Lyras Urges for Transparency

Thursday, February 13, 2003
"A massive decrease in the number of tanker operators is highly likely in the future as oil companies become increasingly exposed to liabilities related to their transport supply chain," Dimitris Lyras, advisor to the board of Ulysses Systems, told delegates at yesterday's Tanker Operations Conference in London. Oil companies must make sure that their transport supply chain stands up to scrutiny in any eventuality, Lyras asserts, otherwise they risk enormous penalties in public perception and stock valuation. An oil major's liability for an oil spill is far greater than the cleanup and claimant compensation, the real cost is from damage to their long-term image and reputation as responsible energy suppliers.

As oil companies seek to monitor their suppliers through vetting and self assessment initiatives, Lyras considers 400 transport suppliers for 7 oil majors to be an unsustainable situation. Consequently, he suggests only those ship operators who can demonstrate due diligence and best practice will be able to obtain charters from the major oil companies over the coming years. In order for oil companies to be able to monitor a large number of ship management operations, Lyras believes that one of the best ways forward is to allow the ISM audit process to supply ratings on certain areas of operation related to risk mitigation. This of course requires some commitment to internal transparency, not only so records of past operation can be studied but, above all, because internal transparency assists in creating internal awareness of the changes a ship operator is making. One of the major stumbling blocks to increased internal transparency is the fear that it can provide the legal fraternity with a reason to deny a claim. However so long as operators can demonstrate that they were aware of a fault and had addressed the problem, insurers should accept that this attitude is better than one of denial and deception. "We must enable oil majors to evaluate management," Lyras concluded. "It cannot be stressed enough that internal transparency is a key constituent to risk mitigation and to continuous improvement and must be encouraged both internally within the industry and externally by the legal fraternity who evaluate claims."

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