INTERVIEW: Blue Energy Partners Sees Growing Role for Bunker Firms in GHG Compliance

Trine Braathen is the firm's environmental trading director. Image Credit: Trine Braathen / LinkedIn

Norway-based Blue Energy Partners is seeing a growing space for conventional bunker firms to take a role in helping their customers with GHG emissions compliance.

Blue Energy serves as the Norway office of bunker supplier Global Energy Supply, and operates as a dedicated unit focused on delivering environmental and regulatory-driven energy solutions for their partners.

Uncertainty over the proliferation of GHG emissions regulations for shipping is driving demand for its services, Trine Braathen, the company's director of environmental trading, said in an interview with Ship & Bunker.

Braathen noted the information she provided is intended for industry insights only and should not be considered as specific guidance for purchasing or selling allowances. Specific cases may differ and should be evaluated individually, and Blue Energy assumes no responsibility for any decisions made based on this information.

"What we're seeing, and have seen for a few years, is that the regulatory landscape is changing on both mandatory and voluntary developments," Braathen said.

"There are lots of things happening at the EU level, national levels and also, of course, the IMO level concerning the shipping segment.

"There's no doubt that the green initiatives and the green regulatory changes are in super-focus in the industry at the moment, because of course this represents something new; it represents complexity, and it represents something most of the shipping companies are not really fully aware of or understand fully, and it's definitely not their core competence.

"Our role, and why we see it as a business opportunity, is precisely because of this uncertainty.

"It's where we can use our expertise and knowledge, and share that with our customers and stakeholders."

GHG Services

The EUA market is Blue Energy's primary focus for shipping at present.

But the company is also preparing to offer biofuels, both B100 and blended products.

Compliance with the FuelEU Maritime regulation may also become part of its business in time, Braathen said.

"Of course, FuelEU Maritime is definitely something that we will investigate quite a bit in December to see what our role is in the market, where can we actually provide our expertise and guidance," she said.

"As a company, we will focus on being a supplier, so we would not necessarily go on the emission side into reporting, for example, or verification."

The firm is also starting to see interest from shipping companies in UK Allowance procurement for compliance with the UK Emissions Trading Scheme. Domestic shipping will be added to the UK ETS next year, and international shipping from 2028.

EUA Procurement Strategy

The firm has seen a variety of approaches to EUA procurement for EU-ETS compliance in its work with shipping companies.

"What we're seeing at the moment is lots of different types of procurement strategies," Braathen said.

"The most common one is just to buy per voyage; I think at least for the mid-size and bigger fleets, that's definitely the norm.

"But for the smaller companies, it's quite interesting, they don't have the liquidity or the budget and so forth, and they are just bundling the volume and buying it as late as possible."

A more complex approach may bear dividends, for those willing to become more deeply involved in these markets.

"There's room for improvement for these types of strategies, but it all depends on risk preference and risk exposure," Braathen said.

"It depends on, would you allow to only buy these allowances, or would you allow to also sell them.

"And if you buy them, bundling some volume ... and suddenly the market price dropped by 15%, in your governance and policy are you then stuck with that position, or are you allowing it to be sold back to the market and then buy it back at a lower price?

"And of course, it comes down to liquidity in the company.

"Do they actually have the liquidity to hedge for future years and so forth? It depends a bit on which type of company, but we definitely see discussions which are much more advanced than a year ago."

EUA Savings

Braathen points to volatility in the EUA price this year as evidence of the potential savings to be made by altering strategy.

"Let's look at an example I gave to a customer about this a few days ago, where we just looked at prices during the autumn of this year," she said.

"Imagine if you were buying volume on, let's say, August 1, at EUR 71/mtCO2e.

"Let's say, to simplify it, you had a volume of 100,000 mtCO2e that you needed to buy, and then at 71 you buy all the volume because you believe that's a good price.

"Then you have another company waiting and waiting, and they decide to buy volume on November 1 instead, and they buy at EUR 82/mtCO2e.

"They have the same volume, but it's a substantial difference in this price just within those three months."

The EUA price has averaged around EUR 73.41/mtCO2e so far this year, with a low of EUR 60/mtCO2e in April and a high of EUR 83/mtCO2e in November, according to Ship & Bunker data.

"I think a lot of companies don't necessarily understand the implications of this, because of course if you don't include that into your contract ... if you are a bit delaying the purchase or not having a proper strategy around it, then having these types of changes in prices could have a significant impact on the compliance cost and how it's spread out to your stakeholders and customers," Braathen said.

"You have what becomes a competitive advantage if you manage to time the purchase correctly, and what could be a significant disadvantage compared to your competitors if you buy at a terrible price level."

IMO Delay

Another area Blue Energy might be interested in engaging with would be the IMO's Net-Zero Framework, which if adopted would include an element of buying and selling GHG compliance units to meet its thresholds.

The UN body's Marine Environment Protection Committee decided in October to put off a vote on the framework by a year.

Braathen questions whether consensus can be reached to pass the deal in its current format within that timeframe, but remains optimistic over the long-term prospects for global GHG regulation for shipping.

"At the moment, with all the lobbying from the US side, it is challenging to see how they will manage to change that sentiment within the year," she said.

"But the IMO have the opportunity now to maybe simplify it a bit and look at what they could actually control, It's not necessarily all about the financial aspects of this carbon framework.

"But of course, I am quite positive.

"I believe that at some point there will be a global carbon market for shipping; whether it's next year, or if it will take more time, let's see.

"What most of the member states want, of course, everyone wants; a fair, simplified system which makes sense.

"To get to that framework and find a compromise which everyone can live with, that's the challenging part, but from a regulatory perspective it makes so much sense to have a global system."