If there was one takeaway from the Capital Link crude oil tanker panel during LISW it was that IMO 2020 signals that the industry is in the hands of the regulators
Independent tanker owners have to accept that a large chunk of that independence will be ceded to IMO on 1 January 2020 – that was the impression given by the crude oil tanker panel at the 12th Annual Capital Link Shipping & Marine Services Forum held during London International Shipping Week.
Dr Sterling noted that banks now play an increasingly regulatory role in the make-up of a tanker company’s fleet. Under the Poseidon Principles, a bank will declare the carbon footprint of its portfolio, driving banks toward financing lower carbon emitting tankers. Of course, this is to be lauded, but it does take away flexibility.
Mr Durham was standing in for the company’s found Nikos Tsakos, and while admitting to not being a shipowner himself, he observed that the highly regulated banking sector was imposing regulations on the tanker sector. This seemed to be an extension of banking roles which should be left to IMO.
Mr Burke had a different view pointing out that in the past, the expected life of a tanker was 20 or even 15 years. In contrast, the life expectancy of a railcar was 40 years and an aircraft 30 years. No one ever questions how old an aircraft is before buying a ticket – but 20 years is imposed on the tanker fleet. This stemmed from phasing out the single hull tanker fleet, but he questioned the environmental impact of scrapping and replacing tankers at 20 years old. He pointed out that it takes an enormous amount of energy to produce the 40,000 tonnes of steel that goes into a VLCC, but there has been no environmental study on the impact of such activity.
As per the product tanker panel, the moderator asked the panellists about investment plans. Dr Sterling felt that as this was a crude oil tanker panel, the amount of free money to invest was increased to US$100M.
Mr de Stoop: “I would buy an LNG-powered VLCC.”
Mr Pribor: “We renewed our fleet at the bottom of the cycle at the cost of US$600M and US$50M allocated for scrubbers. If I had another US$100M more it is now time for capital allocation and deleveraging and to return cash to shareholders.”
Mr Burke: “If return on equity is going to be higher for lower risk, as we are being told, then that is what I would do.”
Mr Durham: “Some conferences ago I said we were going to expand into LNG and in a year or two have six LNG carriers. That did not happen. So this time, I would use the money to put a deposit on three or four new LNG carriers. That’s the direction we are going in.”