Ripe for disruption

REMI ERIKSEN

Welcome to Trust and transformations - leaders navigating change, a DNV podcast. I'm Remi Erikson, DNV’s group president and CEO.

 

In this series, myself and our business area CEOs sit down with other global leaders to talk about how they tackle transformations, build trust in their business and people, and what they think is coming next for their industry. Right now, they are experiencing a series of historically significant transformations, making trust more important than ever.

 

This episode is hosted by Knut Ørbeck-Nilssen, CEO of Maritime at DNV.  

 

KNUT ØRBECK-NILSSEN

Hello and welcome to Trust and transformations - leaders navigating change. I'm so pleased to welcome Lois Zabrocky, President and Chief Executive Officer of International Seaways, to the podcast. Hello, Lois.

 LOIS ZABROCKY

Yes. Good day. And it's a privilege to be here with you.

 KNUT ØRBECK-NILSSEN

Thank you so much. Let's dive into some of the questions that I've prepared for you. But first of all, International Seaways is one of the largest tanker companies worldwide with a fleet of about 77 vessels and you provide energy transportation services for crude and also petroleum products across the globe. Right?

 LOIS ZABROCKY

Yes.  Absolutely. International Seaways - INSW on the New York Stock Exchange - and we're around $2.5 billion. Very strong balance sheet and very strong prospects for the business, as we head into the second quarter here of 2024.

 KNUT ØRBECK-NILSSEN

That's the marketing, approach. Right?

LOIS ZABROCKY Yes!

KNUT ØRBECK-NILSSEN

Good. So I want to ask you a little bit around, transformations that we experience and also the outlook. And if I can, pose the first question. So in your illustrious career, spanning nearly 30 years, starting as a third mate aboard a chemical tanker, serving on multiple boards these days, you must have witnessed a fair share of industry transformation.

 

And, how does our current challenges brought on by decarb and also geopolitical instability compare with the past, and maybe also as a leader, how are you guiding your employees through these challenges, please?

 

LOIS ZABROCKY

Yeah. I would say, many, many things change and many things stay the same. Right? So I think, you know, even in my brief time being at sea, you know, it imparts into you a real respect for the seafarer and living conditions and understanding, you know, you have these trusted colleagues that are really running the company’s greatest assets - remotely, by the way. You know, so I think it's so important, to never forget the seafarer, and that remains the same.

 

I think the complexity only becomes greater and greater. And if you think about through the decades, you know, we went from single hull vessels to double hull vessels. We survived the, you know, financial collapse. So you see all these impacts on - specifically for us - the tanker market, the broader shipping markets, you know, the impact of greatly fluctuating demand, economic conditions, and through that all, we're going to deliver the oil. And that never changes.

 

I think as we look forward, it always seems like today's challenges are greater than what we've ever faced before. But I would say that the difference. But when we look forward at the horizon today is more exciting because okay, what will the trajectory be of reduced oil consumption in the world and what will that look like? And we want to be able to plan for that as a society and as a company.  

 

 

KNUT ØRBECK-NILSSEN

Great, great.

Lois, we both spoke at CMA shipping earlier this year, and you were asked what your priorities for business and operations are for the medium and also the longer term. Could you please reshare your thoughts on this for our listeners, please?

 

 

LOIS ZABROCKY

Absolutely, Knut.

So we look at our fleet on the water today, and of course, what we want to make sure is that we are planning to reduce our emissions on that existing fleet and lengthen the life of those vessels as much as possible. So today, we have a plan to go forward five years and really look at the trajectory of our emissions and what are all the available opportunities for us to decarbonize.

 

And that involves Mewis ducts, that involves advanced hull coatings, that involves really everything that's available today, including, you know, increased bottom cleanings, and if you look at in the past, you'd have to wait six months and kind of get some data and say,’ oh, look, that ship's not performing well’ and all of those timelines are shortening and that allows for us to take initiatives and really try to keep that fleet operating properly.

 

And then we look forward to, okay, we want to, you know, we are going to build some ships. We have a depreciating asset base. Well, what does that look like? And then you look even further forward and you say, ‘okay, well, what are we going to be carrying’?

