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Euronav shares details of IMO 2020 fuel procurement, scrubber strategy

09 Sep 2019

Independent tanker company Euronav NV on Thursday (5 September) revealed details on its approach towards the new Sulphur fuel regulations coming in as part of IMO 2020.

“The introduction of new Sulphur emissions regulations as part of ‘IMO 2020’ is one of the most progressive and significant developments for all shipping segments over the past fifty years,” said Hugo De Stoop, CEO of Euronav.

“Reducing shipping’s Sulphur footprint is a critical step forward for all seaborne transportation and Euronav wholeheartedly welcomes the new regulations and looks forward to fully complying with them.

“In summary, Euronav has purchased the equivalent of 420,000 metric ton of compliant fuel and Marine Gasoil at what we believe to be a competitive price.

“This volume can provide a substantial coverage of our fuel requirements during the initial period of the regulation.

“Leveraging our balance sheet strength and operational capability to purchase and secure supply of tested compliant product that should provide a natural hedge for Euronav against any lack of fuel oil availability, poor quality compliant fuel or unwanted price spikes and help establish strong, direct B2B relationships for future fuel sourcing.”

According to Euronav, the core benefits of the current approach are:

  • Quality – all ISO 8217:2017 standards have been fully met and any blending undertaken has been third party tested to ensure product compatibility
  • Provenance – critical that Euronav knows the fuel origin and production
  • Reliability & Safety – the action taken so far substantially reduces the operational risk within the fleet and ensures future ratable supply
  • Lower emissions – Using VLSFO will have lower particulate and Nitrogen emissions and will reduce sulphur emissions from the Euronav fleet – proven when tested against fuel samples for HSFO currently supplied to ships
  • Security of Supply – Euronav has protection against any lack of compliant fuel availability, uncertain quality and potential price spikes as a result.
  • Direct relationships – established key B2B relationships with refiners and suppliers of compliant fuel ahead of implementation of IMO 2020
  • Leverage – Separate financing scheme in place to ensure balance sheet liquidity remains strong

The company further notes it has bought a range of fuels progressively during calendar 2019 at various prices; the average purchase value of Very Low Sulphur Fuel Oil (VLSFO) has been at $447 per metric ton compared to a bunker price (HFO-3.5% Sulphur content) of $400 per metric ton over the same procurement period.

“It is important to stress that the majority of our procurement activity so far and going forward has been on a new compliant fuel of 0.5% Sulphur content and not a blended product,” it stated.

“We believe that after a period where the markets will adapt to the new regulations, there will be ample and sufficient compliant fuel available to the shipping industry.”

Euronav, meanwhile, said it has also entered into a new $100 million revolving loan facility with a club of banks in order to assist funding of the IMO 2020 compliant fuel inventory on the Oceania.

The firm says it will continue to assess the potential retrofitting of part of its fleet – specifically on non-eco VLCCs forming the minority of its fleet.

“Euronav believes that it can still fully capture the potential benefits of an investment in scrubbers after the start of the regulation,” it explains.

“At that time, the derivatives market of LSFO should have developed in size and in volume which allow Euronav to fully lock in the benefits of the spread at the time of making the investment.

“This should even provide Euronav with a ‘second mover advantage’ in learning the flaws of the first round of installations and take a decision based on facts without having to speculate.”

In conclusion, Euronav believes it has taken a proactive investment in building a dedicated team and infrastructure to manage the challenges of implementing and complying with IMO 2020.

“We believe this proactive approach will deliver security of supply of quality tested fuels in sufficient quantity for the initial 6-9 months of 2020 and we are working on additional fuel saving and procurement initiatives based on the experience built up over the past nine months,” it notes.

“Euronav will continue to constantly evaluate the merits and opportunity from retrofitting scrubber technology particularly when a full LSFO fuel market is in place.”

Photo credit: Euronav
Published: 9 September, 2019


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