“The environmental agenda is shipping’s biggest challenge. The new regulations can be game-changers and will drive innovation,” says Captain Graham Westgarth, President of Teekay Marine Services.
“45,” says Captain Graham Westgarth, President of Teekay Marine Services. “That was the number of ships, all of them Aframaxes, operating in the Indo-Pacific trade, when I joined Teekay in early 1999. Today – 136, with an additional 11 newbuildings on order.
“But we are a much different company today,” he continues. “Our fleet operates worldwide. We still have about 37 Aframax tankers, and are the largest operator of Aframax tankers, but we also have Suezmax, product, shuttle, LNG, LPG tankers and Floating Storage and Offloading (FSO) and Floating Production Storage and Offloading (FPSO) vessels.”
Teekay’s short history can be traced back to its founding in 1973, then to the purchase of its first Aframax tanker in 1985. It restructured into Teekay Shipping Corporation in 1993 and became a public company trading under the New York Stock Exchange symbol TK in 1995. Then, in 1998, Teekay embarked on an aggressive, and equally impressive, global growth strategy. It acquired Australian Tankers Pty and won its first FSO contract in Australia.
Teekay then made its first expansion into Norway in 1999 with the acquisition of Bona Tankers. This was followed by another acquisition in Norway, this time Ugland Nordic Shipping in 2001, placing Teekay squarely, and significantly, in the shuttle tanker business. Teekay further built its shuttle tanker business in 2003 with the purchase of Navion ASA and a 50% stake in Skaugen PetroTrans providing entry to the lightering trade.
Reaching even further and higher in 2004, Teekay entered into liquefied natural gas (LNG) transportation with the purchase of Naviera F. Tapias and a successful bid to charter three LNG carriers to RasGas II, an ExxonMobil Corporation and Qatar Petroleum joint venture. Teekay’s LNG shipping business expanded again in 2005 with a contract to charter four LNG carriers to RasGas III and another two LNG ships to the Tangguh project in Indonesia.
Continued growth
Teekay continued to strategically grow its business in 2006. First, with a pool of product tankers. Then, it took a major stake in Petrojarl ASA, the largest FPSO operator in the North Sea, which it eventually fully acquired in 2008. At the same time, Teekay’s unbroken attention to growing its conventional tanker business took place with Teekay and Torm’s joint acquisition of OMI, a large owner of Suezmax and product tankers. During this period Teekay also grew organically with 25 newbuildings.
“You may think that this is simply a story book ending,” Graham Westgarth says with a sly smile, “but I can tell you that Teekay had a strategic growth plan to place the company in the marine midstream sector with a complete slate of transportation and storage services to link upstream energy production with the downstream refining and distribution. Our strategy was simple: Growth from a regional shipping company with Aframax tankers to a global shipping company that really became the ‘midstream’ transportation and storage piece. We wanted to move up the value chain. And we wanted to seek stable revenue with long-term fixed contracts and, more importantly, develop long term customer relationships based upon the safety and the quality of our assets and operations. I recognise that many of these things are important to DNV too, and DNV’s understanding of our own strategy has been very helpful to us.”
Simple strategy
When asked if he had any concerns about sharing Teekay’s strategy, Captain Westgarth doesn’t hesitate a moment to respond that a strategy is useless unless it is implemented and the magic happens only with solid execution of the strategy. “As I said,” Captain Westgarth restates, “the strategy was simple. Putting that strategy into operation is another matter. Along the way, we saw a couple of economic setbacks, such as the dot com bust and more recently, the global financial meltdown in 2008. Throughout the entire period, a supportive board of directors, an aligned management team, our clear sense of direction and purpose throughout the organisation and our own core values were key success factors for us.”
When pressed for details about Teekay’s strategy for the next ten years, Captain Westgarth is a little cagey at first as he reminds us again that a strategy can be seemingly quite simple. But he offers a few clues as he shares his thoughts, as both President of Teekay Marine Services and as Chairman of Intertanko, the International Association of Independent Tanker Owners, about future challenges facing the shipping industry:
The biggest challenge ahead
“For Teekay and the shipping industry, the environmental agenda is our biggest challenge. There is a lot of environmental legislation on the table, such as CO2 emission limits, ballast water and invasive species and NOx and SOx emissions. We know that many of these new regulations can be game-changers. These regulations will drive innovations in ship design, materials, equipment, hull shapes and fuel for propulsion.
“It is less clear, though, whether we have the right regulatory environment to reward those owners who choose to position themselves for future regulations. Also, how will new regulations deal with grandfathering older standards for a ship’s operating life? This leaves owners with tough choices to make now for a ship designed to operate for at least 25 years. However, as a perpetual optimist, I see lots of opportunities for those who seriously consider the environmental challenges and choose the right solutions.”
We do too.