Haugen Consulting's Demurrage Blog

Demurrage Benchmarking Study

noreply@blogger.com (Haugen Consulting LLC) — Fri, 22 Jan 2010 15:49:00 +0000

Haugen Consulting (HC) was first approached a year ago by an oil major who was interested in HC conducting a demurrage benchmarking study with their peers. The project is a natural fit for our company as we are an international independent demurrage consulting firm and thus naturally well-versed in the depth and breadth of demurrage issues. In embarking on this study, we sought input from those interested in participating as to what they would like to see reported.

The purpose of the study is to assess one’s demurrage department’s performance in relation to its peers by quantifying what a successful demurrage department actually is and the business practices leading to that success. To accomplish this many factors would be considered and data stratifications reported, including but not limited to, differentiating amongst cargo, vessel type, payable and receivable claims; and, further, distinguishing settlement cycle time norms between claims made by vessel Owners and claims made by commercial trading partners. In addition, the study will explore the demurrage cost on a per barrel basis, demurrage to freight ratios, demurrage analyst experience, software, operating procedures, and overhead. Naturally, due to the confidential nature of this study, HC would sign confidentiality agreements with all the participants.

Great idea, right? Well, it may be a great project that will yield insightful information but as with all things in life, timing is everything. The study did not take flight a year ago due to an insufficiency of participants; perhaps the economy was to blame. More recently, about a year after we initially embarked on this study, we got a call from an interested participant who last year was not a subscriber but now wants to see this project launched. Perhaps now the time is right?

Again, with enthusiasm brimming, HC campaigned for the resurgence of this study amongst numerous producers and trading companies, but to no avail. Although some previously disinterested parties expressed interest this go around, it was nullified because some of last year’s interested parties declined participation this time. There’s simply not enough interest to get this off the ground at the moment.

Nonetheless, we will not abandon this demurrage benchmarking study altogether, rather, we look forward to the day when more organizations will be inclined to participate to gain insight into running a successful demurrage department. Just give us a call if this study is of interest to you and we’ll be happy to make another attempt at launching it. I’m certain that one day this project will fly, it’s just a matter of when.

NPRA 2010 – International Petrochemical Conference

noreply@blogger.com (Haugen Consulting LLC) — Wed, 23 Dec 2009 16:24:00 +0000

San Antonio is the quintessential destination for the annual NPRA meeting and so I’m looking forward to attending the upcoming 2010 International Petrochemical Conference being hosted there from March 28th-30th. It’s a great opportunity to put in face time with current clients, meet prospective new clients, and catch up with old friends. This is singly the best venue of the year to meet with the decision makers in the petrochemical industry from around the globe in one locale in a period of just a few days!

Although Haugen Consulting’s demurrage services are downstream from the refiners’ core business, these producers must successfully move their feedstocks and refined products, usually by tanker or barge, and thus this conference goes hand-in-hand with the transportation and logistics services sector who are poised to help make the commercial transactions seamless and most cost-effective.

Haugen Consulting’s core business is to facilitate resolution of demurrage disputes which, at times, are unavoidable. However, in the first instance, we work to mitigate these ancillary shipping charges proactively through optimized vessel scheduling, writing comprehensive marine provisions, and successfully managing clients’ demurrage receivables and payables. With over 15 years as an independent consultancy we work as advocates for oil majors, petrochemical producers, commodity traders, and ship owners, in addition to teaching training courses worldwide making Haugen Consulting leading demurrage experts in the field.

Regardless of the position one holds in the petrochemical industry or what deals are being explored at the 2010 International Petrochemical Conference, I’m looking forward to the camaraderie of all the attendees who are keen to make things happen! Likewise, Haugen Consulting enjoys taking an active role in returning positive results. A few minutes invested in a personal meeting with Haugen Consulting in San Antonio can lead to increased effectiveness of one’s revenue generating employees while simultaneously improving one’s demurrage cost center management.

If you would like to schedule a meeting with Haugen Consulting while at the conference in San Antonio , please call Kathy Haugen at +1-540-463-5818 or send us an email via our website’s Contact Info page. Hope to see you there!

noreply@blogger.com (Haugen Consulting LLC) — Mon, 07 Dec 2009 15:34:00 +0000

Fast as Can (FAC) -- What are the Parameters?

Our office has seen a couple of disputes arise under contracts that stipulated laytime as "Fast as Can" (FAC) because on the surface this term appears ambiguous as to which party (the Vessel or Terminal) is responsible for loading/discharging the cargo as fast as possible. Let me explain.

FAC is not commonly used in the bulk liquids trade; rather, laytime allowance is typically fixed basis total hours such as 72 hours per Worldscale or as a volumetric rate, say 125 Metric Tons per Hour (MTPH) or 2,500 Barrels per Hour (BPH), which is then readily converted into laytime by dividing the total cargo volume (inclusive of deadfreight) by the volumetric rate. So, when a contract stipulates "FAC Discharge", for example, it is not always clearly understood by the parties as to what exactly it means. . .

