INTERVIEW: Total Rides Out Short-Term Volumes Hit in Shift to Cleaner Marine Fuels

Leprince-Ringuet said the bunker industry showed resilience in 2020. Image Credit: Total Marine Fuels Global Solutions

Global energy producer Total has taken a short-term hit to its bunker sales as HSFO declines and the company positions itself to become a leading supplier of alternative marine fuels.

The company's bunkering unit, Total Marine Fuels Global Solutions (TMFGS), has "shifted [its] ambition to focus on cleaner marine fuels," Jérôme Leprince-Ringuet, the firm's managing director, told Ship & Bunker in an interview last week.

"We have all our efforts on VLSFO and LNG from 2020."

HSFO Hits 2020 Sales

That shift has not come without a cost in the short term. The company saw its position in Singapore's list of its top bunker suppliers by volume drop from 6th place to 13th last year while other large western oil firms including Shell, BP and Chevron gained ground.

"It's not a surprise to us, and I'm proud that TMFGS has maintained its position as one of Singapore's top 20 bunker suppliers," Leprince-Ringuet said.

"From the start of IMO 2020, we've shifted our global focus from delivering HSFO to VLSFO and other cleaner marine fuels such as LNG.

"With Singapore being TMFGS's global headquarters and the world's largest bunkering hub, this is a key location where we will continue to emphasize our focus on quality and to drive forward initiatives to offer more sustainable marine fuel solutions."

The drop in HSFO sales probably impacted upon Total's sales at other hubs as well, he said.

"But there's a vision here," he added.

"VLSFO and LNG are growing markets, and leveraging on the group's capabilities and low-carbon investments is the most consistent way for TMFGS to develop cleaner marine fuels for the shipping industry overall."

LNG Growth

Beyond the conventional oil-based bunker fuels, Total has already made considerable inroads into newer areas for the marine fuels industry; it may well have some claim to be the world's largest alternative bunker supplier before long.

The company's deal to supply CMA CGM with LNG for its gas-powered boxships over the next decade already makes it a leading LNG bunker supplier. A single stem in November -- its first bunkering of the CMA CGM Jacques Saadé at Rotterdam -- represented about a quarter of total LNG bunker sales there for all of the fourth quarter.

"I do see now in the market more and more shipowners embracing LNG or asking questions and working behind the scenes," Leprince-Ringuet said.

"I think there will be a lot of decisions around the LNG-fuelled fleet in 2021."

Total currently forecasts global LNG bunker demand to reach 10 million mt/year by 2025 and beyond 20 million mt/year by 2030. The company is set to launch two more LNG bunker barges this year, and by 2022 will have LNG bunkering operations at Rotterdam, Singapore and Marseilles.

More Alternatives

About 13% of the LNG Total supplied to CMA CGM in November was biogas, in a one-off trade as the new ship started operations in Europe. This may represent a growing market for Total, as it has just acquired Fonroche Biogaz, the largest producer of renewable gas in France, and now plans to produce 4-6 TWh/year of biomethane by 2030.

At the time that deal was announced, Leprince-Ringuet hailed it "as an important step forward for us to realise bio-LNG as a real marine fuel solution for shipping's decarbonisation."

While conventional fossil LNG can only be used for so long as the shipping industry seeks to bear down on its carbon emissions, the use of biogas and synthetic gas either on their own or blended with fossil LNG may allow shipping to continue using gas-powered ships for decades to come.

Another possible avenue for Total to explore in the alternative bunkers landscape is hydrogen. Earlier this month Total and Engie signed a deal to operate France's largest renewable hydrogen production site near Total's La Mède biorefinery, producing 5 mt/day of green hydrogen.

"Total as a group has a climate ambition to get to net-zero emissions by 2050, and we are moving forward to reach this ambition," Leprince-Ringuet said.

"We have made strong investment moves into hydrogen, biogas, solar, wind and biofuels, and will leverage these capabilities to serve our customers in the shipping industry.

"This will serve our goal to be a leading clean marine fuel supplier."

Resilient Bunker Market

But for now, the company sees some positives in the current conventional bunker market.

"I think the bunker market showed quite strong resilience in 2020; this is correlated to the resilience of the shipping industry as a whole," Leprince-Ringuet said.

"The places where we focus and operate are showing some growth -- in Asia, that includes Singapore and China, and we see that the ARA region has maintained its market share.

"One of the big market developments experienced in 2020 is the increase in Chinese bunker volumes, particularly in the Zhoushan Ningbo area where we have made significant investments," he added.

"We have started delivering bunkers through our joint venture with Zhejiang Energy Group -- Zhejiang Petroleum Marine Fuels Co Ltd."

Clouds on the Horizon

2020 also came with some casualties in the bunker industry, as fraud allegations rocked Ocean Bunkering Services and GP Global and left a generally tighter credit market for the rest of the industry. But these shocks have not made a big change to Total's way of life, Leprince-Ringuet said.

"We have not changed our way of doing business," he said.

"Whenever we engage with a stakeholder, a partner, a customer or a supplier, we run our own due diligence risk assessments.

"That protects us from taking too much risk and entering in relations with fraudulent counterparties.

"Nonetheless, the credit risk has been higher in 2020, which we anticipated in view of expected higher prices of bunker fuels with the implementation of IMO 2020, and we have reinforced our credit risk processes."

That rise in credit risk and tighter availability of credit is likely to bring more consolidation to the industry this year. Bunker Holding and KPI OceanConnect have already announced they are on the lookout to acquire smaller firms, and recruitment agents are reporting a healthy job market for experienced bunker traders.

But Total is less interested in growth through acquisitions in the bunker space this year, according to Leprince-Ringuet.

"The way we operate is organic growth," he said.

"For the moment, this is the best way to leverage our strengths."