Maersk bob bowers, commercial perspective, rev 1

A commercial perspectiveon vessel maintenance, cost and efficiency

Bob BowersMaritime Technical ServicesMaersk Line, LimitedNorfolk, VA

November 2, 2010

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Maersk Line, Limited Proprietary

• MLL fleet overview (briefly)• Approach toward maintenance• Depot maintenance• Non-depot maintenance• Energy management and emission reduction• Implications

Contents

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“Commercial” Sustainment Basics

• High asset utilization– 5 years between 2-3 week long dry-dockings – Optempo is 85% at sea and 15% in terminals; 2 days off service/year– Maersk service life is 25 years but vessels often sold and operated 10-15 years longer

• Safety is never compromised

• Full regulatory compliance– Class Society – significant technical resource and technical risk mitigation– Flag State/Port State control

• SOLAS• MARPOL

• Continuous maintenance based– Can not tolerate “maintenance backlog”

• Global– The need to be capable in any port

• Maintenance and Repair decisions based on business value– Consider alternatives, risks and value. Choose accordingly.

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Maintenance approach

The business of maintenance • Ships are expensive assets which

provide optimum value only by being maintained for maximum operational availability.– Maximize revenue (on hire)– Control total ownership costs

• Costs don’t stop when ship isn’t being used.

Revenue (charter hire) = $25k/dayDaily costs = $20k/day Profit = $5k/day or $150k/month

Commercial Military

Revenue Charter hire Readiness?Availability?

Costs Crew Maintenance Fuel AdministrationProvisionsStores Depreciation Insurance

Crew Maintenance Fuel AdministrationProvisionsStores

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Managing Maintenance Profit Risk

Maintenance Strategy for Cost Risks• The approach to achieving affordable total ownership costs must begin

with a maintenance strategy that…– Selects cost effective equipment in the “new build” design phase– Has flexibility within readiness standards (RCM/risk)– Exercises obsolescence management over the service life

Maintenance Strategy for Revenue Risks• The approach to achieving steady revenue streams is based on vessels

that are operating reliably 24/7/365, built on…– Sufficient redundancy (safe risk profile)– Sound technical support– Guidelines for safe operation– Training– Classification

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Life Cycle Reasoning

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Readiness at any cost?

Value to Asset Owner

Maintenance Cost

Rusty Freighter

Best value model

Military

Excessive maintenancePoor managementPoor training

(too much time in depot maint, maintenance backlog)

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• Hull maintenance

• Condition based machinery maintenance

• OEM/operator joint ventures on R&D

• Service contracts/”Frame” agreements

“Better” than Minimum

Operating above minimum standard should be a well thought out policy.

• High safety/environment/quality emphasis

• Voluntary compliance

• Leadership position in industry

“Competitive advantage” is a function of company culture, reach, innovation and mass – not just low cost.

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Methodology

• The smart application of “smart” maintenance systems

• Preventive maintenance:

– carried out by the crew (at sea) and vendors (in port)

• Continuous maintenance (organizational and intermediate):

– Every port is a repair port

– Dry docking represents no revenue. A well maintained ship spends less time in DD

• Scheduling:

– Most commercial vessels have one 24 hour load port for receipt of fuel, lubes, stores and accomplishing “longer” repairs

– Not uncommon for as many as 10 large maintenance/repair items being addressed in a 24 hour port call

– Reliance on commercial transport and “agents”

• Dry Dock:

– Rarely more frequently than every 5 years or longer than 16 days.

• OEM is used as an extension of company resources. Expensive on a per hour basis but cheap based on quality and intrinsic value in using OEM’s own global infrastructure.

– Tech manuals

– Obsolescence

– Training

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The Commercial Approach

• Drive maintenance from depot to “O and I”

• Utilize a commercial mentalityTreat the ship as having a dollar asset value – every day idle is a loss of moneyMaintenance targets of opportunity supporting continuous maintenanceMinimum intrusive maintenance without reason

Trust watchstander as a CBM toolAssess risk profile regarding willingness to allow equipment to fail and a measured

approach to repair is possibleDoes 1 of 4 fire pumps OOC require a CASREP?Failures that would stop a ship at sea … focus for training and spares

• Classification provides access to a wealth of technical resources

• Response that grows as severity escalates– When commercial owners need a robust support group we grow one on the spot.

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Relative targets:

• Maersk Line25% reduction per TEU-km from 2007 to 2020

• Maersk Tankers15% reduction per tonne-km from 2007 to 2015

• Maersk Supply Service5% reduction by end 2011

Maersk Line has reduced CO2 emission of own fleet by 15% in the period 2002 to 2008

Carbon (energy) - Achievements and targets …

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Achievements and targets - How and Why?

• How?– Operational and engineering improvements

• Fleet optimization• Focused marine engineering

– Technology advances (innovation)• Effective integration of sub-systems• Redesigned systems• New systems

– KPI driven performance• Frequent and relevant data• Communication of results and shortfalls

– Regulatory input• Establishment of common goals and a coordinated effort

• Why?– It’s the right thing to do– It’s good business

• Shippers demand it• Cost structure demands it

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Marine Engineering Innovation Vessel Performance Regulatory Affairs Business Case Analysis

Monitoring of hull &propeller conditions

Main Engine efficiencyAuxiliary Engine efficiency

Voyage planning and execution Cargo load optimization

Optimum trim guidance for all vessel classes

Monitoring of new paint technologies

Basic load optimization

Cylinder oil optimization

Propeller technology enhancements

Other InitiativesAlternative fuel testsNew propulsion technologiesISO 14001 certifiedCrew awareness and engagementSOx scrubber studies

QUEST: Low energy chilled containersModified bulbous bowMicro bubblesBallast water optimization and treatment systems

Waste heat recovery systemSlow steaming and super-slow steaming

Five elements essential for sustainability

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Maersk Line, Limited ProprietaryPAGE 16

GSF design 8500 TEU : additional space required for technologies

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Maersk Line, Limited Proprietary•17

Vessel Performance Management

•Performance tool

• Vessel Performance Management Service (VPMS) provides

• Key vessel performance monitoring

• Decision support on vessel operation

• VPMS reports provide guidance and decision-support on

• Hull and propeller performance and efficiency

• Improving main and auxiliary engine performance

• Optimal cylinder oil consumption

• Drydocking, hull cleaning and propeller polishing intervals

• Evaluation of anti-fouling paint type

•Value Proposition

• Believe in the credo – “You can only improve what you measure”

• Promoting and reinforcing green image in the business

• This service has direct impact on optimising daily running cost

• Direct impact on improving fuel performance

• Provides continuous and close performance monitoring

• Ensures drydocking costs and off-hire are kept at minimum level

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Emissions thoughts

• Cold Ironing– Does it improve a vessel’s carbon footprint?– Would localized LNG or biodiesel electricity production be a better solution?

• Are marine diesel lubricants specialized enough to deal with slow steaming, biodiesel use, injection of water into the combustion process and the drive to reduce cylinder oil consumption?– In the near future, vessels will carry cylinder oil blending systems that produce

custom blends and are agile enough to customize the cylinder oil several times a day.

• Will exhaust gas monitoring systems override Annex VI requirements to trace the pedigree of engine parts that impact NOx emissions?

• Will inconsistently applied regulatory limits for emissions cause a shakeout in the industry resulting from small owners not being able to afford vessels that can meet requirements in all ports.

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Thank you for your attention

Education

Maersk bob bowers, commercial perspective, rev 1