International Seaways chief executive Lois Zabrocky has explained how the fuel choice for its new VLCCs — and charter backing from Shell — is enhancing financing options for the vessels.
Earlier this year, the US company joined Advantage Tankers and AET in ordering 10 VLCCs at Daewoo Shipbuilding & Marine Engineering, backed by profit-sharing deals over seven years at effectively break-even charter rates with the energy major.
International Seaways is paying $97.5m each for its three tankers.
Zabrocky said: "We are moving forward on being able to finance these to a much greater extent than a conventional vessel without a contract."
Financing could cover up to 85% of the contract price, she told the TradeWinds Tanker Shipping Forum.
"We've been developing multiple sources of people vying to finance these vessels," Zabrocky said.
But even without contract cover, the dual-fuel element has enough appeal and is cutting-edge enough to get a higher percentage of finance, she believes.
Zabrocky put this at "70%, something like that". This compares with between 50% and 60% for conventional vessels.
And, of course, having a first-class charterer makes a difference, the CEO added.
Zabrocky said being able to work very closely with Shell as the customer, and the other shipowners, was a "real opportunity for the company".
Claire Wright, Shell's general manager of commercial and shipping, told the webinar the major wanted to use the best low-carbon fuel available at scale, and this was LNG.
She said efficiency savings of 20% are achievable but depend on engine choice. The new vessels will minimise methane slip, she added.
Klaveness Combination Carriers (KCC) chief executive Engebret Dahm said he did not necessarily agree that LNG is the most cost-effective way of reducing emissions.
But he added that the Shell VLCC deal shows how charterers are willing to pay to reduce their carbon footprints.
He sees his job as making decarbonisation as cost-effective as possible for charterers.
Owners must be encouraged to make the right choices
And Dahm said some form of carbon tax is essential for the industry.
"Without the cost of emitting CO2, the owners will not make the right choices," he added.
The KCC boss said the scope for his company's carriers is "quite considerable".
The vessels can reduce emissions by more than 30% through eliminating ballast legs, as they carry both wet and dry cargoes.
This does not work in all trades, Dahm explained.
But he said: "We're in an early phase. The ships are getting accepted by big names in the industry."
ING's global head of shipping finance, Stephen Fewster, said his bank wants to work with clients who actively engage on decarbonisation issues.
He sees his role as raising the issue with owners, not telling them what to do.
Fewster said that a shipping company happy to trade older ships for the next five years, making a lot of money and then "riding off into the sunset" is "not the client for us".
"We can't as an industry sit around and do nothing," the banker added.
Fewster said the issue of decarbonisation is "looming", but he added that it is an "interesting and exciting" subject.
As a signatory to the Poseidon Principles, ING has committed to revealing its vessel portfolio's environmental performance.
He told the webinar he found it baffling that some owners are not willing to provide the data, which they would in any case give to class societies.
Clients first, assets later
ING has turned away some business as a result, Fewster added.
The banker believes the trick is picking the right client, and then the right assets will follow.
Ardmore Shipping chief executive Anthony Gurnee was asked if the company's joint venture to produce hydrogen as a fuel aboard vessels, using a methanol converter, would make it more attractive to investors.
He said the E1 Marine project "could be worth $3 or $4 dollars a share eventually".
Gurnee described the new company as an asset-light investment, involving $6m in cash.
"But that's not really why we did it," he added.
Gurnee explained the project fits with its long-term decarbonisation plan.
"Investors really do care, but they're looking at what you do and what you say," the CEO added.