Friday, February 19, 2016

Afra Oak - not Canadian

The Liberian flag Aframax crude oil tanker Afra Oak arrived this afternoon in ballast and anchored for bunkers.

The ship is sailing under a Canadian coasting license for Irving Oil,. Unable to find a suitable Canadian tankers to carry Hibernia crude oil from Whiffen Head to Canaport, Saint John, NB, Irving applied to the Canadian Transportation Agency to use foreign ships.
Earlier this month it was the British Cygnet that made one trip carrying 675,000 bbls of crude and before the end of the month Afra Oak will make two trips - 700,000 bbls on the first and 675,000 bbl on the second.

Afra Oak was built as British Oak in 2003 and sailed for BP tankers until 2013 when ownership passed to Hellenic Tankers Co Ltd of Athens and it was placed under the commercial management of the large Navig8 tanker pool. The 57,567 grt, 106,395 dwt ship was built by Tsuneishi shipyard in Tadotsu Japan.

Canadian cabotage regulations specify that if no suitable Canadian vessel is available, the the Minister of Pubic Safety and Emergency Preparedness may issue a coasting license to a foreign vessel. When it comes right down to it, most Canadian crude oil tankers are booked months if not years ahead and are often in dedicated service to other oil companies. Since Irving no longer has crude oil tankers of its own, it is pretty much free to get a coasting license any time they need want.

Cabotage laws are intended to protect the Canadian shipping business from unfair foreign competition, but it is hard to so how it does so. Temporary coasting licenses are granted continually because there are no suitable Canadian ships available. Companies like Irving Oil apparently can't afford to have a Canadian tanker standing by all the time, nor can a Canadian tanker compete on the open market.
That leads to a situation like the Afra Oak, where Irving Oil applied for a coasting license on February 8, the Canadian Transportation Agency made their determination that no suitable Canadian tanker was available and submitted it to the Minister February 16, for a coasting license to start February 17, and have the tanker  immediately available.It is highly unlikely that any suitable Canadian ship could ever be available on that short notice. Afra Oak became available after it unloaded another cargo of crude at Canaport yesterday.

It is unlikely than any Canadian shipowner could or would make a business case for a crude tanker without secure long term contracts (even with the elimination of duties on foreign built ships.). Thus spot coasting licenses will always be needed. Canadian seafarers are the real losers in this equation, since there will be fewer jobs for them unless cabotage laws are tightened. In this day of free trade and elimination of tarifs even the cabotage law we have will soon be history.

One of the only countries still carrying stiff cabotage laws is our neighbour to the south. The Jones Act in the United States contains cabotage provisions, among many others, and is so pervasive that it is a way of life and unlikely to change any time soon. It is not an ideal arrangement either and has its critics. It has resulted in a lot of old ships running domestically when replacements should have been built years before.


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