25 years after their graduation from the Naval Architecture & Marine Engineering School of the National Technical University of Athens,
they found themselves at the helm of leading Classification Societies at Piraeus during one of the most challenging periods shipping has ever met. Ioannis Chiotopoulos DNV GL Regional ManagerSouth East Europe & Middle East and Theodosis Stamatellos Lloyd's Register South Europe Area Marine & Offshore Manager share with nafsgreen their views on the current challenges of the industry, technology innovation and the future of shipping.
Which are the challenges, in order of priority, you had to deal with, after taking over the responsibility of your Region/Area?
Ioannis Chiotopoulos: From the very first moment I assumed my duties; one question has been raised to me “What do we need to do to bring DNVGL in the position that it deserves within the Greek Shipping market?” The answer to above is that DNV GL has decided to strengthen its presence in the region even further and is making Greece its third home market, by moving competence, resources and decision making authority closer to the market. Coordinating the new set-up has been my top priority as the new regional manager.
Greek shipping holds a leading position in the bulk carrier and tanker segments, so DNV GL now has segment directors for bulk and tankers based in Piraeus (both are Norwegian).
We have also reinforced the Piraeus office and established a service centre for Direct Access to Technical Experts (DATE) there, to cover the region. This enables our customers to receive answers to their question and queries in less than 6 hours from the time they register them in our new and extremely user friendly MyDNVGL portal (on 90% of the cases measured until now). Important to note that this is a 24/7 service to our customers also working during weekends for Urgent cases (urgency is indicated by the customer).
The local approval centre will be enhanced in order to do all fleet in service approvals locally within 2016. Owner will not need to refer to Hamburg and Oslo any more.
Our local Research and Innovation centre will be more commercialized so that the local market can benefit from the results of their research. We will also create an advisory department, and CAP and pre-contract services in Piraeus will be enhanced with higher decision making authority.
We have a chief surveyor stationed in Piraeus from 1st of January, so all grey zone area issues, process problems, potential quality issues can be solved on the spot.
In addition, DNV GL will establish a global network of Greek speaking experienced surveyors for fleet in service and new building. Greek owners will have access to this network for surveys on board their ships worldwide. Ports chosen so far are Antwerp, Rotterdam, Dubai, Singapore, Houston, Guangzhou, Shanghai, Dalian and will be manned accordingly by end of 2016.
All above in combination with the expanded geographical coverage of Piraeus (Middle east is included in the Region from 1st January) and the decision making authority both commercially and technically has made us stronger, agile and very competitive.
Theodosis Stamatellos:The Region of Greece, East Mediterranean and Adriatic is unique in the sense that all marine activities are present. Shipowning, Ship Management, Shipbuilding and Ship Repair, Manufacturing of Equipment and Materials, Yachts, Cruise Vessels, Small Ships, Inland Waterways, Oil & Gas etc. One challenge has been to increase our already significant exposure to all of these activities and this has been achieved with robust growth in all Countries and all industries. Now that the Area is expanding with France, Spain, Cuba and Portugal, we will further build on synergies and become even stronger. We wish to continuously be there wherever our Maritime world lives.
Another continuous challenge is to further enhance our ability to listen to our clients. We have exceptional people who live our values. We always aim to understand the worries of our clients better and be able to support them. We will never be resting satisfied with our progress on this. The world changes every day and we need to be living the life of the people trusting their business to Lloyd's Register. The challenges of our clients become our challenges.
A third challenge is to be able to always serve the society in a broader sense. Being owned by a Foundation this is built in our DNA. We will take every opportunity to support young people, their education, professional orientation and placement as well as local industrial initiatives.
The above cannot be placed in any “priority” order. If you think about it, one supports the other and they are all interlinked in a way which all together makes us work for a safer world.
The shipping industry is facing one of the most serious crisis in the last 30 years resulting, among others, to the reduction of newbuilding activities especially in the dry sector. How is your Society planning to overcome the problems associated with the reduction of turn over? Does a possible reduction of personnel come into play?
Ioannis Chiotopoulos:The reduced newbuildings have had an impact on our business, but this was something that was not unexpected. We had projected a significant downturn in construction, roughly from the time of the merger in 2013.
However, the merger did mean that we were able to look at our organisation from top to bottom and base the new structure of DNV GL on those projections. We were able to adapt capacities in certain areas, such as approval, in line with the market outlook.
We also had some restructuring that resulted from having two organisations and could win some synergies because of that, for example removing functions that were doubled and reducing the number of offices globally. This meant that during this downturn we could adjust our capacity levels through the natural turnover of employees and early retirement, but the change in employee numbers, especially in the technical disciplines, has not been radical.
