the first of these ships (first-everVLCCs in China) has been almost two years,the pace of construction is quickening, andNITC’s management is very pleased with theperformance of the delivered vessels.

“Generally speaking, the larger Chinese yardshave a very good track record for standardships, but owners should be more careful aboutwork done by smaller yards where design andparticularly supervision become more critical,”said Westwood, and added, “Some yards canalso have problems with first-time constructionof high-specification/complex vessels.”

Focus on efficiencyIn spite of these imperfections, Westwood be-lieves the real reason for the recent success ofChinese yards is improved steel-cutting andshipyard-layout and management practices.

“New production lines have been installed inold Chinese facilities, thereby improving theway steel is moved in order to be made intoblocks,” he explained. According to Westwood,the improved use of steel and workshops leadsto bigger blocks being used in assembly work,thus shortening the construction time in theberths.

“A major bottleneck is berth space,” said Westwood.The problem of berth space is greater in Chinasince most yards still use old-style slipwaysrather than gated dry docks. Dry docks allowshipyards to transfer ships to outfitting docksafter the major work has been completed.” �

CSSC has accelerated its shipyard development phase with the construction of themodern Shanghai WaigaoqiaoShipyard.


Two competing strategiesA decision was made by the Chinese governmentto divide the two main shipyard groups (CSSCand CSIC) and create more domestic competition.These organisations have since adopted twocompeting strategies in their efforts to add largecontainerships, VLCCs, ro-ro vessels, FPSOs andmore recently, LNGs to their bulker/-tankerportfolios.

CSSC’s ambitious plan has been to expand itscurrent 4m dwt capacity to over 14m dwt by2015. To achieve this, along with other major de-velopments, the Group is scheduled to build theworld´s biggest single yard at ChangxingIsland, allowing it to become the world´s numberone shipbuilder by 2015.

The more conservative approach adopted by theCSIC is to expand its 1.8m dwt production in2003 to 9m dwt by 2015. Although VLCC docksare being expanded at CSIC’s Dalian NewShipyard, the company’s growth strategy is fo-cussed more on restructuring its production ca-pacity. Up to five ship-assembly plants will bebuilt in Dalian, Bohai, Shanhaiguan, Tianjin andQingdao (Behei) City. The group is also com-mitted to developing further as a block assemblyoperation.

Both shipyard groups agree that if China is tosucceed in specialist market sectors and becomea dominant force in world shipbuilding, manage-ment systems, quality assurance, automation anddesign software must be developed to maximiseopportunities created by expanded yards.

Realising its vast potential“This nation (China) has still to overcome someobstacles, but that said, there’s a growing realisa-tion around the world that Chinese yards, by andlarge, build very decent ships at competitive prices.”

Westwood summed it up this way: “The fact is,there’s a train coming through here and youhave to ask yourself, do you stand on the plat-form and watch it, get on as a passenger or get inand help drive? It is my experience that the ma-jority of Chinese yard managers are quite willingto ask for help, readily accepting that their pro-ductivity and yard-management skills are still notas good as those of South Korea and Japan. Theyare also applying market economy principleswhen building and staffing new, more productivefacilities that will relatively soon have an enor-mous capacity.”

Stuart Brewer

EXCERPT FROM ‘CHINA SHIPBUILDING: THE EMERGING GIANT´A study from Matthew Flynn and Poten & Partners

It´s official. China has declared itsintention to reach the summit ofworld shipbuilding by 2015. Thecore of this ambition is a Greenfieldsite on an eight-kilometre (five-mile) waterfront on ChangxingIsland at the mouth of the YangtzeRiver.

The announcement in early Augustwill see the dismantling of the130-year-old Jiangnan shipyardon prime downtown Shanghaireal estate. As a 21st century re-placement, China State ShipbuildingCorp (CSSC) will spend up toRMB 30 bn (USD 3.6 bn) over ten years tobuild what it intends to be the world´slargest shipbuilder in combination withother CSSC yards.

