Loss Prevention Circular No. 08-01
Taking onboard off-spec bunkers can cause significant disruption to a vessels ability to trade. In addition, it creates problems in recovering from the insurers costs incurred due to a lack of and/or limitation in cover. This circular is intended to provide an example of the problem as experienced by shipowners. The case described below relates to a passenger ship, but applies equally to all types of vessels. Loss Prevention Circular No. 08-01 is the next instalment in a series of circulars produced by Gard Services dealing with damages associated with bunkers and bunkering1 and outlines problems which may arise when passenger ships have to deal with off-spec bunkers.
Passenger ship operations are very sensitive to operational disruptions. Costs of disruption can occur in the form of hull and machinery damages, damages and compensation to passengers and crew as well as damage to reputation that may influence future bookings and earnings. Compensation to customers beyond the initial costs due to commercial considerations can easily fall outside the scope of cover of hull and machinery, loss of hire and P&I cover.
Course of events
Upon arrival in Singapore, the vessel was firmly secured to the pier at 0550 hrs. At 0800 hrs, a bunker barge came alongside to deliver bunkers to the vessel. The barge commenced bunkering at 0810 hrs and completed the operation at 1255 hrs. The bunker delivery statement noted that 90 metric tonnes of supposedly IFO 180 cst was supplied. Fuel samples were taken for testing by a credible bunker quality testing company. However, the results from this bunker test would not be available for another 2 3 days.
The vessel departed Singapore for Thailand at approximately 1745 hrs on that same day. At 2215 hrs that evening, the vessel experienced a total blackout, including the loss of all navigational equipment. Power was temporarily restored at 2217 hrs. A second blackout occurred at 2218 hrs resulting in the vessel not being under control. Although power was finally restored at 2220 hrs, the vessel was only able to continue at half speed.
The Chief Engineer observed that the bunker which had been supplied in Singapore that day, had a high degree of carbon residue, clogging the complete fuel system in the main and auxiliary engines. The Master informed the owners of the problem and the decision was made to return to Singapore due to safety considerations.
At 1100 hrs the following day, fuel samples were taken in the settling and service tanks where the bunkers had been loaded and the vessel began discharging the off-spec bunkers at 1200 hrs. A representative from the Singapore Maritime Port Authority informed the vessel at 1230 hours that they were being cautioned due to the emission of black smoke apparently the result of the burning of the off-spec bunkers. An engine repair contractor boarded the vessel at 1600 hrs and upon surveying the situation, indicated that repairs would take at least two days provided no extensive damage was found. After consultations with the owners, the Master decided to abort the cruise.
At 0630 hrs the following day, the debunkering operation was completed. Another bunker barge began loading a fresh supply of IFO 180 cst at 0810 hrs and the operation was concluded at 0945 hrs. All passengers were discharged from the vessel at 0945 hrs. A second agency was used for the sampling of the second bunkers taken and a different bunker testing company was used to analyse the second bunkers. The results of the tests of the first and second bunkers indicated high ash, water and total sediment potential (TSP) content. In addition, high sodium to water content was also reported, indicating the presence of seawater in the bunkers.
However, the bunker brokers advised the company that the samples had not been taken at the bunker barge as required by the Singapore Standard CP60:1996. Further samples were drawn at the barges manifold and sealed with a barge seal.
Damage to machinery
The damage to the main engine as a result of using the off-spec bunker was abrasive wear marks on all fuel nozzles, abrasive wear on all fuel pump barrel/plunger assemblies as well as heavy fouling of all turbochargers. The turbocharger impellers were noted to be heavily fouled, the labyrinth seals on the gas sides were choked with carbon deposits, and the bearing bushes were worn. In addition, the boiler burner unit was also heavily fouled. Upon review of the engine logbooks, there was no evidence of any problems with the engines prior to taking on the off-spec bunker. The running hours of the main and auxiliary engines were noted to be well within acceptable limits for overhauls.
In this case, there was no indication that the vessel had received the results from the first fuel test prior to sailing. In addition, the vessel had apparently a very limited amount of bunkers onboard prior to loading the first off-spec bunkers. Therefore, the vessel had to commence using the new bunkers prior to receiving the test results. In this circumstance, the vessel was not able to create a buffer by using the existing bunkers while awaiting the test results. Had this been the case, the company may have been able to discharge the off-spec bunkers and taken on replacement bunkers.
What types of damages are actually covered?
In this type of case, shipowners can find themselves in a situation where insurance cover can only pay a portion of the costs incurred. For example, in this instance the cost of repairs to the damage to the machinery was below the deductible. For loss of hire, the vessel was off hire but within the off hire deductible. The P&I entry covered the Member's "liability to pay damages or compensation to passengers onboard the Ship in consequence of a casualty" as per Rule 28(b) of Gard P&I Club's Statutes and Rules. As stated in the Gard Handbook on P&I Insurance2: "'compensation' relates only to the Member's legal liability to the passengers and cannot include any claim by the Member in respect of payments made to passengers to protect the Member's commercial reputation." P&I cover thus, does not include additional compensation to passengers above the Member's legal liability made to foster customer goodwill.
The shipowners is therefore left to bear a significant cost for business disruption in these types of instances, where only limited insurance cover would be available under hull and machinery, loss of hire and P&I. Dependent upon the circumstances, demurrage may also need to be charged and thus creating problem for the shipowner.
The lessons learned from this case apply to all types of ships. However, the passenger ship industry can be more sensitive than most industries.
1. Bunkering procedures, including fuel-testing procedures, should be reviewed to ensure correct procedures when dealing with off-spec bunkers. The crew involved should also be properly briefed on these procedures to avoid costly and time-consuming interruptions. In the Det Norske Veritas Annual Report 2000, it is stated that only 40 per cent of the world fleet performs fuel testing.3 This lack of testing can lead to extensive damage to the vessels machinery which is costly both to the owner and insurer alike.
On the other hand, there are cases where there is a company fuel testing procedure but due to commercial or other reasons the results of the tests are neither received in time nor actions taken to adjust the fuel equipment and engines accordingly. The improper use of off-spec fuel can cause significant damage to the vessel and its ability to trade. In the case outlined above, the costs were considerable and were only partially recoverable from insurers.
Taking on bunkers
2. Every precaution should be taken to ensure that adequate bunker supplies are available to allow for the proper testing before use of any new bunkers taken on. It is imperative that passenger ships, as well as other vessels on tight charter schedules, are able to deal with situations where it is necessary to use bunkers without the test results being available. This may involve complex contingency planning in order to properly evaluate and ensure that a buffer exists. For example, some shipowners maintain a quantity of marine diesel oil (MDO) onboard for situations where off-spec bunkers need to be discharged and only limited IFO is available.
1. Gard Services Loss Prevention circulars related to bunkers are: Loss Prevention circular 01-00 (Main Engine Damage Due to Ignition Delay), Loss Prevention circular 03-01 (Bunker Quality), and Loss Prevention circular 04-01 (Charterers Liabilities and Bunkers). These circulars can be found on the Gard Services website at www.gard.no.
2. Gard Handbook on P&I Insurance by Simon Poland and Tony Rooth. Published by Assuranceforeningen Gard. Arendal, Norway 1996. This handbook can also be found on the Gard Services website at www.gard.no.
3. Det Norske Veritas Annual Report 2000 can be accessed via their website at www.dnv.com.