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COMPANIES FOCUS ON OIL SHIPPING SAFETY

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Higher insurance rates and retentions earlier in the decade along with increased costs of cleanups and a 1990 federal law have prompted a heightened focus on loss control in the oil shipping industry.

In the past few years, the oil shipping industry has placed "a greater amount of focus on loss control," noted Paul Bartolo, vp of Center Marine Managers in New York, a hull underwriter.

For at least two major U.S.-based energy companies, though, attention to risk management and loss control has been an important factor without the prompting of costs and regulation.

Part of the reason for the industry drive for enhanced safety is the quadrupling of insurance deductibles for oil shippers from 1992 to 1995. Rates also went up during that time.

"Insurance costs became a very large item to shipowners," Mr. Bartolo said.

The 1989 Exxon Valdez disaster and the consequent passing of the 1990 federal Oil Protection Act contributed to the increased costs, which saw rates and also deductibles go up for many oil shippers.

But for Chevron Corp., safety goes back further than that. Over the past 12 years, Chevron has not spilled more than nine barrels of oil in any year, said a spokesman for Chevron Shipping Co., Chevron's shipping subsidiary in San Francisco.

Chevron's success stems not from a one-shot effort but from continual vigilance, said H.D. Millar, manager of risk management for the San Francisco-based oil company.

The company will support a tanker crew's decision to put safety ahead of a rapid delivery of oil.

"There is no intimidation by management if you make the decision to slow down or hold up from a safety perspective," the Chevron spokesman said.

Focusing on the human aspect in tanker safety will help to prevent spills, said Richard Hobbie III, president of the Water Quality Insurance Syndicate, a New York-based underwriter. He said a WQIS study showed that 90% of oil spills in the 1980s resulted from human error.

Storms or equipment failures cannot be controlled, but "you can reduce the human error to a lower component," he said.

One important change in Chevron's safety procedures stems from the Oil Protection Act.

The law has made spills more costly. Mr. Hobbie said that since OPA passed, the cost of cleaning up a spill has increased 600% to 700%, as the responsible parties now are liable for the government's cleanup costs.

The law requires new tankers to be constructed with double hulls rather than the single hulls previously used. Double-hulled ships have an inner hull, within which sits the oil, built 13 feet inside the outer hull.

Chevron currently has 12 double-hulled ships in its 36-ship fleet. Four more will be delivered in the next three years.

But the success of double-hulled ships in preventing spills has not been proved, and in a severe accident that penetrates both hulls, a spill will occur, underwriters and shippers said.

"They're not a panacea," Chevron's spokesman said. "The real safety impact is in careful handling," he said.

Owning and operating its own ships also contributes to Chevron's safe operations.

"The best way to manage risk is with our vessels, as we have the best knowledge of them and our operating philosophy," the spokesman said. Chevron does charter some ships in addition to owning its own fleet.

Mobil Corp. of Fairfax, Va., also has maintained a near-perfect safety record.

A dedication to safety "permeates all our operation and thinking," said Gerhard Kurz, president of Mobil Shipping & Transportation Co., the shipping arm of Mobil Corp.

Mobil uses a rigorous inspection program for the ships it charters from outside shippers; about one-third fail the inspections and are not allowed to ship Mobil oil. On any day, the company has between 30 and 40 ships chartered around the world.

The company conducts spill simulations to train crews in cleanup efforts, but the best spill response is prevention. "It's a lot easier to keep the oil inside the ship than to clean it up after it has spilled," Mobil's Mr. Kurz said.

Mobil, which also owns its own fleet in addition to chartering ships, has moved aggressively into double-hulled ships. Mr. Kurz said that in 1994 the company launched what Mobil says was the first double-hulled tanker in the industry, and it has added two more since then with another pair on order.

In another safety move, Mobil has received certification under the International Safety Management Code standards (see related story, page 14).

The ISM standards are promulgated by the International Maritime Organization and require oil shippers to have safety procedures for ships and land operations. All oil shippers must become certified by July 1, 1998, but Mobil completed the year-long certification process earlier this year, Mr. Kurz said.

Chevron is in the process of be-coming ISM-certified, a spokesman said.