25/11/12
Q&A: Asyad says ageing fleet to offset sanctions lift
Abu Dhabi, 12 November (Argus) — Oman's state-owned logistics arm Asyad expects
only a limited long-term impact from any potential lifting of international
sanctions on Russia, citing an ageing global tanker fleet and steady oil demand
that should keep the market balanced. Speaking to Argus on the sidelines of the
Adipec conference in Abu Dhabi, group chief financial officer Muhsin Al Rustom
said the company continues to navigate through geopolitical uncertainties
through a diversified portfolio while pursuing a $2.3bn–2.7bn fleet expansion
plan over the next five years. If the Russia–Ukraine situation de-escalates and
sanctioned vessels rejoin the fleet, how might that affect current fleet
dynamics and shipowners' revenue? I believe there are always both risks and
opportunities when it comes to sanctions, whether it's Russia today or Iran.
However, we can't look at sanctions in isolation from the broader dynamics of
the aging global fleet. For instance, in the oil tanker segment, the number of
new vessel deliveries over recent years and those expected in the next three to
five years, is less than half of the actual market demand. At the same time,
more than two-thirds of the existing tanker fleet is between 15 and 20 years
old. This ageing profile, combined with stricter IMO [International Maritime
Organization] regulations on sustainability and carbon emissions, will likely
accelerate fleet recycling and demolition. While the immediate lifting of
sanctions could have some short-term market effects, in the longer term, demand
for oil and tankers remains strong, and the limited supply of new vessels will
continue to support the market balance. How does the group navigate through
challenges that come from geopolitics, economic uncertainty and inflationary
pressures? We are not new to these kinds of challenges. Even before pandemic,
there were plenty of geopolitical risks that we had to navigate. The pandemic
brought its own set of challenges but it also opened up new opportunities for
us. We rely a lot on Oman's strategic location and the country's political
neutrality, which certainly help us manage such risks. But the key factor is
really the diversification of our business portfolio. For example, during Covid,
when China adopted its zero-Covid policy, it created an upside for the group's
ports and dry-docking businesses, as many shipowners chose to come to us
instead. Later, when China reopened and the Red Sea closure affected the group's
ports, our freight forwarding, inland logistics and shipping businesses
performed very well. So, it's really this diversification across our operations
that allows us to stay resilient and weather challenges effectively. Could you
give us an update on the Asyad Shipping IPO and how investors have responded?
Are there plans for any additional equity offering? Asyad Shipping is a
well-established and diversified shipping company. Shipping is inherently
seasonal and cyclical, which often limits the pool of financial and
institutional investors. We addressed this by building a diversified vessel
portfolio across oil and gas, containers, dry bulk and other segments. We
focused on long-term earning capacity, selecting A-rated customers, securing
long-term contracts and maintaining revenue backlog. This approach made the
offering attractive. By engaging with the right banks and investors early, both
regionally and internationally, we secured the right type and size of
investment. The share price has performed well post-listing, attracting a
sizeable number of international investors. Since the listing, we've added over
$800mn in market capitalisation. While additional offerings are potentially in
the pipeline, we will announce them as plans materialise. You plan to add
approximately 30 vessels by 2029. What market signals or demand trends are
influencing this expansion? The expansion over the next five years is a mixture
of both fleet renewal as well as growth. Asyad focuses on maintaining a younger
fleet for purposes of increasing operational efficiency and achieving its ESG
[environmental, social and governance] targets. Modernisation programmes will
replace older vessels with younger, more efficient vessels which will yield
higher returns, drive ESG gains and better position the company in the long
term. We also work with A-rated customers who also have specific requirements
and expectations regarding ESG and carbon emissions. Additionally, diversifying
our shipping portfolio allows us to tap new markets and mitigate risk. Demand
for oil, refined products, and chemicals is cyclical and these segments don't
always move in the same direction or follow the same market cycles. That's why
diversification across different segments is so important so that you are better
positioned to weather the downturns in any one specific area. With very large
crude carrier ( VLCC) rat es on the rise, how is Asyad Shipping planning to
capitalize on this trend? Are there plans to expand your fleet with additional
VLCCs? Yes, we are actively expanding in the tanker market. This year, we took
delivery of two VLCCs. Additionally, we invested in four new builds, which are
due to be delivered between 2026 and 2027. We know that demand for oil is
expected to remain strong over the next decade or two, so our investments are
aligned both with fleet renewal and long-term market demand. While there has
been a recent spike in VLCC [freight] rates, partly due to the oil market being
in a contango phase, we focus on long-term strategy rather than reacting to
short-term fluctuations. Our commitment to the tanker market remains steady. We
also have a robust hedging policy, and a significant portion of our fleet is
under long-term contracts. This ensures that, even if there is a market
downturn, we are well-positioned to weather it while continuing to benefit from
favourable market conditions. How do you expect the dry bulk market to develop
in the coming years, and are you planning to grow your fleet or add new carriers
in response? Oman is aiming to grow its export activities, particularly in iron
ore, gypsum, and other commodities. Oman is the world's largest exporter of
gypsum and among the leading exporters of limestone. The dry bulk segment is an
important part of our portfolio and we are very much long-term investors in the
dry bulk market. This year, we invested in acquiring three Newcastlemaxes, due
for delivery in the first half of 2026. Given the critical role of LPG and
ammonia in the clean energy transition, do you have plans to increase your
exposure or investments in these markets? Definitely, it's very much part of our
plan. We already export both LPG and ammonia, and this aligns closely with
Oman's broader clean energy ambitions. Oman is uniquely positioned with abundant
land, sunlight and wind, making it an ideal location for green hydrogen
production. The country has set an ambitious target of producing up to 1mn t of
green hydrogen by 2030. Asyad has been designated as a national champion for
hydrogen and ESG initiatives. Currently, Asyad Shipping transports conventional,
or "brown" ammonia, but as Oman transitions towards producing more green
ammonia, we're fully ready to support that shift. We often say our vessels are
"colour-blind". Today they carry brown ammonia, and tomorrow they'll carry green
ammonia. The transportation element is already in place, so as Oman scales up
its green energy exports, we're well-positioned to enable and support that
transition. What are your capital allocation priorities across your diverse
portfolio for the next three-five years? As a group, our operations span several
verticals within logistics, including freight forwarding, shipping, dry docking,
ports, and free zones. Over the next three to five years, our strategy focuses
on recycling capital from mature businesses into newer or less-developed areas
where we aim to offer more integrated logistics solutions. Essentially, we
prioritise investment in areas where we are present but not yet as strong as in
our core verticals. We pursue growth both organically and through acquisitions.
M&A [mergers and acquisitions] plays an integral part and the strategy is very
much to have a balanced and diversified revenue streams. For Asyad Shipping, we
are looking to expand our business and fleet. We are targeting a fleet expansion
plan of between $2.3bn-2.7 bn over the next five years from 2025, across all
segments. By Rithika Krishna Send comments and request more information at
feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights
reserved.
