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150 years of the Suez Canal-Flashback in maritime history–Suez Canal opened to shipping 17 November 1869

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The Suez Canal opened to shipping on 17 November 1869,the Suez Canal remains main gateway for global trade.

The Suez Canal was opened 150 years ago. Ever since, Egyptians have had great expectations of the international waterway – it generates significant income, but it also plays a larger role as a national symbol. The canal is a short artificial shipping route linking the Mediterranean and Red seas, and Asia and Europe.

Since its inception and until today, the canal is the main gateway for the global trade movement and a prime shipping destination due to its unique geographical position. The waterway was the brainchild and obsession of dominate European powers in the 19th century who saw it as a massive shortcut for trade routes going to India and Asia as previously they would have to sail around Africa.

The shortcut would spare them precious time and money for their trade fleet expeditions. The canal stretches from the Egyptian city of Port Saeed on the Mediterranean Sea to the Port of Suez on the Red Sea. When built, it was 164 kilometres long and eight metres deep. Upgrade works have since expanded it, raising its depth to 24 metres.

It has tremendous significance because of its strategic location which has made it the centre of and a witness to regional wars that forced its shutdown on several occasions. In 1956, then-president Jamal Abdul Nasser nationalised the Suez Canal, in a defiant and anti-imperial act that the international media dubbed “The Suez Crisis”.

Who first came up with the idea to build the canal?

French explorer Napoleon Bonaparte came up with the idea while commanding a French expedition to Egypt in 1789.

He thought that such a canal would give France a strategic advantage in the trade and shipping industry to its then-rival, Great Britain. The idea never came to fruition because of a mistake made by his surveyors. They thought that the levels of the two seas were too high and the project would flood Egypt’s Nile Delta.

However, the idea did not die there.

In 1854, Ferdinand de Lesseps, France’s then-assistant consul in the Egyptian Mediterranean city of Alexandria, convinced Egypt’s ruler Mohammad Saeed of a similar project and secured his approval. Four years later, the Universal Company of the Maritime Suez Canal, co-owned by France and Egypt, was established to build the proposed waterway and operate it for 99 years.

How long did it take to build?

10 years. Digging the canal began on April 25, 1859.Around one million Egyptians, mostly peasants, were recruited to do the job under harsh conditions including poor wages. They had to remove about 74 million cubic metres of earth. Around 120,000 of the labour died in the process due to food shortages, lack of health care and ill-treatment.

The canal was completed in 1869 at a cost of 433 million francs.

How was the canal inaugurated?

In preparation for its grand opening, Egypt’s ruler Khedive Ismael, who succeeded Saeed in 1863, travelled to Europe to invite royals, heads of the governments and leading politicians to the lavish inauguration.

On November 17, 1869, the canal was opened for international navigation with an extravaganza in Port Saeed where 6,000 guests gathered to celebrate.

Among the attendees were European dignitaries including Napoleon III’s wife, Empress Eugenie de Montijo.Guns fired celebratory shots in honour of top guests including Empress Eugenie of France.Some 6,000 chefs served the dignitaries.

In Cairo, an opera house was also opened in conjunction with the canal’s launch. The celebrations cost about 1 million pounds sterling, according to some historians.

How did Britain get involved?

Just six years later, Britain purchased Egypt’s shares in the waterway for 400,000 pounds sterling after the latter’s debts mounted and teetered on the brink of bankruptcy.

However, France continued to have the majority stakes.

Amid tussles for control, major powers signed in 1888 the Constantinople Convention that gave the waterway international status and open to all ships in times of war and peace. Egypt was not a signatory.

The provision was not always respected, including during the two World Wars.

Although the 99-year contract of the Canal was valid until 1968, the operating company sought to extend it, taking advantage of Egypt’s dire financial situation.

In 1910, the company proposed to the Egyptian government to stretch the contract by 40 more years in return for giving Egypt a share of the profits.

The proposal, backed by the British occupiers of Egypt, sparked an outcry in the country. Egyptian nationalists, led by Mohammad Farid, campaigned against the proposed extension, seeing it as a new attempt to exploit their ancestors’ excruciating work in building the shipping route.

That year (1910) also saw the assassination of Egypt’s then prime minister Boutros Ghali, who favoured the extension.

Faced with public pressure, the Egyptian parliament rejected the extension offer, keeping the original 99-year concession that iconic nationalist leader Gamal Abdul Nasser terminated in 1956.

Nasser was a prominent member of a group of young army officers, who in 1952 toppled Egypt’s monarchy and installed a republican system in its place the following year.

The young revolutionaries sought to empower millions of poor Egyptian peasants and workers through a series of agrarian and labour reforms.

Upon taking office in June 1956, Nasser aimed to implement ambitious socio-economic development schemes geared towards achieving social justice and industrial progress in the country. His efforts earned him the epithet “the father of the poor”.

What was the Suez Crisis?

On June 26, 1956, Abdul Nasser nationalised the Suez Canal to use its revenues in constructing the High Dam, a hydroelectric facility, in Upper Egypt

In response, France and Britain froze Egypt’s assets in their banks.

Militarily, France, Britain and Israel waged tripartite attacks on Egypt marking the climax of what came to be known as the Suez Crisis.

Israel first initiated the attack on October 29, 1956, an act that was followed by an Anglo-French ultimatum to Egypt to allow British and French troops to take over the canal cities of Port Saeed, Ismailia and Suez allegedly to safeguard navigation in the waterway.

They gave Egypt 12 hours to respond. Hardly had Egypt rejected the ultimatum, when Britain and France started airs raids on Egyptian areas including Cairo, triggering Egyptians’ resistance and a global outcry.

The Israelis, Britons and their French allies had to halt their attacks and pull out of the Egyptian territory under international pressure

The hostilities forced the closure of the Canal until April 1957.

How did the 1967 war affect Suez Canal?

The 1967 War, which erupted on June 5, 1967 pitted Israel against several Arab countries including Egypt.

In May, 1967, Syria accused Israel of preparing to attack it.

In a show of solidarity with Syria, Nasser declared barring Israeli vessels from passing through the Red Sea Strait of Tiran, a move that Israel called a “hostile act”.

On June 5, 1967 Israel initiated the so-called Six-Day War that pitted it against Egypt, Syria and Jordan.