 

Because all of this is evolving and changing. So I, you know, I think that, you know, all of the challenges and opportunities on the horizon can keep us all pretty busy for some time.

 

 

KNUT ØRBECK-NILSSEN

Certainly transformations taking place!

 

And if we turn now to more the topic of safety and security – you mentioned the seafarers earlier on and as we’ve alluded the maritime industry is undergoing significant and positive shifts in digitalization and decarbonization. But we all know that it's about safe decarbonization. And, and that's where the seafarers come into the picture significantly.

 

And how have you cultivated a strong safety culture at International Seaways, and how do you ensure safety is prioritized at all levels and in all areas of your business?

 

 

LOIS ZABROCKY

So, you know, this is a constant work in progress. And I think one of the things, when we talk about the safety, the seafarers, you know, you have the complexity of the fuels that we're burning, the complexity of the cargoes that we're carrying, and in some cases - I'll use an example of ammonia - there's a very rigid protocol that will be need to be followed because I think that education for the seafarer and really having very, very strict protocol is going to be critical to make sure that we can keep our seafarers safe.

 

And I would say that, you know, for us, we're constantly working on raising the awareness of safety to the extent where every time we have our town hall meeting on Fridays, we start with a safety moment, you know, and this is just flowing.

 

It's in my goals, it's in my teams goals. It flows throughout all of our meetings and has become really a priority. And we look at it that if we want our seafarers to be starting their day with the safety moment, toolbox exercises, stop the job when they see that there is danger afoot. We have to do it here, too.

 

And at first it's interesting. You feel a little self-conscious. And then pretty soon everybody's coming with safety moments and educating all their colleagues. And I think it really becomes embedded in the culture. Just takes a little bit of time. But this for us is really, really constant.

 

And, you know, it's the same thing, you know, when you're on the airplane and you know, they want you to focus, trust. Everybody's putting on their seatbelt these days because, you know, and but that should be before, during, and after you have incidents.

 

 

KNUT ØRBECK-NILSSEN

You mentioned how you could utilize data with a shorter timeline these days due to digitalization. And as we know, digitalization is becoming a key transformative force in the shipping world and connectivity and system integration also expose ships to growing cyber risks.

 

Now, cyber criminals are constantly looking for loopholes in communications or tracking systems, which they can use to hack into networks. And in your view, how critical is cyber security for the maritime industry?

 

LOIS ZABROCKY

Absolutely critical. Absolutely critical. And we know today, and there has been press on that, you know, so let's just start with the vessels, our ships at sea and, you know, you have systems being spoofed. You have impact upon your seafarers and so we've raised that to the extent where our CIO has to have an inventory of all the computers that he's responsible for in the universe, at sea and ashore, and become aware of and educate both at sea and ashore of okay, well, what will we use, you know, systems and we don't want to download software that's that could be potentially infected and the simplest method for the, you know, basically fishing and trying to cause human error is something that we see. So from top to bottom we have the constant, penetration testing where, you know, they're trying to trick you, you know, and you have to make sure that you're not the one being tricked.

 

And I think it's going to get worse because pretty soon they're going to take this video and podcast, and they're going to be able to use our voices. And, you know, when the cyber criminals come, they often they'll say, okay, you know, let's take the CEO and make a request for funds, etc. Right? So it's becoming more and more sophisticated and we've got to keep running hard to try to make sure that our defences are up.

KNUT ØRBECK-NILSSEN

Exactly. And as you say, it's developing fast on the on the criminal side. And, but fortunately, we can also use some of the same tools to improve our defences, which is a good thing.

 

Now, turning to decarbonization. So this is the grand challenge, I believe, of our time. And, given the urgency to reduce emissions and achieve full decarbonization in line with the global climate goals, and not least also the IMO ambitions. How does your company plan to contribute to this transition, please?

 

LOIS ZABROCKY

This is in constant evolution. So, you know, we are a service provider, and the relationships that we have with our customers. The oil tanker business is pretty commoditized and what we are really working is to deepen the relationships with our customers. Because you can see that a lot of this is going to require collaboration and working with long term customers, long term partners, because you have this combination of technological advances that need to come into play.

