Forum Explores Marine Finance Challenges

The maritime industry and its role in the transport of oil, gas and agriculture products as well as the long-desired “energy transition” were major topics of discussion at the New Orleans Marine Finance Forum, held November 30 at the Four Seasons Hotel, where Canal Street meets the Mississippi River.

While maritime industry leaders were unequivocal in their support for improving their efficiencies, reducing fuel consumption throughout the fleet and lowering emissions, many executives also emphasized the maritime industry’s inherent “green” operations and stressed that initiatives like wind energy have a long way to go before they are economically feasible for maritime companies.

Early on, Marine Finance Forum attendees were introduced to the Blue Sky Maritime Coalition, a group whose members are committed to moving waterborne transportation in the United States and Canada toward net-zero greenhouse gas emissions. The coalition’s president and executive director, David Cummins, explained that the group started with an end goal of net-zero greenhouse gas emissions in the maritime field by 2050 and worked its way back to strategize how to get there.

“Your vision doesn’t have to be perfect,” Cummins said. “In fact, you don’t want to be perfect to be visionary. You just have to be congruent. This is a future, and if that future is where we want to go, what would have to happen 10 years before that? What would have to happen 10 years before that?”

Cummins said a strength of the coalition is the innovative thinking and diversity of thought that exists among its members, and that was on display in the panel of members who spoke at the forum. One member of the panel was Shane Guidry, owner of Q-LNG and chairman and CEO of Harvey Gulf International Marine, an early adopter of LNG as a marine fuel. The company built LNG-powered offshore support vessels (OSVs) of its own long before a group of like-minded companies and leaders existed, Guidry said.“We were on an island for a long time,” he said.

Sam Norton, president and CEO of Overseas Shipholding Group, emphasized operational changes companies and logistics systems can put in place to reduce fuel consumption.

“One of the things we talked about early on is, at least in the deepwater marine business, the way contracts are structured, owners like ourselves are incentivized to go as fast as possible to get to the discharge port or load port,” Norton said. “And that’s done irrespective of what port congestion may look like. The contractual structure incentivizes us not to conserve fuel but to get there as fast as possible, and then we sit in the ports for three or four days, burning diesel generators, etc.”

Norton said it would be interesting to see the impact algorithmic voyage planning might have on fuel consumption.

“I think this is a really interesting example of how, holistically, between the ports, the charterers, the end users and the owners, [we are] looking at ways to alter the conventional way the industry has functioned in the past and trying to create efficiencies, not through new technologies, but through new approaches and actually using existing technologies,” Norton said.

Norton said the industry need not place all its hopes on new vessels because, with steel prices and the cost of construction where they are now, “we’re living with the existing asset base for at least the next decade.”

Decarbonization Efforts

In view of the wide range of efforts that can be taken to achieve decarbonization in the maritime industry, one attendee asked if Blue Sky Maritime Coalition members and leadership might use that as a recruiting tool for attracting new workers to the industry.

Guidry replied that it’s simply not that easy.

“It takes a special person to leave his family, go offshore, fight storms, fight the winter months, work 12 hours a day for 48 days,” said Guidry, who later added, “I’d rather see the money and the energy David and the team have focusing on a bigger picture and let us guys deal with how to get the mariners, because again, we have to target who we want to get, and it’s a small world.”

Norton, though, said that, for his company, he thinks outreach to the maritime academies could be impactful for attracting the next generation to the industry.

“I think framing the mission of the industry in a way that aligns itself with some of the younger generation’s aspirations is something that could be combined with some of the initiatives the maritime academies are trying to do to change the mix of people who are coming to those academies, which ultimately feed the principal workforce we work with,” he said.

Later in the day, another panel focused on the fledgling offshore wind industry in the Gulf of Mexico—an industry that, to reach maturity, will need a new fleet of vessels to install wind turbines, lay cable and provide ongoing service to the system. That fleet could come from new, purpose-built vessels or conversions of existing vessels. Operators on the panel made it clear that, just as with the oil and gas industry, the economics have to make sense for them to build new vessels or convert existing vessels for the offshore wind industry. 