The war ended with Israel capturing the Sinai Peninsula from Egypt, the Palestinian Gaza Strip (which was under Egyptian administration); the West Bank from Jordan and the Golan Heights from Syria.

Military tensions between Egypt and Israel dragged on. Both were engaged in intermittent reciprocal attacks, which Egyptians dubbed the “war of Attrition” until a US-mediated ceasefire in August 1970.

The escalation forced the closure of the Canal for eight years.

During those years, the waterway was infested with various types of explosives and sunken ships.

On October 6,1973, Egypt mounted a surprise attack against Israeli forces in Sinai, an act that forced Israel to sit for negotiations.

Starting from 1974, Egypt mounted an internationally supported demining campaign with the aim of rehabilitating the Canal for safe shipping.

In a symbolic step, Egypt’s then president Anwar Al Sadat reopened the Canal to international navigation on June 5, 1975 after Cairo had sealed a military disengagement accord with Israel.

US-brokered talks between the two countries culminated in a historic peace treaty in 1979.

What is the New Suez Canal?

On August 6 2015, Egyptian President Abdul Fattah Al Sissi, joined by several world dignitaries, inaugurated a 35-kilometre two-direction extension to the original 193-kilometre canal.

The extension was meant to cut the waiting time for ships passing through the waterway to three hours instead of eight.

The eight-billion-dollar project was built in a record one year and wholly funded by Egyptians through certificates of deposits, reflecting public support for Al Sissi.

It also increases the daily average of transiting vessels to 97 ships by the year 2023, up from 49 ships on the old canal.

The major overhaul has furthermore provided direct non-stop transit for 45 ships in the two directions.

Why is the extension so important?

The extension is part of a multi-billion-dollar ambitious development scheme designed to turn Egypt into a global trade and logistics hub.

The large-scale project features six ports and four industrial zones.

The Egyptian government expects annual revenues from Suez Canal to hit 13.2 billion by the year 2023 against 5.9 billion dollars in the fiscal year 2018-19.

Egypt pins a lot of hopes on the expanded Suez Canal, already a key source of national income, to rejuvenate its ailing economy.

The hopes have recently started fulfilling after a spell of slump blamed on weak global trade and a plummet in oil prices.In October, the Canal’s revenues hit a record monthly of $515 million, according to a senior official.

 

An overview of SOLAS 2020 Amendments

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Several amendments of the International Convention for the Safety of Life at Sea (SOLAS) agreed in 2016, 2017 and 2018 are entering into force in less than three months, marking reforms to SOLAS and to international codes made mandatory under the SOLAS Convention.

The amendments entering into force from 1st January 2020 are:

-Amendments to requirements on subdivision and damage stability

Adopted: June 2017 (MSC 98)

IMO adopted a set of amendments to SOLAS chapter II-1 relating to subdivision and damage stability, following a substantive review of SOLAS chapter II-1 focusing particularly on new passenger ships. The review has taken into account recommendations arising from the investigation into the 2012 Costa Concordia incident.

The amendments aim to ensure increased capability for new passenger ships to remain stable in case of flooding after collision or grounding.

Unless otherwise provided, the amendments shall only apply to ships:

  • for which the building contract is placed on or after 1 January 2020; or
  • in the absence of a building contract, the keel of which is laid, or which are at a similar stage of construction on or after 1 July 2020; or
  • the delivery of which is on or after 1 January 2024.

In conjunction with the adoption of the above, the MSC adopted the Revised Explanatory Notes to SOLAS chapter II-1 subdivision and damage stability regulations.

The MSC also approved the revised guidance for watertight doors on passenger ships which may be opened during navigation.

-Amendments on passenger ships safety

Adopted: May 2018 (MSC 99)

IMO has adopted amendments to SOLAS regulations II-1/1 and II-1/8-1, concerning computerized stability support for the master in case of flooding for existing passenger ships.

“For the purpose of providing operational information to the master for safe return to port after a flooding casualty, passenger ships shall have:

  • an onboard stability computer; or
  • shore-based support, based on the guidelines developed by the Organization.”

-Amendments on damage control drills

Adopted: June 2017 (MSC 98)

Starting from January, amendments to SOLAS regulations III/1.4, III/30 and III/37 on damage control drills for passenger ships will require damage control drills to take place on all passenger ships every three months from 2020. 

-Definition of vehicle carrier and requirements for vehicle space

Adopted: November 2016 (MSC 97)

The amendments to SOLAS regulation II-2/3.56 relate to the definition of vehicle carrier and draft new SOLAS regulation II-2/20.2 on fire safety requirements for cargo spaces containing vehicles with fuel in their tanks for their own propulsion, specifically vehicles which do not use their own propulsion within the cargo space.

The MSC 97 considered the decisions of the Sub-Committee on Ship Systems and Equipment that only “pure car and truck carriers” needed to comply with SOLAS regulation II-2/20-1 and that the definition provided in SOLAS regulation II-2/3.56 should be amended accordingly, taking into account a proposal by Antigua and Barbuda, Germany, Norway and IACS.

-Fire integrity of windows for ships carrying not more than 36 passengers

Adopted: June 2017 (MSC 98)

The amendments to SOLAS regulation II-2/9.4.1.3 seek to clarify the requirements for fire integrity of windows on passenger ships carrying not more than 36 passengers and on special purpose ships with more than 60 (but no more than 240) persons onboard.

Harmonization of survey periods of cargo ships not subject to the ESP Code

Adopted: November 2016 (MSC 97)

The harmonized system under regulation XI-1/2-1 provides for a one-year standard interval between surveys, based on initial, annual, intermediate, periodical and renewal surveys, except for MARPOL Annex IV, which is based on initial and renewal surveys. It also provides for a maximum period of validity of five years for all cargo ship certificates, as well as a maximum period of validity of 12 months for the Passenger Ship Safety Certificate.

-Amendments to the (FSS Code)

Adopted: November 2016 (MSC 97)

The amendments to the International Code for Fire Safety Systems are clarifying the distribution of crew in public spaces for the calculation of stairways width.

-Amendments to FTP Code

Adopted: November 2016 (MSC 97)

The amendments to annex 3 to the International Code for the Application of Fire Test Procedures, 2010 (2010 FTP Code) relate to fire protection materials and required approval test methods for passenger ships and high-speed craft. 

