TEN eyes more dual-fuel ships

Greek shipping company Tsakos Energy Navigation (TEN) is accelerating its fleet modernization efforts as it seeks to invest in greener ships.

The company said it was looking into divesting some of its older vessels and replacing them with more modern, eco-friendly vessels.

The strategy builds upon the recent sale of the 2003-built Panamax tanker Inca, which generated $8.5 million of free cash.

“We will only be looking at dual-fuel newbuilding vessels going forward,” George Saroglou, COO of TEN, said in an earnings call. “We know that with the inflation the value of those assets would be increased, and we will be looking at ordering those ships together with one of our clients, with whom we are currently discussing the deal, as we have done with the previous order.”

TEN has four remaining newbuildings scheduled to start delivery in the fourth quarter of 2023, which are part of the company’s LNG dual-fuel Aframax order. All four newbuilds have already secured long-term charters. The order was placed last year with South Korean shipyard Daehan Shipbuilding, covering four Aframax crude oil carriers and two optional LR2 petroleum product carriers. 

The company also has a 2020-built VLCC fitted with a scrubber that will be delivered by November 2022. The South Korean-built crude carrier was bought last June.

With the delivery of the DP2 Shuttle Tanker Porto in July 2022, TEN has a fleet of 70 double-hull vessels, including the newbuilding Aframaxes and the scrubber-fitted VLCC yet to be delivered.

Saroglou added that based on the supply-demand market fundamentals ‘one cannot have enough vessels’, especially seeing that the demand for tankers is set to rise, while the orderbook stands at historic lows.

Specifically, the total newbuilding orderbook stood at 4.25% in August 2022 vs. 10.2% in 2018 and 22.3% in 2010. In practice, this indicates that 234 tankers are set to join the fleet over the next three years. Some 1,797 vessels in the existing fleet are over 15 years old and they are likely to become scrapping candidates together with the 9.0% of the current fleet which is over 20 years old, further exerting pressure on the supply side.

Global oil demand is expected to reach and pass the pre-pandemic levels during the second half of this year hitting 101.5mbpd in 2023. OPEC+ has restored all pre-pandemic production caps when global oil stocks are below five-year levels. China and India are expected to continue to play a significant role in oil demand recovery in 2022 and beyond.

The war in Ukraine is redrawing the global energy map adding to significant tonne-mile growth for both crude and product tankers, Saroglou said, commenting on the market outlook.

As explained, trading dislocations created by current geopolitical turmoil should be additive to tanker freight rates and asset prices.

During the first half of 2022, TEN reported a net income of $51.7 million, an increase of 311% from the 2021 first half. The demand recovery was assigned to unexpected geopolitical events that unfolded in the first quarter of the year, leading to dislocations in global trading patterns that boosted all regional and international tanker trades and created a long-term energy shift.