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Mette Frederiksen

The thrill of Brazil – how record-breaking exports from the South American giant are boosting the VLCC market

Brazil Exports Tankers International November 2022

As the VLCC market goes from strength to strength, we’re exploring some of the factors that are driving this trend.

Oil demand across the world remains robust and is closing in on pre-Covid levels. At the same time, production levels are improving, and while OPEC and its allies have recently announced a small reduction in their quotas, alternative producers are posting record high production and exports that are resulting in fairly balanced oil markets. Brazil is one of those producers.

Firstly, on the demand side, a fresh round of product export quotas has recently been released by the Chinese government. This, combined with fewer Covid-related restrictions, has sent the country’s demand for crude surging. Refineries are taking in more crude to utilise the new export quotas and VLCC shipments into China have increased as a result.

The strong recovery in VLCC rates towards the Far East in the past month is driven both by this increase in Chinese demand but also by where in the world China is sourcing its crude supplies. Oil price spreads have supported the buying of Atlantic Basin crudes over Middle Eastern crudes, and we have seen a significant increase in West to East movements in the VLCC segment over the past couple of months. Many analysts talk about the US Gulf and how the release of Strategic Reserve barrels has driven the VLCC market, and this is not untrue. However, in addition to this, we have seen a great support from Brazil.

Crude exports from Brazil have risen to new highs amid the strong flows to China, and China remains the biggest buyer of Brazilian seaborne crude. During the months of September and October, data from Kpler indicates that oil tankers loaded 1.7 million barrels per day of crude in Brazil – an increase of 23% compared to the average exports during the first eight months of 2022. Flows to China comprise about 30% of the barrels exported via ship.

Translating this development into VLCC demand presents an equally impressive increase. In October, our Tankers International proprietary data counted a record 19 VLCCs loading in Brazil. This is a huge jump from a monthly tally of 10 VLCC loadings from January to August. With two thirds of these VLCC shipments destined for China, this drives a drastic increase in tonne mile demand for the segment. An average round voyage from Brazil to China takes 100 days to perform, employing a VLCC for significantly longer than the same cargo from the Middle East to China, which takes around 60 days on a round voyage basis (from load to discharge and back to the load region.)  So far in November, we count 15 VLCCs booked to load crude in Brazil and the month has only just started.

As oil supplies are tightening in other parts of the world, this increase in Brazilian output and exports is a key driver of the currently buoyant VLCC market.

Accessible Data Means Better Decisions

The best commercial decisions are built on good data. Today, more than ever, comprehensive information holds huge power and potential.

 

The VLCC segment has historically been incredibly opaque. Critical information on fixtures has been held by a select few and not shared with the wider shipowner, charterer, broker, and investor communities. This power imbalance meant that many were making business-critical decisions ‘in the dark’, and addressing the disadvantage that this caused to the market as a whole was one of the driving forces behind the initial development of our VLCC Fixture app.

The ‘live’ fixture data we share via our app can make the difference between maximising profits and missing an opportunity on an individual level. Yet, it can have an even more substantial impact at an institutional level – when it can be integrated into existing systems to supplement other data streams, and seamlessly provide greater levels of support from strategy development to individual deal making.

The right data

If you know at what rate a VLCC was fixed at some point this week, you have some insight into market movements. If you know what are a VLCC was fixed at on the same route that you are contracting for, 5 minutes ago, you have a superior level of insight.

When you can cross-check vessel and contract specifications against your own, you can understand the exact market value of one ship on one route when you are making a deal. By accessing a comprehensive breakdown of that vessel’s Time Charter Equivalent (TCE), you can understand how earnings translate to profits across the market – and where you may need to make adjustments.

Coupling this data with detailed cargo forecasts can further allow decision makers to plan ahead, from strategic decisions on asset plays or dry dock dates, to commercial decisions by charterers and cargo owners guided by VLCC availability and freight levels globally or in specific regions of the World.

This is not an exhaustive list of useful data points by any means, but it does illustrate where the quality of the information you hold feeds into practical, on-the-ground decision making. Decision makers need to have fresh, comprehensive, relevant data that they can trust if they are to maximise their earnings.