-Amendments to IGC Code

Adopted: November 2016 (MSC 97)

The Amendments to the International Code for the Construction and Equipment of Ships Carrying Liquefied Gases in Bulk (IGC Code) are aligning the wheelhouse window fire-rating requirements in the IGC Code with those in SOLAS chapter II-2. 

Amendments to IMDG Code (Amendment 39-18)

Adopted: May 2018 (MSC 99)

The amendments are in line with recommendations from the UN Recommendations on the Transport of Dangerous Goods and include:

  • new provisions regarding IMO type 9 tank,
  • a set of new abbreviations for segregation groups and
  • special provisions for carriage of lithium batteries and of vehicles powered by flammable liquid or gas. 

Amendments to the IS Code

Adopted: May 2016 (MSC 96)

The amendments to the 2008 International code on Intact Stability extend validity to:

  • ships engaged in anchor handling operations;
  • ships engaged in harbour, coastal or ocean-going towing operations and escort operations;
  • ships engaged in lifting operations 

-Modernization of the GMDSS

Adopted: May 2018 (MSC 99)

Also entering into force in 2020 are the amendments to chapter IV of SOLAS (Radio communications), and the appendix to the annex to the 1974 SOLAS Convention, replacing all references to “Inmarsat” with references to a “recognized mobile satellite service” and consequential amendments to the International Code of Safety for High speed Craft, 1994 (1994 HSC Code), the International Code of Safety for High-speed Craft, 2000 (2000 HSC Code) and the Code of Safety for Special Purpose Ships, 2008 (2008 SPS Code). 

-Amendments to the model forms of the Certificates of Fitness

Adopted: May 2018 (MSC 99)

The amendments are clarifying the requirement for an approved loading and stability manual/booklet to be supplied to the ship, under the:

  • International Code for the Construction and Equipment of Ships Carrying Dangerous Chemicals in Bulk (IBC Code),
  • International Code for the Construction and Equipment of Ships Carrying Liquefied Gases in Bulk (IGC Code),
  • Code for the Construction and Equipment of Ships Carrying Dangerous Chemicals in Bulk (BCH Code),
  • Code for Existing Ships Carrying Liquefied Gases in Bulk (EGC Code), and
  • the Code for the Construction and Equipment of Ships Carrying Liquefied Gases in Bulk (GC Code). 

-Protection against noise

Adopted: November 2016 (MSC 97)

Under the amendments to SOLAS regulation II-1/3-12 on protection against noise, the existing paragraph 2.1 is amended to read as follows:

“.1 contracted for construction before 1 July 2014 and the keels of which are laid or which are at a similar stage of construction on or after 1 January 2009;

 

International Register of Shipping (INTLREG) to be the First RO to sign re-validation of the existing approval as per new regulations from MARINA

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International Register of Shipping (INTLREG) to be the First RO to sign re-validation of the existing approval as per new regulations from the Marina, The Maritime Industry Authority -Philippines.

International Register of Shipping (INTLREG ) and The Maritime Industry Authority (MARINA) signed the Memorandum of Agreement (MOA) governing the delegation of statutory certification and services for ships registered in the Philippines on 14 October 2019 at the MARINA Central Office.

MARINA Vice Admiral Narciso A Vingson Jr commended the IRS for accepting the duties and responsibilities as Recognized Organization to perform statutory certification and services to Philippine shipping companies and their Philippine-registered ships, pursuant to the Recognized Organization Code and the MARINA Circular No. 2018 – 01.

“It is my sincere hope that this joint endeavor will stand as one of a long and continuing list of meaningful collaborations between the MARINA and INTLREG. As our goal, that is to achieving harmonized global implementation of requirements established by international maritime instruments to ensure the safety of life at sea and protection of the marine environment,” VADM Vingson said.

VADM Vingson and Captain Everton Morris, Director of Certification, signed the MOA on behalf of the MARINA and INTLREG respectively. The signing was witnessed by Ms. Nannette Z. Villamor Dinopol, MARINA Deputy Administrator for Operations, and Ms. Catalina V. Thomas, IRS Operations Manager.

The MOA, as presented by the Director of the MARINA-Overseas Shipping Service (MARINA-OSS), Atty. Jean Ver P. Pia, consists of two (2) parts. The first part provides the main agreement which includes the application, purpose, general conditions, execution of functions, legal basis, interpretation, equivalents and exemptions, reporting to the flag state, development of rules and regulations, information and liaison, supervision/audit/oversight function and other conditions.

The second part contains the three (3) Annexes, which provide the list of applicable instruments, Degree of Authorization for a particular applicable document, and requirement of reporting to the MARINA.

Per MARINA Circular 2018-01, Recognized Organizations assessed by the Administration are authorized to carry out statutory certification and services under mandatory International Maritime Organization (IMO) and International Labour Organization (ILO) instruments, national legislations, rules and regulations, to Philippine shipping companies and their Philippine-registered ships engaged or shall engage in international voyages and domestic trade.

INTLREG is expanding surveyor network at Philippines with authorization for domestic as well as International vessels with the approval of MARINA (Maritime Industry Authority).

Our Services include: –

  1. Classification & Statutory Surveys –
  2. ISM Internal & External Audits –
  3. New Build Services

INTLREG is fully approved for classification and statutory certification by the MARINA for vessels flying the Philippines flag with an exclusive survey station based in Manila.

To request classification or statutory certification services or to coordinate a survey or ISM Audits or New Build Services  please contact : services@intlreg.org

 

 

 

Do you know why So Many Ships Are Red On The Bottom ?

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Chances are you have never salvaged a vessel yourself or you have (hopefully) never seen a vessel upside down. But in case you have seen photos of a shipwreck or of a new ship getting launched from shipyard, you may have noticed that the bottom of a ship is most times red.

While many may have never really thought about this until reading this article, others, who do have noticed, may think that there is no apparent reason for a ship to be painted in an area which is always below the waterline and nobody normally sees it.

Either way,

…have you ever wondered why most ships are red on bottom?

Reason 1: The answer can be spotted again in tradition. Shipping is a tradition-oriented industry and if it is hard to believe, just remember ships are called ‘she’ based on an old nautical tradition or ask how much paperwork crews have to deal with every day.

But let us take things from the beginning.

