Dual-fuel propulsion for large tankers becomes mainstream, mentions a Riviera news source.
The latest large tanker contracts
The latest large tanker contracts favour an alternative fuel source, while the Jones Act tanker market is traversing a period of M&A activity.
One-time right-hand man to John Fredriksen during the early growth period of Frontline and other vehicles, Tor Olav Trøim announced a return to the tanker industry in July 2023 with an order for six VLCCs from New Times Shipbuilding. The dual-fuel powered VLCCs are scheduled to be delivered between 2026 and 2027.
Some questions remain over the announcement – not least the alternative fuel, which has not been revealed, leading to speculation that it may be LNG or methanol as it remains a little early to expect an ammonia-powered vessel.
There is also a question mark over the contracting company, UK-registered Magni Partners, which lists only two directors, Mr Trøim and a Norwegian lawyer, Earling Lind. Mr Trøim’s dry bulk shipping investment vehicle, Himalaya Shipping, is listed on the NYSE, and that seems a likely destination for Magni Shipping when the VLCCs enter service.
The six Magni Shipping VLCCs bring the list of dual-fuel VLCCs ordered in the first eight months of 2023 to eight, compared to 15 for all the VLCCs contracts placed. Therefore, an inflexion point has been reached, with over half the VLCC orders in 2023 having alternative fuel.
The primary fuel of the VLCC that Euronav has agreed to purchase off-the-blocks for a reported US$112M is yet to be revealed. The vessel is to be delivered in Q3 2026, with an option for a second VLCC newbuilding to be lifted in the coming two months.
The deal brings into focus the small pool of available VLCCs already on order. So far in 2023, only 18 VLCCs have been delivered, with another six due for delivery this year, according to VesselsValue. The projected total of 24 VLCCs for the whole year will be the lowest for a decade.
And there is only one VLCC due for delivery in 2024. This vessel is under construction at Japan Marine United for an unknown beneficial owner.
A single VLCC is also expected in 2025, due to be delivered from Dalian COSCO for the account of MOL. In 2026, MOL is expected to receive a further three VLCCs from Dalian COSCO, and Dynacom Tankers is due to receive three VLCCs from Dalian in 2026, plus one in 2027.
Sale and purchase events
July and August 2023 also saw two major sale and purchase events take place in the niche US Jones Act sector. In the first, Maritime Partners struck a deal to buy American Shipping Co’s (AMSC) fleet of 10 tankers. The sale will see Maritime Partners’ newly created subsidiary, Project Merchant Acquisition, buy out the shares of AMSC subsidiary American Tanker Holding Co (ATHC). The deal is set to close in October 2023, pending approval by a two-thirds majority of AMSC’s shareholders. AMSC’s board of directors unanimously approved the sale, and AMSC said its two largest shareholders, Aker Capital and DNB Bank – holding 34.61% of the issued and outstanding shares – have “irrevocably and unconditionally agreed to vote all respective shares in favour of the transaction”.
All of AMSC’s vessels that are in the sale are on long-term bareboat charter to two US-based companies, seven with Overseas Shipholding Group and three with Keystone Shipping Co, which operates the vessels in the US Jones Act market.
“We are thrilled to acquire AMSC’s Jones Act business, which is a natural fit for our platform and consistent with our investment strategy,” Maritime Partners co-founder and chief executive, Bick Brooks, said.
“The acquired vessels are critical long-lived assets engaged in the transport of non-discretionary cargo throughout the US. The vessels are employed on long-term bareboat charters with two strong counterparties. This acquisition will nicely complement our existing lease portfolio by diversifying lessee exposure, asset exposure and end market exposure within the protected Jones Act markets. As we look to the future, we are excited about cultivating a lasting and growing partnership with our two new lessees, Overseas Shipholding Group and Keystone.”
AMSC said it will receive gross cash proceeds from the transaction in an aggregate amount of US$249.3M, divided between consideration for the shares in ATHC and repayment of a shareholder loan. The total enterprise value of ATHC, and as such the value of the sale, comes in at US$746.7M based on the company’s balance sheet as of 31 March 2023.
In the second Jones Act tanker deal, Crowley and SEACOR Holdings have formed a strategic joint venture to integrate their liquid energy and chemical transport vessels, operations and related services into Fairwater Holdings LLC.
Fairwater will operate with a fleet consisting of 20 oceangoing, articulated tug-barges and 11 tankers, several of which are under long-term charter. The joint venture will also provide crewing and technical management for 21 additional third-party vessels.
The successful completion of the joint venture is slated for Q1 2024, subject to customary closing conditions and regulatory approval.
Seabulk chief executive, Daniel Thorogood, will assume the chief executive role at Fairwater at closing. The joint venture will be based in Fort Lauderdale with offices in Fairfield, Houston, Jacksonville and Seattle.
Mr Thorogood said: “Fairwater marks an important milestone in meeting the evolving need for safe, efficient and sustainable US domestic maritime transport solutions.”
Crowley chairman and chief executive, Tom Crowley, said: “Through this new joint venture, Fairwater will create more value for customers. Seabulk is an ideal and complementary partner with proven expertise in providing safe, sustainable and reliable maritime results and in driving innovation, much like Crowley.”
Tanker fleet deletions have been almost non-existent in the first eight months of 2023, with only 24 tankers reported sold for demolition. The largest was the 1998-built, 47,200 dwt MR2 tanker Salamis, which was sold to Bangladesh recyclers for US$660/ldt.
It has now been over a year since a VLCC was sold for recycling. The last reported sale was the 2002-built, 299,200 dwt Uranus, which was reported sold in August 2022 for US$620M ldt. According to VesselsValue, there are 77 VLCCs the same age or older than Uranus still live in the tanker fleet.
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Source: Riviera
