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Mercuria joins Tankers International VLCC Pool

The Mercuria-operated Seaways Kilimanjaro will benefit from maximised earnings, operational streamlining, and technical informational sharing as part of Tankers International’s specialist Scrubber Pool.

Tankers International, the world’s leading shipping pool for VLCCs, announced today that the Mercuria operated Seaways Kilimanjaro has joined Tankers International’s specialist VLCC Scrubber Pool.

The Seaways Kilimanjaro (296,999 DWT / Built 2012) was delivered to Tankers International on 15 March. The total size of the Tankers International fleet now stands at 58 VLCCs, and the specialist Scrubber Pool has increased in size to 21 vessels, with four more retrofits expected to join throughout 2022.

Mercuria, one of the largest integrated energy and commodity trading companies, will benefit from a transparent and cost-effective solution to maximise earnings in the spot market through Tankers International’s powerful economies of scale and unparalleled access to relationships and cargoes. Mercuria will also benefit from more streamlined operations, consistent cash flow, and high-level information sharing associated with Tankers International’s pooling model. At the same time, Tankers International will benefit from new insights into Mercuria’s trading markets.

The Tankers International Scrubber Pool functions as a sub-pool within the Tankers International organisation, operating on a financial and commercial perspective while continuing to share resources across the entire Tankers International fleet. It allows Tankers International to leverage the different trading patterns and earning potential inherent in scrubber-fitted vessels to maximise Pool earnings and provide consistent access to more options for customers.

Charlie Grey, Chief Operating Officer, Tankers International, commented: “The addition of the Seaways Kilimanjaro further improves the unrivalled strength and depth of our pool, which will deliver unique benefits for Mercuria as well as our other Pool partners. It also represents an exciting opportunity for us to develop a closer relationship with Mercuria, which has a fantastic reputation and large footprint across the commodities supply chain.

Climate Compensation – what’s the opportunity and how can I transform carbon exposure into positive business and environmental benefits?

Tankers International’s new climate compensation voyage programme for the tanker sector enables organisations to accelerate and deliver climate commitments through nature-based solutions. Delivered with Vertree Partners Limited (Vertree), a subsidiary of Hartree Partners, the initiative allows Tankers International to assess and understand the carbon footprint of its pool and offer customers the ability to compensate unavoidable value chain emissions.

The initiative has received strong interest following its launch in January 2022, suggesting that there is growing recognition of the role that climate compensation could play in addressing carbon consumption in global supply chains. This is critical for the shipping industry, which faces major technological difficulties in decarbonising compared to land-based transport and industries. With new low and zero carbon marine fuels yet to mature, energy-efficiency technologies offer the sector’s main short-term option to secure emissions reductions. However, climate compensation will help to achieve further progress along the road towards net zero. A similar scheme is already in place in the global aviation industry. The International Civil Aviation Organization launched CORSIA, short for “Carbon Offsetting and Reduction Scheme for International Aviation”, in 2016 to complement a broader package of measures to help the sector achieve its aspirational goal of carbon-neutral growth by 2020 onwards.

Market-based measures like Tankers International’s climate compensation voyage programme offer participants a voluntary, flexible, and affordable way to achieve environmental savings. In the wake of COP 26, the shipping industry, tanker segment and wider supply chain players are increasingly asking: what’s the opportunity and how do I participate?

What is climate compensation?

Climate compensation enables the shipping industry and its supply chain to invest in nature to reach net zero. It finances projects around the world that protect, restore or plant forests that sequester or capture carbon from the atmosphere, while also delivering co-benefits to local communities including biodiversity protection, local job opportunities, cleanwater supplies and improved educational opportunities.

Participants in Tankers International’s climate compensation voyage programme have the opportunity to offer customers high-quality spot or forward verified carbon credits. To determine a CO2 emissions baseline, Vertree uses scientifically recognised methodologies and independently verified proprietary data to calculate emissions on a per voyage, monthly or annual basis. Customers can then choose from a range of nature-based options to compensate the carbon footprint, tailored to price, geographies and impact targets.

