Petrobras Cancels Vessel Leases, Schahin to Sue

By Reuters 2015-05-28 21:10:56

Brazil’s state-run oil company Petrobras canceled leases with Schahin Petroleo e Gas SA for five offshore oil drilling and production vessels after a cash crunch forced the ship leaser to remove the equipment from service for nearly a month, Schahin said on Thursday.

The decision, if upheld, will result in the loss of more than 1,000 related jobs, Schahin said, while creditors and investors stand to lose more than $4 billion. Schahin said it plans to sue Petrobras, as the oil company is known, to reinstate the contracts.

Petrobras said in a e-mailed statement that the cancellations were due to a contractual breach.

Petrobras has been trying to slash costs in the face of falling oil prices, soaring debt and record losses related to poor planning and fallout from a giant price-fixing, bribery and political kickback scandal.

In the lower oil price environment, Petrobras, the world’s most indebted oil company, and third most indebted non-financial company, faces a market with a growing number of unused vessels and falling day rates. Deepwater drillships that rented for $500,000 or $600,000 a day several years ago can now be leased for $400,000 or less, according to industry sources.

The five Schahin vessels are the drillships Cerrado Sertão and Lancer and the semi-submersible oil production platforms Amazônia and Pantanal. All had been on long-term leases.

Schahin said it was forced in early April to temporarily pull these vessels from service with Petrobras for nearly a month and move them to port after a lack of cash to pay debt led a creditor to seek the sale of assets. The creditor was leasing the Pantanal and Amazônia to Schahin.

In late April, after renegotiating a $1 billion reduction in debt Schahin informed Petrobras that the ships were ready for service. On May 21 Petrobras canceled the leases, Schahin said.


Shore Power Too Expensive for Hong Kong

By Wendy Laursen 2015-05-28 20:22:44

Hong Kong’s Environmental Protection Department has said that if shore power facilities were built at Hong Kong’s new Kai Tak cruise terminal they would be significantly underutilized. Therefore, plans for building the facilities will not go ahead.

The terminal, built on the tip of the former airport runway, can accommodate two Oasis class vessels at a time as well as three medium-sized vessels.

The department has stated that only five of 60 cruise terminals in the Asia Pacific are considering shore power, and that only 35 international cruise ships, about 16 percent, are expected to be equipped to use such facilities. Most of these vessels sailed in North America, not Asia.

The South China Morning Post reports that a study was undertaken by Hong Kong’s Electrical and Mechanical Services Department in 2013 to look at the feasibility of installing shore power at Kai Tak. It estimated that construction of shore power facilities would cost $40 million (HK$315 million) and would take 60 months. It would then cost $1.8 (HK$14 million) a year to operate.

“The survey findings suggest that setting up onshore power supply is not a priority task among cruise ports in the Asia Pacific region and this will likely remain so in the foreseeable future,” the department said.

CAN Disappointed

Hong Kong’s Clean Air Network (CAN) is very disappointed. According to the 2012 emission inventory for Hong Kong published by the Environmental Protection Department, ocean going ships became the number one source of inhalable suspended particulates, nitrogen oxides and sulfur dioxide in Hong Kong.

Cruise ships accounted for 2.4 percent of SO2, 0.9 percent of NOx and 1.5 percent of particulate matter respectively, says CAN.

As estimated by Hedley Environmental Index in 2014, air pollution caused 2,616 premature deaths and 32.657 billion in lost (Hong Kong) dollars. Thus, we can calculate that by installing onshore power supply, the death number could be reduced by 42 and HK$523 million could be gained annually, said CAN in a statement.

CAN CEO Sum Yin Kwong says, “The government tends to calculate cost benefits without considering external social costs. Comparing similar community projects such as spending 600 million for a gymnasium, the building of onshore power facilities is certainly worthwhile in order to protect public health.”

CAN says the government should seize the opportunity to be the forerunner in Asia and attracts shore-power-capable cruise ships to come by providing the facilities.

MarEx reviewed the views of various ports around the world on the benefits of shore power here.

