Singapore’s BW LPG is enjoying a healthy rate premium for the 15 VLGCs it has converted to run on LPG.
Niels Rigault, the Oslo-listed company’s executive vice president of commercial, said the investment in dual-fuel upgrades has been the biggest commitment towards decarbonisation in the sector.
He told a conference call with analysts: “We believe that LPG as a fuel is both clean and economical.”
And Rigault added: “Looking at the price [spread] between compliant fuel and LPG for 2023, LPG is priced over a hundred dollars cheaper, representing a time charter equivalent premium of about $4,500 per day compared to conventional vessels.”
BW LPG has also been active in selling off older, less-efficient ships.
Over the last five years, 23 vessels have left the fleet, with seven offloaded in the last 12 months.
The executive said these most recent deals have brought a profit of $35m, or $0.26 per share.
“We are now comfortable with our current fleet profile, which will allow us to manoeuvre through all kinds of market conditions ahead. We have no vessel orders and no immediate plan of ordering vessels, despite a more positive market outlook,” Rigault said.
He admitted the high number of newbuildings already on order is a concern.
But the executive added: “Our analysis suggests that tightening emissions regulation and increased congestion in the Panama Canal combined with higher LPG production to partly offset the freight pressures from the new vessels.”
‘The world needs LPG’
“The world needs LPG, and this is perfectly demonstrated in today’s energy situation,” he said.
Since the start of 2022, the price of WTI crude has increased by 40%, natural gas has more than doubled and European naphtha has jumped by 24%, while LPG prices have increased by only 8%.
Chief executive Anders Onarheim was asked about potential investment opportunities in the future.
He responded by saying the company is always evaluating deals.
“I think for right now, we feel that we have interesting prospects…along the value chain. We are always looking if we can create value through acquisitions or partnerships,” the CEO said.
“We will continue to evaluate that, but there’s nothing concrete to mention now,” he added.