When completed, the Changxing Islandshipyard should be able to assemble atotal deadweight tonnage each year of8m dwt, according to Guo Xiwen, theCSSC director in charge of the project.

Together with other CSSC yards inShanghai, capacity would be 12m dwt,while counting other CSSC yards outside

Shanghai, the CSSC capacity number wouldactually hit 15m dwt.

To date, contracting in China has been fastand furious, allowing it to capture 2m gtin new orders for the first six months of2003, according to LR-Fairplay statistics.While impressive, this is still a distantthird to South Korea´s 17.1m gt and afraction of the 9m gt won by Japan. Thequestion is not whether China can buildbigger ships to meet owner standards.

The question is whether it canmove to a higher volume of big-ger standard ships.

China needs to invest heavily inproductivity improvements ratherthan pure expansion and cer-tainly should consider concen-trating efforts in key facilities asit is for Changxing Island.

Management skills will deter-mine whether Chinese shipbuild-ing has a tail wind or head windon its journey to become an industry leader.

Leadership ETA for China is likelysometime after 2015 and possibly closerto 2020, sharing the market with SouthKorea and Japan in a triumvirate ofAsian shipbuilding.

Rome was not built in a day.

For more information on this report, contact [email protected]

Need for more bigger standard ships

Andy Westwood, DNV Maritime’s regionalmanager for the GreaterChina area.

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Mohammad Souri, chairman and managing director ofNational Iranian Tanker Company

NITC: Making waves in ChinaThe National Iranian Tanker Company (NITC) hasrecently taken delivery of the first VLCC vesselsto be built in China. Chairman and managingdirector Mohammad Souri gives “thumbs up” tothe Dalian New Shipyard, describing the vessels´quality and performance as “highly satisfactoryand exceeding our expectations.”

“This is a unique situation for us,” explains Souri.“It is an opportunity for us to build ships exactly aswe want them, from start to finish.”

Dalian New Shipbuilding (DNS) is the first Chineseshipyard commissioned to build a very large crudecarrier (VLCC). The shipyard is currently build-ing a series of five vessels for NITC, three of whichhave already been delivered. All the vessels havebeen built to precise specifications, includingforty-year global fatigue on the hulls. The designsare Korean supplied, with extensive assistancefrom DNV.

According to Souri, there were many factors influ-encing the choice of shipyard, including affordablelocal labour rates. But the deciding factor was thatDNS allowed NITC the freedom to control the de-sign of the ship.

A solid teamSouri explains, “One of the key reasons for thesuccess of this project is the use of the same 15member project team who had already workedtogether in Korea on NITC’s Aframax and Suezmaxnewbuildings. Their experience, coordination andknowledge were key to making this project such asuccess.”

Echoing NITC chairman Souri’s words, the com-pany’s technical project manager Parviz Sangin saidNITC enjoys an excellent cooperation with the yard,a relationship that has benefited both parties. He at-tributes flexibility and control as underlying reasonsfor the positive working relationship with the yard.

While Sangin acknowledges that problems oc-curred during the newbuilding process and felt

the yard might benefit from a more efficientorganisational structure, he says NITC gained a lotfrom the experience. “Working with the Chineseover a period of several years has raised the level ofour professional work techniques, experience whichhas enabled the whole building process to runmore smoothly,” said Sangin.

Quality control“As in most yards, efficiency could be improved,but the main key to success with foreign yards is torun control checks to monitor the degree of ‘totalunderstanding’ of the project or task at hand,” saidSangin. He was also quick to note the ‘solid and reli-able support’ NITC received from DNV, a key factorto the successful series construction. “Some aspects ofthe ships are very complex, and DNV has given usthe confidence to forge ahead with structural con-figurations which have not been used on ships ofthis size before.”