Vertree currently has a global portfolio of projects under management, which provide carbon offsets that equate to the equivalent of over 30 million tonnes of CO2 per annum.

These include a mixture of carbon reduction and carbon removal projects. Example projects include forest conservation, protection from deforestation afforestation, restoration, regenerative agricultural practices, blue carbon restoration, and clean cooking stoves.

Do participants in Tankers International’s scheme need both carbon avoidance and carbon removal?

Biology dictates that carbon removal projects will take time to deliver the desired volume of carbon credits Trees, for example, take decades to grow. This means that in the initial years of a climate compensation programme, there is an inevitable wait.

To avoid a carbon debt building up during this time, carbon reduction initiatives can be used. A big part of the value that Vertree brings is the ability to create a portfolio that evolves over time and is spread across the globe to mitigate against country risks. Typically, this means overweighting carbon reduction credits today, and scaling up carbon removal credits over time. A fixed price delivery of CO2 offsetting from carbon reduction and removals is achieved through Vertree’s integrated business model. This allows customers to, for example, lock in climate compensation for the duration of a long-term time charter. 

How do you price a climate compensation voyage?

There are three key elements that come into play during price calculations. The first is the quality of the carbon offset. Each project has its own price and Vertree bases its calculations on the cost of displacing the current activity taking place. In practice, this could mean, for example, considering the cost of displacing palm oil production in Indonesia.

Next the scope of the emissions being offset is considered. For example, this could include upstream, midstream and downstream elements. If all three are factored in, there will be a larger absolute cost, but the customer benefits from economies of scale. The final key factor is the relative carbon intensity of the commodity to be offset. This final factor is used to calculate the baseline amount of carbon to be offset during each voyage.

Supply and demand characteristics also come into play. The shipping industry is not competing in the carbon markets in a vacuum. The power, oil, technology, and aviation markets are just some of the global industries also vying for a finite amount of opportunities.

How do you guarantee the integrity of projects and greenhouse gas emissions reductions included in the climate compensation voyage programme?

Transparency around climate compensation projects has never been better and continues to rapidly improve. When assessing a project, Vertree uses a five-step process to ensure emissions savings are real, unique, permanent and additional (i.e., over and above the emissions savings achieved in the natural environment without intervention).

All projects are verified under major international standards including the Verified Carbon Standard and Gold Standard. Vertree also aims to achieve the Climate, Community, and Biodiversity Standard certification.

Regulation of climate compensation projects is also various and evolving, and Vertree actively monitors the legal landscape and ensures compliance to new standards. It also adapts its certification, closely following new standards in the market and using independent rating agencies when appropriate.

Where can I find more information about the climate compensation voyage programme?

If you would like to find out more about our climate compensation voyage programme, please visit this page or contact Matthew Smith, Senior Vice President Commercial & Operations at comms@tankers.uk.com or +44 (0) 20 7870 4700

 

Arabian Gulf VLCC volumes return to pre-pandemic levels

The global oil markets have entered 2022 with a sense of optimism. Where the new COVID-19 omicron variant momentarily threatened to stall any progress achieved through the summer and autumn months of last year, it appears to present less of a risk to market recovery than initially feared – and oil market reporting agencies continue to forecast demand recovery in 2022.

Many of these agencies are now predicting that demand levels will return to pre-COVID highs. The most recent indications from Platts Analytics point to an additional 4.6 million barrels per day of demand in 2022, hitting 103 million barrels per day, which is 0.4% above pre-pandemic levels.

Global oil supply is also rising strongly and, after a 1.6 million barrels per day increase in 2021, global supply growth is set to accelerate this year to 6.6 million barrels per day. While we see positive supply projections from places like the US, Canada and Norway, it is still thought that a strong call on OPEC will remain. This will push Saudi Arabian supply even higher than it currently is, according to Platts Analytics, and we could see volumes close to their official capacity levels of 11.5 million barrels per day.

