The Blue Visby Solution is a collaborative technological and contractual platform for the multilateral optimisation of the ocean passages of cargo ships, intended to eradicate the operational inefficiency of SFTW, and deliver savings in GHG emissions.
Any systemic inefficiency that results in low asset utilization is undesirable in any industrial process.
There are three main reasons why SFTW must be eradicated:
- Cargo ships spend 6-8% of their entire lives at anchorage.
- Congestion at anchorages increases the risk of collisions, and it also contributes to local air pollution in the port area.
In a decarbonization context, if maritime operations could be optimized perfectly, so that no ships ever had to wait at anchorage, savings of 20% GHG emissions would be achieved.
There are various reasons: ocean communications and earth observation did not reach a level of technological maturity and scale of adoption until the 2000s; marine fuel prices have been low until recently, and the relative fuel savings compared to the value of the cargo or of freight were low; the contractual architecture of maritime trade (charterparties, bills of lading and sale contracts) evolved through the age of sail and steam, where the uncertainties of the an ocean voyage required vessels to sail “with the utmost despatch”; the port optimization efforts of the last two decades have revolved around co-ordinating the various shore-side facilities and port infrastructure and improving the port-vessel interface, so that “just-in-time” initiatives target berthing optimization, rather than focus on the specific problem of SFTW.
In one word: decarbonisation.
Any operational inefficiency of the magnitude of SFTW is unsustainable in every sense: the emissions of the existing fleet must be reduced; energy efficiency is critical to the early adoption of new fuels during the transition phase; the ultimate destination of zero carbon fuels is inconsistent with the inefficiency of SFTW.
During the transition, both the maritime industry and the supply chain that it serves, have committed to GHG emissions reductions. For example, through IMO’s Carbon Intensity Indicators and EEOI, but also SCOPE 3 and SBTi.
As to zero carbon fuels, they all have a lower energy density than marine fuel oil, so energy efficiency will be critical to their adoption. Financially, the level of investment needed for the maritime trade to decarbonise (calculated at around US$1 trillion) is such that low asset utilization of the type represented by SFTW would be financially unacceptable.
The Blue Visby team has conducted several proof-of-concept studies, including an analysis and hindcast – in real operating conditions – of a dataset of 150,000 voyages of 13,000 ships in 2019, as well as analysis of data provided by the Blue Visby Consortium participants.
The analysis results show that the Blue Visby Solution delivers benefits on average of 16% across the bulker and tanker fleet.
The operational aspects of the Blue Visby Solution are implemented by the Blue Visby Operations System (BV Ops), which encompasses two technological elements: first, the Blue Visby algorithm; and, second, a system for monitoring the movements of vessels, and monitoring and forecasting environmental conditions (weather, swell, currents, bathymetry, tides).
This system is being tested rigorously and is currently undergoing a ClassNK certification process.
Upon commencement of a Blue Visby voyage, BV Ops assigns to the participating vessel an optimal target arrival date/time (Blue ETA), which is calculated by the Blue Visby algorithm on the basis of four sets of parameters: (a) individual vessel specifications and performance; (b) the specifications and performance of all other ships sailing to the same destination; (c) port congestion at the destination and (d) environmental conditions (weather, currents, swell, bathymetry, tides).
BV Ops continually monitors those four sets of parameters and communicates to the participating vessels every eight hours any changes to their Blue ETA.
At all times, BV Ops ensures that Blue ETAs keep the vessels’ order or arrival (or queue number) as if they had sailed independently without the involvement of the Blue Visby Solution.
The Blue Visby Solution recognizes that maritime trade requires flexibility. Cargo ships do not operate like passenger aircraft, tied to a rigid timetable. For that reason, Blue ETA may be reallocated or swapped between participants under certain conditions and requirements.
The Blue Visby Solution is complementary to all voyage planning and weather routing products and services, all of which seek to optimize the voyage of an individual ship. In that sense, those products are unilateral, as opposed to the Blue Visby Solution, which is multilateral.
The Blue Visby Solution serves a different purpose: it does not seek to optimise the route or the voyage of an individual ship, but seeks to remove the systemic multilateral inefficiency, i.e. the inefficiency of a group of ships sailing to the same destination without reference to one another and without regard for the conditions at the destination.