An institutional approach to data

Where fixture data is vitally important, it is rarely the only decision-critical information that an organisation will hold. Most shipowners and charterers will hold their own proprietary information or data streams, and many will purchase external data dashboards and terminals from specialist insight partners.

Maximising the institutional value of this data can be a difficult task. The biggest challenge is often ensuring that decision makers are practically able to access, understand, and cross-check different types of data that they have access to at critical times; often data streams provide different types of information in different formats, and switching between dashboards or raw number can be challenging.

Information must be readily accessible and frequently used across each of an organisation’s levels if it is to be used to its full potential. The best way of achieving this is to integrate data streams into a single system, to create cross-stream dashboards and uniform data formatting.

This can be critical for larger shipowners, charterers, and investors. But it is also vital for their external insight providers, who pride themselves on offering an easy-to-navigate one stop shop for high quality data and insights.

We know that this knowledge and insight-based approach works because we use it across Tankers International. By leveraging the strength and scale of our pool, alongside the unrivalled experience and expertise of our team, we can develop enhanced and actionable insights. We then use these insights to reliably boost earnings for all our pool partners.

We provide our VLCC fixture data in an easily accessible format. All users benefit from a simple user interface that can be accessed via a simple web app. PLUS tier subscribers additionally benefit from enhanced search features that allow them to better locate specific data based on different parameters such as vessel type, owner and route, as well as having access to a comprehensive breakdown of TCE calculations. PRO tier subscribers also benefit from cargo forecasts and live WhatsApp notifications.

Our data can also be integrated into a company’s own systems through our app Application Programming Interface (API). A number of major organisations have already opted for this API integration option. If this is of interest to you or your organisation, please contact the Tankers International team.

Data insights are the foundation of all good commercial decisions. Now more than ever, shipowners, charterers, brokers, and investors must ensure that they have the right data – and are able to seamlessly use it, throughout their organisation.

You can find more information about subscriptions for the Tankers International VLCC Fixture app here. Please contact our team to enquire about our API.

Editorial – Capitalising on the Middle East’s VLCC Recovery

Editorial published in Transport & Logistics Middle East on 7 October 2022

It was widely predicted that we would finally see the VLCC market recover this year. After two years marred by challenging oil demand and Covid restrictions, this year seemed to promise a return to ‘normal’ as restrictions were lifted, and OPEC committed to continuous supply increases.

Happily, as we enter the latter stages of 2022, we can say that VLCC demand is well on the way to recovery. Rates have risen exponentially in recent months, in contrast to the historic lows at the start of the year. Interestingly, these headline figures have masked another story; VLCC trade routes are changing.

A geographic shift

Oil demand and production increased dramatically during the first half of 2022. This was primarily driven by the easing of Covid-19 restrictions that had artificially depressed global demand since late 2019, alongside the impact of the Ukraine invasion, which has affected energy security.

Tankers International proprietary data shows that this has created a definite global increase in VLCC fixtures on the spot market. We saw an additional 27 monthly VLCC spot market liftings during the first half of this year globally, when compared to the 2021 average. This leaves the sector very close to matching pre-Covid average fixing volumes.

Yet, this recovery has not been uniform. The Arabian Gulf has seen the fastest recovery in volumes to date. This is unsurprising, given that many OPEC members in the region initially cut oil supply levels in response to Covid-related decreases in demand and are now increasing production at a steady pace.

The number of VLCC fixtures in the Middle East has increased steadily over the last two to three years and has now surpassed pre-Covid levels (2019 averaged 156 liftings per month). In the Arabian Gulf alone, we counted an additional 26 liftings per month in the first half of this year compared to last. We note further expansions going into the third quarter and count 189 VLCC liftings in the Arabian Gulf in September this year.

While Europe has not historically been a major receiver of crude oil in VLCC parcel sizes, this year we have seen a marked shift. As the continent has reduced the amount of Russian oil taken in the wake of the country’s conflict with Ukraine, we have seen a dramatic increase in demand from alternative suppliers, such as the Middle East but also the US and South America. Much of this volume has moved on VLCCs as freight levels in the segment have been competitive compared to the smaller tanker types, that have traditionally carried crude oil to Europe.

