Dorian LPG Confident on its Scrubber Strategy, Indifferent on Open-Loop Bans

Tuesday February 5, 2019

Dorian LPG Ltd has given a confident account of its scrubber strategy, saying the economics already look good and there is little concern over recent announcements of open-loop bans by some key ports.

In comments made as part of its latest earnings release, the VLGC owner also unveiled plans to install scrubbers on three additional vessels at a cost of $4.3 million, not including installation.

Those will come in addition to the seven units it has already committed to, with retrofitting taking place during calendar year 2019 and 2020.

As with its other orders, the scrubbers are hybrid in nature meaning they can operate in open or closed-loop mode.

While it too early to get any real picture of pricing for IMO2020 fuels, John Lycouris, CEO, Dorian LPG USA, noted recent trades for 0.50% fuel in Singapore were showing a "healthy difference" between compliant fuel and HSFO.

The trades were at $500/mt and $517/mt, whereas the firm's future contract traded at the same time at $320/mt.

With that premium of $180/mt or more for the 0.50% sulfur fuel versus HSFO, "we would expect to recoup our investment in approximately 18 months," Lycouris said.

No listed scrubber advocate should expect to complete an earnings call without being asked for their opinion on recent plans by Singapore, Fujairah, and China to ban the use of open-loop scrubbers within their waters, and Dorian LPG's call Monday was no exception.

While making it clear that such a ban "doesn't affect us because all the scrubbers that we're fitting are hybrid," John Hadjipateras, Chairman, President & CEO, said the ban by Singapore seemed "uncharacteristically unstudied" as he felt it was not supported by any scientific evidence.

And while those against the use of scrubbers say a lack of scientific evidence is the reason they feel caution on the technology is needed, Hadjipateras seemed happy with the industry's current state of play on the matter.

"I'm not sure it's in our interest to convince everybody to put scrubbers in," he said.

* Some quotes from this article as transcribed by Seeking Alpha