The laws of hydrodynamics dictate that slow steaming can result in great fuel efficiencies. However, slow steaming in itself does nothing to solve SFTW. Any ship can adopt a slow steaming practice, and then waste time waiting at the anchorage anyway.
The Blue Visby Solution results in the systemic optimisation of the ocean passage of vessels, which, according to our research, results in an average speed reduction of about 1 knot. That is a modest reduction, and poses no navigational or engineering issues, but delivers considerable savings in GHG emissions.
The Blue Visby Solution is complementary to Just-in-Time initiatives, all of which focus on berthing optimization and are port-centric.
Just-in-Time initiatives focus on two challenges: firstly, the challenge of co-ordinating the various stakeholders with a role in berth utilization at a specific port (terminals, storage facilities, pilots, tugs, customs authorities and agents, multimodal transport hubs, shore labour); secondly, the challenge of creating a communication protocol between those stakeholders ashore and vessels.
The types of those challenges are similar in many ports, but the characteristics of every port are different. While a few ports have made admirable progress in various initiatives over the last decade, no universal Just-in-Time system is on the horizon.
The Blue Visby Solution is not affected by either of those two challenges that Just-in-Time initiatives focus on. The crucial difference is that the Blue Visby Solution does not seek to optimise berthing. Instead, it optimizes the ocean passage of vessels up to a notional point just off the anchorage at destination, the “Blue Line”. The Blue Visby Solution treats the short journey (“shifting”) from anchorageto berth as a type of “last mile problem”, which is in the hands of every individual port to address. Instead, the Blue Visby Solution seeks to optimize the 99% of s vessel’s journey, i.e. the ocean passage. The end-point of the optimization achieved by the Blue Visby Solution is not the berth, but the Blue Line.
The Blue Visby Solution approaches SFTW as a systems optimization problem, where the “system” is the group of vessels sailing to the same destination, and then applies Theory of Constraint principles and algorithms to optimize that system.
The Blue Visby Solution monitors and takes into account the rate at which each port receives vessels at berth from the anchorage, from which it derives a dynamically adjusted “berth service ratio”.
The Blue Visby Solution optimizes “the system” of the group of vessels, so that each arrives at the Blue Line at intervals that match the berth service ratio. That service ratio changes over time, and BV Ops monitors and dynamically adjusts the vessels’ target arrival time (Blue ETA) accordingly.
The Blue Visby Solution is not port-centric, in the sense that it does not seek to improve the berth service ratio, which is entirely in the hands of every individual port.
Following the Blue ETAs, vessels are able reduce speed during the ocean passage, , thus reducing fuel consumption and GHG emissions. Such reductions are additional to any further reductions that individual ships may achieve by following their individual voyage planning or weather routing recommendations.
The implementation of the Blue Visby Solution drastically reduces congestion at port anchorages. Ports are able to deal more efficiently with the steady stream of arriving vessels, and optimize their operations ashore accordingly. In this way, the Blue Visby Solution is entirely complementary to any Just-in-Time initiatives, and helps ports optimise their shore operations.
Virtual Arrival is a bilateral arrangement between the shipowner and charterer of a single vessel. It does not extend to the shippers or receivers of the cargo, who, as bill of lading holders, also have a stake in the voyage, as well as a contractual relationship with the shipowner (as carrier).
By contrast, the Blue Visby Solution is systemic and multilateral: it encompasses all the parties with a stake in a vessel’s voyage (shipowner, all charterers in a charterparty chain and all parties to the sale contract chain for the cargo on board, including of course the bill of lading holders), as well as those in the voyage of the other vessels steaming to the same destination.
There is consensus that decarbonization requires collaboration. Over the last few years, there have been various collaborative projects, ranging from industry fora and centers, joint industry projects, consortia, joint ventures.
The Blue Visby Solution has embraced all such collaborative efforts, by working with the Global Maritime Forum, the Moller Center for Zero Carbon Shipping, universities and associations.
We have set up the Blue Visby Consortium, which brought together twelve of the most respected entities in the worlds of decarbonisation (such as the Carbon Trust and the Ocean Conservancy) and of maritime trade, including the UK Hydrographic Office, who have provided navigational aids to the world’s shipping for over 100 years (the Admiralty Charts can be found on board 80% of all ships worldwide).