Traditional VLCC receivers east of Suez have also seen increased volumes, including India and Singapore. During the first half of the year we noted a reduction in VLCC cargoes heading to China, this trend has however reversed and September saw a surge in activity into the country. This latest demand surge is driven by a declining oil price and move away from sanctioned Russian oil.

Staying ahead of a moving market

Where this rate of change is unusual, it is not completely unsurprising. Tanker markets have always moved quickly and will continue to do so well after the global economy has moved forward from the consequences of Covid-19 and recent geopolitical issues.

The past few years have proven that not all paradigm-shifting events are reasonably foreseeable. Yet, detailed analysis is still critical in navigating the VLCC market – ultimately, profits are driven by understanding how fundamentals are evolving and likely to evolve in the medium to long term and understanding the exact market conditions as you negotiate a fixture.

It can be easy to miss out on potentially lucrative market movements if you do not have the data to create strategy and informed decisions. Negotiating positions may leave the other side in a particularly advantageous position, or longer-term decisions – such as on time charters or dry docks – could leave you missing out on headline rates.

Harnessing this data is one of our core values at Tankers International. By leveraging the strength and unique scale of our VLCC pool, we can secure data and information that would otherwise not be available to any of our pool participants – which we turn into actionable insights, that help maximise earnings.

This approach was the motivator behind the development of our VLCC Fixture app, which we believe is creating a healthier market by opening information on fixtures up to the wider shipowning, chartering, broking, cargo owning, and investing community. Subscribers benefit from segmented and searchable information on fixtures updated every 5 minutes that was previously the preserve of a select few. This includes TCE breakdowns and cargo forecasts – which can allow users to reliably take advantage of an evolving market.

Oil logistics is now facing unchartered territory, especially in the Middle East. Capitalising on today’s market requires tools to succeed – such as the weight of a tanker pool, ideally combined with a robust set of data to enable informed decisions.

By Charlie Grey, Chief Operating Officer (COO), Tankers International

The VLCC market renaissance: Strengthening fundamentals are driving 2022’s long-promised VLCC recovery

The year 2022 was from the outset seen by many as the year we would finally see the VLCC market recover. After two years marred by Covid restrictions and challenging oil demand, this year started with greater freedom of movement for people across the world and OPEC committing to continuous oil supply increases. As the summer draws to an end, we have a clearer picture of how these changes have directly impacted the VLCC market through the first half of this year.

Looking at our proprietary data, we can compare the average monthly VLCC lifting numbers in the spot market for 2021 and the first half of this year. As oil demand and production have been rising throughout that period, we expect an increase in demand for VLCC tonnage and therefore, an increase in cargo counts in the segment. The data shows a definite boost. Globally we count an additional 27 monthly liftings in the VLCC spot market in the first half of this year compared to the 2021 annual average, and we are very close to reaching pre-Covid fixing volumes.

It is interesting to look at where these changes have occurred in more granularity. Unsurprisingly, the load area with the highest increase in volume has been the Arabian Gulf (AG). Many of the OPEC members that initially responded to the Covid-induced collapse in oil demand by cutting supplies are based in this region. This is also the region now returning oil supplies to the market at a steady pace. We count an additional 26 liftings per month from the Arabian Gulf alone this year. The data also shows a slight increase in volumes loading in the US Gulf with an additional four liftings per month. Much of this has been replacement barrels for Russian oil and has found a home in Europe, a route traditionally covered by smaller tanker segments when traded in lesser volumes. Simultaneously, we see a reduction in cargoes lifted from Europe over the period, as the region has kept supplies internal.

At the same time, Europe is topping the chart of increases in cargo volumes received into an area. This is off the back of a reduction in Russian oil taken following the country’s conflict with Ukraine. Traditionally Europe has not been a big receiver of crude oil in VLCC parcel sizes. However, this year has seen firstly a rise in oil imports into Europe and secondly a freight market that made the VLCC segment competitive relative to the suezmax freight market. We have also seen increased volumes into India, Singapore and other traditional receivers east of Suez. While China remains a significant taker of VLCC cargoes, the data shows an average of 5 cargoes per month fewer this year compared to 2021. This is down to them receiving more crude from Russia via pipeline and smaller tankers and due the country drawing down on inventories during a time of elevated oil prices.

