Chairman, Nick Fistes and Managing Director, Peter Swift

We are part of what is by far the most commonly used method of transportation of raw materials and finished goods on earth. Our world needs the shipping industry to satisfy its growing material requirements. Without the tanker industry to transport the increasing volumes of liquid energy demanded, civilisation as we know it today would grind to a halt.

We are constantly under the spot light, being watched by regulators, politicians and the public; surveyed and inspected by flag states, class societies and insurers; monitored by charterers, coastal states and port states; scrutinised by the media. It is perhaps not surprising that, historically, the tanker industry has tended to be defensive. But we should not be, for we have a great record of improvement over the last 35 years.

We admit that we may not be perfect and that several of these improvements may have primarily been driven by regulation. But the tanker industry has changed fundamentally from what it was and how it worked in the 1970s. And it is not just the ships and their equipment that have evolved, but the people on board those ships and the people ashore have changed too. We are as an industry increasingly determined to strive for perfection. We believe that this is something worth doing. And we have a record that we are proud of.

Oil tankers are cleaner than ever before. Accidental oil pollution from tankers is down – from 2.9 m tonnes in the 1970s to less than 200,000 tonnes this decade so far – despite world seaborne oil trade over the same period having more than doubled. This has been achieved by segregating water ballast tanks from cargo tanks, by the introduction of crude oil washing, by rigourously monitoring overboard discharges, by achieving a greater environmental awareness and responsibility.

...We are as an industry increasingly determined to strive for perfection
...And we have a record that we are proud of

Today’s tankers are more efficient than ever before. Diesel engines replaced steam turbines and then these engines have become smaller and more efficient, and they consume less fuel. In addition auxiliary power is often provided (at least in part) by using waste heat. Today, one litre of fuel on a modern VLCC moves one tonne of cargo more than 2,500 kilometres – more than twice as far as 20 years ago.

More than USD 500 billion has been invested in newbuildings since the year 2000. In 2010 over 85% of the tanker fleet will be double hulled, and operating with the latest environmentally friendly machinery and systems.

Yes, we are proud of our performance – but lest we should feel complacent, we do not forget that we are striving towards the Poseidon Challenge zero goals – zero fatalities, zero pollution, zero detentions.

It is with increasing misgivings that we note the upturn in reported tanker incidents since 2004. From an all-time low in 2003, incidents have climbed back up to the levels not seen since the late 1990s – still well below the levels seen in the 1980s and early 1990s, but nevertheless too high for comfort. The cause? Fingers are pointing towards increased transparency and more reporting, towards hard-worked ships and crews in a succession of strong markets, towards the manpower shortage that has meant some taking shortcuts in training and recruitment. We are determined to work with the greater shipping industry to find out the cause of this unacceptable rise in incidents and to develop appropriate responses.

Nevertheless, despite this setback, our industry has become truly impressive in how it is now keen to be a driving force instead of a follower, to be ahead of the game and to be ahead of the regulator. Take three of the biggest environmental issues of the day – air emissions, anti-fouling coatings, recycling – and we have been running ahead of the game in all of them.

Air emissions
INTERTANKO’s original 2006 submission to the IMO on revisions to MARPOL’s Annex VI (ship air emissions) placed on the table issues meriting further discussion including the use of distillate fuels with a global sulphur content cap of 1.0% (reduced to a lower level at an appropriate time in the future) and effectively the establishment of a global Sulphur Emission Control Area (SECA). The concepts behind this submission had gained support from our members when they saw how important it is that there is an open international debate on the subject of how best to meet the world’s rapidly changing expectations for lower ship emissions and to ensure that the full burden of responsibility is not placed solely on the owner, ship and ship’s staff. INTERTANKO has maintained a constant course as it helps drive this issue forwards, with full support from its Council and its Executive Committee, and from the overwhelming majority of its members.

As this work at the IMO moves towards a conclusion, INTERTANKO continues to work for the delivery by the Marine Environment Protection Committee (MEPC) of a comprehensive revision to Annex VI which avoids the need for regional regulation and which improves the environment and the lives of those working on our ships.

