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Q&A: Ardmore sees 0.5pc bunkers as feasible 2020 option

03 Jul 2017 20:52 (+01:00 GMT)
Q&A: Ardmore sees 0.5pc bunkers as feasible 2020 option

New York, 3 July (Argus) — Shipowners have taken several strategic approaches to comply with the planned International Maritime Organization (IMO) regulation on capping marine fuel sulphur content at 0.5pc from 3.5pc, starting in January 2020. Argus spoke with Adrmore Shipping's executive vice president and chief operating officer Mark Cameron, who shared his view on the issue, as well as on the tanker market.

Ardmore Shipping is the New York Stock Exchange listed owner of 27 refined products and chemical tankers, which range in size from 25,215 to 49,999 deadweight tonnes. Below is a transcript of the interview edited for clarity:

Maersk announced this year that they will use low-sulphur bunkers to comply with the global marine fuel sulphur cap commencing in January 2020, rather than installing exhaust scrubbers. By contrast, BP said in a presentation that scrubbers are very effective on bigger vessels and it is now looking at retrofitting scrubbers on a large number of vessels in the company's fleet. How will Ardmore comply?

The most feasible option today is 0.5pc sulphur bunker fuel, whether low sulphur heavy fuel oil (HFO) or gasoil. Gasoil appears the most viable at this stage, but we are continuing to evaluate hybrid or HFO options and keeping an open mind.

The price differential will be key, but we do not currently anticipate being heavily reliant on a blended component, largely because of compatibility issues. We have discounted LNG, as we do not believe it is an appropriate solution for Ardmore's requirements, but we do believe that scrubbers may well have a role to play in the industry. However, there is a lack of clarity over the economic rationale at this moment in time and without greater certainty on the return on investment of scrubber technology, we cannot definitively say that this is the right solution. For the moment, our approach is to maintain a watching brief and keep our options open. More generally, there is unlikely to be a one-size-fits-all solution for any one shipping company, let alone the industry, and a combination of scrubbers and low sulphur fuel could be a realistic option for a number of operators.

How many eco-tankers does Ardmore own? What makes the eco-tanker eco? In your quarterly results release you distinguish between "eco-design" tanker and "eco-mod" tanker. What is the technical difference those? Approximately what percent less marine fuel does an eco-tanker burn compared with the equivalent regular tanker?

Ardmore's fleet currently comprises 21 "eco-design" tankers and six "eco-mod" tankers. Our eco-tankers deliver a minimum of a 10pc fuel saving compared to an equivalent non-eco vessel... We give our crew the authority to take the operational decisions that enable them to optimise the performance of their ships.

Does Ardmore have plans to build or is currently building new vessels? Will they have scrubbers or LNG-burning engines installed? Is Ardmore scrapping or planning to scrap any vessels?

We are not currently building any new vessels and have no current plans to do so. Having grown our fleet responsibly to this point, we do not wish to add to net fleet growth in our sector at this time.

Looking ahead, we would only build eco-tankers, and any newbuild decisions would similarly need to balance what the supply-demand balance of the sector can sustain, with the environmental benefits of modern, fuel-efficient tonnage.

We have a very young, modern fleet, with only one ship approaching 15 years old. That ship is currently on track to gain a Condition Assessment Programme 1 rating, which is the highest level of condition. The vessel is very efficient, so we have no scrapping plans.

What is your product tanker and chemical tanker outlook for 2017 and 2018 and why? What are some of the opportunities and threats you see for your chemical and product tanker fleet?

We are confident in the prospects for the product and chemical tanker sectors, given the underlying fundamentals in our market. Although there has been an imbalance in the MR segment, net fleet growth is quickly declining and the orderbook is at a historic low, with the pace of deliveries set to decline further over 2017.

At the same time, there are also plenty of reasons to be positive about the demand growth for our cargoes, which is set to continue at around 4-5pc, driven by increased consumption and export-oriented refinery activity.

The IMO's ballast water convention will enter into force on 8 September 2017, requiring all existing international vessels to install a ballast water management (BWM) system at their next special survey. Special surveys take place every five years and involve a close inspection of the ship, which must be placed in dry dock during the process. The BWM system could cost millions of dollars for each vessel, depending on the vessel size. How many of your vessels are compliant with the ballast water convention, and how will this impact your operations?

We currently have ten vessels with ballast water treatment systems installed. As well as gaining experience in their use and assessing their operational capacities and complexities, we also have a comprehensive plan for retrofitting the balance of our fleet to ensure that we comply with all regulatory requirements at all times.

However, it is a great pity that in a global business such shipping, we have different regional models and regional standards trying to govern the same regulatory issue. This fragmented, uncoordinated regional approach is far from conducive to delivering the global best practice that the whole industry should strive towards.

Delays in demurrage payments have been an ongoing problem for shipping companies. Is there something the shipping industry as a whole could do to prompt oil traders to pay their demurrage fees without delays?

It is disappointing to see some parties treating demurrage as a cheap form of capital. We should encourage everyone to pay on time, as per their contractual obligations and in line with good practice.

Intertanko are supportive of encouraging customers to improve their payment performance and at a time when shipping companies are being asked to apply best-in-class performance, it is not unreasonable for us to expect the same standards to be met in return.