New Sulfur Regulations

It is expected that most cruise ships will find it more cost-effective to switch fuels at berth. The Hong Kong Marine Department is implementing a new low-sulfur regulation for ocean-going vessels moored or anchored at a berth in Hong Kong waters from July 1, 2015.

Lloyd’s Register explains, the Air Pollution Control (Ocean Going Vessels) (Fuel at Berth) Regulation (Cap. 311AA) requires vessels to use compliant fuels while at berth in Hong Kong when operating main engines (except when used for the propulsion of the vessel), auxiliary engines, boilers or generators. The requirement does not apply during the first hour after arrival and the last hour before departure.

Under the regulation, compliant fuel means low-sulfur fuel with a sulfur content not exceeding 0.5 percent by weight, LNG or any other fuel approved by the Hong Kong authority. Exemptions may be granted for emission abatement technologies.

After the Regulation enters into force on July 1, 2015, masters and owners of any OGVs using non-compliant fuel while at berth in Hong Kong may be liable to a maximum fine of $200,000 and imprisonment for six months. Masters and owners who fail to keep the required records may also be liable to a maximum fine of $50,000 and imprisonment for three months.


Australia’s MH370 Search Technology Questioned

By Reuters 2015-05-28 19:24:52

Nearly a year after embarking on a multi-million dollar quest to solve one of aviation’s greatest unsolved mysteries, authorities and search teams are being criticized over their approach to finding Flight MH370 in the remote southern Indian Ocean.

The Australian-led search, already the most expensive in aviation history, has found no trace of the Malaysia Airlines jet or its 239 passengers and crew, prompting calls for a rethink into the way the mission is conducted.

Experts involved in past deep water searches say the search to find MH370 could easily miss the plane as Dutch company Fugro, the firm at the forefront of the mission, is using inappropriate technology for some terrain and inexperienced personnel for the highly specialized task of hunting man-made objects.

Heightening concerns, Australian authorities said on Wednesday that another search vessel, the Go Phoenix, which is using the world’s best deep sea search equipment and crew provided by U.S. firm Phoenix International Holdings, would pull out within weeks. No reason was given for withdrawing the vessel from the quest.

“Fugro is a big company but they don’t have any experience in this kind of search and it’s really a very specialized job,” said Paul-Henry Nargeolet, a former French naval officer who was hired by France’s air accident investigation agency BEA to co-ordinate the search and recovery of Air France Flight AF447 in 2009.

“This is a big job,” Nargeolet told Reuters. “I’m not an Australian taxpayer, but if I was, I would be very mad to see money being spent like that.”

Fugro, which was contracted by the Australian government to operate three ships pulling sonar across the vast 60,000-km search zone, has rejected claims it is using the wrong equipment, saying its gear is rigorously tested.

Still, Nargeolet’s concerns are echoed by others in the tightly held deepsea search and rescue industry, who are worried that unless the search ships pass right over any wreckage the sonar scanning either side of the vessels won’t pick it up.

Experts also question the lack of data released by the Australian Transport Safety Bureau (ATSB) on the activities of the Fugro ships.

Three of the bidders rejected for the MH370 contract, U.S. firm Williamson & Associates, France’s ixBlue SAS and Mauritius-based Deep Ocean Search, have taken the unusual step of detailing their concerns – months down the track – directly to Australian authorities in correspondence viewed by Reuters.

Several other experts are also critical, including some who requested anonymity, citing the close knit nature of the industry which has just a few companies and militaries capable of conducting deepwater searches.

“I have serious concerns that the MH370 search operation may not be able to convincingly demonstrate that 100 percent seafloor coverage is being achieved,” Mike Williamson, founder and president of Williamson & Associates told Reuters.


Australia took over the search for the missing plane from Malaysia in late March last year, three weeks after MH370 disappeared off the radar during a flight from Kuala Lumpur to Beijing.

The search area was determined by satellite data that revealed the plane turned back sharply over the Malaysian Peninsula and flew undetected for another six hours before crashing into the inhospitable southern Indian Ocean.

