BW LPG, ADNOC enter 1st LPG bunker supply deal in the Middle East

Singapore-based owner and operator of LPG vessels BW LPG has inked an agreement with UAE’s energy giant ADNOC for the supply of liquefied petroleum gas (LPG) as bunker fuel.

BW LPG said that the deal marks a notable milestone as the Middle East’s first dedicated LPG bunker supply contract.

The inaugural vessel to utilize LPG as bunker fuel under this agreement is the BW Volans. The bunkering took place in Ruwais, Abu Dhabi.

The company has 15 VLGCs retrofitted to LPG dual-fuel propulsion technology in partnership with German engine manufacturer MAN ES as part of its decarbonization strategy.

BW LPG expects that LPG propulsion to lead to an estimated 97 percent reduction in sulfur oxide emissions, as well as substantial reductions in particulate matter emissions (around 90%) and decreases in carbon dioxide and nitrogen oxide emissions (about 20%).

Efficiency gains have been identified as another advantage, with output efficiencies expected to improve by approximately 11%.

However, the unconventional nature of LPG as a bunker fuel has necessitated the establishment of new terms with industry stakeholders, including customers, suppliers, and oil majors, to establish a reliable LPG bunker supply network.

In related news, BW LPG Limited has completed a private placement involving the sale of 8,400,000 shares by BW Group Limited, representing approximately 6% of the company’s outstanding shares. After this transaction, BW Group Limited retains ownership of 34.58% of BW LPG Limited, equivalent to 48,407,126 shares.

The seller has agreed to a customary 180-day lock-up arrangement with the Managers (DNB Markets, Fearnley Securities, and Pareto Securities) for the remaining shares.

Kristian Sorensen, who took over the role of CEO of BW LPG on October 1, was allocated 1,200 shares in the offering.

“Although shipping remains our core business, BW LPG has over the last years significantly broadened our scope of activity across the LPG value chain and we are well positioned for future growth. In 2023, our shipping business started the year by delivering the highest historical daily TCE on record with US$60,900 per available day. Together with our partners, our expanded VLGC pool allows us to capture value in the buoyant market, our India business continues delivering steady returns, and our Product Services business is developing nicely. We are seeing sharp improvements in the uptime on running our retrofits on LPG, which is providing significant fuel savings and reductions in CO2 and other emissions,” Sorensen said.

“In this favorable market, we continue to generate substantial free cash flow and our balance sheet is rock solid. Reflecting this, we did a share buy-back through a reverse book building process in June, and we continue to return capital to our shareholders through attractive dividends. For the first half of 2023, we will have distributed nearly NOK 20 per share. This equals an annualized dividend yield of about 30 percent.”

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