INTERFERRY 2007 - STOCKHOLM: CONFERENCE REVIEW

From global warming to superheating market forces, the 32nd Annual Interferry Conference in Stockholm probed the ferry sector’s hottest political, technical and commercial challenges under the theme of new visions for a new era.  Some 200 industry leaders also heard that another of the trade association’s current concerns is coming to the boil, with a target of next spring to complete preparations for pilot projects in Bangladesh under a joint initiative with the IMO to slash ferry deaths in developing nations. 

The conference’s business sessions reflected the link between environmental issues, the search for new energy solutions and unprecedented demand for new capacity.

THE ENVIRONMENT

Setting the scene on global warming, conservationist group WWF’s European policy director Tony Long said that temperatures had risen by 1.7 degrees C over the past 100 years – just 0.3C short of the danger point for food production, water supplies, disease pandemics and coastal erosion. “We’ll see particularly big changes in polar regions,” he warned. “The melting of the Arctic ice cap could mean the opening up of the NW Passage for shippers between Asia and Europe – but before you get too excited, you have to realise that pieces of ice the size of Manhattan are breaking off and moving around uncontrollably. The reduction amounts to 100,000 sq km per year over the last ten years.” Economic activity had increased humanity’s ecological footprint by 150% since 1960 to the point where, in effect, we were consuming 1.25 planets. “I’m not sure how earth’s natural resources can accommodate this rate of growth – we have to learn to live on one planet,” he concluded.

US Ambassador to Sweden Michael Wood noted that the transport industry generated 25% of CO2 emissions, 11% of which came from shipping. Cruise and ferry operations accounted for 10% of shipping’s share. “The US has a bad image on the environment but we’re awake now,” he claimed. “Companies are competing with each other to be green. I believe the problems can be solved but we must marshal our forces through a combination of the people’s will and technological breakthrough.”

Outgoing Interferry president Jan-Eric Nilsson, chairman and CEO of Swedish operator Rederi AB Gotland, responded: “We will be rewarded or punished by our customers. It’s up to us to seek solutions in our industry.”

 

ENERGY AND EMISSIONS

A session on alternative energy technology started by examining hybrid electric ferries that use a pivoting wing device to harness solar and wind power as back-up to fossil fuels. The system was conceived and patented by Robert Dane, founder of Australia’s Solar Sailor, who revealed that the company had just won its third contract, involving a 149-passenger catamaran for Shanghai.“When we started in 1999, oil was $10 a barrel and we were told no-one would be interested, but now time and tide are coming together,” he observed. The company’s first solar sail was installed in 2000 on a 100-passenger tourist ferry still operating in Sydney Harbour. Mr Dane said the system could match the conventional power unit’s 15-knot commercial speed while also offering safety through redundancy, fuel savings, low emissions in transit and zero emissions on the wharf.“We need a 1000% improvement in batteries to completely replace fossil fuels, but hybrid marine power and solar wing technology is applicable to a wide range of vessels including tankers,” he added.

Fuel cell technology – using hydrogen, LPG, methanol or diesel - was reviewed by Germanischer Lloyd’s Gerd-Michael Wursig, who advocated the advantages of high energy efficiency and low emissions even though overall power output was small. In addition to research funded by the European Union, Dr Wursig described the classification society’s role in the Zemship (zero emissions ship) project, which aims to introduce a 100-passenger hydrogen-powered ferry on Hamburg’s Alster lake by next May. “Current technology is mostly geared towards auxiliary power for bigger vessels – most emissions occur along the coast so this is an important point – and my guess is that it will be available by 2015-2020,” he predicted. “I don’t know if it will be commercially viable but the technology is possible. It’s worth remembering way back when a former IBM chairman thought there was a world market for only five computers.”

Changing markets were acknowledged Andy Osbourne, of sulphur scrubbing specialist Krystallon, in his outline of abatement technology options. The business development director at BP Marine’s joint venture company confided: “A lot of the enquiries we are getting now are for newbuildings and not retrofit.”

Discussing advanced propulsion arrangements, Wartsila head of conceptual design Oskar Levander urged: “There are things we can do now. If we think outside the box, the ferry of the future is available today.” His cost-effective solutions included longer ships – because “power demand can be reduced by 35% per vehicle carried” – and adoption of the low resistance contra rotating propeller (CRP) concept, which he said was in operation on two vessels in Japan and had produced fuel savings of 20%. On alternative fuels, he added: “I see the biggest potential in LNG – it produces more energy, it’s clean, the price is not bad and there are good dual fuel engines that can burn it.”

