So where do you turn when you would like to start your own ship management company, but you need a million dollars and the worst financial crisis of a lifetime has rendered traditional sources moot? In the case of Dubai, UAE-based Noah Ship Management’s Svein Elof Pedersen and Thomas Chacko Arakal, the core tenants of the real estate business – Location, Location, Location – applied to their vision of creating a small, efficient ship management company. “The banks would not even let us in” the front door, said Pedersen. But because he lived in Dubai for more than a dozen years and had a network of connections with the locals, he successfully reached out to one for the seed investment that effectively gave rise to Noah Ship Management, a progressive ship management company which is long on experience as well as ideas on simple yet crucial methods to save ship owners millions annually.
Setting Up Shop
Though the investment in and growth of Dubai over the past decade is in a word spectacular, Dubai too was swept into the global financial meltdown, which served to grind to a halt its construction and infrastructure spending spree. Storm cloud for many, silver lining for some.
“Dubai is very inexpensive right now, as this office cost about 250,000 AED ($68k) to set up; the space was just 50 AED (about $13.50) per square foot,” said Pedersen, meaning the time was ideal for a small company to open its doors and build business without onerous overhead.
Noah received its license to operate nearly one year ago, May 13, 2010, and officially opened its doors two months later in July 2010, earning its first contract to manage one ship in August 2010. At the time of Maritime Professional’s meeting with Pedersen in his office in Dubai, the company had grown to 12 employees including two technical superintendants managing six ships for two owners; one local owner for three ships, and a Maltese owner for three ships. Noah’s projection for the end of 2011 is 15 ships under management, and the five-year plan is 35 vessels. “Our optimum size is 35 ships … the intention is to keep this smaller, more manageable,” Pedersen said. “If you have 35 ships or 150 ships, it really doesn’t matter because you’re not making more month, due to the increased top end management costs.” of a larger organization.
“We are concentrating now on the UAE as there is a lot of investment in the region,” Pedersen said, particularly in the offshore sector, where there are 482 offshore vessels operating in the region, but there is no one management company specialized in the offshore sector, as Pedersen intends to steer Noah.
While Noah is currently small in terms of personnel and vessels, it is large in experience, as both he and managing director Thomas Chacko Arakal have a combined 60 years maritime ship management experience, with names such as EMS Ship Management, Thome Ship Management, Barber Ship Management and VShips highlighted on their CV.
Control = Profitability
Pedersen contends that a ship management company does not have to be large to be profitable, but it must control costs (see Chart 1) with a vigil eye on the bottom line and the average annual budget of $2.4m ($6,642/day) for each ship. “Traditionally there is too much dead capital stuck on every ship, which can be significantly reduced with proper management.” He estimates that there is, on average, $1m in inventory on each ship, and Noah’s mission is to, via planning, reduce that inventory from 5 to 15%; effectively saving between $50,000 to $150,000 per ship per year; between $1 to $3m when extrapolated across a 20 vessel fleet.
In addition, Pedersen and his team take fuel consumption and saving particularly serious, as a 2.5 to 5% bunker consumption reduction can equal savings of $6.9m alone for a ship which burns 50 tonnes/day at $550/tonne, with 250 steaming days per year. To help reduce consumption, the Noah team melds experience with technology, focusing:
- passage planning
- engine tuning
- weather routing, and
- hull condition.
Starting any new company, much less a ship management firm in a particularly fragile but recovering global marine market, involves elements of risk. Buoyed by a booming regional market, Svein Elof Pedersen – armed with extensive experience and a simple business philosophy – nevertheless has upstart Noah firmly positioned and well on its way.
Average Budget Per Year, Per Vessel ($)
Item Annual Per Day
Payroll 1,303,026 3570
Insurance 200,700 550
Provision 68,500 188
Lube Oil 142,900 392
Stores 148,000 405
Repairs & Maintenance 308,000 844
Radio & Tele 29,000 79
Miscellaneous 74,000 203
Management Fee 150,000 411
Average Annual Budget $2,424,126 $6642
Source: Noah Ship Management
Noah Ship Management Services
- SHIP MANAGEMENT: Offshore and sea going vessels of all categories
- CREW MANAGEMENT: Crewing and training of seafearers from multiple sources world wide
- POST FIXTURE: Voyage and demurrage calculations
o Charterparty administration
- CORPORATE ACCOUNTING: Revenue calculations and consolidation of accounts
o All systems sarbains oxley compatible
- SALES AND PURCHASE INSPECTIONS: Vessels pre-purchase inspection and reporting
- NEW BUILDING SERVICES AND PROJECTS
o Feasibility studies
o Drawing approvals
o Site supervision
Svein Elof Pedersen, CEO, Noah Ship Management
Mr. Svein Eloff Pedersen has been a partner and CEO of Noah Ship Management since it's inauguration in May 2010 Prior to this, Mr. Pedersen was the President of EMS Ship Management. He has held several senior management positions in the shipping industry, including Managing Director of Thome Ship Management, Managing Director of Barber Ship Management and Vice President of International Tanker Management (ITM). Mr. Pedersen brings with him 30 years of maritime experience and holds a degree in electronics/automation.
Thomas Chacko Arakal, Managing Director, Noah Ship Management
Mr. Thomas Chacko Arakal is a founding member of Noah Ship Management DMCCO. A Marine Engineering Graduate with a Masters Degree in Business Administration, he has extensive maritime industry experience as a Ship Manager in worldwide locations. More than 30 years in the maritime field with Barber Ship Management, International Tanker Management (ITM) and VShips. Founding member of International Tanker Management, last eight years as Vice President with ITM.