Frontline’s exit clears path for CMB’s bold decarbonization agenda for Euronav with ammonia and hydrogen at the helm

The latest agreement between Belgian shipping major CMB and its Norwegian counterpart Frontline signals a new chapter for tanker owner Euronav, one that holds the promise of resolving long-standing disputes and steering the company toward a more diversified and sustainable future.

Specifically, CMB and Frontline have reached an agreement that aims to end the deadlock in Belgian tanker heavyweight Euronav.

Under the deal, CMB is set to become Euronav’s majority shareholder with 49.05% ownership of the company’s issued shares, translating to a commanding 53% of voting rights, and a mandatory takeover bid planned for later this year.

On the other hand, Frontline will purchase $2.35 billion worth of vessels from Euronav, paving the way for the termination of the announced arbitration process and marking a significant step in resolving Euronav’s ongoing disputes and strategic transformation.

With the agreement in place, CMB has laid out a strategic plan for Euronav, centered on three key pillars: fleet diversification, decarbonization, and optimization.

First and foremost, CMB wants to reduce Euronav’s dependence on the crude oil transportation segment by diversifying Euronav’s fleet.

“This does not mean exiting the tanker business altogether, but a gradual decrease of the share of revenues coming from pure crude oil transportation by adding different shipping asset types to the Euronav portfolio,” CMB said.

This diversification will include acquiring second-hand future-proof tonnage, ordering newbuildings, and potentially adding part or entire CMB and CMB.TECH’s future-proof fleet to Euronav’s portfolio, with a focus on low-carbon emitting ships, hydrogen and ammonia-powered ships.

CMB and its arm CMB.TECH have a massive fleet under construction which is set to ply the seas running on ammonia and hydrogen.

According to the company’s fleet data, CMB has twenty-four Newcastlemax bulk carriers under construction at the Chinese Qingdao Beihai Shipyard.

The first four ships from the batch are described as Super Eco bulkers powered by engines from MAN Energy Solutions, with two already delivered earlier this year and two more set to follow in early 2024.

The orderbook includes ten ammonia-ready 210,000 dwt bulkers, six of them to be powered by MAN’s highly-anticipated ammonia two-stroke-engine slated for delivery in late 2024 and four set to feature WinGD’s ammonia-fueled engine that is planned to enter the market in 2025.

CMB has teamed up with Ocean Yield on the construction of the ammonia-ready Newcastlemaxes under a 15-year bareboat charter deal.

The remaining ten Newcastlemax newbuilds will be fueled by NH3, with ammonia-fueled engines incorporated during the very construction phase. Notably, WinGD is set to spearhead the development and installation of the ammonia dual-fuel X72DF engine on the ten-strong fleet of 210,000 dwt bulk carriers earmarked for CMB’s sister company, Bocimar.

Qingdao Beihai is scheduled to deliver the final bulker from the batch in May 2026.

The deliveries coincide with the anticipated readiness of ammonia-fueled engines as major engine manufacturers like MAN and WinGD commit to having the essential components for ammonia-fueled ships ready by the end of 2024 and 2025, respectively.

What is more, CMB has four 6,000 TEU ammonia-ready containerships under construction at Yangfan Shipyard, intended for a charter with French liner giant CMA CGM.

The first vessel from the series, CMA CGM Masai Mara has already been delivered.

Finally, the Belgian industry major also has six ammonia-ready chemical tanker newbuilds in its fleet, two of them delivered earlier this year and four intended for completion in 2024. CMJL Dingheng has secured the shipbuilding contract.

Under its arm, CMB’s affiliates have ordered three hydrogen-fueled commissioning service operation vessels from Damen Vietnam slated for delivery in 2025. The company also operates 75 crew transfer vessels.

Recognizing the importance of low-emission ships, CMB plans to invest significantly in green technology, low-carbon engines, fuel supply systems, and the production of low-carbon fuels, positioning ‘Euronav as a leader’ in the decarbonization of the shipping industry.

The company said that it would divest less efficient or older tankers from Euronav’s fleet while reinvesting the proceeds in modern vessels and technical upgrades such as energy-saving devices.

“CMB wants Euronav to play a leading role in the decarbonization of the shipping industry and be the reference shipowner when it comes to green ships,” the company said.

Subject to the successful completion of the transaction with Frontline, CMB is exploring options to allocate a portion of the vessel sale proceeds to expedite the realization of its decarbonization vision.

CMB’s latest vision for Euronav paints a clear path for the company’s future which has been battling with a lot of headwinds following the botched merger with Frontline, including the departure of its CEO Hugo De Stoop, who led Euronav for nearly two decades.

The company now faces a crucial juncture on the decarbonization front.

Choosing the fuel of the future has been a paramount concern, and Euronav has taken a prudent approach in this regard, initially considering LNG. However, with recent market shifts, it becomes evident that carbon-free fuels are gaining momentum.

The evolving landscape, where dual-fuel methanol and ammonia are emerging as contenders, has prompted Euronav to take a more forward-thinking strategy, as exemplified by its recent orders for methanol and ammonia-ready Suezmaxes from Daehan Shipbuilding Co.

In total, Euronav has four newbuilds on order, according to its company data, including two Suezmaxes at Daehan and two Suezmaxes at Hyundai Samho Heavy Industries, all scheduled for delivery in 2024.