Risk Profile of STS Service Providers

Introduction

Traditionally, Ship-to-Ship (STS) transfer operations have been guided by the recommendations and best practice guidelines of the OCIMF. Ensuring the safe implementation of STS operations has always been the responsibility of the ship owner. From a statutory perspective, this responsibility was formalized with the ratification of the ISM Code of SOLAS Chapter 9 and MARPOL Chapter 8 of Annex I.

Ultimately, the parameters that may increase risk in an STS operation arise from various factors, including crew performance, the technical condition of the ship, the advice of the POAC, the level of preparedness, and the STS gear. These factors can be broadly categorized into those related to the ship and those related to the STS service provider.

To what degree may the quality of services rendered by the STS Service Provider affect the risk of the operation, and what could the consequences be?

STS Service Providers (SP) are companies that supply services to energy companies (Cargo Owners or Traders) by providing the technical means and logistics for cargo transshipment between two tanker ships. The energy company is identified as the "client" and the tanker ship as the "user" of the service.

The STS SP is identified as the expert company and, as such, consults on vessel and gear compatibility, mooring patterns, weather thresholds, vessel maneuverability and approach, crew coordination, hazard identification, and contingency planning when deemed appropriate.

The roles and responsibilities of STS SP differ when they have custody of one of the participating vessels and/or the cargo itself. This fact distinguishes providers in the USA, South America, China, Southeast Asia, and other parts of the world.

The level of the risk profile of the STS SP results from the quality of its Safety Management System (SMS), level of accreditation, transparency and the interaction with the user during the actual operation. The existence of an SMS denotes that the STS SP has adopted procedures in line with OCIMF and MARPOL to develop, perform, and monitor the safety of STS operations. The absence of an SMS goes against industry recommendations and is a sign of a high-risk STS SP.

The functions of the STS SP relate to the level of preparedness and the services rendered prior to, during, and after the completion of operations. It is important for an STS SP to maintain transparency in safety issues and always act with due care.

DYNAMARINe , having served as an STS Assurance Organization and STS Subject Matter Expert (SME) on behalf of the users since 2010, identifies four key risk elements for STS Service Providers based on following categories:

·???????? Quality of SMS,

·???????? Quality of the service rendered to the user,

·???????? Level of developed KPI’s with monitoring techniques and

·???????? Safety records

Below table 1 presents the key Risk Elements with criteria

Although there are five risk categories according to the risk level of the STS SP, the difference between LOW and LOW MEDIUM primarily pertains to the quality of records rather than the first three elements. Similarly, the same difference exists between the MEDIUM HIGH- and High-risk categories. This distinction identifies performance characteristics and aims to encourage the STS SP to improve their interactions with the user.

The categorization of RISK for an STS SP is based on assessment of elements such as those listed below:

a.?????? Existence of an SMS system.

b.?????? Records of verification of SMS Implementation.

c.?????? Implementation of SPSA.

d.?????? ISO 9001 or equivalent quality systems.

e.?????? Level of conformity with the Regulations and Industry Guidelines.

f.??????? Organizational structure with respect to roles and responsibilities of personnel.

g.?????? Use of fully employed and/or external/ contracted POACs.

h.?????? Response to Incidents.

i.???????? Incident Ratio.

j.???????? Screening output prior to individual STS Operation.

k.?????? Feedback from the Master after completion of the STS operation.

l.???????? Age of STS equipment

m.???? Access to technical assessment/ benchmarking with the manufacturers.

n.?????? Origin and type of Service Provider clientele.

o.?????? Areas of Operation and risk profile of competitor companies.

p.?????? Combination of the above, always based on objective evidence.

Impact of Service Provider Risk to the Performance of STS Operation

The risk level of STS SP is directly linked to the safety of STS operations, according to DYNAMARINe OSIS Database. This may be attributed to the quality of the service rendered by the STS SP directly linked to the STS equipment, procedures in the SMS, or the advice of the POAC. These are key factors that can either prevent, mitigate or instead contribute occasionally to incidents.

Records from the last five years of STS operations reveal that the risk level of STS Service Providers can be quantified and has an impact on the safety of STS operations.

The analysis presented in this section includes data from STS operations over the last five years (03/07/2019 – 03/07/2024). The risk profile of the STS SP engaged in STS operations during that period is shown in Figure 1 below. The five risk categories depicted at Table 1 have been grouped into the three main categories.

The percentage of operations is mainly distributed between those of Medium and High Risk since the number of verified STS Service providers by DYNAMARINe or other SME is small, while those being audited by oil majors is larger. Still, there is a large percentage of STS operations conducted by High-Risk STS Service Providers.

Incidents

The incident ratio of STS Operations observed at OSIS Database during this period (last five years) is 2,5%. This percentage includes incidents as reflected in below Figure 2.

Mooring lines breakdown followed by fender breakdown and vessel collision at those of highest likelihood.

Through information exchanges with stakeholders, primarily OCIMF members and P&I Clubs, DYNAMARINe is aware that the industry's STS incident percentage is much higher than what is depicted in DYNAMARINe's statistics.

Out of the operations with incidents, below Figure 3 depicts those attributed to High & Medium High-Risk STS SP. Although High Risk Providers participate in 49% of the STS operations (according to Figure 1) their contribution to incidents is 57%, while the relevant percentage of Medium and low risk providers is less, compared to their market share. Therefore, the risk level of the STS Service Provider has an Impact on the Incidents.

