Tanker Energy Efficiency through operational fuel saving initiatives

Jarle Coll Blomhoff, Business Development Leader, Maritime Advisory Germany & East Med, DNV GL Maritime presentation during the 2015 GREEN4SEA Forum

Fuel efficiency has become a key differentiator for shipping companies, and fuel bill often make up more than half of total cost of operation. There are two main drivers for improving efficiency of a tanker; changing the design of the vessel, and reduce efficiency losses by improving operation.

I will talk about the topic of operational fuel efficiency for tankers. It will be based on our experience working together with several companies from various vessel segments; however also briefly looking at the fuel efficiency projects we are doing together with Euronav here in Piraeus, Antwerp & London.

 The first question to ask yourself should be ‘’ what is the actual bunker consumption of your fleet?’’ A typical example; a VLCC consumes approx. 17,000 ton/year. It used to be 10 million per year at 600 USD/ton, at the moment is more close to 5 million per year at 300USD/ton. I believe that in few years, this value is about to rise. The next question is ‘’what is the impact it has on the operation of your company?’’

 There are three different impacts:

• Direct on spot voyages
• Indirect through pool points distribution
• Indirect via charter rate

 The charters are now teasing the benefits of fuel consumption reduction as well, so each time you save you charter for fuel costs, it will benefit you in the probability in getting a charter or to get a charter at all in bad times. I think that the last few years, average of 400 million revenue per year and fuel costs is roughly about half of it. Cutting fuel costs by 2%, gives 1% increase in profitability of the company.

 We are trying to work on the cost side thus looking at the total cost of a vessel. Let’s look at the example of a typical VLCC with fuel expenses accounting for almost 45% of total shipping costs equivalent to more than 1,5 times capital costs. The voyage related cost is the biggest one. There are also fixed operating costs, the classification cost – a smaller share – and the capital cost, also smaller than the voyage cost.  When breaking down total cost for a VLCC, it is quite clear why fuel efficiency has gained such a momentum the last few years. I’m sorry to say that there is not that much potential to save in traditional cost cutting areas such as spares, dry-docking, etc. Not even with classification cost. So, the message is quite clear: put focus on fuel efficiency, it will pay off!! But with lower bunker prices it does not matter that much you say… I would rather say; it is still very important, and the ones that excel in fuel efficiency will be the ones that reap the benefits in the future.

 So, what can we do to improve the fuel efficiency of our fleet? We have two different options:

1. Asset – you may optimize your newbuilding as good as possible. For existing vessels you may look into retrofitting
2. Operational topics – how well you are maintaining your vessel and cooperating with different units in your company.

Both asset and operational based efficiency measures are required to realize full potential of fuel saving for our fleet. Both of these areas have a significant potential. The one to the left is most often quite costly, and the one to the right is most often more difficult since you have to deal with people and company cultures. Retrofitting people is the most difficult task (but short payback due to low cost…) Comparing it with the VLCC again; a 10% fuel saving is 500k USD for VLCC per year @300UDS/ton & 1mn USD @600UDS/ton

There are three important challenges which need to be handled to realize the operational efficiency potential.

1. Organizational anchoring – “Clear responsibility and accountability for energy management missing”. Why is an area with up to 50% of company cost most often handled ad-hoc?
2. Reporting & Monitoring – “Limited real insights into vessel operations generated” Why are most shipping companies not even efficiently using their existing noon report data to support smart decision taking?
3. Measures – “Shipping lines struggle to implement measures on board” A compliance driven industry with focus on document on-board instead of actual involvement of crew and selection of the correct few measures which deserve focus…

Now, let’s look at the first challenge, the organization which includes top management, ship management with its parts; technical, HSQE, crewing which are all involved in the energy efficiency, and also operations and chartering & projects department. There is also an Energy Management Team trying to coordinate data and playing a crucial role to the company as it can directly impact the profitability. This role needs to be like a ‘’spider in the web’’ pulling threads and talking to all parts of the organization to make sure the pull is together in the correct direction. A good experience from our recent project with Euronav was the involvement of departments and locations across the company,  i.e. video conference with Antwerp, London & Piraeus. 

Daily monitoring of few KPIs via stakeholder specific reports allows effective energy management. It is important to do the following:

• Focus on a few, relevant KPIs, providing detailed data in master database for further analysis
• Continuously and timely monitor KPIs
• Define stakeholder specific reports/dashboards
• Provide reference values, e.g. target, sea trial or sister vessel performance

The available operational measures need to be considered if the maximum saving potential is to be unlocked. There are many areas than can bring operational savings to your fleet such as voyage planning, main & auxiliary engines and boilers, voyage execution and fuel management. However that does not mean that you need to have them all in your SEEMP. Do a structured approach and focus on the ones that are the most important to you. Continuously follow-up and adapt to current situation in fleet.

So where are you with your fuel consumption? Have you realized asset measures? How is your operational efficiency?

Above article is an edited version of Jarle Coll Blomhoff’s presentation during the 2015 GREEN4SEA Forum

You may view his presentation video by clicking here

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About Jarle Coll Blomhoff

Business Development Leader, Maritime Advisory Germany & East Med, DNV GL Maritime

Jarle Blomhoff holds a Master of Science in Engineering with specialization in Navigation, Guidance and Control of Ships from Norwegian University of Science and Technology (NTNU). Jarle has 7 years experience from DNV and FutureShip (Germanischer Lloyd). He is currently supporting shipping companies on improving their operations with an efficient organizational setup, profitable technical measures as well as efficient design of assets. With long experience within project management, risk management, technical analysis as well as organisational and process review, he has worked together with clients from industries such as shipping, telecommunication, finance, IT and transportation.

In the beginning, I was straightforward with you propecia before and after has changed my existence. It has become much more fun, and now I have to run. Just as it is incredible to sit.