It has been an interesting first half of 2022 in the VLCC market. Our previous blog discussed the change in crude flows into Europe, titled, “Atlantic crude flows drive change in VLCC tradelanes”, however, a positive takeaway from this piece, is that overall cargo counts are up, and not by an insignificant amount. 27 additional cargoes per month would employ more than 30 VLCCs full time if they were all traded between the AG and Singapore. Of course, some travel shorter distances and some travel further, but it is an indication that the market has seen the positive shift we expected at the start of the year, at least in terms of fundamentals. We need this to translate into a more dynamic freight market where tighter fundamentals dictate a sustained uplift in the freight market and a more profitable freight environment for shipowners.

Will Zero VLCC Contracting Lead to Fleet Contraction?

For the past 12 months, we have seen zero new orders for VLCC newbuildings. This has left the orderbook at historically low levels and market fundamentals are pointing to several years of record low fleet growth – or even fleet contraction.

The last recorded order for new VLCC tonnage in the Tankers International Database is dated June 2021. This is more than 12 months ago and this is the result of depressed freight markets combined with booming returns in competing shipping segments. While tanker owners have been struggling with marginal profits since Covid-19 devastated the global demand for oil, shipowners in other segments have experienced golden years, earning healthy returns and leaving them with an appetite for contracting more tonnage. Shipyards have been quick to reach capacity building vessels such as bulk carriers and container ships, and we are currently looking at a delivery timeframe of 2025 or even 2026 to build a large vessel of VLCC dimensions. At the same time, limited yard availability has allowed shipbuilders to push prices up to $120 million to build a new VLCC, and the market has not experienced price levels like this since the tanker ordering boom in 2008.

Therefore, we have a clear view of any new tonnage that will join the VLCC fleet over the medium term. Compared to historical data, the numbers are very low. By our estimation, we expect a further 20 new VLCCs to join the fleet this year, followed by another 15-20 during the whole of 2023. And that is it. No VLCC deliveries are scheduled beyond 2023.

On the flip side, the VLCC fleet is ageing, and there is scope for a significant removal programme. 20% of the current fleet is aged 15 years and older, with 10% of vessels falling into the 18+ years age category. Even if a fraction of this pool of ships is sold for removal, we will see the VLCC fleet reducing in size over the coming years. For comparison, over the last 20 years, an average of 4% of the VLCC fleet has been removed per year. A fleet contraction will be welcomed by tankers owners in a market that has been dominated by tonnage overcapacity for a number of years.

While tanker demand is rising, as Covid-constricted oil demand is in recovery mode, there is still a way to go before there is total balance in the VLCC market. A reduction in fleet supply would get us to a fundamental equilibrium between demand and supply just a little bit quicker.

Atlantic Crude Flows Drive Change in VLCC Tradelanes

The Atlantic basin has not traditionally been a place where VLCCs pick up crude cargoes destined for Europe. These relatively short haul routes load in North and South America, West Africa and the Mediterranean for discharge in Northern Europe and are usually serviced by smaller oil tankers. This year we have seen VLCCs increasingly competing for this business resulting in a change to trade patterns for the segment. There are a number of factors that help to explain this situation.

Firstly, oil flows from Atlantic basin producers to Europe has increased. Crude flow data from KPLER clearly shows an increase this year, especially as we move into the second quarter. This of course is on the back of reduced crude flows into Europe from Russia. If we overlay this with Tankers International fixture data we note a sharp rise in VLCC liftings over the same period. In the second quarter of this year, we have counted an average of 13 inter-Atlantic VLCC liftings per month compared to historic figures of just 1-3 monthly liftings.

However, the increase in crude flows does not fully explain what has happened here, as this could have simply translated into a boom in the Suezmax and Aframax segments. This did occur to some extent. As Europe began to replace Russian crude with similar grades from suppliers in the Atlantic basin, freight rates for the smaller tankers spiked as demand went up. A relatively weak VLCC freight market meant that this segment became more competitive, even on these shorter routes, and VLCC fixing activity started to take off.

