Some major names in the shipping and oil industry aspire to raise $1 billion for a vehicle aimed at profiting from a clampdown on highly polluting marine fuels, pitching the investment vehicle as an insurance policy for shipowners or airlines against a spike in fuel costs, according to the Financial Times.
Mainly, London-based Enerjen Capital plans to use the money to create a ‘hedging basket’ designed to profit from a price spike many fear could be triggered by the new IMO’s rules.
Additionally, IMO’s regulations will come into practise at the end of 2019 and they are one of the most major changes in the oil industry, concerning the past decade.
For many years the majority of vessels were using higher sulphur bunker fuel, which is cheaper and widely available but has been accused of increasing air pollution.
The company also states that the vehicle can be used by smaller shippers, their owners and airlines to hedge against a rise in fuel costs without having to buy over-the-counter derivatives from banks and post collateral.
Contrary to other commodity funds, the Enerjen IMO vehicle will have a limited lifespan, based on the period the IMO rules will be implemented. It goal is to have its hedges in place by the end of Q3, when shipping companies will need to buy marine diesel for their fleets in order to be compliant on January 1, 2020.
The hedges will remain in place through 2020 and will be liquidated during Q1 of 2021, according to the Financial Times. Enerjen will charge a fee to cover operational expenses and take a share of profits.
Moreover, Enerjen foresees that approximately 3.7 barrels per day of high sulphur oil demand are to disappear, whereas increased shippers’ consumption could experience a 1m to 1.5m b/d deficit materialise in the diesel market until new refining capacity comes on line in 2021.
Mr Schueler, one of Enerjen’s founders, addressed that a ‘global ban’ is possible, thinking of the decision made by California and Singapore, which aim to outlaw the use of ‘open-loop’ technology.
Mr Schueler added that
Scrubbers defeat the purpose of IMO 2020. Even if shipowners want to fit scrubbers they can’t for the moment.