Tank Barge Industry Leads the Way in Double Hull Conversions

Tuesday, March 26, 2002
The American Waterways Operators AWO says that the tank barge industry is leading the way as American companies make the multi-billion dollar investment required to transform the nation's fleet of oil-carrying tank vessels into environmentally friendly double hulls. More than 65 percent of the U.S. tank barge fleet is double-hulled today, more than 13 years before the 2015 deadline set by Congress in the landmark Oil Pollution Act of 1990 (OPA 90). Even as government and industry sources agree that there is a surplus of tonnage on the market today - more vessels than are needed to meet U.S. demand for oil transportation - America's tank barge operators are leading the transition to an all-double hull fleet. According to U.S. Coast Guard data, U.S. tank barge operators have built 567 new double-hulled petroleum barges for inland and coastal service since the Oil Pollution Act was passed in 1990. The pace of new construction has accelerated in recent years, with 23 percent of this total - 134 double-hulled barges - built between 1999 and 2001. More new double hulls are on the order books, including at least eight oceangoing tank barges scheduled for delivery in 2002, plus options for 10 others and pending contracts for the conversion of seven oceangoing tank barges from single to double hull. The capital investment required to overhaul the U.S. tank barge fleet is significant: a 30,000 barrel inland tank barge costs some $1.45 million to build, while a 120,000-140,000 barrel coastal tank barge carries a price tag of $15-17 million. Because a double-hull barge is much larger than a single hull with the same carrying capacity, vessel owners must often invest an additional $9-10 million for a more powerful tugboat to move the larger barge. Retrofitting (adding a double hull to an existing single hull barge) is an option for some coastal tank barges and can shorten delivery time by several months, but the cost remains high: some $12-13 million for a 120,000-140,000 barrel barge. The cost of a state-of-the-art articulated tug-barge unit, or ATB, runs $26-27 million. Given the size of the capital outlay required, companies must weigh many factors in deciding when to build a new double-hulled vessel. Paramount is demand for oil transportation – how strong shipper demand is, and what the likelihood is that freight rates will be sufficient to offset the cost of such a major investment. If demand is there, building will follow. Building vessels of any kind in the absence of demand hurts the industry, artificially depressing freight rates and undermining the industry's ability to shoulder the investment in modern, environmentally friendly vessels to meet future needs. Government experts from the Coast Guard to the General Accounting Office to the Maritime Administration agree that U.S. tank vessel capacity today exceeds demand for oil transportation, and will continue to do so until at least 2004. As American companies strongly committed to the U.S. market, the members of the American Waterways Operators stand ready to make the investment in new double-hulled vessels to meet the nation's energy transportation needs, and to continue providing safe, environmentally friendly, and economically efficient service to U.S. shippers and consumers.

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