Oil companies have a responsibility to stimulate a market for environmentally sound shipping, according to Hunter Group chief executive Erik Frydendal. But they are not stepping up.
"As long as old ships burning older fuel are getting the same rates as newer ships, it doesn't seem that oil majors are willing to pay the cost of being sustainable," he told TradeWinds.
"We are not seeing any willingness to pay for superior equipment."
Nor are governments doing their part, as international trading sanctions by the US and others are what keeps the dirtiest part of the world tanker fleet afloat.
Even so, the VLCC sector is at its most attractive in years as a space for newbuilding investment, Frydendal said.
The Hunter CEO spoke this week in a TradeWinds conference of Norwegian shipowners addressing the challenges of emissions and other ESG difficulties.
Like other speakers on the panel, he said oil majors are still oil majors for the time being, even after they change their names from Statoil or Total to Equinor or TotalEnergies.
Hard cash investment
Progress will happen but tanker charterers need to back it with cash. Hydrogen will not be available for a long time, LNG is a temporary solution at best, and an expensive one for which tanker charterers are not paying a premium.
He highlighted oil major Shell as an example.
Rival tanker owners International Seaways, Advantage Tankers and AET have a total of 10 VLCCs on order at DSME as a result of a Shell tender for dual-fuel ships, but Hunter was not attracted by the terms.
"Shell came out with its proposal to charter LNG newbuildings, and we looked at it and we did the numbers and we did not get them to add up," he said.
The seven-year charters with profit-sharing were done at what has been described as "essentially break-even rates".
Frydendal, like others, sees hydrogen as the most promising fuel on the horizon. But until new fuels become commercially available and competitive, he defended the use of heavy fuel oil in long-distance ocean transportation as a reasonable way to use the residual refining product.
"We are constantly looking at new solutions but the responsibility lies with the oil companies to stimulate that market," he said.
"I think hydrogen is probably the solution but it's not available yet. And we can't afford to be the first movers."
Being the first shipowner with a hydrogen-powered vessel would be like being the first owner of a fax machine, he said.
Oil still in the mix
Hunter controlling shareholder Arne Fredly signalled earlier this year in Norwegian business daily Finansavisen that the company could make investments in other sectors.
But Frydendal would not be drawn on any such prospects, describing the VLCC sector as "extremely attractive", with the lowest orderbook and the oldest existing fleet in decades.
"We are ahead of some interesting times in global GDP growth including government infrastructure projects, and that's going to be fuelled by something, and I haven't seen an excavator powered by hydropower or wind yet," he said.
Hunter's current fleet is of four one-year-old South Korean-built VLCCs with open-loop scrubbers, whose sulphurous by-products as "a natural constituent of seawater" are harmlessly absorbed by the ocean, he said.
"But we are getting a premium for our ships because they are more fuel-efficient, not because oil majors pay any premium for lower emissions," he said.
"The cheapest offer still gets the job. You can say you are in the decarbonisation business but when you charter a 17-year-old vessel, it shows what you really are."
Frydendal said the industry's current International Maritime Organization-driven focus on vessel emissions risks misrepresenting the true carbon footprint of shipping, which should be measured not on a tank-to-wake basis but on a well-to-wake basis, including the carbon impact of the refining process.
Frydendal underscores that he is no climate-change denier and he believes optimistic targets are good to have, as long as the goals do not prevent gradual realistic solutions.
"It's good to be ambitious, even if everybody knows we will never get to zero," he said.
"Everyone is looking for one solution to the problem of global carbon emissions, and there is no one solution," he told TradeWinds in a separate interview.
"But we can find a mix of good solutions, and they range from wind power on the left to coal on the right, and oil will be in the energy mix for a long time."