Among the many challenges a ship has to encounter during its journey at sea is biofouling, which refers to the accumulation of various aquatic organisms at the ship’s hull, such as plant life and barnacles, as well as worms that eat hulls.

Except for transferring invasive aquatic species from one sea ecosystem to another and affecting marine life normality in each of them, this accumulation is responsible for deteriorating the ship’s structural integrity but, more importantly, for causing the ship to run slower and, consequently, burn more fuel.

Shipbuilders of the early years of shipping would use a copper coating as a biocide, to prevent organotins from sticking on the vessel’s hull. That copper coating was responsible for the ship’s red color.

In the 21st century, it is more than obvious that antifouling coatings can be mixed with any color. So why ships insist on red? It is nautical tradition, of course!

Did you know?

-Due to lack of a global regulatory framework on biofouling, local governments are developing their own unilateral regulations, most notably:

  • New Zealand
  • Australia
  • US (Federal Law)
  • The state of California

-In March 2019, the Global Environment Facility (GEF), the UN Development Programme (UNDP) and IMO kicked off the five-year GloFouling Partnerships project, to address bioinvasions by organisms which can build up on ships’ hulls and other marine structures.

Reason 2: Another reason can be traced in the contrast of red hull to the sea water, which demonstrates if the load of cargo is overweight: The more cargo a ship is carrying, the deeper it enters the water. In the same context of ‘contrast’, the red color at sea can be very easily captured by passing-by helicopters in case of an emergency. 

Fatal accident of a crew struck by a portable gangway

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When a Hong Kong registered chemical tanker was at berth, the vessel’s portable gangway (the gangway) was placed between the main deck of the vessel and the berth as access. Before departure, when the gangway was being lifted back on board by the vessel’s crane, it struck at the chief officer. The chief officer went ashore for medical treatment, but he refused the doctor’s advice of hospitalization. He returned to the vessel and was declared dead on board later. This Note draws the attention of shipowners, ship managers, ship operators, masters, officers and crew to the lessons learnt from this accident.

The Incident

1. When a Hong Kong registered chemical tanker was berthed at Kuala Tanjung, Indonesia, the vessel’s portable gangway (the gangway) was placed between the main deck and the berth as access. By using the vessel’s crane, the chief officer led a team of deck ratings to lift the gangway back on board before departure from the berth. While the chief officer was investigating the cause that made the gangway got stuck with the vessel’s railing, the gangway suddenly moved and struck at him. The master conducted a visual body check for the chief officer and instructed him to take a rest. The vessel departed the port as per her schedule. The chief officer visited a doctor when the vessel arrived at Pelintung, Indonesia on the next day, but he refused the doctor’s advice of hospitalization. The chief officer returned to the vessel and was declared dead on board later.

2. The investigation revealed that the contributing factors to the accident are as follows:

  1. (a)  as the crane, limited by the arm span, could not reach the gangway’s centre point, the gangway was lifted under an asymmetrical centre line of hoisting thus causing the gangway being subjected to an inboard pulling force when lifted. As a result, the hooks at the end of the gangway were stuck with the vessel’s railing. When the hooks were suddenly freed from the railing, the gangway slid inboard in an uncontrolled manner. The uncontrolled gangway struck the chief officer who was standing at a spot within the danger zone of the gangway’s moving path; and
  2. (b)  the deployment of four guard ropes failed to withhold the sudden inboard swing of the gangway. The risk assessment and the work plan prepared before the gangway lifting operation had not been done properly.

3. A safety issue was also observed in the accident. Seafarers should always consider accepting a doctor’s advice when attending medical treatments. The chief officer might save his own life if he decided to stay in the hospital as advised by the local doctor.

Lessons Learnt

In order to avoid recurrence of a similar accident in future, masters, officers and crew should:

  1. (a)  conduct a proper risk assessment for lifting heavy objects. During lifting operation, no person should stand in the danger zone. Lifting operation under an asymmetrical centre of the lift should be avoided as far as practicable;
  2. (b)  check the medical report of an injured person to confirm whether he/she is still fit for duties/sailing on board; and
  3. (c)  consider duly and accept the doctor’s advice when attending medical treatments.

4. The attention of shipowners, ship managers, ship operators, masters, officers and crew is drawn to the lessons learnt above.

 

Why do ships use ‘port’ and ‘starboard’ and not ‘left’ or ‘right’

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As port and starboard never change, they are unambiguous references that are independent of a mariner’s orientation, and, as a result, mariners use these nautical terms instead of left and right to avoid confusion.

Have you ever wondered why sailors use the terms ‘port’ and ‘starboard’, instead of left and right side on ships?

In the past, ships used to have rudders on their centre line and they were controlled using a steering oar. As it is the case today, back then as well the majority of the people were right handed.

Thus, as most of the sailors were right handed, the steering oar used to control the ship was located over or through the right side of the stern.

For this reason, most of the seafarers were calling the right side as the ‘steering side’, which later was known as ‘starboard’.

The word ‘starboard’ is the combination of two old words: stéor (meaning ‘steer’) and bord (meaning ‘the side of a boat’).

The left side is called ‘port’ because ships with steerboards or star boards would dock at ports on the opposite side of the steerboard or star.

As the right side was the steerboard side or star board side, the left side was the port side. This was decide so that the dock would not interfere with operating the steerboard or star.

Another reason why the left side is ‘port’ is because it sounds different from ‘starboard’. Originally, sailors were calling the left side ‘larboard’, which was easily confused with ‘starboard’, especially when challenging conditions at sea made it difficult to hear. The switch was done to lead to a distinctive alternate name.

Namely, the old English name for the port side sounded like ‘backboard’. On big vessels, the sailor using the steering would have his back facing the ship’s left side.

As a result, ‘backboard’was named ‘laddebord’, which is the loading side of the ship. Later, ‘laddebord’ became ‘larboard’, causing the confusion that led to change to port.

This is why ships are using the terms ‘port’ and ‘starboard’, as they are unambiguous references that are independent of a mariner’s orientation.

With these terms, seafarers remove ambiguity, and they prefer them over using the terms left and right.