Upgrading the fleetNITC has been vigorously improving and mod-ernising its tanker fleet in recent years in order tobecome more competitive in the oil transportationbusiness, where double-hull tankers are now thepreferred design for environmental reasons. In thepast five years alone, NITC has ordered or builtfive Aframax, five Suezmax, ten VLCCs and fiveproduct carriers.

“By the end of our newbuilding programme in2003, the average age of the company’s tankerfleet will be less than four years,” says NITC chair-man Souri. “As a result, NITC will soon own andoperate the most modern and efficient tanker fleetin the world.”

Stuart Brewer

Parviz Sangin, NITC´s technical project manager

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Graig: The Chinese connectionWith about 40 ships ordered at Chinese yards, noother western company has as much experience ofbuilding in this country as the UK´s Graig Group.

“Since 1995, Chinese shipbuilding has evolvedmarkedly,” says Hugh Williams, CEO of theGraig Group. “China is the place to build vesselstoday.” At the recent Mare Forum in Rotterdam,Williams expressed confidence that Chinawould be able to deliver the twelve firm ordersfor the Group’s Diamond 53 carriers “on timeand to standard.” And Graig has set a highstandard: the company´s ships will be 53,000-dwtbulk carriers with double hulls and a numberof other innovations incorporated by theirdesigner, Carl Bro of Denmark.

According to Williams, Graig identified the ad-vantages for owners and charterers in buildingdouble-hull bulkers. It also saw that Chineseyards could build new designs cost effectivelyand yet still be prepared to offer a degree offlexibility not found in other major Asianyards. Graig Group was eager to do businesswith Chinese shipyards, but instead of goingalone, the Group assembled a coalition of part-ners whose individual strengths could be fo-cused to create a stronger project.

Strength in numbers“We started by getting together a designer,class, owners and yards then added a financepackage, both local and international, and anewbuilding supervision package,” he says. “Thefirst benefit was that we got an owner-friendlydesign, rather than something a yard has comeup with to simplify its work.” Williams explainsthat Graig had the technical expertise and marketsupport of the major class society active inChina. “We were able to offer a package withexcellent finance terms and attractive deliveryslots. Then we involved a major broker and wehad a project which was much bigger than wecould have managed alone. In this way, we wereall able to input experience and expertise, andeach of us benefited.”

To date, there are 12 Diamonds on order forfour owners, and Graig will soon be launchingnew, larger Diamond designs based on thesame sharing philosophy. “Our only currentlimitation is the production capacity of yardsthat we deem to be acceptable as regards toquality,” says Williams. But he is quick to addthat Graig has confidence that both the qualityand capacity of China’s shipbuilding sector willcontinue to improve rapidly. “Providing thereis unrelenting yard supervision and correctdocumentation, companies can get a high-quality product at a good price,” says Williams.

Stuart BrewerCEO of the Graig Group, Hugh Williams (left), shakes hands on a newbuilding contractwith Li Chang Yin, president of the China Shipbuilding Industry Corp during last year’sSMM exhibition


Five on China

Sitting (L-R) Patrik Wheater, Sam Chambers, Bob Jaques.Standing (L-R) Hugh O'Mahony, Paul Gunton

During a recent visit to China, editors of someleading shipping publications got a closer lookat China’s dynamic shipbuilding market. Hereare some of their remarks.

SAM CHAMBERSEditor, Maritime AsiaSignificant developments pointing to China’sgrowth include: the successful series constructionof the country’s first VLCCs, more export ordersof higher value ships, plans announced for thelargest shipyard in the world and a growing re-alization around the world that Chinese yardsbuild very decent ships at competitive prices.One area that the Chinese could lean a lot fromthe Japanese is making their 25 plus year oldyards more efficient, while the new ones (suchas Shanghai Waigaiqiao Shipyard) don't haveto worry about such constraints.