The unchartered waters, buffeted by the Roaring Forties winds, stretch as deep as six km, hiding old volcanoes and cliffs in their depths. Australia, Malaysia and China earlier this month agreed to double the search area to 120,000 square kilometers (46,000 square miles).

Whether Phoenix International, which has U.S. navy contracts and found the recorders of AF447, will be part of that extended search area is unclear after the ATSB said that Go Phoenix, owned by Australian firm Go Marine, will cease operating on June 19. Phoenix International, which was contracted separately by the Malaysian government, did not immediately return calls about its position. The Malaysian government also did not reply to requests for comment.

Two of the Fugro ships traverse up and down 2.4 km-wide (860 yard) strips of the sea floor, pulling via a cable a towfish that contains sonar equipment, in a technique often called “mowing the lawn”.

The towfish coasts around 100 meters (110 yards) above the sea floor, sending out sound waves diagonally across a swath, or broad strip, to produce a flattened image of the seabed.

The Fugro ships are using sonar provided by EdgeTech, the same U.S. company whose sonar was used successfully to find Air France AF447 after it crashed in the Atlantic Ocean.

However, experts say while the type of sonar equipment being used by Fugro gives good results in flat surfaces, it is less well-suited to rugged underwater terrain, a world of confusing shadows.

The ATSB has routinely released detailed data from Go Phoenix, but has not done so for the Fugro ships. Experts have cobbled together an analysis from glimpses of the sonar use and data in videos and images posted to the ATSB website. From that, they’ve gauged the EdgeTech sonars are operating at swathes beyond their optimum capabilities, resulting in poor quality images and leaving side gaps in coverage.

“It makes no sense to be using fine scale tools to cover a massive area; it is like mowing an entire wheat field with a household lawnmower,” said Rob McCallum, a vice-president at Williamson & Associates.

Fugro deputy managing director Paul Kennedy said the sonar is running within its capabilities, noting the system identified five “debris-like” objects in 700-meter (765 yards) deep water at a test range off the West Australian coast.

“The test range gives us full confidence the sonars will see the debris field when we cross it,” he said.


Fugro is known for its expertise in high-quality low-resolution mapping of sea floors but has far less experience than some of the rejected bidders in deepwater aircraft searches. It has been involved in 17 search and recovery efforts for aircraft or ships over 15 years, compared with some of the bidders who search for 4-5 aircraft every year.

Kennedy pointed to the find earlier this month of a previously uncharted shipwreck as evidence Fugro was capable of finding the plane.

Concerning experts further is the fact that the third Fugro vessel, which was being used to scan the gaps between the other two ships with an autonomous underwater vehicle (AUV), was this month taken out of action because of encroaching wild winter weather.

That leaves the daily search without an AUV, a much more nimble piece of equipment that was vital in successful search for AF447.

“We are continuously reviewing the search data as it comes in and we are satisfied that the coverage and detection standards we have specified are being met or exceeded,” ATSB Chief Commissioner Martin Dolan said in an email.


Remi Eriksen: Proud and Confident

By Wendy Laursen 2015-05-28 18:57:45

After 22 years of service with DNV GL, Remi Eriksen has been appointed Group President and CEO.

“I’m really proud to work for this company, and why am I so proud? First of all, I’m proud of its history and its purpose. What can be better to work for than a company with a really strong purpose. For more than 150 years, DNV GL has lived its purpose of safeguarding life, property and the environment, and built through this purpose very strong positions in many different industries.”

Eriksen also voiced his pride in the people of DNV GL. “I’ve lived in the west and I’ve lived in the east, and the feedback that I get from our customers is that our competence, our expertise and our people is highly relevant and sought after. But, of course, past success is not guaranteeing future success.”

Talking of the market, he says the outlook is weak, with the potential exception of some sectors such as tankers, the cruise market, mid-size LPG and some container segments. “It will be around 2017 before DNV GL’s own activity will increase again.”

