Billionaire shipowner John Fredriksen has joined forces with trading giant Trafigura to form what will be one of the world’s largest bunker companies.
Fredriksen’s prime tanker company Frontline and bulker owner Golden Ocean will both hold stakes in the new venture, which will also cater to the tycoon's private fleet and Trafigura’s owned and time chartered vessels.
A non-binding term sheet was announced Tuesday with the clock ticking down to IMO 2020 emissions rules, which are expected by many to be a game changer for the marine fuels market.
Both the shipowner and trader have been active in preparing for the new legislation with significant investments.
Fredriksen has previously invested via Frontline in scrubber manufacturer Feen Marine and Trafigura has been ramping up its physical bunkering activity for the past two years.
Robert Hvide Macleod, chief executive of Frontline Management and Birgitte Ringstad Vartdal, chief executive of Golden Ocean Management, said in a joint statement: “It is anticipated that IMO 2020 will create logistical marine fuel supply issues for shipowners globally.
“In addition to presenting a compelling economic opportunity, our participation in the JV will ensure our ability to source and acquire marine fuels at competitive prices on a continuous basis.
“This transaction represents yet another instance where we have been able to leverage our relationship with other entities of Hemen Holding to create significant economies of scale and a real competitive advantage.
“We look forward to working with Trafigura, our JV partner, to create one of the world’s leading suppliers of marine fuels.”
Frontline will have a 15% stake in the new venture, which is set to launch in the third quarter of this year, with Golden Ocean holding a 10% slice.
This is the second time in under a year that Frontline has taken a stake in an outside venture.
However, Macleod said the moves would have no impact on the company's ability to grow its fleet.
"We enter this joint venture to secure quality fuels with the right specification, quality and price," he said.
Macleod told TradeWinds the new venture would provide services for the combined fleets of its backers and third parties.
"The volumes will be significant and we expect it will be the leading bunker purchaser," he said.
Fredriksen is one of the world’s largest shipowners with over 200 tankers, bulkers and gas carriers spread across both public and private companies.
He is also one of the major shipowners reported in these pages last week to be in talks with Shell for the construction of the world's first LNG-fuelled VLCCs.
At the same time, Golden Ocean is involved in a biofuels test project with mining giant BHP.
Trafigura is a major charterer of tankers and has been ramping up its shipowning business with 45 vessels owned via a lease finance structure.
Its last interim report listed time charter commitments of $4.19bn at the end of March this year.
It had an average wet chartered fleet of 45 to 65 ships in 2018, with its dry fleet at between 50 and 55 units.
Jeremy Weir, Trafigura’s chief executive, said the deal with Fredriksen represents a further progression in the development of the company's response to the "challenges and opportunities the impending IMO 2020 regulation will present".
“We look forward to providing an essential service to our clients and working closely with Frontline and Golden Ocean to grow this venture into one of the world’s leading suppliers of marine fuels in the coming years,” he added.
While IMO 2020 has been a catalyst for the partnership, Macleod explained the parties had entered the venture with a long-term perspective.
"We are confident Trafigura's experience will benefit our fleet and the JV," he added.
"Trafigura is a close customer for Frontline and has been so for many years," he told TradeWinds.
"This joint venture feels like a natural progression in our relationship."
Kenneth Dam, co-head of bunkering at Trafigura, said the venture was the latest step in the expansion of its physical fuel business.
“We believe that marine fuel market disruptions will be brought on by the implementation of IMO 2020 regulations and that the JV’s increased base volumes and greater access to both infrastructure and credit will provide increasingly competitive bunkering supply services to our customers,” he said.
“We are confident in our ability to supply quality products at competitive prices to the fleets controlled by the JV partners as well as to third party shipowners and operators.”