HUGH O’MAHONYTechnical Editor, Lloyd’s ListChina’s two main shipyard groups, the southerlyChina State Shipbuilding Corp (CSSC) groupand the north’s China Shipbuilding IndustryCorp (CSIC) have adopted different growthstrategies. CSSC ambitious plans include ex-panding its current 4m dwt capacity to over14m dwt by 2015, creating the world's biggestsingle yard, and becoming the world’s numberone shipbuilder by 2015. The CSIC’s principlepath to expansion will be based on restructur-ing of production processes. Four or five shipassembly plants would be built in Dalian, Bohai,Shanghai, Tianjin and Quangdo City, and yardwork will be more of a block assembly operation.

PAUL GUNTONEditor, FairplayEvery shipowner I have met who has orderedships in Chinese yards brings up the questionof quality. Andy Westwood, DNV vice presidentand maritime regional manager for theGreater China area, says that concerns overquality should be more specific. “There’s atrain coming through here,” he says. “Do youstand on the platform, get on as a passenger orget in and help drive?” Chinese yard managersreadily accept that their productivity and yardmanagement skills still lag behind those ofSouth Korea and Japan, but are applying mar-ket economy principles as they build and staffnew facilities.

BOB JAQUESEditor, SeatradeOne Chinese yard boss has likened shipbuildingin Japan and Korea to “people of 35 to 40, whoare very strong and at their prime, while my in-dustry is 16 - 17.” With their coming of age insight, many larger Chinese yards are provingless malleable to owners’ wishes than before,now stipulating which types of ship they willbuild and seeking better prices. Some foreignowners wanting smaller, one-off vessels haveeven complained of being unceremoniously‘bumped’ from building slots on the eve ofsigning. But Chinese yards feel they are merelyadopting ‘adult’ market practices.

PATRIK WHEATER Editor, Marine Engineers ReviewTalk to the President of any shipyard in Chinafrom Dalian to Guangzhou and you will hearhow China’s shipbuilding capacity is expectedto be comparable to that of Japan and Korea by2015. CSSC has accelerated its shipyard devel-opment phase, which began in 1999 with theconstruction of the modern (by Chinese stan-dards) SWS yard, and will follow in 2007 withthe relocation of Shanghai’s Jiangnan, andother CSSC-operated shipyards, to Changxingisland. CSIC, meanwhile, has big plans for itsyards. The Mayor of the Dalian MunicipalPeople’s Government, Xia Deren, declaredthat the “state government has made it clear itwill build Dalian into a very important ship-building, manufacturing, petro-chemical, elec-tronic and information technology base”. Butthat expansion must go hand-in-hand with im-provements in quality assurance, managementsystems, automation, and design software pack-ages to help meet China’s vast potential.

C


Cold comfort

Coastlines in both Arctic and Baltic areasare especially vulnerable to oil pollution.Several regulatory administrations, Finlandand Russia included, are emphasising theenforcement of Ice Class rules to ensurethat ships operating along their coastlineshave sufficient capability to operate in ice.DNV has been co-operating with other soci-eties and flag administrations, such as thoseof Finland, Canada and Russia, to ensurethat they are sufficiently stringent.

“Managing cold-climate risks is increasinglyimportant,” says DNV marketing directorWilhelm Magelssen, “both for tankers and

for commercial vessels.” He points out thatthe competence to operate safely in coldclimates is not just linked to interaction be-tween ice and the hull, propeller and rud-ders, where there is an obvious need tocomply with special technical standards.Extremely low temperatures can cause airand water pipes to freeze, navigational andemergency equipment to fail, and crew per-formance to deteriorate. Ice formation onthe deck, superstructure and cargo, threat-ens both the performance of deck equip-ment, and the vessel’s stability.

“Managing cold-climate risks isincreasingly important both fortankers and for commercial ves-sels,” says DNV marketing direc-tor Wilhelm Magelssen.

In the winter of 2002-03, temperatures in the Baltic seafell to a ten year low. These icy conditions, combined withincreased tanker traffic, have raised concerns aboutenvironmental safety. Oil tankers operating in cold climates,in particular those serving Russia’s Primosk terminalnear St Petersburg, create risk management challengesfar more complex than those faced by tankers operatingin warmer conditions.


