Crowley eyes on fatter newbuilds

A US-flag owner is keen on ordering bigger tonnage.

Tom Crowley Jr is poised to take his company’s already substantial US-flag tanker newbuilding programme up a notch.

Asked whether Crowley Maritime Corp’s series of 27,000-dwt articulated tug-barge (ATB) tankers will be extended from a current total of eight, the California shipowner told TradeWinds: “Actually, our clients want us to build bigger ones.” He makes it clear that the company would be happy to oblige and is in talks with several yards.

Crowley was speaking to TradeWinds at the Mobile, Alabama, naming ceremony for the first of a series of ATB units under construction at VT Halter, consisting of the 9,280-bhp tug Pacific Reliance and the 27,000-dwt, 185,000-barrel barge 650-1 (both built 2006). Crowley’s filings with US financial regulators put the average cost of each of the first six ATBs to be built in this series at around $69m, counting ownersupplied equipment.

Crowley indicates that the larger ATBs being contemplated would be of 215,000-barrel and 330,000-barrel capacity. Crowley’s top tanker executive, Rockwell Smith, adds that the tugs that go with the 215,000-barrel ATBs will be interchangeable with those used for 155,000-barrel and 185,000-barrel units. With the leap to 330,000-barrel ATBs, however, the propulsion unit would have to be of significantly higher specification.

The latter is the equivalent of a full-size medium-range products tanker in carrying capacity. Rival ATB player Maritrans uses that size in lightering work in the Delaware River and has three such units under construction now.

Crowley does not say what market he would build 330,000-barrel ATBs for. Several industry observers have expressed puzzlement as the longer-distance trades would typically call for faster selfpropelled vessels. However, Smith points to the Gulf-to-Florida route, which is the buggest Jones Act trade in terms of tonnemiles, as a logical place to use big ATBs.

Until orders for the larger ships materialise, at least five more tugbarge pairs in the 650 series are to be built at VT Halter shipyard in Pascagoula, Mississippi, both for work on the West Coast and East Coast and US Gulf. The firm charters on the first four of these are for three years to ConocoPhillips and Shell and for seven years to BP with two units.

All the 650-model ATBs were ordered on spec, Crowley says, and the last two ships in the series remain uncommitted.

But his company is a conservative one and Tom Crowley’s idea of speculation may resemble another’s idea of relatively firm business. “We had a pretty good idea the business would be there but it was not formally okayed by the oil majors when we ordered,” Crowley acknowledged.

The 650 models will join a Halter-built fleet quartet of 550 models or 150,000-barrel units, which were delivered in 2002-2003 and are in service on the West Coast. Crowley Maritime Corp has shaped up alongside Norwegian controlled Aker American Shipping, US Shipping Partners and Florida-based Maritrans as one of the shipowners most active in the recapitalisation of the Jones Act tanker market.

In the slow-moving race to replace single-hull tonnage as US legislation mandates its retirement, Crowley and Maritrans have been working the big-barge side of the street and leaving the other players to deal with the few US shipyards willing to take on long series of self-propelled tanker.

The more spectacular press releases so far have come from the proponents of self-propelled tankers. Most recently, US Shipping Partners is believed to be on the verge of ordering nine products tankers, with four options, to be built by San Diego’s General Dynamics Nassco in collaboration with Korea’s Daewoo Shipbuilding & Marine Engineering. International tanker player Overseas Shipholding Group (OSG) has backed up Aker American Shipping’s spec series of 46,000-dwt tankers from Aker’s Philadelphia yard with five to seven-year bareboat charters on 10 ships, a number OSG boss Morten Arntzen has repeatedly threatened to take to 25.

But it is the ATB builders who have actually built tankers so far.

As a home-grown US approach to the waterborne carriage of petroleum products, the ATB is arguably the child of overregulation. It was begotten by US Coast Guard (USCG) crewing rules and nurtured by barriers to entry in the costly US domestic market.

However, as ATB designs have matured, performance has become harder to distinguish from that of self-propelled vessels. No relevant charterer now turn up their noses at ATBs in principal.

Some, like Don Martin, head of US-flag shipping at Pacific Reliance charterer ConocoPhillips, testify even more enthusiastically to the range of applicability of ATBs than owner Crowley does.

