Scorpio Tankers says takes 6% stake in dual-fuel methanol tanker group

Scorpio Tankers has expanded into alternative fuels with the acquisition of a minor interest in a group of nine product tankers, including five dual-fuel Medium Range methanol tankers, the company said Aug. 5.

The methanol MRs, built between 2016 and 2021, are designed to carry methanol as a cargo and to consume it as a fuel, and are currently on long-term time charter contracts greater than five years, Scorpio said in its second-quarter results.

Scorpio has bought 6% of the outstanding shares in the tanker group for $7.2 million, the company said. The portfolio also included four ice-class Long Range 1 product tankers. Scorpio did not identify the other members of the tanker group.

"This is a foot in the door, a toe in the water," Chief Operating Officer Cameron Mackey said during the company's results call. "If things go well there's a fair bit of opportunity. We are interesting in getting engaged in the trade."

Mackey said methanol as potential alternative fuel has been more recognized alongside LNG, the easiest "bridging" fuel compared with more further-afield alternatives like ammonia or hydrogen.

Mackey said methanol as a fuel currently has a fraction of the infrastructure of conventional fuel and is tied to existing oil major or refiner infrastructure. He emphasized the five MRs in the investment portfolio are dual-fuel, which provides flexibility in terms of fuel availability, and that in the current environment dual-fuel would be the most feasible place to go for fleet expansion or renewal.

Less-developed alternative fuels like ammonia or hydrogen have not yet conceived infrastructure, Mackey said, and are expected to expand further down the line in five to 10 years.

In addition to the advancement of alternative fuels for shipping, the global product tanker fleet is shifting in technology and age, as scrapping rates for older product tankers have increased in 2021 due to high steel prices and the advanced age of the global fleet, Commercial Director Lars Nielsen said. Year to date, 25 MRs had been scrapped, Nielsen said.

Based on current projections and scrapping levels in the first half of 2021, the full year could be the highest year ever for MR scrapping, he said.

Scorpio Tankers operates 131 clean product tankers, distributed between Handymax, MR, LR1 and Long Range 2 vessel classes, with the average age of 5.5 years. Ninety-eight of the tankers have been outfitted with exhaust gas scrubbers.