Rules to suit the operationsStudies performed by the Finnish regulatory au-thorities, and DNV’s experience of operations inArctic areas, have identified a number of challengesto vessels operating in cold climates.

They include the threat of drift ice, entrapment inice due to engine failure, and ship manoeuvring capa-bility. Navigational issues must be considered asmust oil spills, and the greater likelihood of leakagein icy conditions. Crew training, and managing rescueoperations, are also important.

DNV offers a number of class notations correspon-ding to different functional needs when operatingin cold climates or ice-infested waters. As the majorclass society for tankers with ice strengthening, andwith almost 1,800 classed vessels of different typesprepared for operation in cold climate, DNV hasgained many years of valuable experience for devel-oping rules covering different operational needs:

• Rules for soft ice• Baltic rules, assuming support from ice breakers• Arctic rules for more independent operation• Ice-breaker rules for service in heavy ice

conditions • Rules for materials taking into account low

temperatures• Deicing rules for proactive preparedness to

ensure operational safety.

Planning for the futureThe additional risks of operating in cold climatesrequire a systematic approach, focusing on plan-ning and preparations. Ongoing development takesinto account additional risks such as how to ensuresufficient firefighting capability in extreme tem-peratures, and how to cope with new propulsion alter-natives in a robust, safe and reliable manner.

Wilhelm Magelssen warns that regulations alone arenot enough. “We must make shipowners and crewrecognise the challenges of operating in cold cli-mates and icy conditions. DNV is prepared to sup-port and be a discussion partner for owners, yardsand authorities in the further development of ship-ping activities in cold climates. Such communica-tion becomes increasingly important when one re-alises that one-third of all DNV-classed tankers cur-rently on order are specified with ice strengthening,and this proportion seems to be increasing.”

Stuart Brewer

Photos: Courtesy of Anders Utkilens Rederi as

Ice formation on the deck, superstructure and cargo threatens both the performance of deck equipment and the vessel’s stability.

UN standardises regional namesWhile the United Nations (UN) is chiefly recognized for itsefforts to resolve conflicts and manage the distribution ofinternational aid, representatives have also worked hard toestablish international standards to avoid confusion betweennations. Part of this work includes drafting resolutions tomake sure all nations refer to regions by the same name.For example, the body of water that separates Saudi Arabiaand Iran is now referred to as the Persian Gulf, not to beconfused with the Arabian Sea, which feeds the Gulf.


Prestigious award for theSOHO teamThe International Academy of Astronautics (IAA) has presentedthe SOHO spacecraft team with the prestigious Laurels for TeamAchievement Award. The award recognises both the outstandingachievements in designing and building the spacecraft, operatingthe mission, as well as the science it has performed.

SOHO is a project to study the sun from its deep core to its outercorona, including the solar wind. SOHO is a shortening of Solarand Heliospheric Observatory, and was built by Astrium EADS inToulouse on behalf of the European Space Agency (ESA) and theNational Aeronautics and Space Administration (NASA) in cooper-ation.

The SOHO spacecraft, which was launched on December 2nd 1995,was specified for a two years lifetime in operation, but thanks to analmost perfect orbit injection by the ATLAS 2AS launcher (requir-ing only small amount of fuel for delta-orbit correction), goodspacecraft design and operation by the SOHO team, SOHO is stillgoing strong eight years later. In December there will be a eightanniversary celebration since the SOHO satellite was launched.

"We can be proud of having been involved from 1990 to 1996 in thedesign, construction, testing, launch and finally in-flight testing ofSOHO – before it was officially taken over by ESA/NASA in the earlysummer of 1996," says Nils Harald Hansen at the DNV-office inToulouse.

Though the SOHO spacecraft was designed for a two-year-mission,its spectacular success has led to two extensions of the mission, first-ly until 2003 and then until March 2007. The award is a tribute to ateam that has contributed to one of the most successful space mis-sions in history.

