Euronav CEO: We don’t want to make a bet on a specific future fuel

Being a front-runner, especially in the shipping industry, comes with a lot of risks. Being the first to enter a market or introduce a new product or service can give you a significant advantage over others, and even set the tone in the market. However, there is a great risk of failure bringing with it a high financial burden.

For shipping companies that want to decarbonize their operations, this brings a lot of challenges especially due to the ongoing uncertainties involving the availability and production scale-up of alternative fuels.

“What we are thinking at Euronav is whether there is an advantage of being a leader and a first-time owner of a particular type of ship. In our category, it could be a methanol dual-fuel vessel,” the CEO of Belgian tanker shipping major Euronav, Hugo de Stoop said.

Euronav recently booked the construction of Suezmaxes which are both methanol and ammonia-ready from South Korean shipbuilding firm Daehan Shipbuilding Co. The new 157,310 DWT ships will be sister vessels to Cedar and Cypress, which are also built at the yard.

The eco-Suezmax tankers will be fitted with both exhaust gas scrubber technology and ballast water treatment systems.

They have the structural notation to be liquefied natural gas (LNG) ready, with both partners working closely to also have the structural notation to be ammonia and methanol ready.

“We are continuously working with the yard and we have a joint development program with Hyundai Heavy Industries (HHI) to add on as much technology as we can on those ships upon delivery, so they are not completely dual-fuel ready but converting them is very likely in the future,” de Stoop added.

Euronav’s CEO explained the approach as prudent saying that at this point “we don’t want a make a bet on a specific fuel.”

“If you look at the previous 18-12 months, everybody was saying that it would be LNG and not anything else. And, suddenly the wind shifted and now you see more orders coming for dual-fuel methanol, and it is likely that in two to three years down the road it’s gonna be dual-fuel ammonia,” he added, noting that putting all eggs in one basket was not prudent.

The container shipping sector has been blazing the path in the ordering of methanol-powered vessels, accounting for more than half of the orderbook, spearheaded by Maersk, CMA CGM, and COSCO.

As explained by de Stoop, methanol has a future and the demand will spark the development of the necessary infrastructure. The company is, nevertheless, keeping a close eye on the developments regarding ammonia as a fuel for ships.

The tanker shipping market is experiencing the lowest orderbook in the last 25 years paving the way for the large crude tanker market to continue a multi-year upcycle. Some of the key factors keeping the orders at bay are high prices and constrained shipbuilding capacity which is likely to remain in place until 2025 and 2026.

“Noone is ordering tankers due to high prices, regulations, and timed delivery schedules as shipyards are not able to deliver tankers until 2025-2026. New operational regulations will also put curbs on older tonnage. The vessel supply situation appears to be locked in,” de Stoop said.

“The reason behind such a thin orderbook is that we didn’t have the market allowing people to go to the shipyards with the cash they secured early in the market. Now, the picture is a little bit different as yards have been populated with many orders from other segments, including gas and container shipping.”

At the moment there is a big impetus to hold on to older tonnage due to tight supply and high rates. However, Euronav’s head doesn’t believe that tanker owners would rush all at once to order new ships once incentives for fleet renewal become more prominent. Commenting on the constrained shipbuilding capacity, de Stoop is convinced that the shipbuilding industry will find a way to produce enough ships when they are required.

Belgian tanker shipping company Euronav is eagerly anticipating the decision on emergency arbitration against Frontline set for next week (February 7). The decision will shed light upon which clauses from the combination agreement signed in July last year need to remain in place before a decision on the merits of the agreement termination is made.

In the meantime, Euronav is not able to return capital to shareholders in full as it has to abide by the combination agreement’s clause on a maximum of dividend payments (Euronav USD 9 cents per share total, Frontline USD 15 cents per share total) until the settlement of the exchange offer.