Although at a glance FAC appears ambiguous, it is in fact clearly defined in Voyage Charters as the "period of time to be calculated by reference to the maximum rate at which the ship in full working order is capable of loading/discharging the cargo." Additionally, there have been a few disputes decided in New York arbitration that likewise uphold this view. However, keep in mind that every contract is unique and one cannot simply isolate a single term without first considering all the terms of the contract in order to give meaning and effect to the contract as a whole before reaching a conclusion.

In our most recent demurrage case involving FAC, the underlying charter party form was IMOL 78 (a molasses charter) and the laytime allowance clause stipulated "FAC discharge". Nowhere in the contract did it state that the "FAC terms are governed by the terminal" and IMOL 78 Form Clause 5 expressly stipulates that "Cargo to be received from vessel as fast as she can discharge pumping continuously." As upheld in N.Y. arbitrations and defined within Voyage Charterers, said clause combined with the express FAC laytime provision directly relates to the maximum rate of the Vessel's discharge capacity (not the rate at which the terminal can receive).

Although moot relative to the FAC obligation, the vessel in question maintained 100 PSI as required in the Pump Warranty clause which set forth that the vessel is to "maintain a minimum average pumping rate of either 150MTPH against a back pressure of 100 PSI or the maximum rate acceptable by shore facilities, whichever is lower."

It is noteworth that the FAC obligation and Pump Warranty are not mutually exclusive. FAC pertains to the calculation of laytime allowance, whereas the pump warranty clause in this instance sets forth a minimum at which the Vessel is to pump foregoing which the Owner is liable for overtime, excess quay dues, wharfage, etc.

In this particular case, as supported by the Master's LOPs, the Vessel was precluded from discharging FAC because the respective terminals provided only 1x10" cargo hose whereas the Vessel offered 4x12" manifold connections. Thus, the difference in time basis the Vessel's discharge capacity relative to the reduced discharge rate experienced due to the terminal constraints was billable as time on demurrage.

noreply@blogger.com (Haugen Consulting LLC) — Wed, 02 Sep 2009 14:29:00 +0000

For everything there is a season. Each summer brings a respite for body and spirit; a chance to engage in outdoor activities whether gardening, sports, or simply relaxing and reading novels at the beach or pool. But all things must come to an end. The barn swallows that lovingly built a nest and raised their fledglings on our front porch over the course of ten weeks have flown away and the weather has turned cooler with a pre-dawn temperature today of 47°F (brrrrr!).

Now that the summer heat is beginning to fade, let’s hope that this season of change brings an end to the sluggish economy too. I anticipate that after the past few months of the summer doldrums, business activity will resume as more people return to their offices reinvigorated from their holidays and turn off the “Out of Office Auto Reply” function (although some folks have been known to keep that function turned on for a spell despite being back—I reckon the vacation/work transition can be a challenge?!)

The academic year has just begun at the local schools and universities and, likewise, HC has been busy gearing up for a new year of tanker operations and demurrage training programs that begin in three weeks in Houston followed by Amsterdam the week thereafter. Each year the course material is updated with the latest U.S. and English court rulings and arbitration awards that play a vital role in contract construction and dispute resolution.

Having a sound understanding of the various boilerplate charter party forms, maritime law, and custom of the trade enables parties to successfully manage their exposure in the tanker industry. And, as no two voyages are exactly alike or the terms that govern them, shipping will always be a dynamic field of study and practice in exercising critical thinking skills.

Who says demurrage is boring? I call it job security. Now, I gotta get back to work!

noreply@blogger.com (Haugen Consulting LLC) — Mon, 15 Jun 2009 14:24:00 +0000

Before more time evaporates I want to recount my recent whirlwind of activities in the New York area where I had the fabulous opportunity of mixing business and pleasure encompassing a niece’s wedding, teaching HC’s tanker ops and demurrage classes, participating in the 2009 Fort Schuyler Maritime Alumni Golf Outing, as well as tourist activities. Let’s face it, even though one may be born and raised across the Hudson River in New Jersey, actually staying in the Big Apple is truly experiencing all that makes NYC so special—the people, architecture, history, arts, entertainment, food, energy—wow, it’s invigorating! Although my colleague, Brendan Hoffman, and I teach the tanker operations and demurrage workshops worldwide, each locale with its own unique qualities, teaching in NYC is like a homecoming for me; my old stomping grounds.