All the SOHO science data is available for everybody that hasInternet access, and every day you can collect the latest pictures takenby SOHO through the different instruments (Coronal spectrometer,Energetic particle analyser, Ultraviolet imaging, Spectrometric coro-nagraph and others).

For more data, pictures and information, please consult the SOHOhome page:

http://sohowww.estec.esa.nl/

Stena newbuilding ordersSweden’s Stena Bulk has contracted with Hyundai for two 116,000-dwt ice-class tankers.

The two DNV-classed Aframaxes, to be named the Stena Arctica andStena Antarctica, are due to be delivered in the 2005/06 ice season.Both vessels will be further strengthened to Swedish/Finnish IceClass 1A and mainly carry Russian export oil cargoes in the Baltic.

Wilhelm Magelssen, DNV Maritime’s marketing director describesthe newbuildings as among the largest and most powerful ice-strengthened tankers ever to be built.

“Both ships will be able to navigate in 1m thick ice and will have85% more engine power than ordinary Aframax’s,” he said.

Earlier this year Stena’s sister company Concordia Maritime orderedfour 49,000-dwt P MAX product tankers. Croatia’s Brodosplit shipyardwas tapped for the job, with delivery of the first ship scheduled for2005.

Jan Koren, DNV’s business director for tanker ships, said Stena isordering the high spec, ice-class newbuildings to help meet the growingdemand for good tonnage to carry Russia’s burgeoning oil exportsthrough the icy waters of the Baltic.

The P MAX double hulls will be further strengthened to DNV enhancedfatigue Class Notation Plus 2, and Swedish/Finnish Ice Class 1B.

NEWS �

Head of section in DNV Consulting, Toulouse, Nils Harald Hansen,standing in the clean-room next to the MetOp-satellite at Astrium EADS.MetOp, where DNV is also involved, is part of an US/European cooperation within meteorology, and like SOHO its payload includes both US and European instruments.

Photo: Courtesy of Astrium EADS in Toulouse

In the future, Italian restaurants have to fulfil defined standardsto be able to call themselves “Italian”. Strangely enough, upto now, there has been no form of protection or classificationof “brand Italy” in the restaurant business.

Recently, DNV Certification signed a contract with the Italian restau-rant’s association. The project targets approximately 60,000 Italianrestaurants outside Italy, even though no more than 10,000-15,000 aretruly Italian restaurants.

DNV has participated in the study and design of a new quality standardthat will determine whether Italian restaurants abroad offer genuineItalian cuisine to their guests.

This work is done together with the Italian Ministry for Agricultureand Forestry, the Italian Trade Commission (ICE), the Association ofthe Italian Chambers of Commerce abroad (Assocameraestero) andthe Italian restaurants’ association (Associazione InternazionaleRistoranti d’Italia (ARDI)).

First of all, the technical standard requires the use of authentic Italianingredients, although deviations will be allowed from country to coun-try. Mostly Italian wine in the cellar, a head chef who has been formal-ly trained in Italian cuisine or has spent at least six months training ata restaurant in Italy, and at least one Italian-speaking waiter, areamong the other criteria.

On February 28, a pilot project with the voluntary participation ofmore than 50 restaurants in Belgium started up. A number of Italianrestaurants in Luxembourg then joined the project.

The next step over the following 3-4 years is the certification of thetruly Italian restaurants in France, Germany, Great Britain, theNetherlands, and then moving on to the capitals of the rest of CentralEurope and then Scandinavia.

The aim of the project is to create an international Italian food andwine circuit promoting the Italian identity.


DNV to class seafarersIn a further expansion of classification business, DNV is targeting maritime colleagues and seafarers

A new global system of competence standards to ensure thatships’ crews from different nations, cultures and training institutes allhave a common, acceptable level of knowledge, skills and attitudes iscurrently being developed.

As reported in TradeWinds, DNV will not provide the training but,based on its standard for certification of learning programmes, willensure that the content of the training process and the result of thefinal examination meet an acceptable common level set by thestandard.

