Understanding the role of contract based measures for improving vessel operational efficiency

In the maritime sector, addressing operational inefficiencies has become vital for both performance enhancement and decarbonisation. Exploring contract-based measures offers potential avenues to transform traditional sailing practices, notably the longstanding “sail fast, then wait” approach.

One of the key benefits to enhanced data sharing and collaboration is the possibility to better organise port arrivals and departures to support more efficient sea voyages for all ships. The traditional system of “sail fast, then wait” is the legacy of competitive maritime trade, where cargo owners were keen to place some contractual control over ships which invariably disappeared over the horizon for weeks or months at a time.  Global communications have radically improved visibility and today ships no longer need to disappear at all, even when crossing remote ocean regions.

Making just in time arrival a reality

Harnessing the benefits of ships connected by technology and through contracts, The Blue Visby Solution has designed a neutral, independent, and collaborative platform which has the potential to bring about impactful reductions in global GHG emissions by synchronising ships to arrive at pilot stations at the optimal time, while maintaining a fair and equitable order of arrival.

In essence, the Blue Visby system seeks to eradicate the “sail fast, then wait” paradigm by offering ship owners, operators, charterers, and cargo owners a voluntary mutual association through which all members benefit and all members have responsibility for running fairly. The Blue Visby Solution gives structure to the concept of collaborative decarbonisation.

The concept comprises a contractual framework which includes an the element of “mutuality” that is inspired by the structure of a P&I club; an operational system which monitors specific voyage parameters such as vessel specifications and performance; port congestion; weather and current related conditions; a proprietary algorithm for calculating speed reductions and controlling the order of arrivals; and a sharing mechanism inspired by the concept of general average which enables stakeholders to share the cost and benefit of involvement in the program.

Partner at Stephenson Harwood LLP and leading member of The Blue Visby Solution, Haris Zografakis, told Thetius, “In order to progress beyond ‘sail fast, then wait’, we need to recognise conflicting interests, or what economists term ‘split incentives’.”  He continued, “We need to do something together to solve the problem of ‘sail fast, then wait’, which is the biggest carbon inefficiency in world trade. How do we address the obstacle of split incentives? The answer is that we devise a sharing mechanism where the shipowner, the charterers, and the cargo interests share the financial consequences of the system. Fuel saving is one consequence, and there are others.”

The Blue Visby Solution is focussed on eradicating “sail fast, then wait” and helping all members arrive at their destinations at more optimal times, thus making speed reductions and fuel savings a possibility. The benefits are potentially very significant. Blue Visby studies include a very large simulation / hindcast based on 13,000 merchant vessels sailing 250,000 voyages throughout 2019. These studies revealed the potential to reduce global carbon emissions from shipping by about 16%.

Not all calculations are based on hindcast data however. As Zografakis explains, Blue Visby also have a pilot program running in real time: “By using a sophisticated digital twin of the participating ships receiving the instructions from the Blue Visby control tower, the changes are simulated and measured in the digital twin, then compared with the carbon intensity outcomes of the real ship over the same voyage.”

Over the course of their research, careful consideration has been taken towards matching speed reductions with the operating characteristics of the vessel: “A key characteristic of the Blue Visby approach is that speed reductions are kept intentionally modest. Over the course of the 250,000 voyages we have modelled, the average speed reduction required was only around 1-2 kts. This is important because ships are designed to operate within specified load envelopes, so Blue Visby keeps reductions within technically acceptable limits.”

Reducing carbon intensity through contact-based measures

Another example of contract-based collaboration was announced in February 2023 by KCC Charting and integrated energy company, Raizen. The companies signed a three-year contract of affreightment which prioritises energy efficient operations by improving charterer – cargo owner communications and data exchange. By minimising legs in ballast and waiting times during loading and discharge, the partnership expects to reduce the carbon intensity of the contract by up to 40%.

A central enabler of the strategy is KCC’s CLEANBU series of vessels which the company claims are unique in how they are designed and operated. The CLEANBU fleet are simultaneously LR1 product tankers and Kamsarmax bulk carriers, meaning they carry both wet and dry bulk cargoes. This allows KCC to transport dry bulk cargo to a Raizen terminal and come away with a liquid cargo, thus maximising utilisation and eliminating ballast legs. 

By adopting innovative solutions and contract-based frameworks, the maritime industry is advancing towards operational efficiency and carbon reduction. Rethinking entrenched practices and harnessing new strategies paints a hopeful future for sustainable and efficient sea voyages.

This article is an extract from the Thetius Decarbonisation Toolkit, commissioned by Inmarsat. To read the full 35+ page report, fill in the form below.