We can now be sure that we have the resources where our customers need them. This is reflected not only in the expansion in digital services but also in the fact that we have expanded the responsibilities of our eight maritime regions, with technical support units now based in the regions and enhanced R&D capabilities. While globally we have introduced smart and responsive customer centric services, for example our new customer portal My DNV GL – a single sign-on to all online interactions with DNV GL and DATE (Direct Access to Technical Experts). Located in five support hubs worldwide, DATE experts are reachable 24/7 and are authorized to make decisions within a six hour response time.
Theodosis Stamatellos: The shipping industry has benefited from globalisation more than almost any other sector. On the other hand, this was exactly the reason why it was vulnerable to the global economic crunch and it is facing a deepening crisis since 2008. With oil prices reaching the lowest levels of the recent years, an economic slowdown in China and heightened uncertainty in the Eurozone, the past year has seen significant political and economic turbulence. Lloyd’s Register (LR) is not unaffected by these challenges, however I am pleased to report that our 2015 results in Marine business globally were exceptional, with income up over 18% on the previous year.
Our good performance does not imply of course that the reduction in turnover is not a challenge we are facing indeed. Although we are owned by the LR Foundation, the one and only shareholder of the LR Group, still we need to operate in a sound manner with a healthy margin that allows us to support the Foundation’s strategy and return our share to the Society.
In these troubled times it is important to remain vigilant regarding our strengths and weaknesses and turn the challenges into opportunity to develop new areas of expertise. In LR we have leading positions in the development of innovative technologies. We currently have more than 25 technology research projects with governments, universities and research institutes. As well as, for instance, leadership in classification of high technology areas like LNG carriers and passenger ships, LR is increasingly involved in supporting the development of battery and hybrid power solutions across a range of vessel types. We have the leading class share of the growing fleet of battery/ hybrid – powered vessels.
However, many of our clients are not looking for cutting-edge new technology and what they really want us to focus on is service delivery and support with regulatory compliance. Therefore equally important as technology and innovation leadership is to recognise the different needs of our clients and stakeholders and maintain a balance between the needs of the future and the needs of today. Shipowners need to remain competitive and our role is to help them in making the best commercial decisions in confidence based on the best technical advice available at the time.
The Greece, Eastern Mediterranean and Adriatic Region (GEMA) is facing the same challenges as described above, especially with Greece being severely affected by the political uncertainty over the last year. Nevertheless, we are navigating in difficult waters but with a good wind blowing in our sails. Being home to substantial shipowning and shipmanaging hubs GEMA is LR’s single most business volume generating region, despite its relatively small geographical size. This is reflected in LR’s own business figures: About 24% of the total gross tonnage classified by LR in the entire world comes from this Region. Of LR classed newbuildings contracted in China and Korea, a significantly important percentage comes from this Region. Furthermore, a dominant percentage of the Greek LPG orderbook is currently classified with LR, whereas the countries of the Adriatic are building on market leadership in other technology and innovation intensive segments like passenger ships and mega yachts.
LR expects GEMA to become even more important in the near future, when the planned oil and gas exploration and production in the seas off Cyprus, Israel and later possibly also Greece, take off.
We want to try to tap that potential further by enhancing our resources and hiring more people in the Region. The team has expanded in the past two years and we’re looking to expand it further.
Are the present diversified activities of your Society (Oil& Gas, wind energy, consulting etc.) sufficient enough to close the expected gap in income? Do you see the risk that your Society will be further driven away from its traditional roots moving into new business?
Ioannis Chiotopoulos: It’s no secret that there have been tough times recently, but it’s not just in the maritime industry, but also in the oil and gas and renewable energy sectors. As a result of the global slowdown, especially in Europe, what we’ve seen is essentially a downturn across all of these industries. At DNV GL, the maritime business unit is, and will remain, the driving force behind the whole group. We are by far the largest business area in terms of staff and turnover, and we have been able to hit our fiscal goals.
Overall, I think that this has actually had the opposite effect on DNV GL. Rather than taking us away from our traditional services, the slowdown, which has continued through the merger period, has really sharpened our focus on our core classification activities. In many ways the merger had already had this effect – we were looking very closely into every aspect of our maritime business. What does each organisation do well? What could be improved? Where could we make changes to structures and processes? How are our customers reacting and where are the markets and sectors we need to emphasise going forward?
