FSRU operators are seeking buyers for their HSFO ahead of 2020
What does an operator of an older LNG FSRU on a long-term contract do with the high volumes of non-compliant HFO on board when the IMO 2020 sulphur cap enters into force in nine months’ time?
To put this in context, charter parties typically stipulate that an FSRU, depending on its size, arrive at port with between 500 and 1,000 tonnes of high sulphur fuel on board. Today the price of 1 tonne of HFO is around US$430. Multiply these figures out and it's easy to calculate that operators of larger fleets could be sitting on thousands of tonnes of HFO, worth millions, that they are keen to move on.
An obvious solution is to market the fuel to shipping companies that have installed scrubbers and are looking to boost their inventories of high sulphur fuel. But the obvious solution is not necessarily a straightforward one.
Many FSRUs are stationed in remote parts of the world that lack either a bunkering market or the infrastructure to debunker. Often these vessels won't leave their current positions until well after 2020.
The fuel on board is going to be non-compliant HFO and owned by the FSRU operator or charterer. Most charterers are going to be extremely reluctant to see their share of the fuel simply burned off.
The FSRU operator's options appear somewhat limited. Where the charterer is a national oil company with refining capacity there may be the possibility of that client taking back the fuel. Otherwise the FSRU operator faces having to either burn the HFO or pay to debunker the vessel, clean the tanks and then find suitable replacement fuel in locations where the alternatives are not very good quality or available in quantity.
For enterprising companies, the FSRU operators' dilemma could be an opportunity to acquire significant volumes of high quality HFO at a steep discount. Any such deal of course will hinge on the ability to overcome the logistical challenges in obtaining it.