V.Ships

OPEXTHE SHIP MANAGEMENT VIEW

V.ShipsThe Aim

Working with owners

to enhance

operating efficiency

V.ShipsOPEX Budgeting

Budgeting is a vital part of a cost

control policy and can be described as “the process of planning systematic spending”

If the OPEX budget is not realistic the vessel will suffer

either

Operationally

or

Loses asset value

The owners loses money

The manager loses business and reputation

V.ShipsWhat are the drivers

• Fuel prices

• LO prices

• Crew Wages

• Finance !

• Food costs

• Spares costs

• Maintenance costs (more shore technicians being used) .

• Insurance (part market forces part owners profile)

• P+I rise of 10 to 15% in 2013 !!

• NEW REGULATIONS (93 pages in the LR IMO summary )

• Piracy ( increasing / decreasing or just moving)

• Currency swings; Euro/dollar ?

V.ShipsManning – Cost Drivers

• End of super-cycle in 2008 brought end to period of high crew wage

inflation (up to 20%+ YoY).

• NOW

• Continuing growth in world fleet translates into persistent

undersupply of officers (over supply of ratings).

• For forecasting purposes, crew wages look fairly stable for 2013 but

we may still see increase in officer rates on special tonnage.

• Increase cost of training (OBT and shore based facilities ) as industry

needs to increase competency levels.

• Air travel costs. Low cost airlines ?

• Victualing cost rising due to food price inflation.?

V.ShipsOperating cost breakdown

63%5%

8%

5%

3%

3% 3%

3%

7%

COST ALLOCATION

1. CREW COSTS

2. STORES

3. LUBRICATING OIL

4. SPARES

5. REPAIRS AND MAINTENANCE

6. SURVEYS AND SERVICES

7. SAFETY AND RISK

8. GENERAL EXPENSES

9. MANAGEMENT FEE

2012

SUMMARY OF ESTIMATED RUNNING COSTS

(Panamax tanker 5 years old) TOTAL PER DAY

US$ US$

1. CREW COSTS 1,248,612 3,421

2. STORES 105,000 288

3. LUBRICATING OIL 170,600 467

4. SPARES 99,000 271

5. REPAIRS AND MAINTENANCE 56,000 153

6. SURVEYS AND SERVICES 54,000 148

7. SAFETY AND RISK 54,102 148

8. GENERAL EXPENSES 57,395 157

9. MANAGEMENT FEE 136,000 373

TOTAL RUNNING COSTS 1,980,709 5,427

10. DOCKING/UPGRADE 0 0

11. OTHERS 0 0

GRAND TOTAL RUNNING COSTS 1,980,709 5,427

V.ShipsVessel Costs

8%

20%

12%56%

4%

Vessel Cost Modern VLCC ($65m value / av daily hire $20k)

Interest

Installments

Opex

Bunker

Port cost - commision

V.ShipsAny Links ???

Baltic Dry Index

0

20

40

60

80

100

120

Q1/10 Q2/10 Q3/10 Q4/10 Q1/11 Q2/11 Q3/11 Q4/11

Equipment Failures & Damage

V.ShipsCrude oil price index 2003 > 2012

Indications are that an underlying ceiling of around 115 usd and a floor of around 100 usdfor Brent Crude will prevail for the foreseeable future.

V.Ships380 Cst HS fuel 2012

V.ShipsLube oil Price trends 2006 > 2012

Baltic Dry Index

$0,00

$50,00

$100,00

$150,00

$200,00

$250,00Ιαν-06

Απρ-06

Ιουλ-06

Οκτ-06

Ιαν-07

Απρ-07

Ιουλ-07

Οκτ-07

Ιαν-08

Απρ-08

Ιουλ-08

Οκτ-08

Ιαν-09

Απρ-09

Ιουλ-09

Οκτ-09

Ιαν-10

Απρ-10

Ιουλ-10

Οκτ-10

Ιαν-11

Απρ-11

Ιουλ-11

Οκτ-11

Ιαν-12

Απρ-12

Ιουλ-12

Οκτ-12

LO price trends are heavily weighted by additive costs, not just base oil

V.ShipsFood price index 1990 > 2012

Weather incidents can have a major effect

V.ShipsThe Big Mac Index 2007-2012

Location and political issues.

V.ShipsExternal Factors

• Crew nationality and numbers.

• Trading Area

• Insurance Conditions

• Age and Condition of the vessel

• Type of vessel

• Charter terms & conditions

• Owner’s Drydocking & Maintenance policies

V.ShipsWhat has improved

Savings in the same period;-

Specific Fuel consumption has reduced (although engines did get bigger).

Specific Cylinder Oil consumption has dropped. >20%

Spares, large items such as cylinder liners have dropped in real price.

TBO’s have increased.

Crew numbers ? (not much change)

Docking intervals > more In Water Surveys.

V.ShipsThe future >>>

• SEEMP

• Ballast water treatment system retrofits.

• Capex >1 million usd.

• Opex ???

• Low sulphur fuels; impact on

• Fuel costs

• Lube costs

• Exhaust Gas Scrubbers ?????

• Maintenance

• Wear caused by changeovers.

• EU CO2 measurement project ?

• Other New Regulations ? (

• Bio Fouling Management plans worldwide and USA

• Local Bio fouling rules ? Will the EU go it alone ?

V.ShipsThe future >>>

• How can we use any of these as leverage to help.

• Energy Management is the most obvious ;-

• Real fuel saving.

• Real maintenance saving.

• Improved charter profile.

• Low cost entry point.

V.ShipsAll OPEX budgets must be……..

• Competitive

Any manager sells on a value-for-money proposition not a least cost one in a fiercely competitive marketplace

• Realistic

based on all available information to hand including previous experience in running the same or similar ships

• Substantiated

reasoning and assumptions must be clearly spelled out in order to explain the company’s position.

V.ShipsRealism and communication

• It is essential that owners and managers communicate clearly to establish the target OPEX for the vessel.

• The onus for this is on both sides

• A clear understanding of the owners aspirations is required

• The owner needs a fair assessment of priorities for expenditure and the consequences of delaying .

• At the end of the day OPEX will probably trend upwards but working together we can ensure the rise is limited as far as possible.