The results are obvious to see, the new rule set, the development of the modern class initiatives, new pricing and contracting models. It’s especially true here in Greece where we decided to put resources into the region, expand the responsibilities and number of experts located here, and make Greece our third home market. Tough times can often spell trouble for companies who look for a new magic bullet, but it can also mean you get back to basics. And that’s the case at DNV GL; we’ve redoubled our commitment to working our customers to deliver high quality, innovative services, as efficiently as possible.
Theodosis Stamatellos:LR is probably the most diversified of the marine classification societies. At the same time the diversity of the shipping industry itself means that different people want different things at different times. Our aim is to have a holistic approach to our clients’ and stakeholders’ needs and make sure that we remain relevant to the market while maintaining our technology focus as well as our key role in regulatory developments.
LR is a dynamic organisation and has repeatedly proven vigilant and proactive in keeping the finger on the market’s pulse while adapting in the global political and economic circumstances. I am personally proud about the Organisation’s reflexes.
Nevertheless, whatever our business focus is at any given time, promoting safety of life, property and the environment is always the cornerstone of our mission. The LR Foundation is the bond among our activities ensuring that at the end of the day we return something back to the society. In that sense I am not concerned about moving away from our traditions but I feel like we are moving ahead keeping our values in the core of our activity.
How do you see the future of ECO ships in view of the historically low charter rates for bulkers and container ships and the oil prices being below 30 USD per barrel? (In other words: is it worth investing nowadays in more expensive ECO ships?)
Ioannis Chiotopoulos:I think the ECO ship is here to stay. In fact I would argue that most of the innovations that were associated with the first wave of so called “ECO” ship are now standard practice on any new vessel. Hull line optimisation for individual routes and engines designed for slow steaming would be the biggest factors and this is now part of modern design and construction. There are also many lower cost innovations that are still gaining in popularity and while the payback times on these have increased, operators will still see a benefit over the long term – modern hull coatings for example, or a fleet performance solution like DNV GL’s ECO Insight. ECO Insight uses big data to generate savings and has already been installed on board more than 700 vessels just one year after its launch. In terms of retrofitting on the other hand, there may be some reduction, but this may be because the vessels that were the most suitable for retrofitting have already been to the yard and older tonnage is now not competitive, even with retrofitting.
Building a new ship is a long term investment and shipowners need to be confident that the ship they build today will operate competitively and efficiently throughout its lifetime, while also complying with any regulations that will come into force in the foreseeable future. That’s why we have continued offering class notations like GAS Ready, Scrubber Ready, which let owners set the base for a later retrofitting. This lets them keep their options open, while not overcommitting on CAPEX spending in a very tight market.
We’re also at the beginning of a digital revolution in shipping, which has a great deal of potential for the industry as a whole. The whole area of big data and digitalization is one of the key areas for DNV GL going forward. ECO Insight is a good example of one of the first services that takes advantage of this approach. We’re involved in several pilot projects with customers to examine how they can benefit from these innovations, to make sure that they have good quality data and that their data is protected. But we’ll have a lot more services and improvements to our service delivery based around this in the near future.
Theodosis Stamatellos:It is a fact that low charter rates and dropping oil prices have limited enthusiasm for innovative fuel-efficiency projects. However the industry faces a number of key challenges in the area of environmental performance and greenhouse gas emissions. The 2020 challenge is ahead and therefore new technologies will emerge as alternatives for compliance with the 0.50% Sulphur limit. Shipowners will sooner or later be under greater pressure to invest in new technologies, fuels and approaches. In addition as the world moves towards the Paris COP21 vision, the Shipping industry will be called to continuously deliver greater CO2 reductions.
LR continues to lead the way towards innovative technologies with LR Foundation backing them. The LR foundation spent nearly £23m ($33.2) of grants for innovation and education projects over the past two years. Moreover projects such as Poseidon Med help LR maintain an edge and are also in line with its role as a service provider for companies wishing to take good commercial decisions on the basis of sound technology.
Notwithstanding all the above, designing and operating a ship in an effective and efficient manner goes beyond any short term financial outlook. Our industry should in principle be aiming towards such designs in the same manner as a captain will always head for the most effective operation all things considered.
Do you see LNG as an alternative to the conventional bunker oil for being used on main and auxiliary engines in the near future?
Ioannis Chiotopoulos:Yes, even with the current price difference between HFO and LNG, the uptake of LNG as a ship fuel is continuing to grow. The regulatory forces that favour alternative fuels like LNG (spreading ECAs, stricter NOx, SOx and particulate limits and the probability that controls on shipping’s CO2 emissions will be introduced) are all building. At the same time there is really a significant amount of liquefaction and production capacity coming online, which will help with the price differential – as well as port infrastructure, which will increase availability. Currently, there are 77 LNG fuelled ships in operation and 85 confirmed LNG fuelled newbuilds on order and that’s a big jump even from 2012.
