COLUMN | When things go wrong: Scrappers turn shipowners; Ocean Valiant aground; Mean Luck for Teras Lyza’s insurers; US$56 million for Singapore bank; questions remain [Offshore Accounts]

I apologise to the reader who wrote in asking if I had the insider scoop on the grounding of the aged, 1988-built semi-sub drilling rig Ocean Valiant in January on the coast of Tunisia near Bizerte.

I don’t. The rig had been sold for scrap in Turkey by Noble after it acquired Diamond Offshore Drilling, and it was under tow by the AHTS SPM Neel Pratap 180, the former Maersk Tracer, built in 2009, and now owned by SPM Shipping of the UAE.

Clearly, the towline parted and the anchor handler has remained on location for the last three months since the incident as per AIS data. No details of what happened have been released; the rig was deadship and presumably the crew on the tug have to adhere to a strict social media policy, or maybe didn’t see anything until it was too late.

Or maybe the owner is too stingy to provide decent Wifi for video streaming. Anyway, Shipwrecklog has some good footage here. Any more recent shots are always welcome.

Scrapper behind SPM Shipping

The great irony here is the SPM Shipping is part of Gaurav Mehta’s Best Oasis scrapping group, well known as a cash buyer of vessels and rigs destined to be recycled as razorblades. The parent company literally specialises in beaching and breaking up vessels as its core competence.

Unfortunately, Ocean Valiant seems to have ended up on the wrong beach, so, presumably, the tug and its owners have to get the rig refloated themselves, as this is likely an in-house problem.

SPM Shipping owns six tankers and three Capesize bulkers, but offshore is now its largest segment. Mr Mehta has acquired a fleet of 12 elderly offshore vessels since SPM Shipping was founded in 2022, and all of these are second-hand and of a certain vintage, built between 2006 and 2011.

In December last year, SPM acquired the 2011-built, 245 tonnes bollard pull ex-DeepSea1, ex-Go Antares, now SPM Bheem, its largest and most powerful vessel. Readers with long memories will recall the lengthy saga of original owner Mosvold Supply and its battle with Otto Marine over the very troubled US$323 million order for the four DeepSea anchor handlers of the same series built in Batam, Indonesia.

The provenance of the SPM Shipping fleet is mixed, with vessels hailing from original owners as diverse as Bourbon, Bumi Armada, Emas, Gulfmark, Sanko, and Tidewater, as well as Go and Maersk Supply Service, and many of them were sold into China in the downturn and then resold to SPM when the market recovered after the Russian invasion of Ukraine.

There appears to be no commonality of design or equipment across the fleet, but with cheaper rates than its competitors, a low cost of operations, and a client base in India, Nigeria, Angola and Libya, perhaps that doesn’t matter.

Star Matrix scraps scrapping business, it says

This is the same business model as Star Matrix, another Indian-owned offshore player which began with a scrapper as a parent company. The Jain family, which owns Star Matrix, entered the offshore market in the last downturn and has a fleet of seven anchor handlers.

The company told the Irish press at the start of 2024, when controversy arose over the scrapping in India and Bangladesh of two anchor handlers (Jarvis and Thanos), which had been owned by Dublin’s Trade Credebt, that it had foresworn scrapping. Valerie Flynn reported that Star Matrix said it had not done a recycling deal since 2022, and was now a pureplay shipowner.

It most recently acquired the more modern 2014-built, 150-tonner Posh Persistence in December for US$14 million to add to its superhero-themed older vessels of between 120 tonbes bollard pull and 220 tonnes (Aquaman 2, the 2005 built ex-Maersk Dispatcher, now working in Nigeria).

Will SPM follow the same model and exit the cash for scrap sector? Scrapping is a business that has increasingly attracted controversy and human rights complaints over worker fatalities, especially in the Indian Subcontinent where the safety record of recycling locations is dire, so one might have thought that a scrapper would be an unacceptable owner of offshore support vessels for most oil majors.

Maybe this is a case of “don’t ask, don’t tell” for clients like the ENI affiliate in Libya that charters the anchor handler SPM Sailor.

Don’t ask, don’t tell

Unfortunately, “don’t ask, don’t tell” will probably also apply to the publication of the accident investigation. The grounded rig was formerly flying the flag of the Marshall Islands and SPM Neel Pratap 180 is under the Liberian registry, so it may be some time (if ever) to understand what happened.

It would be in the interests of the entire industry for the lessons learned to be shared as widely as possible by the flag states involved to prevent repetition. High-profile groundings like this do nothing to help improve the image of shipping as a whole, nor of any of the players involved.

Other cases, were lessons learnt? This one’s a Winner

And it is not the first time this has happened. In 2016, the semi-sub Transocean Winner was under tow west of the Scottish Isle of Lewis by the tug ALP Forward when it encountered a huge storm.

The effect of the wind and waves on the rig was so strong that both tug and tow were dragged backwards for over 24 hours until the tow line parted. The rig then ran aground on the north coast of the Isle of Lewis.