One question that arises is whether this represents a fundamental change to VLCC trade patterns going forward. The answer to this is not straightforward. If the crude flows into Europe from Atlantic basin suppliers remain at elevated levels, they will certainly provide a baseline for keeping a certain level of localised VLCC activity within the region. The swing factor is likely to be freight markets and the correlation between Suezmax and VLCC freight. Charterers will consider all options and, all other things being equal, choose the cheaper vessel.

Editorial – How Pooling Can Facilitate Shipping’s Sustainability Revolution

Editorial published in Marine Log 22 July 2022

Shipping’s role in the global supply chain is increasingly under the spotlight when it comes to ESG. Today, most large energy companies have formal environmental targets. Many of these targets are notable for their ambition, or the way that they underpin new branding and strategy. Most of these companies are already reporting their emissions to the public, to shareholders, and to regulators—and these targets and reports are now focusing on every aspect of the supply chain.

This is highly symbolic of the industry’s new decarbonization dynamic. Environmental issues are increasingly driving commercial decisions for cargo owners and their customers, which in turn means that the efficiency and emissions credentials of shipping represents tangible value for charterers and their stakeholders. Increasing demand-side pressure is neatly coinciding with a growing focus from regulators. The shipping industry faces a series of landmark regulations over the next few years, with every indication suggesting that there is more regulation to come.

Sadly, this dynamic is creating significant challenges for shipowners. At a fundamental level, zero-carbon ship technology and investments are still in their infancy and the sector is not going to be able to go green overnight—even if many of our stakeholders need green options today. This is where Tankers International’s VLCC pooling model is uniquely placed to help shipowners, charterers, and the wider industry today.

Meeting the regulatory challenge

The Energy Efficiency Existing Ship Index (EEXI) and Carbon Intensity Indicator (CII) regulations will be shipping’s first global decarbonization rules when they enter into force on January 1 next year. Targeting a vessel’s design and measuring and benchmarking its carbon efficiency in operation, these rules will have a radical impact.

Ships that are not able to demonstrate EEXI or CII credentials may be restricted in their trading options. At the same time, they provide easily comparable benchmarked indicators for charterers—and thus make it easier to make decisions based on climate impact.

The dramatic potential impact of these regulations is making carbon efficiency a priority for even the most resistant shipowners. Yet, even the most progressive may find compliance a challenge.

Continual measurement and benchmarking will invariably occupy a shipowner’s operational resources, while planning for vessel efficiency improvements can in itself take up resource. For many, EEXI and CII rules will also require costly specialist software and new analysis techniques that cannot be learned overnight.

Shipping’s regulatory journey toward decarbonization is just beginning, and future rules will add more complex challenges. For example, the EU is now expected to add shipping to the EU Emissions Trading Scheme with the proposed legislation recently passing several hurdles. By explicitly tying carbon to costs, and by requiring the purchase of credits based on solid data, these rules will create even wider-reaching obligations.

Maximizing resource and sharing knowledge

The Tankers International Pooling model frees up operational resource for a shipowner. As a pool we will take over a significant amount of day-to-day commercial and operational responsibilities surrounding a vessel, which would otherwise need to be handled by an in-house team. With pooling, these staff can be redeployed as appropriate to focus on strategic priorities.

As new environmental regulations are creating more complex obligations for shipowners, the operational benefit of pooling will only increase. For example, the Tankers International VLCC Pool will assist participating shipowners in calculating and monitoring efficiency to help optimize ships for CII rules and will support in meeting future EU Emissions Trading Scheme requirements.

Cash-flow is another pivotal advantage, especially in the context of meeting ambitious environmental goals. High environmental standards represent clear value for charterers and will represent a growing premium for the highest rated VLCCs, yet landmark technology investments are naturally capital expenditure intensive.

Our model combats this challenge by providing shipowners with a regular and scheduled income, through revenue sharing between vessels. We provide transparent and equitable insights into how the revenue-sharing works with all our pool participants. This is based on zero-commission, no hidden fees or unexpected costs, leaving them with a clear understanding of their financial position.