There are challenging market developments in both the maritime and oil and gas industries. “DNV GL will not remain unaffected, but I have strong confidence in our ability to constantly improve and develop our services. Even in tough markets, there will be a need for expert advice and services that can help improve efficiency, qualify new cost-effective technologies, and that can help drive standardization of specifications and work processes – just to mention a few examples. In the energy sector and the business assurance market, I expect positive development in the next few years,” says Eriksen.

“The oil and gas industry is really at a crossroads,” he says, due to low oil prices and cost increases. “For more than 100 years, the industry has provided the fundamentals for keeping electricity and transportation for society, and they have been doing that to meet the expectations of operating safely and responsibly and also managing the environmental impact of these activities.

“Now the industry is facing a different order of challenge – it is to manage the global consequences of the very use of hydrocarbons. For many in the oil and gas industry it will be worse before it gets better. I’m afraid we will see the latter part of 2016 before things are trending in the right direction again. For rigs, I think it will take even longer. We will see 2018 at the earliest,” says Eriksen.

“I believe the future will be characterized by a very complex and fast-changing world and a period of slower global growth. However, the world economy is still on track to more than double in size over the next 40 years. I see a future where trusted independent parties are increasingly needed to enable safe and responsible business performance and sustainable value chains.

“In this context, DNV GL’s innovation capabilities, as well as our role as a standard setter and driver of joint industry collaborations, will be an increasingly relevant strength. It will be important for me that we continue our investments in people, R&D and innovation to develop new thinking, insights and solutions to the benefit of our customers and society,” Eriksen says.

Eriksen is a Norwegian citizen and has a Masters degree in Electronics and Computer Science from the Norwegian Institute of Technology and has had executive education at Rice University, IMD and INSEAD. In the course of his career he has published many professional papers and articles.

He brings wide experience from the oil, gas and maritime industry in Norway, Brazil, the U.S., Middle East and Asia Pacific to the role and has extensive experience in leading change in a global, multi-cultural environment to capture growth opportunities.

Eriksen’s technical expertise lies within maritime and offshore technology as well as gas value chains. He has initiated and managed several joint industry projects in the offshore and marine domain to develop new technology and risk based decision models for design of complex systems.

During the period 2006-2010 Eriksen was a member of the OG21 Board of Norway – a board appointed by the Ministry of Petroleum and Energy tasked with the responsibility to develop and implement a common national technology strategy for Norway.

“I am very humble and thankful for the opportunity to lead this company I have worked for the past 22 years,” says Eriksen.

“These have been fantastic years, giving me opportunities to develop,” he says. “This variety of challenges is a great feature of the company. Since I joined in January 1993, the company has grown exceptionally.”

Leif-Arne Langøy, Chairman of the Board of DNV GL Group says; “In addition to his strong performance in managing the integration of DNV and GL, Eriksen has deep knowledge of our core markets and key industry technologies. Not least, he has displayed an acknowledged ability to foresee industry challenges and drive responsive solutions.”

Eriksen is succeeding Henrik O. Madsen, who is retiring on August 1.

“As Henrik O. Madsen is retiring after more than 30 years of service with us, the last nine years as Group President and CEO, I want to sincerely thank him for his commitment and extraordinary achievements in heading the company towards the world-leading positions we are in today,” says Langøy.


California Pipeline Owner Receives Oil Cleanup Order

By MarEx 2015-05-28 17:09:18

The U.S. Environmental Protection Agency and the U.S. Coast Guard have issued a joint federal Clean Water Act order to ensure the cleanup of heavy crude oil leaked from a pipeline near Refugio State Beach, Santa Barbara County, Calif. The order requires Plains Pipeline, L.P. (a.k.a. Plains All American Pipeline), the pipeline owner and operator, to continue its cleanup work inland, beachside, and in the ocean, to contain the oil and prevent further shoreline contamination.

The order establishes federally enforceable timelines and cleanup requirements for the long-term response action that will be required to clean up the largest coastal spill in California in the last 25 years.

