DSM19 On stage - Jacob Granqvist, Sales Director - Gasum

There's the thing that's been bothering me. It's not the thing that kind of keeps me up at night, but it's like an itch you know and it won't go away. It's something that I've been thinking about for the last couple of years. This thing is something that concerns us all here, and with less than four months away from something that people call the biggest disruption in shipping since we ditched the sails and we started to steam instead. I've been puzzled by that so many they really don't have a clue what is going to happen. It's not the sulfur cap in itself that bothers me. I don't think that this will matter that much at all. The vessels will sail as normal. Ship owners won't have a hard time sleeping due to operational issues. But the thing that's bothering me is that there are very few that have a clear strategy on how to handle this and a clear strategy on what to do now and for the future. It's amazing that we have ship owners with million dollar assets and you still only think on a quarterly basis. You only look for the next three months or maybe a fiscal year, but you don't see what's beyond the sulfur cap and what's coming next. We can all agree that the sulfur cap won't be the last environmental thing that IMO is going to go out with. There's a lot of political pressure now on cutting emissions. Now we're not only talking about sulfur or NOx, we're talking about GHG emissions as well. There are already clear targets for this, but still people are investing and thinking about how to cope with 2020. Some of the solutions that are out there might fix that, but you know what they say: it gets warm for a bit but then it gets cold again. Let's play a little mind game to illustrate my worries. Let's say I would be fortunate enough to be a ship owner and I decide to build new vessels. I scout around, maybe I have a broker involved, and then I find it okay, I will build my vessels in Asia. It's convenient, cheap, maybe good quality these days. So I decide to build in Asia. Then I start to plan the vessels, I plan the voyage from Asia to Europe because I know that my contracts with the charters will be in Northern Europe. I start looking at the journey back home. I think about Singapore: the vessel is going to come out from the shipyard in summer months. Singapore is quite hot, tropical. In order to please the unions and the crew on board, I install professional AC in the accommodation. Box ticked, fixed that. Next I think about Aden. There's a lot of piracy there, so I think about a solution for that. Then it's smooth sailing back home to Europe. So if we look at regulations today, let's say Singapore is the 2020 sulfur cap, and Aden is the Tier III. But then I stop there. I don't consider what's evident and it's out there. Yes, my vessel will come and trade in Northern Europe, so I need to start preparing for sub-zero conditions and think about ice classes and so on. During the financial phase, the design phase, the building phase, not even when I give the command at the yard have I done a single thing about any ice class things. Yes, there's still ice up here even though we talk about global warming. This doesn't make sense to me. If I'm so sure and I already have the time charter contracts, why wouldn't I prepare for the conditions ahead? The same concept counts for the emission regulations. I did my homework for the sulfur cap, I did my homework for the Tier III, but I didn't do anything for what's evident: GHG emissions. This bugs me, especially when there's a very good solution out there. The solution is already in place, the infrastructure is there, and it gives a very good bridge to decarbonize shipping. LNG as a marine fuel is not a mystery anymore. It's out there. Many owners who have embraced it say it's a solution that is out there and already now we are seeing biogas coming into the pipeline as well. We see more and more of this. You can start to buy blends of it. It doesn't need to be one truck coming from a bio plant in Sweden; it can in the future be delivered with vessels as well. For Gasum's part, I think we need to look more towards the ship owners and what their needs are. In order to be competitive in an industry like shipping, it's not enough that your strategies follow what the others are doing. Maybe you can survive, but you will never lead the pack by just staring at the sulfur cap. What is your strategy? They say we'll just wait and see. Who will ever win anything by following others? What we need to do now, me and my colleagues, we need to talk to you and say: what are your needs? What do you need in order to be competitive towards the others? What needs do you have that we can solve? Do you need an emission reduction program? Digitalization? Are you ready to outsource your bunker desk and have someone else take care of it with certain commitments and a very good price? If environmental arguments aren't good enough, shipping and ship owners are quite conservative. But who will pay for it? Now it even pays off to be environmentally friendly. We have seen fuel prices go sky-high in Singapore in the last few weeks. In Shanghai they were up like 120 percent. So the big spread that everybody is waiting for maybe isn't going to happen. Instead, the spread might be smaller. The scrubber business case might not be that good anymore. Looking at gas price compared to what will happen with oil price, if the spread isn't that far, maybe the gas price will go up. Gas doesn't really follow the fundamentals of the oil market. Today we can see quite a heavy discount towards gas, even 40 percent for LNG. This makes a business case, and I think this will grow even bigger in the future. This makes for a very good business case not only for the environment but also for the economics. So I think a lot of people in the shipping industry need to rethink what they are going to do and at least start doing something. By just following we won't change that much, and we certainly won't be competitive.

I think that we need to work more together with the ship owners towards their customers. No ship owner would be willing to take a financial risk if nobody is there to pay for it. We heard yesterday at the commercial meet by talking to big industry companies that they have quite ambitious environmental agendas, but in order to solve that they need help as well. I think that shipping is a very good tool for them to reach those targets also. By that we could help the ship owners help their customers and make it all one happy family together, and not only improve the business economics in it but also improve the environment.

I think it's a lot of education and educate people on what's the right thing to do, at least give them the alternative. But then what's most? I think it's more to get away from the molecules and start talking about services and solutions and how we can help. Then the molecules will be a part of that, of course, but it's not that we want to go out and be just a commodity provider.

Thanks for a very good question. Yes, I would say so. What we see now with the bunker industry is quite sad when you look at what's happening on the conventional side. There's a lot of cheating and it's been like that for ages. Coming from that side of the business, I know quite well what you're talking about. As LNG is quite a new thing still, there have been several things that have been done already from the start in order to get away from things like that. So everything is being delivered with mass flow meters and so on. It's very much more regulated than the conventional bunker business, not only in terms of delivery volumes and qualities but also in regards of safety. So there are a lot of assessments done before we do the first bunker with a vessel, so we can ensure that it's safer and we can also ensure that the customer is actually getting what he's paying for.