One item that struck me in the recent news was changing of the guard at a northern European state-controlled oil company, with new executive being an outspoken proponent of the greening of energy. The company, active in the North Sea, had already changed its name a few years back in a way that saw the removal of “oil”. Now, as offshore wind projects (including near to American shores) are looming large, its offshore fossil fuels expertise can find a new home in clean wind energy (to accompany its new name). With old branding jettisoned along with some old businesses, I am reminded that the move to ESG (Environmental, Social and Governance) is very real. Unlike some other externally driven developments, usually regulatory in nature, shipping need not be a victim, on the receiving end of some disruptive force. Instead, the industry’s unique constellations of technical and logistical smarts enables incumbents to pivot relatively easily into the green new world. Indeed, I am aware of at least one project (maybe there are more…it’s very tough to keep up) where a small flotilla of offshore oil platforms will be powered by electricity generated from a series of wind turbines floating out in the North Sea. Yes, there are some subsidies involved, but it shows how an experiment minded insider can get the pole position, gaining experience in these technologies (and some nice bragging rights) as green energy moves forward.
For shipping companies, I do find some inspiration with the pronouncements, and indeed actions of some of the big European oil companies. Unlike some of their transportation providers, who at times seem to be looking for the next market blip maybe three months out, the big guys take a longer term view, maybe 10 or 20 years out, certainly beyond IMO2023- the next “big one” on our horizon. So while the big oils consider how they will adjust their product mix towards non-oils, making $billion bets, many shipowners serving them are looking cautiously and nervously at 2023.
At that time, the International Maritime Organization (IMO) will do its own pivot, adjusting goals on the long road towards 2050 targets for reducing CO2 emissions. The common refrain on the webinar circuit is “…we don’t know what propulsion technologies will be…so nobody is ordering.” Analysts who track such things have indeed reported that orderbooks for vessels are at multi-year lows; I cannot argue with the premise that reduced vessel supply is a good thing.
But there is more at play here. Just under the surface on the downward pointing inflections on supply/ demand graphs are great opportunities on the technology front. This is a great time for experimentation. Just as deals have been struck where charterers will pay for scrubbers (and also- though clear economic incentives are lacking, for BWTS) through various hire schemes, so too, might owners and charterers get together on experimental programs for trying out new technologies. Savvy deal arrangers may be able to point to “non-traditional” funding sources that could support (did I say “subsidize”?) such arrangements. But getting back to role for “insiders”- intrepid owners (and there are a few already doing what is being suggested), working with trusted providers of technology to the maritime business, are going to uncover workable solutions before the outsiders, with all their media bluster, can hack them together.
Meantime, those in the know tell me that tanker hires might rally just a bit…in the next few weeks…but there are really bigger fish to fry, with longer time horizons. And yes, ESG investors (with their own undercurrent of subsidies and credits lurking deep below the waterline) just might want to participate and back the shipping guys on the inside- the ones who will come up with those solutions that will take us way way way beyond 2023, much in the style of those Big Oils.