In NYC, HC’s classes are taught downtown at The Seamen’s Church Institute on Water Street. SCI provides legal services and ministry to mariners and the venue houses a maritime museum with fabulous models of old sailing vessels as well as modern ships on display throughout the building. This part of NYC, the Seaport, is on the East River and has a feel of old-time Americana with low-rise historic buildings lining cobble-stoned streets with the backdrop of the famous Brooklyn Bridge; enjoying a beverage at one of the many new cafes that have opened in recent years feels timeless. The Financial District is only a few blocks away.

The delegates in HC’s tanker and demurrage training classes were from a diverse background and hailed from oil and chemical companies, brokerage firms, tanker management companies, and traveled from as far away as Indonesia, California, Illinois, and the surrounding New York area. When not in class, the delegates enjoyed a variety cuisine and activities ranging from taking in a Yankee baseball game at the new ballpark; visiting the Statue of Liberty; going to Broadway shows; and, walking down the new pedestrian lane on Broadway from Herald Square (Macy’s at 34th Street) to Times Square. When I was not preparing for the next day’s lesson or answering business emails, I found time to hang out with my sister, have dinner with business associates, shop in SoHo, watch the sailboats ply the Hudson River, and walk across the Brooklyn Bridge and around The Heights. What’s not to love?

After a week of teaching, I ventured over to Long Island to gear up for a much anticipated golf tournament hosted by the Fort Schuyler Maritime Alumni Association. Having played for the first time at Sands Point Country Club at this charity event last year, I was eagerly anticipating my return to see what, if any, improvements I had made to my golf game having been daunted a year earlier by Sands Point’s long holes and fast greens. Despite a year over year improvement (albeit nominal), it’s obvious that I must keep my day job.

The golfing, although fantastic, is second to the camaraderie enjoyed with associates. Mr. John O’Connor, of International Marine Consultants, has an office in nearby Syosset and is a graduate of Fort Schuyler. IMC provides technical marine services globally including Loss Control, Inspection Services, Port Captain, Spill Prevention and others. I have known John for about six years and can’t say enough about his organization’s maritime expertise and professionalism. I consider myself fortunate that our offices collaborate on joint service projects for clients from time to time. Together with his colleague, Mr. Stuart Vallis, from their U.K. office and Mike Jurewicz of Noble Americas Corp., we formed a foursome for the second year in a row. The day of golfing bliss was followed by an awards banquet at the Nassau Country Club. Based on our collective skill level, I’m certain that it’s the spirit of this charitable event and not the prizes that keeps us coming back!

noreply@blogger.com (Haugen Consulting LLC) — Fri, 29 May 2009 12:38:00 +0000

Does the adage, another day, another dollar, still ring true? The slowdown in the economy has seen many companies, in and outside the maritime community struggle to stay afloat (no pun intended) during these tough times. This can be both good and bad. Clearly, on the downside is the fact that many companies cannot continue to operate and many individuals have been displaced from their jobs and are dealing with the financial and emotional insecurity of being unemployed.

Although I have never been unemployed myself, I came close to it and actually left a former job in 1987 before the dreaded pink slip arrived on my desk as was the trend every payday for less fortunate employees at that company. In hindsight, my preemptive move was a fortuitous event as I took a leap of faith on a new career path working for a ship brokerage firm in the parcel tanker trade, and have never looked back.

I find that the shipping community is very tight knit, the work is dynamic, and the omnipresent challenges exercise critical thinking skills—never a dull moment. That is when I first became aware of the true meaning of following my bliss and by doing so, never working a day in my life!

Enough about my good fortune, Haugen Consulting (HC) has resumes of some extremely talented individuals that are currently looking for work opportunities in tanker chartering, ship operations, laytime and demurrage claims processing, ship management, and physical commodity trading, to name a few. Just give us a call if your company is interested in exploring the talent that is waiting in our wings. These folks have lots to offer.

The upside to the sluggish economy is that is has brought about a heightened awareness of creating efficiencies in the workplace forcing companies to operate more effectively on less revenue and oftentimes less personnel. Companies have to be leaner whilst simultaneously providing better services in order to compete on the global playing field.

Although HC’s offices have become more productive over the years, we are always looking for ways to improve our processes and grow our business. To that end, within the next few weeks we are bringing onboard a fresh young business talent, Mr. Campbell Palfry, who is finishing up his first year at the Johns Hopkins School of Advanced International Studies. With one more year to go, he will graduate with an M.A. in International Relations, with Concentrations in International Economics and International Policy. In the meantime, some of his objectives at HC this summer will be to provide new insight into streamlining our demurrage claims handling; improve the database tracking of voyages, laytime calculations, and key performance indicators; as well as, bring fresh marketing ideas to the table.

I have learned that there’s only one certainty in life: change. And, through change we can stretch to reach our higher potential. No one can promise that change is easy, but one thing for sure is that one can make the best of any situation by keeping a positive attitude: there’s always hope on the horizon!