Up to 6% of the Global Fleet Will Use Scrubbers By End of 2020 to Comply with IMO 2020

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Environmental regulation is closing in on shipping

A few months from now, the new regulations by the International Maritime Organization (IMO) will take effect. Current sulphur exhaust is capped by the IMO at 3.5% of total exhaust by ships in most of the open seas, and 0.1% in the so-called Emission Control Areas (ECA’s) along the EU and US coasts. From 1 January 2020, the maximum share of sulphur exhaust is no longer allowed to be higher than 0.5%.

For shipping companies, the three most viable options to reduce their sulphur exhaust to 0.5% are: switching to ultra-low sulphur fuel oil (ULSFO); fitting an exhaust scrubber (a device that washes the exhaust gasses) or a switch to Liquid Natural Gas (LNG).

To ensure compliance it will be illegal for ships that are not fitted with scrubbers to have high sulphur fuel oil (HSFO) on board from 1 March 2020 onwards. The IMO is part of the United Nations and has no authority to enforce the new guidelines itself. Enforcement is delegated to national governments via annex VI of the MARPOL agreement of 1973. Till now, 59 countries have ratified this annex. Enforcement relies on these countries and is likely to be ensured by port authorities via Port State Control Inspections (PSCI’s).

Smaller ports of countries that do not have the capacity or have not ratified annex VI, may not enforce the new regulations. In particular, ports along regional shipping routes between smaller countries may lack enforcement. Therefore, shippers along these routes have an incentive for non-compliance. Industry experts said that the expectation for non-compliance is about 10% of all shipping movements.

How to comply with the new rules

1. Ultra-low sulphur fuel oils (ULSFO)
To meet the current restrictions, the majority of the shippers will switch to burning (ultra-) ultra-low sulphur fuel oils (after this ULSFO). Most ships already have a separate fuel tank and already burn (0.1% compliant) ULSFO when entering the ECA’s along the European and US coasts. The ports along these coasts facilitate ULSFO bunkering. But it remains a question of how much refiner capacity is available to facilitate the mass transition to ULSFO.
Also, the different ULSFO types are not necessarily compatible. Even the same type of fuel from the same refiner but bunkered in two different locations may be incompatible. This means that a fuel tank should be more or less empty before a different ULSFO is bunkered. This requires more extensive fuel planning by engine technicians and shippers in comparison to traditional high sulphur fuel oil (HSFO).

If low sulphur fuel is unavailable in a port, vessels can get a waiver and are allowed to bunker high sulphur fuels (HSFO). However, this is also quite costly for shippers as they will need to unbunker the high sulphur fuel and clean fuel tanks at the first next port that offers bunkering of low sulphur fuels.

2. Scrubbers
The second option for compliance is fitting ships with so-called exhaust scrubbers. An exhaust scrubber is a device that cleans exhaust gasses with water. Ships with scrubber installations are allowed to run on HFSO under the new regulations. This means that they can benefit from the lower price of HSFO.

Most common are open-loop scrubbers that wash the exhaust with seawater and dispose of the wastewater after some cleaning back in the sea. This reduces the amount of chemicals to be disposed of onshore. Alternatively, there are closed-loop scrubbers that store the scrubbing waste on board. In addition, there are also hybrid scrubbers that can do both.

Closed-loop scrubbers require ship owners to dispose of the exhaust waste, which is difficult and costly. However, open-loop scrubbers are a source of environmental concerns. The chemicals and exhaust waste washed into the sea are reasons for large ports to prohibit the use of scrubbers in their waters. In addition, there are concerns about a possible future prohibition of open-loop scrubbers by the IMO. Although industry experts say that any regulation by the IMO will only target new scrubber installations and not existing ones, considerable uncertainty remains as to how long scrubbers will be allowed. This is especially the case given the IMO 2050 cut in carbon exhaust to 50% of 2008 levels.

3. Liquid Natural Gas (LNG)
LNG is a particular type of ULSFO. Switching to LNG requires a more intensive and costly conversion process compared to the other solutions. It requires a modification of the engine that may not be possible for every ship that is not LNG-ready. In addition, LNG bunkering infrastructure is lacking and unavailable in most ports. Therefore, a backup fuel tank needs to be present. The installation of a separate gas tank means that, often, transport capacity will be lost and that the ship, likely, will need to be rebalanced. This is a costly process to keep a ship idle for a while. On a large scale, LNG only seems a viable consideration for new-build ships. New ships will face the problem that few ports offer LNG bunkering infrastructure. LNG is environmentally the cleanest option, as carbon exhaust is about 20% less than with traditional fuels. Despite being momentarily the cleanest solution, LNG is not compatible with the IMO 2050 carbon cut of 50%.

The costs of ultra-low sulphur fuel oil (ULSFO)

In the months up to the imposition of the new sulphur limit, most ships will switch to burning ULSFO. After this switch, it will still take a couple of months before the sulphur exhaust by ships decreases to 0.5%. This is because it takes a while before the remains of high sulphur fuel oil (HSFO) in the tanks wash away. Switching too late to ULSFO will mean that shippers will need to have the fuel tank cleaned to meet the rules by 1 January, which is a costly process.

The cheapest option for compliant fuel will be 0.5% compliant ULSFO blends. Unfortunately, there are currently no reliable market forward rates[1] for these fuels yet. Therefore, we look at the forward rate of 0.1% compliant Marine Gas Oil (MGO), which is more expensive. Currently, 0.5% compliant ULSFO is trading US$90 per ton cheaper than 0.1% compliant MGO. Therefore, we assume that the spread between the forward rates of 0.5% compliant ULSFO and HSFO would be up to US$100 less than the forward spread between ULSFO and MGO.

We expect that the price difference between MGO and 0.5% compliant ULSFO will initially become smaller as demand for 0.5% fuel oil will be higher since this is the cheapest option. As supply catches up with demand, the price difference will slide back to what we observe currently. Our estimated bandwidth for the 0.5% ULSFO – HSFO price spread is US$165 to US$300.

In anticipation of the regulation, most ships will switch to ULSFO in the last quarter of 2019. This is reflected in the steep widening of the price spread between the prices of low sulphur fuels and high sulphur fuel (Figure 1). On one hand, higher demand for ULSFO oils will push up its price. On the other hand, lower demand for HSFO will lead to lower prices of heavy fuels. In particular, because HSFO is a residual product with limited options for other use.