Any growth in oil volumes traded is positive for the oil tanker sector, and historically there is a strong correlation between OPEC production and the demand for large crude carriers, in particular for VLCCs.

The VLCC market has already seen demand increase in the Middle East; towards the end of last year the number of spot market cargoes lifted in the Arabian Gulf reached a similar level to those experienced in 2019, before the COVID-19 pandemic.

In 4Q 2021 we counted an average of 157 VLCC spot cargoes lifted in the region per month. This trend looks set to continue into this year. In January we have also counted 157 VLCC liftings in the Arabian Gulf and on the Tankers International VLCC Fixture App we note that fixtures are surpassing the expected numbers for the month.

With oil production projected to ramp up through the course of 2022 we expect to see further expansions in tanker demand, not only in the Arabian Gulf but globally. Preliminary data (available via the Tankers International VLCC Fixture App) shows that the lifting programme in West Africa is also larger than expected in January and the same is the case for the US Gulf and South America region.

While the Arabian Gulf volumes are important to the VLCC market and a very good indicator of the general health of vessel demand, crude oil shipped from the Atlantic Basin tends to carry greater tonne miles, employ vessels for longer periods and ultimately reduce tonnage availability across the globe.

The VLCC market is moving towards an equilibrium where demand is closing in on supply, thereby reducing tonnage availability per cargo which should in turn translate into better freight rates.

Historically Low VLCC Orderbook Drives Market Optimism

The VLCC orderbook is at a historically low level, with the segment making up just 8% of the global trading fleet. This metric supports our positive freight market outlook for 2022. With many shipyards reporting limited availability in the next couple of years, it is unlikely that many new VLCC orders will be placed for delivery in 2022-2024. This means we have a good grasp of expected fleet additions for this time frame.

The VLCC orderbook is shrinking on the back of a slowdown in tanker contracting. This is driven by several factors. The oil tanker sector has gone through a period of very low earnings. Most VLCC owners have been far from breaking even on most of their vessels, making it difficult to justify investing in new tonnage. Secondly, the shortage of large vessel slots in reputable yards has pushed prices up. An earnings boom in the container and dry bulk sectors has encouraged contracting in these segments, filling up yard capacity fast. Another driving force is the uncertainty around the longevity of any engine design decisions made today and how to ensure newbuilt vessels will successfully navigate a low-carbon future.

With low fleet growth expected over the next few years the VLCC market is moving closer to an equilibrium between vessel supply and demand. Vessel demand has already started to see signs of a sustained recovery. The demand for oil is picking up across the world and OPEC and its allies are determined to maintain their original schedule of incremental monthly oil production increases.

As more oil is moved around the globe, the demand for oil tankers will benefit. We are optimistic about 2022 and believe that this is the year we will see a positive shift in the VLCC freight market.

Tankers International Partners with Vertree to launch Climate Compensation Voyage Programme

Tankers International, a world leading shipping pool for VLCCs, has today announced the launch of its new climate compensation voyage programme for the tanker sector. The initiative will be delivered with Vertree Partners Limited (Vertree), a wholly owned subsidiary of Hartree Partners, which enables organisations to accelerate and deliver climate commitments through nature-based solutions.

The international shipping industry accounts for approximately 1 billion tonnes of greenhouse gas emissions annually1, with a trajectory that is set to see that figure rise. Shipping is also deemed by the UNFCCC – along with aviation – as facing major technological difficulties in decarbonising compared to land-based transport and industries; with new, substantially more costly low and zero carbon marine fuels the main option for the sector to transition.

The partnership with Vertree will allow Tankers International to assess and understand the carbon footprint of its pool and offer its customers a facility to compensate their unavoidable value chain emissions.