INTERTANKO is proud to represent an industry that wants to be a driving force and to stay ahead of the game. Air emissions are set to remain high on the agenda throughout 2008 – with GHG reduction heading up the list, not just SOx, NOx and PM. We cannot reduce CO2 emissions significantly without reducing our consumption of carbon fuels. This is hard to achieve when global demand for transportation is driving fleet growth. But this is achievable on an individual ship basis by implementing operational measures such as slow steaming, and by practising other on-board fuel and energy economies including using better coatings, polishing propellers, optimising a vessel’s trim and making better utilisation of a vessel’s capacity and deadweight.

We believe that it is crucial to show proactive leadership on the climate change issue. We also wish to contribute actively and effectively as an industry rather than as individual associations, towards the short term as well as towards the longer term perspectives. On one hand the Round Table associations (BIMCO, ICS/ISF, INTERCARGO, INTERTANKO) together with OCIMF and also several flag states, and elsewhere the Tripartite Group (ship owners, shipyards, class), have submitted documents to the IMO’s MEPC Committee. One provides a general viewpoint from the international shipping industry on the issue of greenhouse gas (GHG) emissions (first and foremost CO2), giving an overview of the basic principles which the submitting parties believe should be applied in any future regulation regarding GHG emissions from international shipping, and encouraging the IMO to take early action. The industry is continuously trying to optimise fuel consumption although there is still the potential for further improvement. To help move this along, another document is proposing the development of a mandatory CO2 design index for new ships which reflects the technical performance of the ship and its engine rather than operational or commercial aspects.

Recycling
Pending final approval by its Council, the IMO will be holding a Diplomatic Conference in May 2009 in Hong Kong to adopt the International Ship Recycling Convention. The agreement to proceed with this means that the IMO has now only a limited period in which to finalise the draft Convention. INTERTANKO has been actively involved all the way on this issue. Our Association has been proactive in seeking to raise the profile of the Ship Recycling Convention and also in getting the industry up to speed in the interim period leading up to the Convention’s adoption in 2009 and its subsequent entry into force.

A five-point Interim Strategy was developed by INTERTANKO (and subsequently adopted by other industry partners) out of the desire by the shipping industry to implement and adopt a general industry procedure to be followed between now and the entry into force of the international instrument – a period of several years which will coincide with the likelihood of increased tanker scrapping as the MARPOL phase-out deadlines cut in. Based on the latest draft of the IMO Convention, it is intended to be put into practice by the relevant industry stakeholder associations and their members using procedures which bring about a direct, short-term impact on improving recycling practices as well as being practical and workable options identified in the draft IMO Convention.

What is of key importance to the industry is that, when the Convention finally enters into force, there should not only be a shipping industry that has already been applying the spirit of the regulation for some years, but that there should also be a sufficient number of authorised recycling facilities to manage any increase in demand and encourage an open market.

Anti-fouling
The International Convention on the Control of Harmful Anti-fouling Systems on Ships was adopted on 5 October 2001 and finally enters into force 17 September 2008 after its long-awaited and relatively recent ratification by the required number of states.

The shipping industry and the coatings industry have long supported this Convention, which bans tributyltin (TBT) from marine paints. The vast majority of responsible ship owners have been proactively abiding by the Convention’s requirements since the 2003 target date – irrespective of nonratification. In fact INTERTANKO Council policy from the beginning was to adopt the ban from January 2003 – once again ahead of the game. Many leading paint manufacturers stopped producing TBT-based paint systems by 2003 and have been marketing alternatives. Most shipbuilders and ship repair yards ban TBT paints – though not all. Those few who do buy and use stockpiled TBT-based coatings had been using non-ratification of the Convention to salve their consciences, even though TBT-based paint is still not strictly illegal. Ratification and entry into force will now mean the final eradication of TBT paints.

We now also have looming ahead of us the major issue of biofouling – transferring invasive species via the hulls of ships. Regional studies carried out mainly in New Zealand and Australia, have demonstrated that the threat of invasive species being brought into a country on ships’ hulls is as great, if not greater than, the threat from their being introduced in ballast water. Our Environmental Committee is already actively engaged in discussing ways of dealing with this issue.