However, in addition to adopting such traditional models of collaboration, the Blue Visby Solution has added two elements to decarbonization collaboration that are unprecedented in the short history of maritime decarbonization. The Blue Visby Solution contains two collaborative elements:-
- a contractual sharing mechanism for the costs and benefits of implementing the Blue Visby Solution; and
- a membership organization that will regulate the relationship amongst the participants to the Blue Visby Solution.
The sharing mechanism is called Blue GA and the association is called Blue Visby Mutual Association. If the names are strangely familiar, that is because they are inspired by long-standing maritime traditions: Blue GA is inspired by general average and the Blue Visby Mutual Association is inspired by the structure of P&I Clubs.
The premise of the Blue Visby Solution is this: throughout the ages, shipping has developed collaborative solutions to deal with the “perils of the seas”. Both general average and the concept of mutual insurance are sharing mechanisms to deal with the costs of maritime emergencies and risks. Using contemporary terminology, they can be described as multilateral collaborative arrangements.
The Blue Visby Solution is inspired by those concrete collaborative traditions, in order to deliver concrete results.
The degree of collaboration required by the Blue Visby Solution is no different to the collaboration amongst stakeholders in general average, which has a history of thousands of years; and no different to the collaboration amongst shipowners and charterers through their membership in P&I Clubs, which has a history of hundreds of years. There are also similarities with tanker pools, which have a history of decades.
The Blue Visby Solution has created collaborative structures that use the industry’s own collaborative traditions, adapted for a new common purpose: decarbonization.
If you agree that the climate emergency is the challenge of our era, and a threat to the entire world of maritime trade, then collaboration is the natural response: joining forces in the face of common threats is what the maritime industry has always done.
Blue GA is a sharing mechanism for the costs and benefits of the Blue Visby Solution. It adds content and depth to the notion of collaboration, as all stakeholders are given “skin in the game”.
One of the main obstacles to the eradication of SFTW is the so-called split incentives, or “agency problem”, i.e. that parties will not take action from which they will not benefit. There are countless similar problems in the economics and social science, e.g. prisoner dilemmas.
The Blue Visby Solution tackles the problem head-on.
It does not merely appeal to good will, or rely on policy statements and ambitions; instead, it recognizes that the financial interests of all stakeholders must be taken into account, And then, it digs deep into the maritime industry’s history and traditions to find a hidden treasure: general average, the archetypal and age-old collaborative system for sharing the costs of dealing with a maritime emergency.
The Blue Visby Solution borrows from the principles of general average to create Blue GA. That is set of rules (broadly modelled on the York-Antwerp Rules for general average), which is incorporated into the relevant contracts (in a similar way as the York-Antwerp Rules), and regulates the way in which the costs and benefits of the Blue Visby Solution will be shared amongst all stakeholders (shipowners, charterers, cargo shippers and cargo receivers) – or, to use general average terminology, amongst all the parties to the common maritime adventure.
There are three financial consequences of the application of the Blue Visby Solution:
- fuel savings;
- prolongation of the vessel’s ocean passage (from the port of origin to the Blue Line at destination); and
- carbon credits.
The fuel savings, depending on the type of charterparty, would ordinarily benefit only the shipowner or the time charterer.
The prolongation of the ocean passage ordinarily would be sometimes cost-neutral (if the vessel is time chartered, hire would have been payable anyway during waiting at anchorage). However, sometimes it could result in a sacrifice of demurrage for the shipowner under a voyage charter, or for the FOB buyer or the CFR/DAP/CIF seller under a sale contract – depending on the terms of the relevant contract.
Carbon credits represent the monetary value of the CO2 savings that are achieved by the operation of the Blue Visby Solution to the particular voyage.
Blue GA is designed as a sharing mechanism, whereby all stakeholders in the vessel’s voyage share the financial consequences of the application of the Blue Visby Solution.