“Our action today is to make sure the oil response work continues until the Santa Barbara County coastline is restored,” said Jared Blumenfeld, the EPA’s Regional Administrator for the Pacific Southwest. “Working closely with our local, state and federal partners, we will see this cleanup through to the end.”

“The Coast Guard will maintain its course to completion,” said Capt. Jennifer Williams, Unified Command Federal On-Scene Coordinator. “While this defines Plains Pipeline as the responsible party, federal and state agencies will continue to work alongside the responsible party and maintain our priority of safety of the public, personnel and the environment.”

Since the 24-inch pipeline ruptured on May 19, with an estimated 105,000 gallons of heavy crude inside, trained cleanup crews have been working to capture and remove oil that has leaked from the pipeline, seeped into the soil, and reached the shoreline and ocean. The Coast Guard and EPA mobilized immediately after notification of the spill and integrated into a Unified Command with California Department of Fish & Wildlife’s Office of Spill Prevention and Response and Santa Barbara County’s Office of Emergency Management.

The federal agencies expressed appreciation for the critical role played by the state and county in their collaboration to protect California’s coast. Nearly 1,000 people have participated cooperatively under the Unified Command. On the ocean, 2240 feet of hard boom and 1840 feet of sorbent boom have been used, and 10,060 gallons of oily water have been recovered from skimming operations. Crews on land have removed 310 cubic yards of oiled vegetation, 760 cubic yards of oiled sand and 2,610 cubic yards of oiled soil.

The compliance order requires Plains to:

· Continue oil removal and site control operations currently underway until a work plan is approved

· Submit to the Coast Guard and EPA and by June 6 a written work plan for response activities, including plans for sampling and analyzing air, water, rocks and soil

· Ensure no more oil is released into the environment

· Clean up all remaining oil and petroleum contamination at the release and oil-impacted areas

EPA and the U.S. Department of Transportation’s Pipeline and Hazardous Materials Safety Administration will be investigating the cause of the pipeline failure, and will continue to investigate the environmental impacts of the spill with our federal, state and local partners.


U.S. Renewable Energy Consumption Hits 80 Year High

By MarEx 2015-05-28 15:23:15

Renewable energy has hit the highest rate of usage in over 80 years. In 2014 renewable energy accounted for 9.8% of total domestic energy consumption. This marks the highest renewable energy share since the 1930s, when wood was a much larger contributor to domestic energy supply.

Renewable energy use grew an average of 5% per year over 2001-2014 from its most recent low in 2001. The increase over the past 14 years was in part because of growing use of wind, solar, and biofuels. Wind energy grew from 70 trillion Btu in 2001 to more than 1,700 trillion Btu in 2014. During the same period, solar energy (solar thermal and photovoltaic) grew from 64 trillion Btu to 427 trillion Btu, and the use of biomass for the production of biofuels grew from 253 trillion Btu to 2,068 trillion Btu. Hydroelectricity was the largest source of renewable energy in 2014, but hydro consumption has decreased from higher levels in the mid-to-late 1990s. Wood remained the second-largest renewable energy source, with recent growth driven in part by demand for wood pellets.

In 2014, slightly more than half of all renewable energy was used to generate electricity. Within the electric power sector, renewable energy accounted for 13% of energy consumed, higher than its consumption share in any other sector.

The industrial sector used 24% of the nation’s renewable energy in 2014. Nearly all of that renewable energy was biomass, which included wood, waste, and biofuels used in manufacturing processes as well as in the production of heat and power. The production of biofuels results in energy losses and co-products, which are also included in industrial consumption of renewables.

About 13% of the renewable energy used in the United States is now consumed in the transportation sector, which experienced the largest percentage growth in renewable consumption from 2001 to 2014. The growing demand for liquid biofuels, including both ethanol and biodiesel, pushed renewables to nearly 5% of the sector’s energy consumption in 2014.

A greater use of wood for home heating and steadily growing installation of solar systems are the main contributors to increasing renewable energy consumption in residential buildings and, to a lesser extent, in commercial buildings.