The process is not onerous. Vertree uses scientifically recognised methodologies and proprietary data to calculate an emissions baseline on a per voyage, monthly or annual basis. Customers can then choose from a range of nature-based options to compensate the carbon footprint, tailored to price, geographies and impact targets.

These range from afforestation projects in Uruguay to avoided deforestation and degradation in Cambodia. All projects promote a positive social impact, meeting multiple Sustainable Development Goals set by the United Nations (UN SDGs). To ensure the highest levels of environmental and social integrity, all Vertree projects are verified and certified by third parties, including the Verified Carbon Standard; Architecture for REDD+ Transactions; Gold Standard; and Climate, Community, and Biodiversity Standard.

Matthew Smith, Senior Vice President Commercial & Operations, Tankers International, commented: “We have been working hard to bring a climate compensation voyage programme to customers through an accurate and transparent mechanism, and are delighted to have found such a trusted, experienced and progressive partner in Vertree. The project further enhances our relationship with Hartree Partners, which joined our VLCC pool in 2019, as one of the original members of Tankers International’s dedicated scrubber fitted VLCC Pool.

“As an organisation, we recognise that the world is changing fast and the energy transition is something we need to embrace and adapt to. With the cost of fuel and the cost of using carbon only set to rise, this partnership will provide a high quality, cost effective and transparent solution to compensating currently unavoidable voyage emissions, contributing to overall efforts to reduce the environmental impact of global supply chains. While compensation is not the total solution to GHG emissions reduction in shipping, it can play an immediate and meaningful contribution to efforts to reduce cumulative emissions in the atmosphere – helping to prevent catastrophic heating while the industry pursues efforts to reduce its actual emissions.”

Ariel Perez, Managing Director at Vertree, added: “The use of carbon climate compensation is becoming increasingly important, as companies look to meet higher ESG standards from their customers, as well as meet ever tighter compliance standards. Our agreement with Tankers International allows us to support organisations that charter cargo and catalyse environmental action that’s increasingly demanded by their customers. Although within value chain emissions abatement should remain the priority, nature-based compensation is among the most scalable and effective way to reduce emissions, protect and restore biodiversity and support the United Nations’ Sustainable Development Goals.”

 

Tankers International meets demand for more intuitive, actionable fixtures data with new app

Tankers International, the world’s leading shipping pool for VLCCs, today announced the launch of its new improved VLCC fixtures app. The latest version of the popular app delivers enhanced functionality and value to shipowners, charterers and brokers – reflecting increased demand for more intuitive, actionable fixture data.

First launched in 2014, the app is the only source of such comprehensive fixture data – otherwise only distributed to a select few brokers. Since its inception, the App has staggering usage levels; downloaded by more than 25,000 individual users including investors, brokers, charterers, and shipowners for complex forward planning that improves their profit margins.

The upgrades provide superior functionality, including an easier to navigate interface across different platforms, as well as improved search options based upon region, age, and operator-based data segmentation – making it quicker and easier to find the actionable information that users need.

The new app can be accessed directly from any web browser on any modern device, without first being developed for, and downloaded from any proprietary app store. This creates a smooth cross platform experience for users, and will allow Tankers International to more quickly and efficiently develop even more improvements in future. All previous and new users will be able to access core information provided by previous versions of the App for free, while enhanced paid for options will be available to subscribers.

Charlie Grey, Chief Operating Officer, Tankers International, commented: “It has been incredibly rewarding to see the app grow since it was first launched in 2014, and how it has demystified the VLCC market for shipowners, brokers, charterers, and investors. The new version of the app underpins Tankers International’s status as a leading hub for tanker knowledge, providing unique data and analysis that has real commercial value users.”

“At a time when great uncertainty persists in the tanker market, the reintroduction of the App with unique data and analysis is both timely and important, delivering operational advantages and real commercial value that can help users navigate changing dynamics and charterer requirements in the VLCC segment.”

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