The UK Marine Accident Investigation Branch (MAIB) report of 2017 is thorough and publicly available for free here. It found that examination established that ALP Forward’s tow line was in a deteriorated condition before the tow commenced, and it was further weakened during the heavy weather prior to the accident.

In the serious weather conditions encountered, the rig would probably have grounded anyway, even if the tow line had not parted.

Aiviq fiasco off Alaska

Meanwhile in America, the National Transportation Safety Board (NTSB) published its excellent report into the grounding of the cylindrical ice-class drilling rig Kulluk off Alaska in 2012 whilst under tow by the Edison Chouest ice-class anchor handler Aiviq (now owned by the US Coast Guard) for Shell.

Again, the towline parted in rough weather after some winch problems, and then Aiviq suffered all four of its engines failing after the emergency towline was connected. The rig went aground, whilst, in the words of the report, “with the engines providing no propulsion, Aiviq maintained a safe distance from Kulluk by using its thrusters.”

The whole point of these MAIB and NTSB investigations is to help everyone learn from accidents. The quality of the work is excellent. It is hoped that the Liberian, Tunisian and Marshall Islands authorities are as thorough and prompt in publicly sharing the lessons of the Ocean Valiant incident.

What are the odds of that?

Warranty surveyors' weighty role

A case like this raises the role of the warranty surveyor, the one person one would hope would be familiar with past incidents involving rigs under tow like Transocean Winner and Kulluk.

We don’t know who performed the warranty survey and issued the towing certificate for Ocean Valiant, but any investigation is likely going to place a lot of scrutiny on that one person’s judgement.

The warranty surveyor is the key decision maker in any tow; the person, usually a master mariner or chief engineer by training, who inspects both tug and tow, and towing gear, witnesses the connection and issues the towage approval and the towing certificate for the underwriters of the tow.

Warranty surveyors have an invidious role – they face commercial pressure from owners keen to depart in a timely manner, and they must judge risks and probabilities that are often unknown.

For example, what will the weather be in 30 days when the convoy reaches the Cape? How strong is the tow wire that is now nine years old? Does the oil leak from the generator signify a more serious problem?

Warranty surveyors are even tasked to assess the competency of the officers and crew of the tow, based only on conversations and documents sighted on board the vessel at anchor, for the most part.

It’s not an easy job, but the more one digs, the stranger the situation becomes.

No experience needed?

What’s interesting is that there appear to be no universally agreed qualifications for a warranty surveyor – which may explain some of the special individuals inhabiting the fringes of the industry.

Instead, a number of private training institutions, including Lloyd’s Maritime Academy, offer certification for a few thousand pounds, but it is not clear to me who validates the course material or checks the quality of the programmes.

The advertising for one advanced diploma course as a marine warranty surveyor even begins with, “minimum entry requirements – there are no prerequisites for this course,” which is hardly reassuring (one might think literacy and numeracy or some sea time as a senior officer on a tug would be prerequisites, but you would be wrong, apparently).

A recent high court case in Singapore has shed more light on the importance of the warranty survey. Whilst we can’t comment on what happened to Ocean Valiant and SPM Neel Pratap 180, we do have a detailed high court judgement on the loss of a jackup under tow.

On May 2, Justice Kwek Mean Luck in Singapore finally published his definitive and binding judgement in the case of the loss of the liftboat Teras Lyza. Download it here.

Teras Lyza loss was a lost opportunity to learn

If it takes a village to raise a child, it takes a bloody big lawsuit and some of the most expensive legal experts in the world to get some transparency on the circumstances of the loss of the liftboat in Singapore, it seems.

It is shocking that a US$56 million, two-year-old lifeboat should sink under tow in 2018, but no official accident investigation report was ever issued by either the Singapore as flag state or the Philippines as littoral state. Instead, it takes litigation six years later, and a judgement in the Singapore High Court nearly seven years later to discover what happened.

Unfortunately, because this is a lawsuit between the insurers and the mortgage holder of the jackup, the judgement is focused on the question of the legal responsibility (or not) of the insurers to pay the bank, rather than lessons learnt for the marine community regarding best practice and marine safety.

Now that the facts have been published by the Singapore judiciary, maybe the Lion City’s Ministry of Transport could finally bestir itself and issue its own report.

The facts of the case

On June 5, 2018, the Ezion-owned liftboat Teras Lyza turned over “unexpectedly” whilst under tow by an Ezion-owned tug, Teras Eden, between Vung Tau, Vietnam where the liftboat had been laid-up, and Taichung, Taiwan. Fortunately, no one was on board the jackup when the accident occurred, so nobody was killed or injured.

The stricken upside-down hull was later towed away and its bunkers were pumped off, then it was scuttled and sunk in deep water off the Philippines by Resolve Marine, its salvors, in August 2018.