Improving cash flow also boosts total earnings, allowing a vessel to take advantage of longer voyages that often represent better freight rates. As an example, bunkers must be purchased by the shipowner before the vessel embarks on a voyage, and freight is only paid after the voyage is completed. This leaves the owner with poor cash flow and can limit a tanker’s income potential. Our pool will leverage its scale and financial strength to take care of these expenses and maximize total earnings.

Participants can also benefit from enhanced technical support and information sharing that can help owners to identify and optimize any investments required to adhere to environmental regulation. For example, Tankers International offers regular technical forums to give insights on new technologies, which helps shape purchasing decisions and best practice.

Although charterers are seeking green solutions zero-carbon shipping will take time. In the meantime climate compensation can offer an immediate solution.

Tankers International’s Climate Compensation Voyage Programme was recently launched in partnership with specialists Vertree. The scheme uses scientifically recognized methodologies and proprietary data to calculate a specific VLCC’s emissions on a voyage, monthly, or per year basis. Charterers are then provided with the option to compensate their carbon emissions via a range of nature-based and community led solutions.

Climate compensation alone will not solve shipping’s decarbonization problems, however it can play an immediate and meaningful role in giving charterers the green tools they need to succeed today.

Decarbonization is set to be an era-defining issue for the entire shipping industry. Shipowners will need to dedicate huge operational, technical, and financial resources to meet the challenge—and many will see their bandwidth and cash-flow stretched to breaking point. It is critical that tanker owners maximize the support that is available to them as the pressure to deliver results intensifies. Pools are crucial tools that can help drive shipping’s sustainability revolution.

By Matthew Smith, Senior Vice President Commercial and Operations at Tankers International

Tankers International enhances its VLCC Fixture app for faster, live updates to help keep pace with current market

New subscription plans will unlock new levels of bankable data, functionality, and analysis.

Tankers International, the world’s leading shipping pool for VLCCs, today announced an update, including a new subscription scheme, for its popular VLCC Fixture app.

This new subscription structure will provide even better functionality for app users and support market stakeholders in understanding current developments for the global VLCC fleet.
First launched in 2014, the Tankers International VLCC Fixture app is the only publicly available source of comprehensive fixture data for the global VLCC fleet and provides wider market access to data that was once only provided to a select few brokers. The app has received over 259,000 visits a month since it was re-launched in December 2021

Paid app subscribers will benefit from faster data updates and a suite of additional insights. Subscribers to the PLUS tier will benefit from additional information on bunker prices, fixing rates, laycan, demurrage, and commissions as well as a full breakdown of TCE calculations. PRO tier subscribers will additionally benefit from cargo forecasts as well as WhatsApp notifications. Users will also have an option to receive fixture data via an API feed to integrate into their own systems.

These improved features will allow users to integrate even more quality data and analysis into negotiations and strategic decision making, helping the VLCC market make better decisions that improve profit margins for app users and their stakeholders. The app’s BASIC tier will remain free and will continue to provide headline data on VLCC fixtures, but with some delay.

Charlie Grey, Chief Operating Officer, Tankers International, commented: “We recognise that the current market climate means that shipowners, charterers and brokers alike all need quality data, faster to support decision making. The new subscription options for our VLCC Fixture app have been designed to add even greater value and accessibility, including WhatsApp updates for top tier subscribers. By introducing these updates, we are both improving the app for users and, just as importantly, safeguarding the continued development of the app, helping us add even more functionality in the future.”

The newly launched version of the Tankers International VLCC fixtures App can be downloaded as an ‘in-browser’ app here.

Editorial – Tanker Pooling is a Crucial Tool for Decarbonisation

Editorial published in Splash 247 on 19 April 2022

Matthew Smith from Tankers International makes the green case for clubbing together.

As consumers and financiers have better understood the pervasive nature of emissions, measuring, monitoring and ultimately reducing the carbon footprint of every step in the supply chain has become “table stakes” for end-users of oil and public stakeholders who drive regulators.

Virtually every large company connected to the energy industry today has an environmental policy that covers emissions throughout their logistics chain. The supermajors and national oil companies especially have implemented ambitious policies, and emissions are now a real factor in their chartering decisions.

