Yee Yang Chien, chief executive of Malaysian shipping giant MISC Berhad, says financiers need to share the risks that come with new green marine fuels and technologies.
Financing remains the missing link that the industry needs to reach its decarbonisation goals, he told the DNV Energy Transition Conference in Singapore on Thursday.
“Show me the money,” he replied when asked what the industry needs most in its quest to decarbonise.
Yee said that coming up with new green fuels, engine types and abatement technologies requires close collaboration across all sectors.
“As part of the energy transition, I think we all know that risks are going to be taken,” he said.
“It is important that we are clear on what those risks are. We can never remove them. It is about managing them.
“The first thing I think is very important is to find partners that have common aspirations, and it cannot be just purely a commercial aspiration. More important is finding partners who are aligned, in terms of the risks they’re going to take.”
Yee said that only when there is an alignment of risk and aspiration can a project become a reality, and right now, financing is one of the main bottlenecks.
MISC was an early player in the decarbonisation game, ordering two of the world’s first LNG dual-fuel aframax tankers in 2017.
For that project, it was able to line up partners who were fully aligned, from the shipyard that was prepared to build the ships, to the banks willing to finance them, to a cargo owner that took the risk to invest in the infrastructure to supply the LNG.
The company is a partner in the Castor Initiative, which wants to put the world’s first ammonia-fuelled tanker into service by 2025 or 2026.
With the initiative, almost all the required partners have come on board — MISC, via its tanker arm AET as the shipowner, Samsung Heavy Industries as the shipyard, MAN Energy Solutions as the engine maker, Lloyd’s Register as the class society, Yara Clean Energy as the ammonia producer, the Maritime & Port Authority of Singapore as the regulator and Jurong Port as the bunker infrastructure provider.
Yee said all these partners are aligned in terms of aspiration and risks.
But, he lamented, two vital partners are still missing: “We need a cargo owner and we need a financier.”
The lack of participation from financiers remains the “elephant in the room” for many decarbonisation projects.
“In taking a gamble on some of these greener fuel vessels, we have to shift the way we look ... at economics,” he said, noting that under current economic methodology, financiers and asset owners look at the life cycle of an investment to determine how much money they will make out of it.
The Castor Initiative, on the other hand, is about partners working together, not to make money, but to reach the point at which they at least get their project investment cost back.
“For us, at least, it is going to be a zero-sum game,” Yee said. “But to show the way forward for the industry, it’s important that you get your stakeholders and investors behind you.
“Everyone can talk a good game, right. But everyone has to put their weight behind the commitment.”
Yee wants ship finance centres such as Singapore to play a greater, more lasting role in helping make funding available for shipowners and getting banks and capital providers into the picture.
This, he suggested, could be tied to funds from carbon taxes and bunker levies.
“If you raise $100m, that $100m will not buy you a VLCC. But if you get the banks in the picture, and you use the proceeds from those carbon taxes and bunker levies to subsidise the cost of the funding, then that $100m goes a long way,” he said.
“I think that’s the missing piece. At the end of the day, money speaks.”