Hallgeir Kleppe, chief of staff at Norwegian operator Fjord 1 Fylkesbaatane, described the benefits of opting for Rolls-Royce LNG-powered 12,000KW main engines on five new coastal ferries designed to carry up to 240 cars at 23 knots. “In their first five months, the ferries have operated 51,000 port calls averaging seven or eight minutes a time,” he reported. “Full redundancy makes them much safer than conventional ferries, NOx emissions are down 90% and maintenance can be carried out at sea with only a few days a year off hire. Build costs were about 10% more expensive and operating costs are a little higher, but there are no taxes on LNG as compared with diesel.”

Bertil Arvidsson, head of environment logistics at the Swedish Shipowners Association, described a novel government-backed NOx and SOx emissions trading scheme. Exploiting the much lower cost of reducing shipping emissions compared with landside costs, this enabled shipowners to trade emissions credits with land-based industry. “It’s quite possible to achieve a 90% reduction now but the problem is not technical, it’s economic,” explained Mr Arvidsson. “This scheme gives owners very strong financial incentives. By creating emissions credits, they get a payback for their investment in abatement technology or low sulphur fuel.” He said the scheme could reduce North Sea and Baltic Sea emissions to sustainable levels by 2012 and would be open to every ship steaming in the area.

 

COMMERCIAL CLIMATE

In a round-up of Baltic ferry operations, Viking Line CEO Nils-Erik Eklund asked: “Why is it important for shipping companies to be environmentally friendly? So customers will increasingly realise that we are assuming our share of responsibility. The aim is to make sure that ferries are the preferred carriers compared with other modes such as air travel and lorries.”

John Steen-Mikkelsen, CEO of Scandlines, said that combined traffic hubs linking road, rail and sea connections offered the potential for one-stop shopping. “Route networks into key harbours will be the future,” he maintained, “and it will be exciting to see which ports have the guts to do it. We may see vessels with 5-10,000 lane metres and you can’t have ships of that size going into every port.”

Stena Line’s Scandinavia area director Fredrik Lantz added: “It’s not a matter of if, it’s about when they are coming. We’ll see ships with 5,500 lane metres by 2010, a five-fold increase since 1981, and that puts pressure on the infrastructure. We take responsibility for the ships but government has to take responsibility for roads and ports.”

Tallink chairman Enn Pant said that the company’s new breed of vessel had to combine the best aspects of cruise, cargo and high-speed ferries. “More and more they are becoming entertainment, recreation and shopping centres – to get passengers back at sea we must compete with centres ashore. The mini-cruise is our most popular and profitable product.”

 

THE FUTURE OF SHIPBUILDING

Commercial pressures were also exposed in a session examining the imbalance of newbuilding supply and demand. Capt Trafford Taylor, executive vice-president for new vessel construction at Canada’s BC Ferries, said global ferry markets were ‘superheating’ and required 55 ships a year to be replaced at a cost of more than $5 billion.

“We’re looking for big value and small environmental footprint,” he stressed. With little prospect of building in Canada, the company had contracted Germany’s Flensburger yard for three new vessels due in service in 2008 – in addition to a small cruise ferry - and saw Korea as the next big player in the ferry market. Meanwhile a request this year for expressions of interest regarding deliveries in 2011 had attracted responses from 20 pre-qualified yards worldwide.“There is huge competition for yard slots, a three-year wait for main engines and the quality of components has slipped dramatically due to sub-contracting,” he went on. “If you want a ship today you’re not going to get one until 2012 at the earliest and every year we think it’s going to increase 10-15% in price.”

Aker Yards cruise and ferry vice-president Hakan Enlund, who is also an Interferry board member, said demand for new ships was at an all-time high with no sign of the predicted downturn. He urged customers to think longer term: “The production cycle for a ferry project used to be 24-36 months. We’ve had discussions with an operator with a need for 2015 and it was agreed we should start now.”Further yard capacity was coming on stream – particularly with China on track to become global leader by 2015 – but rising newbuilding costs were leading a few operators to question whether their investment would be profitable. “Our challenge is to find a profitable way to manage innovation,” he suggested. “For instance, more production should be moved from the ship to the shop via modular technology.”

