Shell, ExxonMobil and Total could do more to remove the need for speculative orders, says Affinity (Shipping).
Oil majors need to provide more support to owners looking to order LNG-powered tonnage, or the projects will fail to get off the ground, a top broker has warned.
“All of Shell, Exxon and Total have theoretical newbuilding requirements for dual-fuel VLCCs but, getting them to commit at numbers and for durations that make sense for the owners in the time needed for a newbuilding project is proving difficult, or near impossible,” said Affinity (Shipping).
“If those end users, who tend to have a vested interest in LNG dual fuel as major LNG producers, want to keep the momentum building for dual fuel, they will need to provide more practical support to buyers. Otherwise, buyers will have to take speculative risk on dual fuel which most cannot, or will not, do.”
The comments come as Evangelos Marinakis’ much vaunted plan to order a raft of LNG-fuelled VLCC newbuilding’s looks to have been significantly scaled down.
Affinity noted that that when the deal was originally reported, it involved 10 firm dual-fuelled VLCCs costing between $105m and $110m, depending on bunker tank size.
“Now rumours suggest that what will actually be signed will be for a significantly smaller number of ships. Some reports suggest that it may even end up being as small as only one firm ship, which will be ordered speculatively, but with a truck load of optional vessels,” the broker said.
“If true — the reports sound credible but are, so far, unconfirmed and therefore only rumours and speculation — it shows starkly quite how difficult the dual fuel story is to transact.”
The broker said buyers are “understandably reluctant” to take significant speculative exposure in new technology, but the practicalities of getting a charterer to commit make it “pretty much impossible to align with the timescale of a newbuilding contract”.
However, Affinity, which is led by LNG fuel proponent Richard Fulford-Smith, still backs Marinakis’ initiative even if it does lead to just one ship.
“If the rumours are correct, and Capital are contracting dual fuel VLCCs speculatively, they should be praised for proactively taking the plunge regardless of end user prevarication,” it said.