Tor E. Svensen, chief operating officer of DNV Maritime says: “Thiswill be the first global system for classifying maritime competence. Itincludes competence standards that can be applied globally and certi-fication which is internationally recognised.”

The new standards will incorporate the requirements for safe andefficient operations set out in statutory requirements of the IMO andother authorities, including the Standards of Training, Certificationand Watchkeeping for Seafarers (STWC)

Tor E. Svensen, COO DNV Maritime.

DNV certifies Italian restaurants outside Italy

Photo: Getty Images

JSam Chambers is the editor of Maritime Asia and the East Asia editor of Lloyd’s List


Time to appreciate quality of Chinese built ships

Are Chinese shipbuilders painted in an unfair light that allowsshipowners to scramble all over them? Sure, the yards are desperateto increase both their repertoire as well as volumes and willnaturally offer tempting incentives to build a new ship type,but are they going too far?

“You don’tbecome thethird largestshipbuilderin the worldby buildingtin cans”

Japanese and Korean yards, who let’s face it theChinese want to replicate in a hybrid megafashion, confide to some of their Chinesecounterparts how shocked they are that themainland builders give owners such flexibilityand room for manoeuvre, even after contractsigning, which often results in severely dentedprofit margins.

It’s a well-known fact that many of the Chineseyards’ first ships in a new series are often pro-duced at a loss. This is believed to be done toensure that whatever the landmark deal is, itgoes to them. But surely this is wrong. All theChinese yards now talk a good game about theneed to be market-orientated and, more perti-nently, profitable, something that was not nec-essarily in the Chinese lexicon a decade ago.Empowered by yet another record year, withexport volumes jumping massively and break-through moments including Kawasaki KisenKaisha’s car-carrier order, Transmed’s two174,000 dwt double hull cape order at Bohai,and Shanghai Waigaoqiao’s first ship delivery,the CSK Fortune, now is the time to correct in-ternational perceptions regarding quality. Youdon’t become the third largest shipbuilder inthe world by building tin cans.

Exacting standardsStrong blue chip owners, such as Stena,Gotland, AP Moller and the National IranianTanker Company, have been ordering in Chinafor a number of years and, more importantly,they are returning. All these companies haveexacting standards. Perhaps the reason whythey themselves don’t blow the China yardtrumpet so loudly is that they believe they havea temporary competitive advantage over othersordering at more expensive yards elsewhere.

Certainly there are areas where the Chineseneed to improve, and to be fair, the top execu-tives in the industry appreciate there is stillplenty to be done to overhaul the SouthKoreans and the Japanese, as Beijing has statedis its intention within the next 20 years. Thepresident of China’s largest shipyard has high-lighted three key areas where the country’sshipbuilders can learn from their neighboursin Japan and South Korea. Boosting domesticmarine equipment production, research anddevelopment and information technology wereall considered ways to improve competition byPaul Sunbo, boss of Dalian New ShipbuildingHeavy Industries (a finalist at this year’s Lloyd’sList Maritime Asia Awards alongside Koreanheavyweights Daewoo and Hyundai Heavy – afurther sign of boosted credibility) in thenortheast of the mainland.

World‘s largest shipbuilderThere can be no doubt that the Chinese yardswill overhaul their east Asian rivals some timearound 2020, with plans unveiled this year forthe largest shipyard in the world on an islandto the north of Shanghai, plus four other largegreenfield yards. By building on a clean slate,shipbuilders will be able to construct moremodern, better laid out facilities, more Koreanin nature as such than many of the present in-ner city cramped places. Shanghai Waigaoqiaois a forerunner for these new look shipbuildingareas.

Watch this space as Koreans and Japanese flockto invest in Chinese shipyards in the comingyears. With LNG carriers on the way fromHudong-Zhonghua, how much longer will ittake before China’s shipbuilding skills are uni-versally appreciated?

LAST WORD

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