Considering the Quality of the service as reported by the users for the STS Operations with an incident, it was found out that the 75% of substandard service was related to High-Risk STS Service Providers while 25% to Medium Risk Providers, as depicted at below Figure 4. The reports on the service was related either to the quality of hoses, fenders or the POAC. Low Risk STS Service Providers have a nil impact on the quality of the service.

Furthermore, considering the quality of the services related to condition of fenders or hoses, below Figures 5 and 6 depict the percentage of user satisfaction with respect to the risk level of the STS SP. It is evident that unfavorable hose condition is attributed 100% to high-risk STS Service provider, while for fender condition medium risk providers have an exposure of 21% to unfavorable assessment.

ENERGY COMPANIES

Below Figure 7 depicts the percentage of Energy Companies participation in STS Operations with respect to OCIMF members and non-members, as reflected at the OCIMF website.

OCIMF members share 33% of the STS Market Share, while the rest 67% is shared amongst the rest of the companies, mainly trading companies.

Basic differences between OCIMF members and non-members are the quality of vetting criteria, exposure to reputational risk and the level of insurance cost through rigorous underwriting processes.

Below Figure 9 depicts the use of STS SP by the Energy Companies. It is evident that non-OCIMF members are supporting high risk STS SP, while some of them are also used by OCIMF members, probably due to lack of medium or low risk providers in the certain location.

Non-OCIMF energy companies, being involved in almost 67% of global STS operations support high risk providers.

P&I Club involvement in STS Operations

All vessels engaged in STS operations are covered by their P&I in case of incident. The exposure of P&I Clubs is related to the percentage of STS Operations and therefore to the risk level of STS Service Providers.

The following graph of Figure 9 depicts the percentage of P&I involved in STS operations while the orange line depicts the level of high-risk STS Service Providers.

As one can see, all P&I Clubs have direct exposure to STS Operations with high-risk STS Service Providers. This is an expected finding since 67% of STS Operations (according to Figure 7) are organized by non-OCIMF members who prefer to hire high-risk STS Service Providers. The P&I Clubs' loss-prevention departments should provide guidance to their members regarding the screening of STS Service Providers and actively encourage them to implement such measures.

A matter of concern is the lack of transparency in the aging criteria and testing of cargo hoses, which raises alarms among Tanker Operators who would be directly involved in pollution incidents in the event of cargo hose failure. DYNAMARINe identifies and mitigates such cases, but this is only applicable to client vessels, not all. Although the liability for the cargo hose falls on the Energy Company according to the C/P, the vessels' P&I Clubs have the option to subrogate to the Energy Company Insurance for sustained damages.

In general, the issue with the condition of cargo hoses is alarming, especially given the findings that 100% of substandard performance is attributable to high-risk Service Providers.

Conclusion

The risk profiling of STS Service Providers is a process derived from DYNAMARINe's direct STS experience over the past fifteen years. It is a dynamic process, and the data presented in this report may change if the risk profile of an STS Service Provider changes.

It is notable that services provided by high-risk STS Service Providers are more likely to contribute to incidents. Although this conclusion may seem obvious, DYNAMARINe can justify it with objective evidence, thanks to the support received from Tanker Operators who are members of the STS Service.

The use of high-risk STS Service Providers should be subject to rigorous assessment by their clients (Energy Companies) and users (Tanker Operators). P&I Clubs, H&M Underwriters, and OCIMF members should also contribute to raising the standards of STS Service Providers, as they have or may have an impact on incidents. Non-OCIMF members should consults SME prior to the use of an STS Service Provider.

The service rendered to tanker owners by DYNAMARINe team helps to mitigate incidents. Therefore, DYNAMARINe believes that the impact of high-risk STS Service Providers on safety is more significant than what is evidenced by DYNAMARINe's registered clients.

DYNAMARINe supports open dialogue with most STS Service Providers, to inform key personnel about risk categorization and methods for transitioning to lower risk levels. Information from STS service providers become available to DYNAMARINe through the following processes:

1.?????? Audits

2.?????? Verification during STS Operations

3.?????? Continues monitoring

4.?????? Incidents

5.?????? Post feedback from the user

DYNAMARINe will apply and inform the Risk Level of STS Service Provider either through onlinests.net portal or through the feedback conveyed after the completion of each STS operation.

The verification or audit of the SMS (Safety Management System) for the STS SP can take place at prescribed intervals, subject to findings. The higher importance rests on the implementation of SMS as verified during actual STS operations. When the SMS system is verified, records at OSIS Database consist of objective evidence. All STS SP have free access to their records at OSIS database of DYNAMARINe, which also offers the ability to interact when an observation is made.

DYNAMARINe monitors about 20% of global STS operations, according to 2023 statistics. This percentage was lower in previous years, about 12% in 2019, with an increasing trend as more tanker operators register vessels on the STS Risk Management Platform.

The categorization of the Risk Profile of STS Service Providers is a dynamic process and may change based on findings during the screening and assessment process of an STS operation. DYNAMARINe aims to support continuous monitoring to improve STS standards for users and to isolate substandard performance by STS service providers.

Finally, DYNAMARINe is preparing an ERP system for the management of STS Service Providers, which will be ready before September 2024. Service providers will have the ability to manage their own information and data for all STS operations and share findings with their clients upon request.

DYNAMARINe Team