BW Group’s first LR2 tankers will be delivered from the first quarter of next year even as the sector is facing challenges due to poor earnings, its CEO Andreas Sohmen-Pao said.
The group already has a combined total of more than 40 LR1 and MR product tankers and last year placed an order for six LR2s with South Korea’s Daehan Shipbuilding and an option for an additional two units.
The delivery of LR2s will commence early next year, Sohmen-Pao said on the sidelines of the Marine Money conference in Singapore but declined to divulge whether they will be fitted with scrubbers.
Scrubbers are systems used to collect excess sulfur while burning marine fuels. They are in demand due to International Maritime Organization’s new mandatory global sulfur cap for marine fuels at 0.5% from 2020 compared with the current 3.5%. The alternative to scrubbers is to use low sulfur fuels.
“DHT Holdings is installing scrubbers in its VLCCs but we will probably not do it on smaller tankers such as for chemicals,” Sohmen-Pao said. BW Group is the top shareholder in DHT Holdings.
The upcoming cap on sulfur emissions is a good legislation which was signaled early to the industry and addresses the issue of pollution, he said.
“There is no single right or wrong answer to whether scrubbers should be installed or not and it depends on various companies’ decision based on their [projected] payback on investment,” he said.
Citing industry estimates, he said marine fuel comprises 5% or less of the total oil market and to implement the new norms on sulfur emissions may require around 1% increase in refinery yields and throughput, which is not beyond the realm of possibility.
“There will be a period of spike in prices and dislocations but it can be addressed within a reasonable period of time,” he said.
For the product and LPG tankers industry, this year has been one of the worst in living memory, he said adding that daily earnings on product tankers was below $10,000 in the last two quarters.
The shipping sector has struggled to recoup returns on its investment, he said.
On BW Group, he said “we have created very little equity value. We have managed to expand our fleet but shareholder value has been elusive.”
BW Group as a holding company is diversified while it has segments focused on specific business areas including product tankers, LPG and LNG carriers, FPSOs and floating gas infrastructure, he added.
BW Group has achieved its first oil at the Dussafu license in Gabon Sunday, he said.
“I am not sure if this is a record time but we were able to get the first oil in our oil fields in just  months” after the initial investment was made, Sohmen-Pao said.