DNV GL has been the leader in classification on LNG from the beginning, when we issued the first classification rules for the use of LNG as fuel at the time that the first LNG fuelled vessel came into operation (2000, vessel Glutra). We’ve continued to deliver solutions to help expand the use of LNG in shipping and this is evident by the large percentage of DNV GL class for the existing and on-order, LNG fuelled fleet (almost 80 ships!). At the end of 2015 we signed a contract for first LNG fuelled ocean going bulker which will be built to the newly released DNV GL rules.
One of our latest projects is “LNGi”, a new web-based LNG intelligence portal. This will bring stakeholders from across the LNG industry together to share market intelligence and help further boost the uptake of LNG as a ship fuel. As well, here in Greece, we have assisted stakeholders by carrying out feasibility studies on the use of LNG as fuel in the Aegean sea.
Theodosis Stamatellos:Moving to the low sulphur marine fuels era shipowners will need to make some decisions on the most suitable path towards fulfilling their rule obligations. LNG as marine fuel is definitely one of the most important fuel options. It is already being used widely in northern Europe. To mention some LR milestones the first dry cargo vessel with an LNG-fuelled propulsion system M.V. Greenland was built under LR class. Same with the M/S Viking Grace operating at the Baltic Sea, which at the time of its delivery was unique among passenger vessels of this size in having LNG as a fuel alternative.
In Southern Europe there is certainly a field for extended application of LNG as fuel in short sea shipping operations, mainly due to the morphology of Eastern Mediterranean. The plan to implement the paradigm of the North in the South is reflected in the projects financed by the European Union.
However, a critical barrier to the widespread LNG adoption is the lack of an established bunkering infrastructure and supply chain network for delivering LNG as a marine fuel. LR is playing a leading role in EU co-financed projects working towards making LNG as marine fuel a viable reality in the near future. Recently the second phase of the Poseidon Med Project was validated and Poseidon Med II will continue its works up to 2020 towards the wide adoption of LNG as a safe, environmental efficient and viable alternative fuel for shipping, contributing to the development of a lower emission profile for the East Mediterranean marine transportation. The project focuses into tracking technical and economic solutions for developing the use of LNG in the maritime sector, by considering LNG as one of the most promising solutions for Shipping in Greece, Cyprus, and Italy.
In line with the Poseidon Med LNG bunkering project LR is also in tangible support of projects aiming at the renewal of the European Short Sea Shipping fleet, starting from the Mediterranean, by adding innovative and green characteristics to the Shipping assets. This might also be the solution for the revival of the European Shipbuilding sector as such projects could materialise in European Shipyards.
Does the involvement of so many Organisations in safety such as Port State controls, EMSA etc. and even non-State Organisations such as Rightship, weakens the traditional status and Authority of Class Societies?
Ioannis Chiotopoulos:No I don’t think so, at the end of the day we’re all working toward the same goal which is ensuring safety. And classification societies still have an accumulation of expertise and depth of experience that is hard to find anywhere else.
One thing we as classification societies do have to be careful of, and it is something that is especially dangerous in this very tough and competitive market, is a race to the bottom. To devalue class services to a simple “ticket to trade” or offering services essentially for free could end up undermining the role of classification societies in the long term.
That’s why we are very focussed on making sure that our customers really see the extra value that we bring to the table, deliver extra services that are needed, and have investigated new pricing methods, so commercial pressures don’t mean that any shipowner has to compromise on quality.
Theodosis Stamatellos:Weakens the traditional status and Authority? No. There are two important aspects here. The first has to do with the increased need for a Classification Society which is a fundamentally an independent third party such as Lloyd's Register. The more complex the situation the greater this need becomes. I would agree that a Class Society is nowadays operating in a more complex terrain than before. The shipping industry as a whole is faced with a complex landscape where the Class Societies need to operate in.
The other aspect has to do with the evolution of Class Societies. In Lloyd's Register we believe that our duty is no longer just to check Rules and Regulations but to be conveying the voice of our Industry combined with our Technical Expertise towards the Legislators in an effort towards more reasonably structured regulatory regimes.
So in conclusion, truly independent Class Societies are more needed now not only for our traditional work but also for going further into shaping our world.
Photo:From left Mr. Ioannis Chiotopoulos and Mr. Theodosis Stamatellos