Cmb.tech Nv · EURONEXT:CMBT
Cmb.tech Nv — Euronav — IMO 2020 Preparation Webinar
45 slides from Cmb.tech Nv's conference presentation, Sep 5, 2019
Slide 1: Euronav – Update on IMO 2020 Preparation
EURONAV – UPDATE ON IMO 2020 PREPARATION WEBINAR SEPTEMBER 5 2019 1
Slide 2: Forward Looking Statements
FORWARD LOOKING STATEMENTS Matters discussed in this presentation may constitute forward-looking statements under U.S. federal securities laws, including the Private Securities Litigation Reform Act of 1995. Forward-looking statements reflect the Company’s current views with respect to future events
Slide 3: Agenda
AGENDA 1. Where did we come from? Assumptions 2018 2. Where are we now? Actual situation Q3 2019 3. What are the risks? 4. What is Euronav doing? 5. What can be done in the future? 3
Slide 4: Glossary
GLOSSARY HFO Also known as bunker fuel or residual fuel oil, HFO is the result or remnant from the distillation Heavy Fuel oil and cracking process of crude oil and is predominantly used as a fuel source for marine vessel propulsion. HSFO Designated fuel oils which have a maximum sulphur content of
Slide 5: Original Outlook in 2018 vs Today
ORIGINAL OUTLOOK IN 2018 VS TODAY 5
Slide 6: IMO 2020 Compliance: A Ship Owner's Options
IMO 2020 COMPLIANCE: A SHIP OWNER’S OPTIONS Distillates 0.1% sulphur content (MGO, Diesel) Very Low Sulphur fuel Oil <0.5% sulphur content (LSFO or VLSFO) Choices for tanker owner High Sulphur Fuel Oil (HFO and Unregulated sulphur content HSFO) + Scrubbers LNG 0% sulphur content but $$$ installation
Slide 7: Compliant Fuel or Scrubber Technology?
COMPLIANT FUEL OR SCRUBBER TECHNOLOGY? 7
Slide 8: Compliant Fuel or Scrubber Technology?
COMPLIANT FUEL OR SCRUBBER TECHNOLOGY? 8
Slide 9: Compliant Fuel or Scrubber Technology?
COMPLIANT FUEL OR SCRUBBER TECHNOLOGY? 9
Slide 10: Compliant Fuel or Scrubber Technology?
COMPLIANT FUEL OR SCRUBBER TECHNOLOGY? 10
Slide 11: Compliant Fuel or Scrubber Technology and
COMPLIANT FUEL OR SCRUBBER TECHNOLOGY AND 11
Slide 12: The Factors We Considered
THE FACTORS WE CONSIDERED 1. Fleet Profile 2. Fuel oil availability 3. Retrofit & Operational 4. Bunker Price Spread 5. Change in regulation 12
Slide 13: The Factors We Considered
THE FACTORS WE CONSIDERED 1. Fleet Profile 2. Fuel oil availability 3. Retrofit & Operational 4. Bunker Price Spread 5. Change in regulation 13
Slide 14: 1. Euronav VLCC Fleet – Already Efficient
Age of Vessel in Years 10.0 12.0 14.0 16.0 0.0 2.0 4.0 6.0 8.0 Hatteras Amundsen Aquitaine Euronav Ardeche Heron Andaman Euronav Aegean Arafura Aral VLCC Source: Euronav Anne Alboran VLCC Alex Drenec Donoussa Fleet Desirade Alice Dia Dominica Antigone Hojo Sonia Ilma Simone Alsace Iris Non Eco VLCC
Slide 15: The Factors We Considered
THE FACTORS WE CONSIDERED 1. Fleet Profile 2. Fuel oil availability 3. Retrofit & Operational 4. Bunker Price Spread 5. Change in regulation 15
Slide 16: 2. Fuel Oil Availability
2. FUEL OIL AVAILABILITY 2018 Bunker market size: 60,000 ships Bunker Global Volume: 3.5 mmbbls HSFO Volume (post 2020): 0.6 mmbbls (17%) 450 ships to have scrubbers (Argus May 2018) bs Oil majors: Undeclared policy Independent refiners: Few statements National Oil Co.: No communication Oil/Fuel Oil
Slide 17: 2. Fuel Oil Availability
2. FUEL OIL AVAILABILITY 2018 3rd Quarter 2019 Bunker market size: 60,000 ships Bunker Market Size: 60,000 ships Bunker Global Volume: 3.5 mmbbls Bunker Global Volume: 3.5 mmbbls HSFO Volume (post 2020): 0.6 mmbbls (17%) HSFO Volume (post 2020): 1.0 mmbbls (~30%) 450 ships to have scrubbers (Argus M
Slide 18: 2. LSFO Availability – Sufficient
2. LSFO AVAILABILITY – SUFFICIENT Oil Majors LSFO (0.5% S) Bunker Ports • All majors announced plans for availability across world • For example Exxon patented their compliant fuel Refiners • Most major refiners producing 0.5% fuel already • Expectation plans will accelerate into Q4 2019 Port Author