 

You have a lot of first generation technology and is it going to handle it, you know, be able to hold up over the long term? So I think that for us, you know, we are, we have to move the company forward. We have the three dual fuel VLCC’s we're looking at, you know, on our LR One new buildings. They do have a certification from DNV for conversion to LNG. And we're looking at this when we did that project, we said, okay, in order for us to order these vessels, we can't order them on the economics or the price at the shipyard. We have to order them on that price, plus an investment to convert these vessels, because, again, you're building assets for a 25-year life in a ten minute world.

 

And I do believe that there will be incredible innovation that will come to us, and we're going to have to be able to do that very responsive pivot. So we're constantly looking at, okay, we want to, adapt. And one of the things I think is great in the maritime world is that from a technology perspective, you have, I say all the engineers, and there's more than just engineers, but they share, ‘okay, this is what works, this is what doesn't work’, because we're going to have to have that level of collaboration. We're all highly competitive, and yet in order for us to decarbonize at the pace that's going to be required, we better share all of our learnings. Otherwise, we're going to hold the industry back.

 

 

KNUT ØRBECK-NILSSEN

Sure. I want to come back to the sharing part and the collaboration part in a minute.

 

But you mentioned your customers and your customers say ambition or willingness to take part in this. And a lot of factors are driving decarbonization, including regulations, naturally, but also investor and end consumer demands and in your line of business, what would you say is the biggest driver and why?

 

 

LOIS ZABROCKY

So to me, this is a multi-part response. And, you know, the bottom line is society because you can have your intellectual understanding of where you're trying to go, and then it has to eventually line up with the pocketbook, because society - all of us collectively - will bear both the reward and the cost of decarbonization.

 

So, you know, I kind of look at it like, truly money drives the world. It also drives innovation. So if you can put great minds to work and they say, ‘okay, you know, hey, this is something where I can see that I'm going to do good for the planet, and I'm going to potentially be able to make a profitable return, and all of this is going to advance society’, I think that's where everything kind of comes together. So, you know, we've got regulation, we've got an overlay of financial considerations, and on top of that sits what society will drive.

 

 

KNUT ØRBECK-NILSSEN

Perfect.

 

You talked about innovation, now you talked about sharing, about collaboration. This leads me to my next question that now the maritime sector's journey towards decarbonization is quite complex and will demand that global stakeholders work together. And how important do you see collaboration and not least trust between industry leaders and the wider industry being to achieve its goals?

 

 

LOIS ZABROCKY

Well, I think the trust is the cornerstone of every relationship. Right? So one of the things I would love to see would be, okay, here's, you know, yes, everybody says, okay, here's where you want to get to and yet how we're going to get there is incredibly ill defined, largely because technologically it's challenging, investment wise, it's challenging. You know, there's multiple layers. So you know, it'd be wonderful if we all had one boss. Right? So the boss says ‘get here’. But the reality that we understand is, okay, the EU comes with their own scheme and IMO, which sort of governs all of us in the maritime world, comes with their plans, our financial providers have ideals of the targets they want us to meet. So you have many, many different constituents. And each one of these is critical, not to mention your shareholders. Right? Because if you're not serious on your intent, your actions won’t follow.

 

So for us, you know, we have to really start with, okay, there's a commitment here, and then how are we going to get there. And everybody is going to have to work together.

 

Although you know, I was asked, well do you think that maritime is going to meet 2030 and then 2050. And I say 2030? Yes. To me that's something tangible. We can see it and we're coming at it. 2050 I think will also be a yes, but for different reasons, which is, I don't think yet we have all of the solutions in place that will come to bear in the next coming decades.

 

KNUT ØRBECK-NILSSEN

And in a way, that's a good thing, right? We can stay optimistic and hopeful. And also we can, you know, have the new technologies coming into play.

 

So, talking about new technologies. So already you mentioned about digitalization, about certain, you know, operational efficiencies that you can have, which could help drive the decarbonization efforts and, technology like artificial intelligence, automated processing and real time analytics have received tremendous attention lately.

