What can we learn from the Irika sentencing

The US DoJ posted their news release on the Sentencing of Irika Shipping S.A.

When the MV IORANA arrived in Baltimore in January 2010, crew members alerted the USCG port state control officer of illegal dumping of oil and garbage at sea. Granted, this was a blatant case of willful pollution, which no respectable company will tolerate, however, there are a few points in the press release worth noting, if a company operates into the USA.

From reading some of the USCG publications and comments by lawyers, it seems to me the following 2 things probably played a significant part why the fine for the offence was ultimately $ 4,000,000.

• Irika admitted the company had no budget for the vessel and no waste management plan, and crew members received little training regarding the company's environmental policies.
• Irika admitted obstructing justice in a couple of ways, including false statements by ship officers, destroying evidence, etc.

As far as I know a company can shield itself from criminal prosecution in such a case, if the company has in place a vigorously implemented, robust environmental plan, which should also include an environmental budget for the ship. With such a plan the intentional illegal disposal of oily wastes should be eliminated. If it does occur, it would be an act by a rogue employee rather than condoned practice.

Irika pleaded guilty, by my count, to 8 felony charges, each carrying a maximum penalty of $ 500,000. While lawyers frown upon admitting guilt, it seems to me that cooperation by ship officers can significantly reduce the criminal penalty. My math suggests that the court imposed the maximum $500,000 per felony. Cooperation by the senior officers would have reduced the count by at least 2, or the fine by $ 1,000,000 or more!

What I suggest is that a company who's ships call on US ports, should have in place a vigorously implemented environmental policy and that their ship officers are aware on how to work with USCG officers during a port state control.

Residual Fuel

As a follow up to last week, in the September issue of OPEC's monthly oil market report, on page 30 they show a pie chart of the projected demand growth for the various refinery products from 2010 to 2011. OPEC predicts a 1,0 million barrel/day increase in oil demand for 2011 and predicts all products to increase - except for residual fuel. OPEC predicts a decline in residual oil by 143,000 barrels/ day for the coming year.

In the previous blog I stated that according to data published by the IEA residual fuel represented 15.1% of global refinery output in 2008. Based on that figure the 143,000 barrel reduction in residual fuel, for the coming year, represents essentially a 1.1% drop in the supply of feed stock for heavy fuel blending. In other words, the quality of the blended fuel will continue to deteriorate and availability of IMO compliant HFO may become an issue, maybe not immediately but probably in the long term.