The concept of sharing amongst the stakeholders in a vessel’s voyage draws its inspiration from the age-old arrangement of general average, where the parties to the common maritime adventure, to use the terminology of general average, share expenses and sacrifices incurred in response to a maritime emergency. However, Blue GA differs from general average in important respects:
- in most cases, the sum of the three financial consequences of the Blue Visby Solution results in a net benefit, which all stakeholders share
- Blue GA is based on the market rates for fuel and for the hire rate for the period of time by which the ocean passage is prolonged. Unlike general average, Blue GA participants do not need to disclose the financial aspects of their contracts.
- Blue GA is shared in equal parts amongst all parties in the charterparty and sale contract chains, thereby introducing a level playing field. Unlike general average, there is no pro-rating depending on values.
The financial modelling of the Blue Visby Solution shows that in the vast majority of voyages, all stakeholders derive a financial benefit. The exact amount depends on market rates and the number of stakeholders participating in Blue GA.
The Blue GA system operates independently of the financial arrangements of the relevant contracts.
Demurrage is legally defined as “liquidated damages for the Vessel’s delay”. Such delay is often the direct consequence of either the SFTW inefficiency or berthing inefficiencies, or both. It is a fact that SFTW produces, in certain contractual circumstances, a financial benefit for shipowners: under some (but not all) voyage charterparties, as soon as the vessel arrives at the anchorage, it can tender Notice of Readiness, which triggers the commencement of laytime and, on its expiry, the accrual of demurrage. In other voyage charterparties, the accrual of demurrage does not start until berthing.
Demurrage is also a feature of some sale contracts for cargo on board. In particular, FOB buyers and CFR/CIF/DES/DAP sellers often earn demurrage for the vessel’s delay at the loadport and discharge port respectively.
In financial terms, demurrage is a source of income for shipowners under some charterparties and for traders under some sale contracts. Indeed, depending on the applicable rates, it can be a “profit centre” for such entities.
The Blue Visby Solution does not directly affect demurrage for three reasons: (a) the contractual architecture of the Blue Visby Solution operates independently of the laytime and demurrage regime of the underlying contracts; (b) the rate adopted for the ocean passage prolongation in Blue GA is derived from published market rates, not from contract rates; (c) the end-point of the Blue Visby Solution is the vessel’s arrival at the Blue Line, beyond which any operational delay (including berthing delay) is not affected by the Blue Visby Solution.
The Blue Visby Solution is designed to be as frictionless as possible. The Blue Visby Mutual Association calculates and apportions the applicable shares of Blue GA for each voyage, and acts as a clearing house, collecting and distributing the Blue GA shares to the relevant participants.
The Blue Visby Mutual Association is designed as a voluntary non-profit association with members from across the world of maritime trade, as well as non-market participant observers, such as organisations.
The Blue Visby Mutual Association has four aims: (a) to regulate the relationship amongst the participants, including resolving disputes arising from the operation of the Blue Visby Solution; (b) to promote the adoption of the Blue Visby Solution; (c) to administer Blue GA; and (d) to make refinements to the Blue Visby Solution, so as to ensure that it adapts to the evolving decarbonization landscape, as appropriate.
The Blue Visby Solution is designed to operate as a platform that is open to all parties that are stakeholders in a cargo ship’s voyage, either as parties in the charterparty chain or in the sale contract chain.
The Blue Visby Solution is only open to members of the Blue Visby Association.
Membership is annual per calendar year and participants become members either upon signing the membership agreement, or upon the conclusion of a charterparty or sale contract that incorporates the Blue Visby Protocol.
The Blue Visby Solution is operated by the Blue Visby commercial entities, which generate income through subscriptions and a service fee that represents a percentage of Blue GA.
The contractual architecture of the Blue Visby Solution consists of three pillars: the Blue Visby Protocol, which is a set of terms that are incorporated into charterparties, bills of lading and sale contracts, and thereby enables the operational aspects of the Blue Visby Solution; (b) the Blue GA Rules, which set out the principles of the sharing mechanism; and (c) the Terms of the Blue Visby Mutual Association, which regulate the relationship of all the participants inter se.
Membership of the Blue Visby Mutual Association requires members to use best endeavours to incorporate the Blue Visby Protocol and the Blue GA Rules into their charterparties and sale contracts.
The Blue Visby Solution does not require any regulatory or statutory intervention by states or international organisations.