Kommer Damen, president of Damen Shipyards, said his company’s solution was to standardise 80% of their ship designs “allowing us to deviate shipbuilding to countries with low labour cost”. Yards in the Netherlands were slowly being closed in favour of the Far East.“We have two yards in China and are currently building a very big yard in Vietnam, which will be the biggest in the group,” said Mr Damen. “Our philosophy is to combine global financing, engineering support and purchasing with local production, which also helps us to avoid import duties on components.”Adding to advice about ordering early, he warned: “With the rising cost of raw materials and components, ship prices will not go down for years – at least not until building capacity exceeds demand. Then prices will be stable.”

Richard Regan, Europe/Middle East/Africa sales manager for Austal high-speed ferries, said the company was helping to keep prices in check through intelligent design and internal initiatives on materials usage, waste disposal, energy consumption and the optimal use of labour. “If we do all these things, we’ll also be doing our bit to protect the environment,” he added.

 

PUBLIC TENDERING

The effect of legislation to end monopoly ferry services was examined in case studies from Canada, Denmark, France and Scotland.

While confirming that competition promised user benefits in terms of price and quality, the presentations also pointed to major problems – notably because the typical concession term of around five years created operator uncertainty about making large investments with a short depreciation horizon. Erik Ostergaard, CEO of the Danish Transport & Logistics Association, said that only two routes had changed hands out of 27 tendered in Denmark and the situation was similar in other European countries. “The legal framework for tendering ferry routes needs to be reassessed by the EU, especially with regard to the length of contract,” he demanded.

Professor Alf Baird, head of maritime research at Edinburgh’s Napier University, called for further liberalisation of the market in a scathing analysis of domestic services in Scotland. “Subsidies are beginning to get out of control – if a subsidised company needs more money it gets it, usually to the detriment of private competition,” he observed. “The reality of state ferry operations is that fares are high, frequency is low, operating hours are limited and sub-optimal ships are used. The state is depriving local communities of improved services by blocking innovation.”

 

INTERFERRY/IMO SAFETY PROJECT GATHERS SUPPORT

Major progress has been made to launch four demonstration projects in Bangladesh under the Interferry/International Maritime Organization joint ten-year plan to cut ferry deaths in developing nations by 90%. The trade association’s annual conference heard that key steps towards implementation are due to be completed by next spring, boosted by practical input from the national government and external financial aid.

Pilot schemes focusing on vessel specifications, weather conditions, overcrowding and crew training were proposed last December by a working group led by Bangladeshi authorities and operators, reported Interferry project leader Roberta Weisbrod, of the US-based Partnership for Sustainable Ports. She said that the Bangladesh director-general of shipping had “very recently” consolidated responsibility in one department to address concerns over inappropriate, often uncertified vessels and lack of inspectors.

In addition, funding from Korea would enable work to start from October on computerising the current paper inventory of vessels, and a UK-funded surveyors training workshop was being organised in Bangladesh in December. Meanwhile, said Ms Weisbrod, Interferry members are being contacted for help in obtaining and retro-fitting ten hydraulic steering sets to demonstrate the value of reduced response time in avoiding collisions and groundings.

In the long term, plans included the introduction of multi-hull designs in Bangladesh and the development of international standards for domestic ferries on a global basis. Turning to the weather project, she revealed that the US National Oceanic and Atmospheric Administration is approaching the World Meteorological Organisation for funds to send a technical team to Bangladesh to draw up the forecasting and communications requirements of river ferry operators. The NOAA would also seek subsequent funding through its WMO membership.

Confirming that a pre-ticketing solution was to be the basis of the pilot scheme to prevent overcrowding, Ms Weisbrod said that Interferry CEO Len Roueche had opened dialogue with the leader of the Bangladesh shipowners association to engage their respective members in devising the system.

On crew training, plans to produce a DVD covering incident prevention and response were presented by Videotel’s Len Holder, chairman of the UK-based maritime training specialist, where former IMO secretary-general William O’Neil is president. To minimise costs, the company will provide advice and production facilities as backup to the preparation of text and visual content, which has been drafted by the national shipping department ahead of expert Interferry and IMO input.

Ms. Weisbrod suggested that a modal shift project in Bangladesh - starting in the summer of 2009 and supported by the World Bank - was good news for the pilot safety initiatives because it aims to move more freight through Chittagong, the country’s main port, by waterways rather than road and rail. “The World Bank has shown encouraging interest in what we are doing because it helps to strengthen their objectives,” she observed. “It’s a further sign that we have made real progress, have clear plans for the future and have had an influence. “We have been working with the industry to come up with workable and measurable solutions. Our priority now is to achieve the demonstration projects, track progress and continue to enlarge the circle of support.”