Slide 19: 2. LSFO Availability – Sufficient
2. LSFO AVAILABILITY – SUFFICIENT Oil Majors LSFO (0.5% S) Bunker Ports • All majors announced plans for availability across world • For example Exxon patented their compliant fuel Refiners • Most major refiners producing 0.5% fuel already • Expectation plans will accelerate into Q4 2019 Port Author
Slide 20: The Factors We Considered
THE FACTORS WE CONSIDERED 1. Fleet Profile 2. Fuel oil availability 3. Retrofit & Investment 4. Bunker Price Spread 5. Change in regulation 20
Slide 21: 3. Retrofit & Scrubber Manufacturers
3. RETROFIT & SCRUBBER MANUFACTURERS 2018 Anticipation: o 3 majors manufacturers o A few others o Fear of not enough scrubber manufacturing capacity o A simple kit: it is basically a big shower 21
Slide 22: 3. Retrofit & Scrubber Manufacturers
3. RETROFIT & SCRUBBER MANUFACTURERS 2018 3rd Quarter 2019 Anticipation: Actual: o 3 majors manufacturers o 3 major manufacturers o A few others o 20+ manufacturers in total o Fear of not enough scrubber manufacturing o Plenty of capacity in 2020 and some in capacity 2019 o Major issues during retro
Slide 23: 3. Scrubber Investment
3. SCRUBBER INVESTMENT 2018 Anticipated cost: o Scrubber equipment & Installation: USD 3.5 million for a VLCC o Loss of hire: will dependent on your natural drydocking cycle o Deviation and Waiting time: not always considered o Scrubber OPEX: ~USD 150/day 23
Slide 24: 3. Scrubber Investment
3. SCRUBBER INVESTMENT 2018 3rd Quarter 2019 Anticipated cost: Actual cost: o Scrubber equipment & Installation: USD 3.5 o Scrubber equipment & Installation: up to USD million for a VLCC 6.5 million for a VLCC Retrofit o Loss of hire: will dependent on your natural o Loss of hire: average 50 days ($
Slide 25: The Factors We Considered
THE FACTORS WE CONSIDERED 1. Fleet Profile 2. Fuel oil availability 3. Retrofit & Operational 4. Bunker Price Spread 5. Change in regulation 25
Slide 26: 4. Bunker Price Spread – LSFO vs. HSFO
4. BUNKER PRICE SPREAD – LSFO VS. HSFO 2018 HSFO will be available at a very large discount in January 2020 Bunker Price Forward Curve May 2018 USD 400/mt 26 Source: Argus
Slide 27: 4. Bunker Price Spread – LSFO vs. HSFO
4. BUNKER PRICE SPREAD – LSFO VS. HSFO 2018 3rd Quarter 2019 HSFO will be available at a very large The price spread for January 2020 has discount in January 2020 narrowed to $200 / MT Bunker Price Forward Curve May 2018 Bunker Price Forward Curve August 2019 USD 400/mt USD 200/mt 27 Source: Argus
Slide 28: 4. Scrubber Uptake Can Increase Demand for HSFO and Impact Price Spread
4. SCRUBBER UPTAKE CAN INCREASE DEMAND FOR HSFO AND IMPACT PRICE SPREAD Scrubber Order Timing and Cumulative Scrubber Percentage of Total Fleet 300 40% 36% of 35% VLCC fleet % of VLCC , Suezmax fleet with scrubbers 250 30% to have Number of VLCC, Suezmax 200 scrubbers 25% end 2020 150 20% 15% 27% of
Slide 29: The Factors We Considered
THE FACTORS WE CONSIDERED 1. Fleet Profile 2. Fuel oil availability 3. Retrofit & Operational 4. Bunker Price Spread 5. Change in regulation 29
Slide 30: 5. Regulations Changes
5. REGULATIONS CHANGES 2018 Very few areas where OPLS would be banned 30
Slide 31: 5. Regulations Changes
5. REGULATIONS CHANGES 2018 3rd Quarter 2019 Very few areas where OPLS would be banned More than 70 ports where OPLS are banned Norway Latvia Ireland Lithuania China California Belgium Connecticut Hong Kong Hawaii United Arab Emirates India Singapore Australia South Africa1 Source: GARD 29 August 20
Slide 32: What Are the Residual Risks Today
WHAT ARE THE RESIDUAL RISKS TODAY LSFO PRICE ROCKETS HSFO PRICE PLUMMETS DURATION OF SPREAD Lack of general availability Demand for HSFO will Scale of spread between or in specific locations may reduce sharply post 1 Jan LSFO and HSFO important see the price rise 2020 and price may need to but so is
Slide 33: What Have We Done to Prepare?