In the medium term, the price difference is expected to narrow again (Figure 1). As refineries are adjusting their supply to the increased demand, prices of ULSFO are expected to decrease a bit. On the other hand, as more refineries upgrade cracking capabilities (the ability to further refine HSFO), demand and prices of HSFO are expected to rise again.

Figure 1: Expected price difference in high sulfur fuels and IMO 2020 complaint fuels

How will the industry cope with higher fuel prices

It is expected that most container shippers will try to pass through the higher fuel costs to their clients. Depending on ship type and route, the increase in freight rates is expected to be up to 25% (see Annex ii). However, due to overcapacity, the use of scrubbers and competition, the increase may be less. Another way shippers could deal with higher fuel prices is by reducing speed. Since fuel consumption is an exponential function of speed, shippers will be able to cut their fuel bills considerably by reducing speed. Depending on the extent to which this may occur, reducing speed potentially reduces shipping capacity as well as the supply of containers.

Scrubber Economics

Scrubber installations allow the shipowner/operators to surf the spread between low and ULSFOs. The spread between the two types of fuel can be considered as the gross-income of investing in a scrubber. The larger the price difference between ULSFO and HSFO, the more attractive scrubbers are.

The investment appraisal of a scrubber

The most important costs associated with scrubbers are:

  • Investment costs, which are the costs of fitting the scrubber and the opportunity costs of the ship being idle during the installation works.
  • Operating costs that are made up of additional fuel use to power the scrubber, maintenance costs, the costs of disposing of waste chemicals, and financing costs.

On the basis of this information a net present value (NPV)[1] of the investment in a scrubber can be computed for different ship types and a rough comparison can be made. The NPV of a scrubber varies with the spread between HSFO and ULSFO and per ship type.

We computed an expected NPV, using a bandwidth for the expected average fuel spread between HSFO and 0.5% compliant ULSFO of US$150 to US$300.

Box i :Objections to scrubbers
– Environmental concerns: Open-loop scrubbers wash exhaust gasses with seawater. Although the emitted sulphur may not be blasted into the air, it raises concerns about wastewater discharged in the seas. As of now, the environmental effects of open-loop scrubbers are not clear and more scientific studies are needed on the effects.– Inefficiency and higher CO2 emissions: Scrubbing is argued to be an inefficient industry model. Instead of removing sulphur at the refinery stage with all the scale benefits, individual ships will be converted into small factories that isolate the sulphur. Since the desulphurization process is taking place less efficiently, the CO2 footprint of a ship fitted with a scrubber increases.

Figure 2: NPV for large vessels (five year investment horizon)

For the NPV we assume a Weighted Average Cost of Capital (WACC) of 8.08%[1], a five-year project horizon and no rest value or further use of the scrubber beyond that term. We find a NPV of US$5 million to US$20 million for the investment in scrubbers for larger ship types (Figure 2). Large ships can achieve a positive NPV investment within the first 2 years with a spread above US$150 and within the first 4 years with a spread above US$100.

Figure 3: NPV for small vessels (five year investment horizon)

For smaller ships, the NPV’s are considerably lower. For most Panamax vessels and smaller, the NPV varies between -US$1 million and US$5 million. Small tankers and small container vessels only have positive NPV from a spread of US$185. If the spread were to be lower, there is the risk of a negative NPV for these ships over a planning horizon of five years. For Small dry bulk carriers, the NPV is negative for the majority of the expected spread. Role on and Role off (Ro-Ro) vessels and other small ships show a negative NPV for any given spread (Figure 3).

If we assume a longer life span of scrubbers we can easily get higher values for the NPV. Figure 4 shows that with a life span of 15 years scrubbers on smaller ship sizes become economically viable for lower spreads. However, there are two major uncertainties: It is unknown how the spread between HSFO and ULSFOs will develop and the uncertainty increases significantly with time. It can very well be that the spread between high and ULSFO becomes smaller over time due to new innovations by refineries. The second major uncertainty is future regulation that restricts the use of scrubbers. Although it has been said that new IMO regulations will not affect the use of existing scrubbers, there are no guarantees. Especially since attention for environmental standards and climate change is growing globally.

Figure 4: NPV of all vessels (planning horizon of 15 years)

Adoption of scrubbers

Figure 2 and Figure 4 show that especially for large ships, scrubbers are a yielding investment. If the spread remains between the US$150 and US$300, most Panamax size vessels and larger will install scrubbers (Panamax size vessels include container ships larger than 5K TEU and comparable tankers). Due to the uncertainty about the fuel spread between compliant fuel and ULSFOs, purchases of scrubbers are expected to remain limited for the smallest ship sizes.

If the spread remains high, more ships may invest in scrubbers. This fuels demand for HFSO and thereby reduces the price differential between ULSFO and HFSO.

Despite high returns, not all large vessels are switching to scrubbers at 1 January 2020. This is partly rooted in the wait-and-see mentality of the industry, the objections discussed in Box I and dry dock planning. But also at play, is the lack of capacity to install scrubbers. Even if shippers are willing to invest in scrubbers, there is a waiting list at the major suppliers. Some shippers will first switch to ULSFO before installing a scrubber later in 2020 or thereafter. Therefore, the use of scrubbers will continue to increase after 1 January 2020.

Box ii: Which side of a charter contract will reap the scrubbers’ profits?
Where ship owners charter-out ships with scrubbers to other parties, the question arises: who will reap the benefits from the scrubber installation? The answer to this will depend on the specific location and term for when the ship is chartered. If charterers can choose from multiple vessels with scrubbers from different owners for a particular location and term, some competition will arise. Competition between the shippers will drive down the charter rates of ships with scrubber installation below those of ships without scrubbers. For small ships, we expect that only a small share of the world’s fleet will be fitted with scrubbers. Therefore, competition between scrubber-fitted vessels (from different owners), will remain limited for smaller ships. This means that most of the time the ship owner will profit from the scrubber. However, for the large ship types, competition may drive down prices on some occasions.

Currently, the number of scrubbers on order is somewhere around 600 units and 3,500 scrubbers have already been installed. The view of analysts is that over 4,000 scrubbers will be installed by January 2020, which is approximately 11% of the global fleet by tonnage and 4.5% by vessel count. This is expected to increase to 15% of the global fleet by weight towards the end of 2020 (over 6% by vessel count). Following from the NPV analysis adoption will be the highest among the largest ship types.

