OWNERS TOO SLOW TO DOUBLE HULL?

by John Snyder, Senior Editor

With only a limited number of oceangoing double hulled tank barges on order, the OPA ’90 mandated double hulling of the U.S. domestic tank vessel fleet could be in jeopardy.

The tantalizingly slow pace of double-hull construction in the U.S. could lead to a severe shortage of tank vessels beginning in 2005, according to an analysis released last month by a shipyard industry group.

The Washington, D.C., trade group, the Shipbuilders Council of America (SCA), says tank vessel owners need to dramatically increase the pace of double-hull construction to avoid the loss of as much as 28% of the existing U.S.-flag tank vessel capacity by the end of 2004 due to mandatory phase-out dates set by the Oil Pollution Act of 1990 (OPA 90). This includes 45% of all large, ocean tank barges, says the SCA. OPA 90 requires all single-hull tank vessels to be rebuilt as or replaced with double hull tank vessels.

The analysis is “a wake-up call” for the industry, says Allen Walker, SCA president. While many have suspected that owners were moving too slowly, says Walker, the SCA analysis confirms this.

Continues Walker, “The inability of the U.S. to move petroleum products domestically could have a devastating impact on economic and national security, particularly in light of recent events.”

Other maritime trade groups have recently voiced similar concerns. Both the Maritime Cabotage Task Force and the Sealift Committee of the National Defense Transportation Association have said the lack of tank vessels would significantly diminish the nation’s ability to meet its domestic transportation demands and its military sealift obligations.

A report by the U.S. Coast Guard, at the request of the U.S. Congress, is undertaking a more comprehensive assessment of the progress to replace the single-hulled tank fleet with double-hulled tank vessels. That report, which was originally due out this past February, has yet to be released.

BOLLINGER BUILDING
ATBS FOR K-SEA
Some ocean tank vessel operators, however, contend their double-hull plans are right on track. “We’re comfortable where we are in the market now,” says Thomas Sullivan, vice president of operations, K-Sea Transportation Corp., Staten Island, N.Y. “We have substantial double hull capacity,” he continues, “but, we’ll have to see what’s on the horizon.” K-Sea has 11 double-hull barges, seven of which have a capacity of 80,000 bbl or above. Additionally, K-Sea has four other ocean tank barges under construction at Bollinger Gretna, LLC, Harvey, La. The modules for all four barges, two 80,000 bbl and two 100,000 bbl, are being fabricated at Bollinger Marine Fabricators, Amelia, La., and shipped to Bollinger Gretna, where final assembly and installation of piping and other systems is completed. The first barge is due for delivery in summer of next year.

Others, such as Vessel Management Services (VMS), Seattle, a unit of Crowley Maritime, have moved quickly in recent months to ink contracts with Manitowoc Marine, Manitowoc, Wis., and Halter Marine, Gulfport, Miss. VMS has orders and options to build as many as ten 155,000 bbl articulated tug barges. Under the contract with Manitowoc, Bay Shipbuilding will build the 512 ft x 78 x 40 ft tank barges and its sister yard, Marinette Marine, will construct the 127 ft x 42 ft, 9,280 hp tugs. The ATBs will use the INTERCON coupler system. All the vessels will be delivered in the fourth quarter of 2002.

In the ocean tank vessel segment, there are currently orders and options for 27 vessels, ranging in a capacity from 80,000 to 155,000 bbl, at U.S. shipyards (see accompanying table). This includes the only ocean tank barge being built at a U.S. East Coast yard: A $6.5 million order placed by Barges Unlimited, Fall River, Mass., with Southeastern New England Shipbuilding Corp., North Kingstown, R.I., for an 80,000 bbl tank barge. The 320 ft vessel is the largest vessel ordered yet at the yard and the largest double-hull tank barge built on the East Coast.

MARITRANS REBUILDING PROGRAM
One tanker owner taking a different tack is Maritrans. In 1997, Maritrans began to rebuild its single-hull tank barges with double hulls to comply with OPA 90. The rebuild method, which the company patented, relies upon a process of computer assisted design and prefabrication. Thus far, it has completed two rebuilds and has commenced on a third single-hull barge, the 250,000 bbl Ocean Cities. The Ocean Cities was removed from service late in the second quarter to begin a $15.5 million double-hull rebuild at Tampa Bay Shipbuilding & Repair, Tampa. It will return to service before the end of the year.

Earlier this year, Maritrans chairman and CEO Stephen A. Van Dyck commented, “Significant capital investments must be made to replace the single-hulled Jones Act tonnage retiring in the Gulf of Mexico product market. Maritrans’ double-hull rebuild program is part of that effort, and by the end of 2001 we will have invested $38 million to preserve the life of our single-hulled barges. At that time, 52 percent of our fleet capacity will be double hull. Over the next year, we also will continue engineering to rebuild our existing fleet and evaluating preliminary designs for new vessels.”

One reason Maritrans went the rebuild route is cost. The cost of rebuilding single-hull barges is about $55-75 per barrel compared to estimated costs of $125-175 per barrel for construction of a completely new double-hull barge. The total cost of rebuilding the company’s single-hull fleet is expected to exceed $150 million.

Maritrans intends to apply the same rebuild method on up to six more of its ocean single-hull barges and two tankers. The timing of these rebuilds, says Maritrans, will be based on market conditions, shipyard pricing and availability, customer requirements and OPA retirement dates for the vessels, which fall between 2005 and 2010.

TITLE XI NEEDED TO REBUILD FLEET
Clearly, one of the crucial supports for rebuilding the U.S.-flag tank vessel fleet has been the Maritime Administration’s Title XI ship financing guarantee program. And owners will need the continued availability of Title XI to keep their building plans on track. K-Sea, Penn Maritime and VMS currently have Title XI applications pending to build 13 ATBs or ocean tank barges at a cost of $316 million.

On September 13, the Senate passed H.R. 2500, the Commerce, Justice and State Appropriations Act for FY2002. The Senate passed version of the bill includes $100 million for the Maritime Administration’s Title XI Ship Loan Guarantee Program. The House passed version of the bill provided $30 million for Title XI.

STILL NOT ENOUGH, SAYS SCA
Even with the recent increase in double-hull construction, SCA says current ordering still falls far short of future capacity demands. The analysis, which takes into account existing construction and orders, projects that at the current rate of double hull construction, domestic tank vessel demand will exceed supply by 24% by the end of 2004, a key phase-out deadline. In addition to orders already on the books, SCA’s analysis says more than 500,000 dwt will need to be built by 2005 to simply meet growing demand for domestic waterborne transportation of petroleum products. That’s equivalent to the construction of twenty-five 20,000-dwt tank barges over the next three years. ML