WHAT HAVE WE DONE TO PREPARE? 33
Slide 34: Dedicated and Focused Bunker Procurement Desk
DEDICATED AND FOCUSED BUNKER PROCUREMENT DESK Establish dedicated fuel & procurement team o Branch office set up in Geneva (fuel trading hub) o Financial and operational human resource added to team o Built experience in an changing fuel market Procure & source Thorough testing Build relations for L
Slide 35: What Have We Done in Terms of Fuel Oil?
WHAT HAVE WE DONE IN TERMS OF FUEL OIL? 420,000 tons of compliant fuel oil (0.5 & 0.1) purchased o Covers substantial part of Euronav’s total fuel requirement 2020 Procurement o Average purchase price VLSFO: USD 447 p/t v USD 520 p/t for retail VLSFO o Mix of residual and distillate based materials
Slide 36: Procurement
PROCUREMENT 420,000 MT Purchased Average Price Paid for Compliant Fuel Protection 100% 700 0.1% Residual 606 90% Fuel Oil 600 566 80% 70% 500 447 $47 per ton $ per ton fuel cost 400 60% 400 0.5% Premium 50% Fuel 300 Paid so 40% far 200 30% 20% 100 10% 0 0% 0.5% Fuel Oil HSFO Bunker 0.1% Resid & MGO
Slide 37: Operational Management
OPERATIONAL MANAGEMENT o Euronav leveraging our assets and financial capacity to complement our business needs o We are using ULCC as supply platform for fleet o By procuring fuel ahead of 2020 been able to take advantage of emerging 0.5% Sulphur fuel oil market ULCC Oceania o Mediterranean price $3
Slide 38: VLCC Bunker Mapping for Euronav
VLCC BUNKER MAPPING FOR EURONAV Singapore is key fuel hub VLCC SUEZMAX Likely to see c. 70% of bunkering through this core channel in 2020 Source: Euronav 38
Slide 39: Benefits of Forward Buying Fuel
BENEFITS OF FORWARD BUYING FUEL Security of Safety & Quality Control Lower Supply Reliability Emissions Scale Provenance Compliance CO2 (compared with Avoid fuel price spikes Testing Compatibility using scrubber) Security Reliability Stability supply Safety Tested 39
Slide 40: LSFO Arbitrage Trading
LSFO ARBITRAGE TRADING Bunker Arbitrage Trade Flows Current HSFO VLCC trades Potential VLSFO Suezmax trades 40
Slide 41: HSFO Oversupply to Create Floating Storage Opportunities
HSFO OVERSUPPLY TO CREATE FLOATING STORAGE OPPORTUNITIES Tank Farms swapped to LSFO reducing capacity • In traditional storage hubs already switched • Move from HSFO to LSFO to meet new client demand Tank Farms also being used for blending • In order to facilitate blending many tanks used • Putting
Slide 42: Conclusion
CONCLUSION 42
Slide 43: Euronav Position Has Embedded Optionality
EURONAV POSITION HAS EMBEDDED OPTIONALITY “Second mover” advantage • Experience from first installation cycle • Reduced costs & time with increased availability Potentially procure HSFO & store ourselves • Would enable capture of HSFO at low price • Euronav has proven financial and operational capab
Slide 44: Conclusion
CONCLUSION Euronav fleet profile – fuel efficient Fuel Oil Availability – sufficient Scrubber technology – second mover advantage Bunker spreads – narrowed past 12 months Dedicated fuel procurement team established LSFO Quality, Quantity & Supply Security proven > 2020 44
Slide 45: Thank You!
THANK YOU! 45