“For us right now, we’re working on an SOV (service operation vessel) build program,” said Jeff Andreini, vice president of Crowley Wind Services. “We’re not going to build anything without having a contract in place.”

Andreini went on to detail how big of an investment an SOV is and that operators have to take a return on investment into consideration before making that kind of a commitment.

“There’s a huge challenge in building an SOV,” he said. “You’re talking about, as I heard up here, $160 to $180 million, and the charter rates are not indicative of being able to make the rate of returns that are going to be necessary in order for the vessel to be in the market for a very long time.”

Otto Candies III, chairman and CEO of Otto Candies, said terms of contracts are going to be key moving forward.

“I think the biggest driver of being able to give a developer a day-rate cost that’s manageable is going to be the term of the contract,” Candies said. “We don’t currently have any plans either to build anything new without a contract in place.”

Candies said he expects operators will have to collaborate with developers on ways to amortize the cost of the vessel “over something that approaches the lifespan of that asset.”

“If you don’t, it’s just not economical,” he said.

Furthermore, operators made it clear that they’re experiencing record rates on vessels at work due to demand and the cost of construction squelching new builds entering the fleet. That reality only further complicates the economics of building or converting vessels for the offshore wind industry.

Throughout the day, companies’ approaches to decarbonization and their official reports on ESG (environmental social governance) came up for discussion. Guidry made it clear that “the LNG boats are probably the best move that we made,” but that they were very expensive to build and complicated to operate. At the end of the day, he said, ESG initiatives are very expensive and “people are just not going to spend the money, just like they’re not going to spend the money to get me or any of these guys to do a contract to build a $100 million supply boat. It’s not going to happen.”

Todd Hornbeck, chairman, president and CEO of Hornbeck Offshore Services, took a more positive approach to the topic of ESG.

“We’ve got a great story to tell,” Hornbeck said. “I’m not going to hide or run from fossil fuels like everybody wants to do and reinvent their companies with lipstick and say, ‘Look, I’m so safe because I’m away from fossil fuels. We can manage it properly. We can reduce emissions with fossil fuels. We can do a lot of things to make fossil fuels clean. We’ve got a great story to tell.”

Hornbeck said he believes the Gulf Coast particularly has a good story to tell due to the fact the region has the “lowest greenhouse gas emissions while drilling” than anywhere else in the world.

Inland marine leaders also outlined their commitments to lowering emissions and plotting a course for decarbonization on the rivers and canals of the United States. Merritt Lane, president and CEO of Canal Barge Company, said one way everyone can lower emissions is to move goods by the most efficient mode possible.

“The first thing our customers can do to improve their ESG is to move more by water,” Lane said. “We’re eight times fewer emissions than a truck and quite a bit better than rail. And so part of the solution is staring them in the face, and we just have to do a better job as an industry encouraging that. If the government wants to incentivize something, I’d encourage them to incentivize the demand side, not the supply side.”

Members of the inland panel each highlighted projects they’re involved with that employ alternative fuels or reduce emissions, like Canal Barge’s mv. Merritt “Heavy” Lane Jr., a Tier 4 vessel; ACBL’s partnership with Maritime Partners to build a hydrogen-powered towing vessel; and Kirby’s entry into the offshore wind industry and the company’s biofuel blending facility on the Houston Ship Channel.

Still, each leader, when asked about their outlook on the next five to 10 years, said they believe the major focus will have to be on finding and training the next-generation mariner.

“I still think it’s people,” said Lance Sannino, president of Enterprise Marine Services. “How do we bring new folks into the industry? From where we operate, we’ve been able to rely generationally on families to push the business. That’s sort of ending, and it’s concerning. So how do we find the next generation of people?”