Criminalisation
It is not just the environmental issues that have been important in 2007. The issue of criminalisation of the seafarer continues to cast a cloud over those who operate our ships, and is still putting off young people who are considering a career in shipping as well as some of those already in the industry.

In September the European Court of Justice heard oral argument in the case where INTERTANKO has been leading a broad shipping industry coalition to seek a review of the validity/legality of the European Union (EU) Ship Source Pollution Directive which seeks to criminalise accidental pollution by prescribing criminal culpability in the event of serious negligence, applying irrespective of flag and within territorial seas as well as in the Exclusive Economic Zone of a Member State and on the high seas.

The oral argument focused on: (a) the effect of the United Nations Convention on the Law of the Seas on Community law; (b) the power to legislate outside the territorial sea; (c) whether the directive goes beyond MARPOL; (d) serious negligence and the principle of certainty.

In November, the Opinion of the Advocate General was delivered to the European Court in the case concerning the validity/legality of European Union (EU) Ship Source Pollution Directive. This Opinion examines the arguments presented by the parties and makes a series of recommendations as to how the complex issues raised in the case might be addressed. The Opinion is not binding on the Court – it is the judgment of the Grand Chamber that will be decisive.

The Opinion supports the Coalition’s argument that outside its territorial seas the Community has no power to apply laws of its own which go beyond MARPOL. It also agrees that the Directive was clearly intended to do this, as it prescribes “serious negligence” as an additional test of liability.

However, the Opinion has suggested that the Directive would not be invalid if the term “serious negligence” were to be interpreted restrictively, to mean no more than the MARPOL test of recklessness. It has also proposed that this narrow interpretation should not apply in the territorial sea, where it considers that the Community is not bound by MARPOL, and where it recommends that “serious negligence” should be given a broader meaning.

The Opinion’s recommendation to the Court is that the Directive is valid as drafted and that any conflict with international law could be resolved by means of interpretation. It remains to be seen whether the Court will follow this approach as its thirteen judges reflect on this Opinion and consider how it is to rule on the important issues of public international law raised. It is expected that it will be some months before the Court delivers its judgment.

Human Element
2008 will be an exciting and challenging year. Environmental issues will be at the fore of the regulatory process. INTERTANKO is stepping up its presence in Brussels to ensure even closer links with the European Commission, with EU regulators and with European associations.

At the forefront of INTERTANKO’s activities will also come the human element, with a focus on training standards, cadet berths, seafarer recruitment, education and training. TOTS – Tanker Officer Training Standards – is intended to provide the tanker industry with a standard that ensures tanker officer competence through onboard and shore training, evaluating time in rank and time with company and also easing the problems and difficulties that tanker owners are encountering with the different officer matrix requirements of certain charterers. Importantly, TOTS also aims to address the current increasing trends in tanker accidents. We are also continuing to encourage members to increase the number of filled cadet berths, to provide education and training on board ship as well as ashore, and to help make the tanker industry something that today’s good young people really want to be part of. We have been working with the Tripartite grouping of classification societies, ship owners and ship yards to improve on board accommodation standards, thereby making ships a more attractive place to live and work.

International solutions
We also remain fully committed to the principle of international solutions taking precedence over regional and local solutions. In the U.S. in particular we will continue to fight hard to uphold the regulatory authority of the U.S. Coast Guard over vessel operations in U.S. waters, and to do our best to ensure that federal regulations and statutes pre-empt state and local regional activity.

On the so-called Massachusetts lawsuit, which so acutely illustrates a state’s preemptive regulatory move challenging Federal regulations, the U.S. District Court judge requested submissions from the U.S. Federal Government and the industry coalition (including INTERTANKO); and the State of Massachusetts. Submissions have been made by all parties, and we are now waiting for the District Court judge’s decision. In its submission, the U.S. Federal Government requested a preliminary injunction against the state’s requirements for manning and tug escorts.

In the same way we continue our unequivocal commitment to international solutions in Europe and at the IMO where comprehensive and unambiguous action at the international level will avoid any feeling that action might be necessary at a regional or local level.

Nick Fistes INTERTANKO Chairman		Peter M Swift INTERTANKO Managing Director

February 2008