Tankers of many different types will be required to transport the world’s energy.

Large crude oil tankers will be needed for few more decades. Oil production is not expected to peak before the end of this decade and at least one more generation of crude oil tankers will be needed.
There are currently 750 tankers on order, of which nearly 17.5% of the vessels and 36% of the ordered tonnage are for Greek owners. These numbers may look healthy, but compared to a decade ago numbers are far lower as owners hold back on newbuild investments.
This reticence, whilst understandable, doesn’t match the forecasted outlook and tankers of various types will be required to transport crude oil, refined products, and petrochemicals for many years to come.
Further, as we have seen with product tankers, the shift to new cargoes, as the demand of products increases, will be heavily impacted by the need for global industry decarbonisation. Ammonia and methanol vessels will be required to support the need for these alternative fuels.
We have seen a surge in product tanker contracts over the last year. However, in relative terms, product carriers on order still rep- resent only about 12% of the fleet according to GT (Gross Tonnage) and 9% of the fleet according to number of vessels, significantly below the median level. Moreover, almost 40% of the fleet is more than 15 years old.
There has been a series of VLCC (Very Large Crude Carriers) orders placed in the early weeks of the year. Even so, tankers on order in this class represent only about 6% of the fleet, a long-time low that I don’t believe has been equalled so far this century. And in this sector, more than 250 vessels or about one third of the fleet are older than 15 years.


Tanker demand is set to grow as energy requirements in rapidly growing populous regions, such as India and Africa, underpin new tanker trades, whilst a switch from Russian to Middle East and US crude oil supplies destined for Europe boosts tonnes miles. Meanwhile, more tankers are choosing to re-route away from the Red Sea and instead transit around the Cape of Good Hope, which is currently absorbing a significant volume of tanker capacity.
Longer term, a build-up of refining capacity closer to oil producing regions will mean more shipments of long-haul products, driving tonne-mile demand for clean tankers, chemical carriers, and gas ships. The bullish market seen over recent months is set to continue.


The tanker conundrum


Demand may be there today, but the impact of the energy transition and how quickly this could change market fundamentals makes the long-term outlook uncertain.
So tanker owners face a unique conundrum. A new vessel ordered today would not be delivered before 2027. It would be nearly mid-century by the time it reached its twilight years. Would the tank- er still be needed by then?
If asked today, definitively yes, but I would be hedging my bets if you asked the same question in ten years’ time.
Meanwhile, many owners are put off by today’s prices, but I believe they are likely to increase as builders capitalise on strong charter markets and their existing robust orderbooks.
Maximising assets
LR is seeing increased interested from owners in feasibility studies on options such as life extension or replacement; the installation of energy saving devices; or engine retrofits.
However, the economics are complicated because many older tankers may be only marginal upgrade candidates. This applies to the majority of ships that have passed their third special survey. Payback periods for complex retrofits could well be uncertain, or simply too long.
Investing in older vessel upgrades may no longer be a matter of choice. If tankers are to pass charterers’ increasingly rigorous vetting procedures, they must have carbon intensity indicator (CII) ratings of A to C. I expect most tankers older than ten years will almost certainly fall into categories D or E and therefore require remedial action.
Meanwhile, new carbon regulations, such as the EU Emissions Trading System (ETS) and FuelEU Maritime will have an impact. There other strategies to consider. For example, a combination of energy saving devices could make perfect sense for a mid-life products tanker.
Options could include mewis ducts, pods, rudder bulbs, advanced hull coating systems, wind-assisted propulsion systems and wind sail technology to name a few. There has been a slow penetration of these technologies into the tanker sector so far, but more installations are scheduled for later this year and are likely to increase as owners seek to maximise an ageing fleet.
* Lloyd’s Register Global Tanker Segment Director