 

And it is sometimes difficult to distinguish between what is hype and what is truth. And how is your company approaching these new technologies and potentially integrating them into your business operations?

 

LOIS ZABROCKY

So, you know, we had a meeting yesterday, right? It was just, you know, a meeting of our senior management with our CIO leading and one of the projects that he's embraced for us - because he is very senior in his role - is a review for us every year of our major softwares. Okay, who you know, what are we looking at? What are we paying for? Why are we using them? And we were going over our accounting system.

 

And then we advanced the second part of that conversation to how will and how is AI already affecting each area of our company. So this is just one area. And, you know, we will have, a monthly, monthly meetings right where we're going to come together and talk about, okay, you know, how do we foresee that we can more extensively use AI to drive efficiency and just to keep up with the world?

 

Because I do believe that it will change how we do what we do in pretty much every area, whether that's finance, accounting, commercial operations and on board. You know, one of our first AI projects is, we have our young sustainability engineer who's managed to gather a couple hundred thousand documents, which you need huge databases for AI to trawl through to become effective and we've been asked okay, well, let's come up with real life questions around decarbonization that we can then extract from the database. And we can do a beta test of okay, is this, you know, is this going to be of great value to us? So instead of me, you know, writing over to Leena and saying, oh, you know, what is the latest methanol project? You know, we're going to be able to do that, we believe, with the use of an AI instance in this specific case and then trying to advance our knowledge base with the goal of being able to implement and move forward more quickly on our decarbonization tenants and projects, etc.

 

KNUT ØRBECK-NILSSEN

Great. And I think these new technologies are certainly having a resonance with the younger generation. So obviously, it's going to be very attractive for them to dive into some of these new technologies.

 

And that sort of leads me to my last question, Lois, on this podcast, and your experience and passion for the maritime industry is unique. And, starting as a third mate and now the president and the CEO of one of the largest tanker companies in the world, and, you know, thinking about the younger listeners and the new entrants to our industry, what advice would you give to a young person with ambitions to follow in your footsteps and really get to the top?

LOIS ZABROCKY

You know, I think that this is a great industry for young people to come into and to not be like, ‘oh, you know, shipping is very old school’ because we're so ripe for disruption.

 

And so I think young people can, you know, they're very passionate about making a difference. And they have high expectations and they're motivated differently than you know, certainly my generation. I think that they will save us and really, if you apply yourself, I think in specifically, you know, for me, our tanker industry, you know, you've got to seek out your opportunity and there is, when I was young and I looked at these people, I thought, ‘oh, wow’, they must have had it preordained because their success, seemed so great and their path seems so clear. And as I've gotten older, I'm like, I don't think there's a lot of preordained outcomes here. I think that people, very sharp young people sit down, they dig in and they say, ‘ah, I can make a difference’. And when you bring that attitude to bear, you will make a difference. And I think that tankers, shipping, our whole industry in maritime needs that.

 

So my other thing is, you know, bring your passion and be very persistent because it is not like this - your career is not just a linear ascent. You know, all of us have, different considerations, you know, that happen to us along the way and it could be it could be your company, it could be you personally, and you just really stick at it and be very persistent and I think at the end of the day, however, you define success, that you will realize that.

KNUT ØRBECK-NILSSEN

Great insights. Yeah. It's a great opportunity for young people in our industry, Lois.

 

I want to thank you so much for taking part in the podcast and sharing your views and reflections. And it's been, as always, a true pleasure to talk to you, Lois. Thank you very much.

LOIS ZABROCKY

Thank you very much. And, you know, we very much appreciate the privilege of partnership with DNV and you celebrating all of your success for over, for now, 160 years. Is that correct?

KNUT ØRBECK-NILSSEN That's right. Yeah.

LOIS ZABROCKY Yes. Thank you so very much.

KNUT ØRBECK-NILSSEN Thank you. Lois, take care.

REMI ERIKSON

You've been listening to Trust and transformations - leaders navigating change, a DNV podcast. Head to DNV.com to hear more episodes of Trust and transformations or subscribe on your favourite podcast platform so you'll never miss an episode. Thanks for listening.