Noting that the capsize of a modern liftboat was a high-potential incident that could result in the loss of life if it occurred again (which it tragically did in 2021 when Seacor Power rolled over and sank with the loss of 13 lives), we published a column in December 2019 (here) querying why the Singapore Ministry of Transport, as flag state authority, had not published an investigation to help the industry learn from this unfortunate event.

What was Justice Kwek Mean Luck’s judgement?

The case was between the lenders who held a mortgage for US$56 million on Teras Lyza, Singaporean bank Overseas Chinese Banking Corporation (OCBC) as appellants, and the consortium of hull and machinery insurers for the lost jackup, who had refused to pay the bank for the loss.

The defendants were Argoglobal Underwriting Asia Pacific, China Taiping Insurance (Singapore), the implausibly named Great American Insurance Company, MS First Capital Insurance, and QBE Insurance (Singapore).

The key finding is at the end where the judge writes, “in conclusion, I allow OCBC’s claim for payment… for an insured value of US$56 million, on the basis that the vessel was lost to perils of the seas and is thereby covered by the hull and machinery insurance.”

OCBC won, and will get their payout. Unfortunately, “the perils of the seas” – whilst a beautiful phrase – is not exactly a root cause analysis.

What can we learn from the case?

What jumped out at me from the case was the fact that the warranty surveyor changed in the tow planning process. The owners had originally planned to employ Braemar Technical Services (Offshore) as warranty surveyor (which is now part of ABL). As the judgement put it:

“However, a series of events ensued, leading to Techwise Offshore Consultancy ('Techwise') being hired as MWS instead of Braemar… Braemar’s personnel on the same day. According to [the Deputy Director of Teras’ Fleet Operations], he started to grow concerned with several of Braemar’s suggestions for the tow voyage, such as that it should adopt a coastal route and that it should be manned.

"Neither had Braemar provided its quotation by that meeting. Given that the vessel’s initial intended departure date of May 23, 2018 was drawing close, [he] decided to contact a potential alternative MWS – Techwise – to discuss the tow voyage. [He] obtained documents from Techwise, stating its qualification to act as MWS.”

Unfortunately, these weren’t disclosed in the judgement, and the defendants accepted Techwise as the warranty surveyor and accepted the certificate of towage issued by Techwise.

The judge wrote, “The Teras entities’ decision to appoint Techwise instead of Braemar is not a material circumstance. The defendants decided to approve the use of Techwise without asking any further questions. They were prepared at all times to accept Techwise as MWS.”

I bet they wish they hadn’t.

How did the liftboat sink?

Regarding the sinking, it seems to have occurred in line with Ernest Hemingway’s 1926 quote in his novel The Sun Also Rises:

“How did you go bankrupt?” Bill asked.

“Two ways,” Mike said. “Gradually and then suddenly.”

Both sides employed expert witnesses. OCBC’s naval architecture expert, Ms Rosalind Blazejczyk, made an analysis using photographic evidence of Teras Lyza immediately before the capsize.

She performed calculations through the general hydrostatics model, to estimate how the vessel could have taken on the list and trim as shown in the photograph. She concluded that 450 tonnes of water ingress must have occurred into the aft compartments of the jackup.

Because this a legal case over insurer’s liability, the judgement made the following observation:

"While Ms Blazejczyk could not eventually pinpoint the precise cause of initial water ingress, the question of how water had entered the hull of the vessel is ultimately irrelevant to the analysis of whether the capsize was fortuitous.

"What needs to be established is that water ingress was accidental and unexpected, and it caused the vessel to lose buoyancy and stability, eventually resulting in the capsize.”

Whilst this may be correct from a legal point of view, this shows exactly why commercial litigation is no substitute for a thorough technical marine investigation by a competent flag state.

Certainly, Singapore is such a flag state and understanding and preventing such a similar occurrence occurred should be the number one priority of the Ministry of Transport.

It matters to the owners of every jackup under tow how 450 tonnes of sea water entered the compartments on Teras Lyza, causing it to list and then capsize.

And despite hundreds of thousands of dollars of legal fees expended by the bank and the insurers over the fight on the payout, we still don’t know how the water got inside, destabilising the vessel.

Conclusions – 18 more liftboats coming to service…

Two things are clear – the warranty surveyor is at the frontline regarding the safety and planning of every tow, as you all know, but also that commercial litigation is no replacement for proper marine accident investigations (but is better than no investigation whatsoever).

I hope that eventually we know why Teras Lyza capsized and that the findings are widely and publicly shared. Gulf Marine Services has predicted that 18 new liftboats are under construction and will enter service in the next two to three years.

With two major losses in the last seven years, let’s hope this segment of the industry can really raise its safety game, and let’s hope flag states can really raise their game in safety investigations.

Background reading

A summary of the sad shambles that was Ezion can be found from the links in our earlier piece about the case.

Update (May 19): SPM Shipping has reached out with a reply to this article, which the company said contains "several inaccuracies."