V.

Ships

OPEX
THE SHIP MANAGEMENT VIEW
The Aim V.Ships

Working with owners

to enhance
operating efficiency
OPEX Budgeting V.Ships

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
What are the drivers V.Ships

• 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 ?
Manning – Cost Drivers V.Ships

• 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.?
Operating cost breakdown V.Ships

2012

SUMMARY OF ESTIMATED RUNNING COSTS

COST ALLOCATION
TOTAL PER DAY
(Panamax tanker 5 years old)
US$ US$ 3%
3% 3%
7%
1. CREW COSTS 1,248,612 3,421 3%

2. STORES 105,000 288 5%

8%
3. LUBRICATING OIL 170,600 467 63%
5%
4. SPARES 99,000 271

5. REPAIRS AND MAINTENANCE 56,000 153

6. SURVEYS AND SERVICES 54,000 148 1. CREW COSTS

7. SAFETY AND RISK 54,102 148

2. STORES
3. LUBRICATING OIL
8. GENERAL EXPENSES 57,395 157
4. SPARES
9. MANAGEMENT FEE 136,000 373 5. REPAIRS AND MAINTENANCE
TOTAL RUNNING COSTS 1,980,709 5,427 6. SURVEYS AND SERVICES

10. DOCKING/UPGRADE 0 0 7. SAFETY AND RISK

8. GENERAL EXPENSES
11. OTHERS 0 0
9. MANAGEMENT FEE
GRAND TOTAL RUNNING COSTS 1,980,709 5,427
Vessel Costs V.Ships

Vessel Cost Modern VLCC ($65m value / av

daily hire $20k)
4% 8%

20% Interest
Installments
Opex
Bunker
56% 12% Port cost - commision
Any Links ??? V.Ships

Equipment Failures &

Damage Baltic Dry Index
120

100

80

60

40

20

0
Q1/10 Q2/10 Q3/10 Q4/10 Q1/11 Q2/11 Q3/11 Q4/11
Crude oil price index 2003 > 2012 V.Ships

Indications are that an

underlying ceiling of
around 115 usd and a
floor of around 100 usd
for Brent Crude will
prevail for the
foreseeable future.
380 Cst HS fuel 2012 V.Ships
 $0,00
$50,00
$100,00
$150,00
$200,00
Ιαν-06 $250,00
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
Lube oil Price trends 2006 > 2012

Απρ-10
Ιουλ-10
Οκτ-10

Ιαν-11
Απρ-11
Ιουλ-11
Baltic Dry Index

Οκτ-11
Ιαν-12

Απρ-12
Ιουλ-12
LO price trends are heavily weighted by additive costs, not just base oil

Οκτ-12
V.Ships
Food price index 1990 > 2012 V.Ships

Weather incidents can have a major effect

The Big Mac Index 2007-2012 V.Ships

Location and
political issues.
External Factors V.Ships

• 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

What has improved V.Ships

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.

The future >>> V.Ships

• 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 ?
The future >>> V.Ships

• 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.
All OPEX budgets must be…….. V.Ships

• 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.
Realism and communication V.Ships

• 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.