This has radically changed shipping’s decarbonisation dynamic. The most visible sign of this shift is increased regulation, as the industry faces a series of incoming new landmark rules. However, this is coupled with a dramatic change in customer demand – whereby demand-side pressure for lower carbon solution is creating a real commercial advantage for those who go beyond minimum standards.

Yet fundamentally, zero-carbon ship technology and investments are still in their infancy and cannot be implemented overnight. This creates uncertainty for shipowners, and a difficult challenge in planning for installing new technology, as well as a challenge for charterers in search of climate conscious options today. It is critically important that the industry gets the support it needs; Tankers International’s pooling model is uniquely placed to play this role.

The decarbonisation dynamic

Shipping’s first major global decarbonisation regulations are set to enter into force on the first of January next year. The Energy Efficiency Existing Ship Index (EEXI) and Carbon Intensity Indicator (CII) regulations will target a vessel’s design and measure its operational efficiency next to set standards.

If a vessel is not able to demonstrate its EEXI or CII credentials, it may be restricted in trading options. This is making carbon efficiency a priority for even the most resistant shipowners and will make it easier for charterers to benchmark the carbon intensity of any voyage.

Complying with decarbonisation rules will inevitably take up operational resources from shipowners. EEXI and CII rules will require constant tracking and, for many, specialist software.

The EU is expected to implement even more robust rules soon, with plans to add shipping to the EU Emissions Trading Scheme currently progressing. Those plans would explicitly tie carbon to costs and impact operational resources. These rules will aid shipping’s transition to net-zero, and could arguably create even wider-reaching obligations.

Pooling as an enabler

The pooling model supports shipowners by moving most of these operational obligations away from the shipowner to the pool operator. For example, the Tankers International VLCC Pool will assist participating shipowners in calculating and monitoring efficiency to help optimise ships for CII rules and will support in meeting EU Emissions Trading Scheme requirements.

Clearly, meeting environmental goals will pose cash flow challenges – especially when targeting above the minimum ambition. Pooling with Tankers International provides shipowners with the ability to better optimise voyage selection as they are less constrained by cash flow. Vessels operating in a pool can more easily take advantage of longer voyages that often represent better freight rates.

An owner outside of a pool will receive income only when a vessel has discharged, leaving them to cover expenses for bunkers and port calls in advance. A pool will take care of these expenses, while ensuring consistent cash flow to the shipowner through revenue sharing between all the pool vessels.

This regular income can make it easier to plan for investment-heavy emissions reduction technologies, while increasing earnings. At Tankers International we provide technical support and encourage inter-owner knowledge sharing by offering regular technical forums to give insights on new technologies – and help shape purchasing decisions and best practice.

Yet, pooling can benefit the industry beyond shipowners. Charterers are looking for green solutions today, while work on zero-carbon shipping will take time. Climate compensation can offer an immediate solution.

Tankers International’s Climate Compensation Voyage Scheme was recently launched in partnership with Vertree – a subsidiary of longstanding pool partner Hartree. The scheme allows us to offer tailored, voyage specific climate compensation packages alongside normal quotes.

The scheme uses scientifically recognised methodologies and proprietary data to calculate an emissions baseline on a per voyage, monthly or annual basis. This allows charterers to choose from a range of nature-based options to offset the carbon, tailored to price, geographies and impact targets. Where climate compensation is not a total solution to climate change on its own, it can play an immediate and meaningful contribution.

The scale of the decarbonisation challenge is set to stretch many shipowners’ bandwidth and cash flow close to breaking point, while many parts of the industry are already facing pressure to deliver. It is critical that tanker owners maximise the support that is available to them – from technical, to practical, to cash flow – and that charterers are provided with more options. Pools are crucial tools that can help drive solutions today.

Editorial – Tanker Pooling can ease Environmental Reporting

Environmental regulations and demand-side pressures from end-users of oil have created new challenges for VLCC owners and charterers. Owners are faced with new administrative and technical requirements, while charterers need new carbon mitigating options today.

Matthew Smith, our senior vice president commercial and operations, recently wrote an editorial for Tanker Operator about how pooling can help the sector to manage this transition towards zero carbon for Tanker Operator.

Read the full article on page 19 of the May 2022 edition:

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