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Wreck removal issues – the contractors’ perspective

By Andreas Tsavliris, President, International Salvage Union

There are typically some 1000 serious shipping casualties globally each year. Successful intervention means that the majority of these casualties are towed to safety or refloated, repaired and returned to service. Approximately 200 of these cases will be formal salvage jobs under a variety of salvage and towage contracts. In some cases, the complexity and cost of the salvage and repairs needed to bring the vessel back into service means that it is uneconomic to do so and the casualty is declared a loss. In other cases the vessel is totally lost – for example having sunk in very deep water. There are approximately 100 losses each year. Environmental concerns and political intervention mean that it is now increasingly likely that the relevant coastal state will order a wreck to be removed and that is certain to be the case if it presents a hazard to shipping or if its cargo or fuel threatens to damage the environment. Accurate numbers are hard to source but it is suggested that there are approximately 50 wreck removal operations globally each year.

Removing the wreckage of a vessel from the coastline or deeper water has always been a major and expensive undertaking. However in recent years it is widely acknowledged by shipowners, insurers and also wreck removal contractors that the cost of such operations has increased and dramatically so in some notable instances.

The well-known cases of the containership MSC Napoli, beached off the south coast of England, and the containership Rena, grounded offshore New Zealand, generated worldwide interest. Both those cases have now been eclipsed by the cruise liner Costa Concordia which is likely to be the most complex and expensive wreck removal operation of its kind. It has already cost the insurance industry nearly US$ 600 million – which does not include the cost of the hull. Such cases have raised public awareness of the issue of wreck removal, but the shipping and insurance industries have a particular concern with the rising cost: according to the International Group (IG) of major P&I Clubs (the marine industry’s mutual liability insurers) the total cost of the top 20 most expensive wreck removals from the past decade is presently some US$ 2.11 billion and set to rise as some cases are ongoing.

The most expensive wreck removal cases now regularly exceed the level at which the Clubs’ reinsurance cover begins (US $70million). This in turn puts pressure on reinsurance market capacity and any consequent rises in reinsurance costs for the Clubs will be passed on to their shipowner members and therefore increase their operating costs.

Wreck removal contractors – typically active marine salvors who are members of the International Salvage Union – have not driven up costs. Indeed, it has been established by the IG’s own research that increasing costs are chiefly the result of the requirements of coastal state authorities – often with regard to environmental concerns.  And technological developments and more sophisticated engineering approaches have increased the scope of what is possible. For example, the ability to remove potential pollutants from a wreck lying in deep water. These advances have made operations that previously might be too complex or take too long more feasible.

The location of a wreck, including the local conditions, and the type of vessel are important factors in the cost of the operation to remove it. A remote site may increase the duration of the operation and so increase the time for which expensive gear must be chartered from far away. Research also shows that containerships, even modestly sized, make expensive wrecks largely because the operation to remove the containers is often complex and slow. Of course the contractors can do nothing about the location of a wreck.

ISU recognises that increasing ship size and the ability of salvage contractors to handle the largest vessels, either as casualties or wrecks, is a growing challenge for the shipping industry. Larger vessels carry more cargo which will take longer to deal with and there will be more wreckage to remove. It increases the duration of the job and consequently the cost. Salvors have been publicly complimented by the insurance industry as innovative problem solvers and they use their best endeavours to get the job done. That does not take away the need for the industry to think about its investment in new techniques and equipment to be able to work efficiently on the largest wrecks in difficult locations. Systems for removing containers from listing boxships exposed to rough seas are particular interest.

Wreck removal operations can be a good revenue stream for salvors but at the same time, bidding for wreck removal contacts has become very costly. Each company bidding for the work will conduct its own survey often requiring the deployment of a number of experts to a remote site. For the unsuccessful bidders the costs are not recovered. There have been reports that unsuccessful bidders for the work to remove the Costa Concordia spent some € 500,000 preparing their tender. ISU would like to work with the Clubs to explore ways of mitigating these costs – perhaps by releasing common survey data collected by third party experts to those firms competing for the contract. The Clubs have indicated a willingness to consider this aspect of wreck removal.

Finally it should be noted that wreck removal is now the subject of an International Maritime Organisation Convention which is waiting to come into force while coastal states undertake ratification in their own legislatures. The Convention is intended to create more certainty and uniformity among coastal states in their treatment of wrecks and to ensure that governments and claimants have direct access to the shipowners’ financial security for their liability in respect of wrecks. However the ISU notes the likelihood that many states will continue to apply domestic legislation in their own territorial waters means uncertainty is likely to continue.

In conclusion we would suggest that if an owner’s vessel is wrecked, make sure it is not a fully loaded mega containership and let it happen in good weather in the shallow waters of a benign government close to readily available salvage assets.