The edifice of international maritime trade is made up of countless of bilateral private agreements, under English law, the cardinal principle of which is freedom of contract, which allows commercial parties to make their own agreements as they see fit. There is little intervention in terms of national laws (e.g. the Carriage of Goods by Sea Act 1992,) or international conventions (e.g. the Hague Visby Rules). In fact, the York Antwerp Rules that regulate general average are neither a national law nor an international convention, but only a set of terms that parties voluntarily incorporate into their contract.
Freedom of contract under English law is a unique strength of international maritime trade, which the Blue Visby Solution leverages, so as to create a contractual architecture that is based on three pillars: the Blue Visby Protocol, which is designed to be incorporated into charterparties, bills of lading and sale contracts, and enables the operational aspect of the Blue Visby Solution. The Blue GA Rules, which set out the principles of operation of Blue GA, which is also designed to be incorporated into charterparties, bills of lading and sale contracts; and the Terms of the Blue Visby Mutual Association, which creates the necessary contractual framework for all the participants, many of whom would otherwise have no bilateral contractual relationship.
The Blue Visby Solution is designed to solve a systemic problem: the inefficiencies of SFTW. By contrast, providers of voyage planning and weather routing services seek to optimize the operational parameters of a particular vessel.
The efficiencies achieved by the Blue Visby Solution are additional to those of unilateral voyage planning and weather routing.
The Blue Visby Solution is designed to be compatible with all voyage planning and weather routing products.
Operationally, the Blue Visby Solution provides participating vessels with a target arrival date, the Blue ETA. It is then up to any particular vessel to use its own voyage planning and weather routing systems to meet that Blue ETA. The existence of a particular target arrival date, as opposed to the usual “utmost dispatch” approach, greatly assists any voyage planning or weather routing service.
Port and terminals will support the Blue Visby Solution because it delivers benefits for the port area through reduction of local air pollution and increased safety, and it also facilitates the optimization of shore-side operations.
Competition law (anti-trust) issues are always a concern in collaborative arrangements.
The Blue Visby Solution is an example of “pro-competitive collaboration”, and does not pose anti-trust issues because it is designed to be:-
- Independent: the Blue Visby Solution is not owned or controlled by any market participant;
- Inclusive: All market stakeholders are welcome to participate in the Blue Visby Solution;
- Neutral: the operational and software systems of the Blue Visby Solution are compatible with any voyage planning, weather routing or unilateral optimization solution, as well as all just-in-time systems.
- price-agnostic: the Blue Visby Solution operates outside the financial parameters of the underlying contracts, and Blue GA is based on published market rates, and not on contract prices.
In the same way that collaboration has a long history and deep roots in international maritime trade, so does dispute resolution. The combination of light regulation with party autonomy under English law, the law of choice in international maritime trade, has led to a development of a robust and reliable dispute resolution mechanism through the use of London arbitration.
The contractual architecture of the Blue Visby Solution follows the tradition of all maritime contracts under English law, and is not overly prescriptive. Instead, it is designed to evolve as it adapts to commercial reality. This is achieved through an arbitration mechanism, which incorporates the London Maritime Arbitration Association Terms, with one important difference: the decisions are anonymized and published, so that the body of arbitral decisions will, over time, contribute to the evolution of the Blue Visby Solution.
All charterers are supply chain participants, and the GHG emissions of the chartered ships are part of charterers’ Scope 3 reporting requirements. Charterers benefit from the application of the Blue Visby Solution, including by sharing in Blue GA.
All links of the supply chain have a role to play in reducing GHG emissions. Even if a trading entity is not a charterer, the emissions of ships in their supply chain are part of their Scope 3 reporting requirements, and will benefit from the application of the Blue Visby Solution, including by sharing in Blue GA.
Today’s fleet must increase its operational efficiency, in order to obtain a good Carbon Intensity Indicator rating.
The future ships consuming zero-carbon fuels will need the Blue Visby Solution, so as to deal with the limitations of the lower energy density of new fuels.
The Blue Visby Solution will launch in phases, with the first market segments being those of large dry bulk carriers and large tankers in 2023. Other segments will follow, including the container trade, and the elements of the Blue Visby Solution, will be adapted to deal with the particular characteristics of each market segment.