ATBs are cheaper and quicker to build than tankers in part because more yards are willing to try their hand at them.  They lend themselves to construction by section in multiple yards for final assembly. Crowley Petroleum Services general manager Rockwell Smith points out that barge yards are more price competitive than bigger players not only because there are more of them but because it is easier to start up a facility. “Fly over this part of the Gulf in a  helicopter,” said Smith. “You’ll see them. Building ATBs doesn’t require deep-draught facilities.”

Even more compelling than the cost of building is the cost of operation. An ATB crew is normally less than half the  size of a self-propelled vessel’s. Smith is careful not to cast the competition between articulated tug-barge (ATB) and self-propelled tankers in very stark terms. Like company principal Tom Crowley Jr, Smith says there is room for both types of vessel in the US domestic or “Jones Act” market.

But could the developing tonnage race between tankers and ATBs eventually lead to an overtonnaging of the Jones Act?

Absolutely possible, says Crowley. He qualified, however: “It’s not a danger yet but it could be around 2011 or 2012.”

“I don’t see a collision,” Smith told TradeWinds. “The relative proportion may change but the vessel types will coexist.”

Indeed, there may be room for both types even at Crowley, which still owns two self-propelled tankers dating from its acquisition of Maritime Transport Lines (MTL), the 40,000-dwt Coast Range and 42,000-dwt Blue Ridge (both built 1981) as well as two units of a type no longer built, the integrated tug barge (ITB), namely the 41,000-dwt SMT Chemical Explorer and SMT Chemical Trader (both built 1981). All these have drop-dead dates of 2011 under the US Oil Pollution Act of 1990 (OPA 90).

Both Smith and Crowley say the company could order more selfpropelled ships despite the ATB newbuilding programme.

“We’re in business to meet the needs of our customers,” said Smith. “If tankers are the best-value proposition, that’s what we’ll provide.”

Smith underscores that the US domestic or “Jones Act” market is hard to understand from the perspective of an international tanker owner with his model of the versatile handysize tanker that can fit into any market. “The Jones Act is small,” he said. “It consists of niches. There are only a few trades you’re building for. The international chartering situation does not apply to the Jones Act because we don’t have the same universe of voyages that call for  interchangeable ships that can be used in trades all over the world.”

In some of the Jones Act niches, he explains, the lower capital and operating costs of ATBs outweigh any performance drawbacks.

Still, although ATBs increasingly challenge the capacity and speed advantages of self-propelled ships, the small crews that give them a cost edge over self-propelled ships also limit them operationally.

Much more is left to shoreside personnel and maintenance is more by contract than on a selfpropelled tanker. “On barges, the vessel’s crew doesn’t enter tanks to change cargoes from black to clean, for example,” he said.

He hastens to add that Crowley’s 27,000-dwt Pacific Reliance/650-1 ATB (built 2006) like its sisterships compensate in all kinds of ways for their small crews, especially through increasingly sophisticated design. The astonishingly light and very expensive lines used on the Crowley barge allow two or three crewmen to make the ATB fast. Cargo systems are all-electric, with no worry of leaks from hydraulic lines on deck. Ballast water exchange can be carried out at sea from the tug without boarding the barge. Ergonomic planning of the discharge and loading operations separates these on a catwalk level and the deck. And the Pacific Reliance’s barge is the first ATB to feature a control room as opposed to a “shack” on deck, a feature that “makes tankermen last longer”, as ATB convert Don Martin, head of USflag shipping at charterer ConocoPhillips, pointed out during a tour of the vessel.

However, Smith added: “We don’t build an ATB and claim it can do everything a tanker can do. The model has some limitations — ATBs are not tankers.”

Smith acknowledges that tankers such as those at Aker Philadelphia Shipyard have some advantages over ATBs for longer hauls — always with the provison the Philly yard has not proven its claim that increased experience will cut its production costs.

“If the advertised price of those ships is true and holds, they’re going to build a lot of tankers,” Smith said. “The economics is compelling. That tanker at that price carrying that much product will get business our ATBs won’t get.”

He draws attention to the economics of long voyages as a compelling plus for self-propelled ships. “It’s all about fuel economy,” he said. “The ability to deliver a barrel of product on a given route at a given price is sensitive to fuel costs.”

But the cost of building self-propelled tankers at US yards is a big if. On the Philly ships, Smith said: “I don’t believe that those ships will be delivered at the prices that have been publicly discussed.”

He is even more sceptical of prices at yards that are basically naval builders with some commercial exposure, like General Dynamics Nassco. “The large US shipyards are the most profitable shipyards in the world except when they try to build commercial ships,” he said.