All in all, on scrubbers can be a lucrative investment (also beyond 2020) if they are fitted on large vessels. Smaller vessels may be better off switching to ULSFO. Despite being a lucrative investment compared to having to switch to low sulphur fuels, scrubbers still imply a higher fuel bill, relative to the current situation. All else equal, this would also mean that vessels with scrubbers may sail at lower speeds to limit the rise in fuel costs.

The environmental road ahead – the next big thing

The IMO 2020 sulphur cap is a major step in improving the air quality of exhaust gasses. This has far-reaching implications for the industry as we have seen. From 2020 onwards, however, the focus in shipping will shift towards climate action. In 2018 member countries within the IMO agreed to cut carbon emissions by 50% in 2050 versus 2008. Although shipping lags other sectors in this goal-setting, this will even be much more challenging.

Maersk, one of the leading shipping companies, has the ambition to move even faster to catch up with the Paris climate goals. Currently, no realistic techniques are available yet to meet the IMO 2050 regulations. Improving fuel efficiency and ship design have potential and will be the first focus. Transition fuel blends of biofuel and LNG will probably be the next call. Finally, future replacement options might be: synthetic fuels, methanol and hydrogen. However, these options require a lot of research and innovation before they become technically and economically viable. Depending on the dominant solution, this will also require substantial investments in different ship configurations.

For the medium term, scrubbers can be a lucrative investment if they are fitted on larger vessels. Smaller vessels (smaller than Panamax) may be better off switching to ULSFO. The increased fuel bill resulting from the transition to scrubbers or ULSFO will drive up transport prices. However, shippers may reduce shipping speed in order to limit the price increase and save fuel costs. If this would happen on a large scale, this potentially restricts the shipping capacity of the world’s fleet.

Annexes

Annex i.a: Assumptions for different ship types used in NPV calculation.

Annex i.b: Formula NPV calculation

Annex ii. Increase in transport costs

 

A price increase of up to 25% is a rough estimate. Assuming that a container ship caries about 12,000TEU from Shanghai to Rotterdam, being on route for 30 days, burning 400ton fuel per day. The extra fuel bill is approximately US$250 per container (assuming a spread of US$250, 400t*US$250*30days = US$ 3,000,000, 3,000,000/12,000teu = US$250). Assuming the price of shipping 20ft container from Shanghai to Rotterdam is about US$1000 per TEU, the increase in freight costs would be about 25% if the full price is fully billed to clients. Fuel consumption of 400ton per day on cruising speeds are common, but new, more energy-efficient vessels, are able to burn half or even less than half the fuel. These ships would also see halve the extra full costs per container.

Assumptions about fuel economy are taken from Transportation, Environment, and Society.

ISO releases much-anticipated IMO 2020 compliant fuel specification

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ISO informed that it has published the ‘ISO/PAS 23263:2019 Petroleum products — Fuels (class F) — Considerations for fuel suppliers and users regarding marine fuel quality in view of the implementation of maximum 0,50 % sulphur in 2020’.

The document addresses quality considerations that apply to marine fuels ahead of the implementation of maximum 0,50 mass % sulphur in 2020 and the range of marine fuels that will be placed on the market in response to the international statutory requirements to reduce exhaust gas emissions.

It also defines general requirements that apply to all 0,50 mass % sulphur fuels and confirms the applicability of ISO 8217 for those fuels.

In addition, it gives technical considerations which might apply to certain fuels for the following characteristics:

  • Kinematic viscosity;
  • Cold flow properties;
  • Stability;
  • Ignition characteristics;
  • Catalyst fines.

Moreover, it provides considerations regarding the compatibility between fuels and additional information on ISO 8217:2017, Annex B.

Commenting on the development, IBIA said that it has been getting several queries about when ISO specifications for fuels meeting the 0.50% sulphur limit will be available. It explained that:

  • Existing ISO 8217 specifications will still apply;
  • The Publicly Available Specification (PAS 23263) from ISO would not introduce any new specifications but rather help explain how ISO 8217 will continue to apply.

What is more, IBIA notes that there are no new specifications for 0.50% sulphur fuels. They can still be sold under existing ISO 8217 specifications, preferably the latest edition, ISO 8217:2017, as this includes some extra reporting requirements on cold flow properties for some distillate fuels.

“Fuels with maximum 0.50% sulphur will still need to meet ISO 8217 specifications, and they can still be classified in accordance with Table 1 for distillate marine (DM) fuels or Table 2 for residual marine (RM) fuels, which define the maximum, and some minimum, parameters limits for a number of fuel grades (specifications)”

However, it may be that instead of using RMG 380, which is the most commonly used ISO 8217 specification for RM fuels currently, many of the fuels expected to be available would be better described by using other RM specifications in Table 2 of ISO 8217, such as RMA 10, RMB 30, RMD 80 or RME/RMG 180. This is because many will have lower viscosity than the typical high sulphur fuel oils (HSFOs) sold today.

As for distillate fuels, IBIA says that there could be more DMB-grade fuels returning to the market. Today, the majority of distillates are sold as DMA-grade gasoil meeting a 0.10% sulphur limit, as this is the grade most ships use to meet the legal requirement in emission control areas (ECAs) and at berth in EU ports.

Finally, fuel testing agencies have already tested thousands of samples of VLSFO produced to meet the 0.50% sulphur limit, reporting significant variations in viscosity and density. Viscosity in the tested samples typically ranges from 30 cSt to 380 cSt. A few samples have been less or above that range, with lows of 6-7 and highs of up to 500 cSt reported, but they are rare. As for density, it has been seen in a range of 850 to almost 998, with most more than 900 kg/m3.

What is AIS (Automatic Identification System ) ??

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The world of AIS (or Automatic Identification System) can often be a confusing one to delve into, with many questions arising such as “what is AIS?”, “why do I need it?”, and “what type of AIS does my ship actually need or have?”

Automatic Identification System (AIS) is an automated tracking system that displays other vessels in the vicinity. It is a broadcast transponder system which operates in the VHF mobile maritime band. Your own ship also shows on the screens of other vessels in the vicinity, provided your vessel is fitted with AIS. If AIS is not fitted or not switched on, there is no exchange of information on ships via AIS. The AIS onboard must be switched on at all times unless the Master deems that it must be turned off for security reasons or anything else. The working mode of AIS is continuous and autonomous.

