The Salvage & Wreck Conference in Retrospect
Speaking at the Salvage & Wreck conference in London this December, The International Salvage Union’s recently appointed president, Charo Coll, provided a concise summary of the state of the industry. Her appointment has not come at an easy time for the salvage sector, with “oversupply, weaker demand, and lower values” all making the job of the salvor more competitive and less profitable. But she does not regard the current climate as unchangeable. “I do not think that the industry has entered a period of permanently suppressed incomes,” she said, pointing to the rate of use of Lloyd’s Open Form contracts - which has stabilised at around fifty to sixty uses per year by ISU members after a long period of decline - as evidence of a reversal in the industry’s fortunes.
Given its potential expensiveness for insurers, it is perhaps unsurprising that the picture of LOF’s future which emerged during the insurer’s roundtable and contracting panel sessions later in the day was less optimistic. Martin Hall, head of marine casualty at Clyde & Co, pointed to the fact that many of the LOF contracts used over the past year have been capped due to pressure from insurers. His prediction that the “use of hybrid LOFs or commercial salvage terms will increase,” was supported by Per Åge Nygard of the Norwegian Hull Club, who warned that salvors’ commitment to LOF should not prevent them from evaluating each case on its own merit, and by Skuld’s Andreas Øgrey, who believes that the kind of emergency situations for which LOF is best suited are reducing in frequency. “I do not agree that LOF is salvage”, Øgrey summed up.
However, the conference saw signs that insurers and salvors, despite their differences in opinion, are both beginning to recognise the benefits that can come from a closer and more cooperative relationship. Dieter Berg, President of the International Union of Marine Insurance, reassured attendees that insurers understand the extent of their dependence on the salvage sector: “For us it’s very much about client services and risk mitigation. This is where the salvage industry comes into play, because we have to provide solutions… the way forward is working in close cooperation, in a really transparent way.”
Berg also warned of some of the new threats that are facing the shipping sector, in particular from cybercrime. “There is no global kill switch,” he cautioned, and “many members of the industry don’t realise the risk that is out there.” But cybercrime is only one of a new range of challenges facing the sector. Peter Townsend, of AmTrust Underwriting, voiced the main source of concern for many industry members when he explained some of the technical difficulties that would be involved in responding to the casualty of a ship of 20,000 teu or more. Not least of these challenges, he pointed out, would be the difficulty of extinguishing a fire on a vessel of that size: with the largest boxships often carrying containers stacked 20 rows high, it may not be possible for first responders to pump water high enough to reach the flames. Townsend fears that the will to anticipate and prepare for such contingencies before they arise has yet to materialise. “I think we’re going to have to have a big loss before people focus their minds on it,” he said. “It’s when, not if.”
Another potential threat discussed at the Salvage & Wreck conference was the possibility of a casualty involving an LNG fuelled vessel. SMIT Salvage’s Jan Willem Duit explained to attendees that with LNG fuelled vessels making up only 0.1% of the world fleet, there is little incentive for salvors to invest in the equipment or training needed to deal with a casualty situation involving one. When a casualty eventually takes place, Duit fears that the salvors tasked with managing it will be insufficiently equipped - and perhaps worse, unaware of the sources or degrees of risk involved. It is not yet understood how LNG tanks will respond to full or partial submergence, how they will be affected by depth, or what timelines salvors can expect to abide by. Also a “grey area”, in Duit’s words, is the Underwater Rapid Gas Expansion Effect (URGEE); the rapid phase transition from liquid to gas that would take place should the LNG tanks fracture. One thing Duit is certain of, however, is that dealing with a casualty involving an LNG fuelled vessel will not be easy. “If there are two things LNG doesn’t like,” he explained, “it’s water – there’s plenty around – and carbon steel.”
Though the Salvage & Wreck conference provided many warnings for industry members, it also examined some of the new opportunities available to the sector. Speaking on the shift towards decommissioning contracts undertaken by some salvors, HFW’s Tom Walters said that the tone of the discussion had moved from the theoretical to the practical: “The big difference this year was hearing some of the bigger players talking about how they’ve actually carried out these projects.” With an estimated 8 million tons of steelwork and infrastructure currently installed in the North Sea alone, and regulators in Oslo keen to see it all removed once operational life cycles come to an end, it’s clear that there is no shortage of demand for some of the skills that salvors and decommissioning specialists share in common. “There is considerable interest within the offshore oil and gas industry about engaging with this community,” Walters's colleague Nigel James assured the audience.
The conference also provided the industry with an opportunity to learn from some of its recent accomplishments, including the successful removal of the Sewol wreck. TMC Marine Director Stephen Tierney, who acted as an advisor during the wreck removal process, described some of the unique challenges involved with the operation, which was in his opinion “more or less at the limit” of what could be considered achievable. At the urging of the families of the Sewol disaster’s victims, it was necessary for the wreck to be removed in a single piece – a considerable task given that neither the exact weight nor the center of gravity of the vessel were known.
The plan eventually agreed upon, and successfully executed by Shanghai Salvage, was to insert 33 neutrally buoyant beams beneath the hull and lift the wreck horizontally onto a semi-submersible vessel. The result, Tierney told audience members, was the world’s first one piece intact wreck removal of a 700 tau vessel from a depth of 45m. Though the recovery of the wreck was undoubtedly a remarkable achievement, it points to a disturbing tendency in high exposure cases to make almost impossible demands of salvors. “Where there is a high degree of stakeholder interest, particularly when coupled with public pressure, the conventional rulebook can basically be thrown away,” Tierney said.
This event review only covers a few of the many topics addressed at the Salvage & Wreck conference. Eager to find out more? Then join us in 2018.
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