Luis Gronda of global energy and commodity price reporting agency Argus Media on Thursday (19 November) published an interview with Norweigian shipping company Odfjell’s Chief Sustainability Officer, Øistein Jensen on how the company stands in meeting IMO 2050 GHG goals based on its current strategy to reach a 40% CO2 reduction by 2030:
Norway-based shipping company Odfjell SE says it is charting a path to align itself with the industry-wide goal of cutting carbon emissions through a climate plan that it set earlier this year. In this interview, Odfjell’s chief sustainability officer, Øistein Jensen, discusses the company’s strategy to achieve this goal, why it decided to use 0.5% sulphur fuel oil instead of scrubbers on its vessels and how the Covid-19 pandemic has affected it this year. This interview has been edited for clarity and brevity.
How far along is Odfjell in reaching the International Maritime Organization’s (IMO) goal of a 40% CO2 reduction by 2030? What is the company’s goal for cutting greenhouse gas (GHG) emissions by 50% by 2050? How many ships does Odfjell have that run on alternative fuels? How many newly commissioned newbuild vessels does it have? Which of the alternative fuels do you plan to use mostly by 2030 and by 2050 to meet IMO’s regulations: hydrogen, ammonia, batteries, other? Please explain your thinking behind this strategy.
Odfjell has come quite far in achieving the goal of 40% carbon intensity by 2030. Since 2009 we have improved our carbon intensity 30% on our owned fleet and are confident that we will achieve the IMO target. But I would like to point out that the IMO target is related to international shipping, and it is not yet clear how IMO will measure and set the target on a ship basis per segment. Odfjell has recently set ambitious climate targets. See our launch here: (https://www.odfjell.com/about/our-stories/odfjell-sets-ambitious-climate-targets/)
Our goal is to have a carbon-neutral fleet in 2050. We do not have any ships in our fleet that are running on alternative fuel now. This is primarily due to the lack of infrastructure of alternative fuels, which is out of our control. Instead, we have focused on reducing our consumption.
The major challenge for our industry, especially deep-sea shipping, is that there is no commercially available alternative to a combustion engine. Then the major challenge will be to find a zero-emission fuel and build enough infrastructure to provide fuel to the global fleet. So, this challenge has many owners. We follow all energy carriers, but it is a high risk to bet on any of them. We believe that zero-emission is not about technology or fuel itself, it is about zero-emission fuel infrastructure which we do not control. Therefore, we want to keep as many doors open as possible, and fuel flexibility is therefore our strategy.
Odfjell decided to not use scrubbers and is instead burning 0.5% marine fuel in order to comply with the IMO 2020 regulation. How would you assess this decision 11 months after the IMO’s rule began? Do you think other companies in the chemical tanker industry will follow Odfjell and not invest in scrubbers?
The intention of the IMO 2020 was to limit Sulphur oxides (SOx) emissions from ships to improve air quality and protect the environment. SOx is known to be harmful to human health, causing respiratory symptoms and lung disease. In the atmosphere, SOx can lead to acid rain, which can harm crops, forests, and aquatic species, and contributes to the acidification of the oceans.
We believe that this was a good decision to not invest in scrubbers in all aspects. First, we believe that it was not the intention of the regulation to take the sulphur out of the air and let it into the sea through an open-loop scrubber. We also thought that the fuel producers would quickly adapt to the new market and the spread between high-sulphur fuel oil (HSFO) and very low-sulphur fuel oil (VLSFO) would be less than first estimated. Thirdly, we were struggling to make a good business case with the scrubber, given all factors with price, payback time, efficiency, energy use, off-hire, technical complexity, running costs, slop disposal and local regulations, etc.
So far, we have seen very few in our segment deciding to invest in scrubbers, but I cannot guess what others will do.
Has availability been an issue with the lower sulfur fuel or not? Have you had specification problems burning 0.5% sulfur marine fuel this year?
Our organization was very well prepared for IMO 2020, from preparing fuel contracts to ensuring updated procedures and that all vessels were technically ready. Availability has not been an issue for Odfjell. We have seen fewer problems with the VLSFO than we observed with HSFO.
How has the ongoing Covid-19 pandemic affected your emissions reduction plans and goals?
At the start of Covid, we have focused on operations, operations, and operations. But generally, I believe that Coxinhas accelerated activities and focus on environmental, social, and governance (ESG) matters in society. We say that one should never waste a crisis, and I believe that Covid will accelerate ESG efforts and the transition to low carbon in society. For Odfjell, our plans to reduce CO2, continuously focus on safety and efficiency, and achieve our targets are not delayed by Covid. We have decided on new ambitious climate targets during the pandemic.
In one of its quarterly earnings releases earlier this year, the company said that it has yet to experience strong negative impact from the Covid-19 pandemic. Can you explain why? Do you expect the chemical tanker market to remain solvent, or even thrive, in the third and fourth quarters of 2020?
An important element is that we carry a wide range of products serving a wide range of industries globally which makes us relatively diversified as we ship essential products to the global markets; everything from products to the food and agricultural industry to the pharmaceutical and packaging industry. Demand from some industries has been unaffected, some positively affected while some are of course negatively affected. Being dependent on seaborne trade and the outburst of the global pandemic impacting different regions at different times has also stimulated trade, which has led to the demand for seaborne trade not trailing drop in overall end-user demand. While the demand growth trend has been slower, we have been positively affected by a reduction in supply driven by the decline in oil prices where high demand for vessels for floating storage resulted in a supply chain reaction across the tanker industry. We expect to see the usual seasonal slowdown in the third quarter to impact us somewhat and we are not seeing any clear signals that the fourth quarter should not seasonally improve just yet. But we will refrain from giving out any longer-term guidance considering the uncertain environment for the global economy.
Odfjell completed the sale of its stake at the Dalian, China, terminal. Can you say why that terminal was sold? Will the company be investing in other terminals?
Odfjell continues to be fully committed to its presence in storage. The sale of OTD was part of a broader restructuring of our terminal platform, whereby we will focus on terminals in global chemical hubs where we have either operational synergies with Odfjell Tankers or see another clear angle for value creation. We have the ambition to grow our terminal footprint and will look at ways to do that in a capital-efficient manner, but first, we will be focusing on realizing the value potential of our current assets.
Photo credit: Argus Media
Published: 20 November, 2020
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