Why is AIS provided?

It is fitted on ships for identification of ships and navigational marks. However, it is only an aid to navigation and should not be used for collision avoidance. Vessel Traffic Services (VTS) ashore use AIS to identify, locate and monitor vessels. The Panama Canal uses the AIS as well to provide information about rain along the canal as well as wind in the locks.

SOLAS Requirements

The IMO Convention for the Safety Of Life At Sea (SOLAS) Regulation V/19.2.4 requires all vessels of 300 GT and above engaged on international voyages and all passenger ships irrespective of size to carry AIS onboard.

AIS Types

  1. Class A: Mandated for all vessels 300 GT and above engaged on international voyages as well as all passenger ships
  2. Class B: Provides limited functionality and intended for non SOLAS vessels. Primarily used for vessels such as pleasure crafts

AIS operates principally on two dedicated frequencies or VHF channels:

  • AIS 1: Works on 161.975 MHz- Channel 87B (Simplex, for ship to ship)
  • AIS 2: 162.025 MHz- Channel 88B (Duplex for ship to shore)

It uses Self Organizing Time Division Multiple Access (STDMA) technology to meet the high broadcast rate. This frequency has a limitation of line of sight which is about 40 miles or so.

Working

How does AIS work exactly? How do we obtain all this data?

Originally, AIS was used terrestrially, meaning the signal was sent from the boat to land, and had a range of roughly 20 miles (also taking into account the curvature of the earth). As ships began sailing further and further away from land, they began sending the signal to low orbit satellites, which then relayed information back to land. This meant ships could sail as far as they like, and we’d always have peace of mind knowing exactly where they are, and how they’re doing.

The AIS system consists of one VHF transmitter, two VHF TDMA receivers, one VHF DSC receiver, and a standard marine electronic communications link to shipboard display and sensor systems. Position and timing information is normally derived from an integral or external GPS receiver. Other information broadcast by the AIS is electronically obtained from shipboard equipment through standard marine data connections.

Although only one channel is necessary, each station transmits and receives over two radio channels to avoid interference and to avoid communication loss from ships. A position report from one AIS station fits into one of 2250 time slots established every 60 seconds. AIS stations continuously synchronize themselves to each other, to avoid overlap of slot transmissions.

It’s pretty easy to install as well, as AIS is generally integrated with ship bridge systems or multifunctional display, but installing a standalone system is as straightforward as plugging in a couple of cables and switching on the plug.

Data Transmitted

1. Static Information (Every 6 minutes and on request):

  • MMSI number
  • IMO number
  • Name and Call Sign
  • Length and Beam
  • Type of ship
  • Location of position fixing antenna

2. Dynamic Information (Depends on speed and course alteration)

  • Ship’s position with accuracy indication
  • Position time stamp (in UTC)
  • Course Over Ground (COG)

3. Voyage Related Information (Every 6 minutes, when data is amended, or on request)

  • Ship’s draught
  • Type of cargo
  • Destination and ETA
  • Route plan (Waypoints)

4. Short safety related messages

  • Free format text message addressed to one or many destinations or to all stations in the area. This content could be such as buoy missing, ice berg sighting etc

AIS as a surveillance tool

In coastal waters, shore side authorities may establish automated AIS stations to monitor the movement of vessels through the area. Coast stations can also use the AIS channels for shore to ship transmissions, to send information on tides, NTMs and located weather conditions. Coastal stations may use the AIS to monitor the movement of hazardous cargoes and control commercial fishing operations in their waters. AIS may also be used for SAR operations enabling SAR authorities to use AIS information to assess the availability of other vessels in the vicinity of the incident.

AIS as an aid to collision avoidance

AIS contributes significantly to the safety of navigation. All the information that is transmitted and received enhances the effectiveness of navigation and can greatly improve the situational awareness and the decision making process. As an assistant to the OOW, the tracking and monitoring of targets by the AIS as well as determining information on the CPA and TCPA adds great value to the safety of navigation overall. However, the user should not solely rely on the information from the AIS for collision avoidance. AIS is only an additional source of information for the OOW and only supports in the process of navigating the vessel. AIS can never replace the human expertise on bridge!

Limitations of AIS

As with all navigational and/or electronic equipment, the AIS has limitations:

  1. The accuracy of AIS information received is only as good as the accuracy of the AIS information transmitted
  2. Position received on the AIS display might not be referenced to the WGS 84 datum
  3. Over reliance on the AIS can cause complacency on the part of the OOW
  4. Users must be aware that erroneous information might be transmitted by the AIS from another ship
  5. Not all ships are fitted with AIS
  6. The OOW must be aware that AIS, if fitted, might be switched off by a certain vessel thereby negating any information that might have been received from such ship
  7. It would not be prudent for the OOW to assume that the information received from other ships might not be fully accurate and of precision that might be available on own vessel

To sum it up, the AIS only improves the safety of navigation by assisting the OOW/VTS or whatever entity. It’s pretty easy to install as well, as AIS is generally integrated with ship bridge systems or multifunctional display, but installing a standalone system is as straightforward as plugging in a couple of cables and switching on the plug.

ISM Code: Regulatory Update at a glance

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The ISM Code in its mandatory form was adopted in 1993 by resolution A.741(18) and entered into force on 1 July 1998. Since then, revised Guidelines were adopted by resolution A.913(22) in  2001, and subsequently by resolution A.1022(26) , adopted in December 2009, resolution A.1071(28) in December 2013, and revised Guidelines adopted by resolution A.1118(30) with effect from 6 December 2017.

Revisions

Provisions relevant to SOLAS chapter IX and the ISM Code

  • Revised guidelines for the operational implementation of the International Safety Management (ISM) Code by companies (MSC-MEPC.7/Circ.8),
  • Guidance on the qualifications, training and experience necessary for undertaking the role of the designated person under the provisions of the ISM Code (MSC‑FAL.7/Cir.6),
  • Guidance on near-miss reporting (MSC-MEPC.7/Circ.7), Guidelines on maritime cyber risk management (MSC-FAL.1/Circ.3)
  • Maritime cyber risk management in safety management systems (resolution MSC.428(98)).

Others

MSC 81/17/1 – Independent Export Group Report: Role of the Human Element – Assessment of the impact and effectiveness of implementation of the ISM Code