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Changing risk profile for LNG ship

Changing risk profile for LNG ship
IT is not just badly-run companies that have accidents. Some of the best blue-chip ones sometimes get unlucky. The difference is in the way things are handled when they do go wrong.

Changing risk profile for LNG shipping

IT is not just badly-run companies that have accidents. Some of the best blue-chip ones sometimes get unlucky. The difference is in the way things are handled when they do go wrong. International tanker operator Teekay is as blue chip as it gets but it still had an anxious few days last week when one of its LNG carriers broke down off the US coast.

Teekay is well-known for the lengths it goes to make sure its officers are well-trained. And, with some of the highest wage packets going, Teekay's masters and chief engineers are among the most experienced in the industry.

Coincidentally, Teekay and the LNG carrier Catalunya Spirit, the very ship that was adrift for a short while off the US East Coast, were featured in the most recent issue of classification society Lloyd's Register's technical magazine Horizons.

Teekay Shipping commissioned Lloyd's Register to develop an LNG training course for its staff. One delegate to this tailored training course remarked he thought it was 'very thorough and in-depth' and said that he 'learned a wealth of information on LNG vessels and the industry as a whole'.

Another delegate from Teekay said: 'Having sailed on LNG tankers, I felt that this course was a great introductory course with good, relevant information on containment systems in current production.'

In addition, I spoke last year to a Teekay master who not only went on intensive courses before taking over an LNG carrier but also spent three months as supernumerary of such a vessel understudying the master.

So the message is that this is a company that takes LNG seriously. That does stop boiler feed pump failing and shutting down the ship's steam propulsion machinery, as happened last week. But it does give confidence that even when something like this happens there are people involved afloat and ashore who know what they are. And I sure hope that same applies to all the operators of LNG ships. They are all right at the top of the league when it comes to best practice.

All these companies, however, are now looking to expand their LNG fleets and consequently need to recruit and train significantly more officers capable of running these specialist ships.

This prospect has given marine mutual liability insurer North of England P&I club food for thought.

In a recent issue of the club's newsletter North News, director Mike Salthouse says: 'The LNG industry is going through a radical change, which has dramatic implications for the way in which LNG ships operate and the risks involved.'

Mr Salthouse notes: 'Ownership of the world's rapidly growing fleet of LNG vessels has diversified significantly recently to meet the anticipated global growth in gas use, and the new players are planning to operate the ships quite differently.'

As Mr Salthouse points out, the LNG industry used to revolve around capital-intensive projects, with shipping playing a relatively minor part - all that the vessels were required to do was go backwards and forward between two set terminals for which they had been specifically designed and built.

That is changing. In anticipation of a spot market, Mr Salthouse says, the new LNG carriers are being designed and equipped to be more flexible as they are likely to be calling at a number of different ports and terminals.

He warns: 'As such the operational risks may be greater. LNG operators will need their P&I clubs - as with all their service providers - to be able to look forward and understand the new market environment in which they trade.'

According to North of England, the worldwide LNG fleet stood at 217 vessels at the beginning of 2007. As recently as 2004, the total passed the 100 mark, 34 years after the first LNG ship entered service. A large number of new ships are scheduled for delivery over the coming years and the club has seen little evidence of scrapping.

'LNG shipping has a remarkably good record for providing safe and reliable transport but, given the current growth, in particular in the volume of short-term trades, the risk profile of the industry will change,' says senior claims executive and former LPG carrier master, John Owen. 'It is going to be a very different game - everybody is learning and gaining experience as they go along.'

Mr Owen says that as new terminals come on stream, owners are increasingly being required to accept a greater share of the risk associated with the use of such facilities. 'And as a market develops for short-term charters, the ships and their crews are required to have an unprecedented level of operational flexibility,' he adds.

Nobody should start panicking that LNG carriers pose a huge and rapidly increasing risk, as argued by some opponents of LNG terminals in the US.

Nevertheless, it is interesting that a P&I, whose business after all is to assess risk, is making cautionary noises. Perhaps it is now time for the P&I clubs to make crystal-clear to owners what they expect to see on LNG ships in terms of crew numbers, competence and experience.


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