ASYAD Presents Its Strategy for Expansion and Sustainable Growth:
• Commitment to zero emissions and a thoughtful transition to dual-fuel for fleet sustainability.
• Expansion in the bulk carrier sector and ensuring logistical security through investment in container ships.
• Ports must be required to provide equipped facilities for the discharge of ballast water from ships.
With the emergence of Asyad Group as a unique Middle Eastern model in the maritime industry, the group intends to continue its promising journey through expansion and sustainable growth strategies. Dr. Ibrahim Al Nadhairi, CEO of Asyad Shipping and Drydock, talks more to Robban Assafina about the company's plans to further expand the fleet by the end of 2024 and enhance drydock capabilities by purchasing a new floating dock before 2027.
In addition to discussing decisions issued by the IMO, with the company's commitment to net-zero principles through the use of alternative fuels and its intention to convert its entire fleet to dual-fuel systems by 2032.
Initially, how would you describe Asyad's expansion and growth over the past few years?
Our expansion has always been well-planned, as our strategic plan began in 2020 and will continue until 2025. Our plans are usually medium-term, focusing on understanding market challenges and needs, and aligning the types of ships with global demand. In 2019, we had around 15 Very Large Crude Carriers (VLCCs). However, the fleet is getting old, and we need a younger fleet to remain competitive in the market. This need is driven by several factors, including environmental requirements and IMO regulations, as well as market demands and the number of ships in the market. Additionally, some ships are used by certain owners for their private needs.
We operate on the principle of long-term time chartering, with some ships put into service to benefit from market variations. We embarked on a fleet renewal plan in 2019 and delivered our first two ships in 2021, and the third in 2022, this is regarding VLCCs. The oil tanker market is constantly changing due to global geopolitical situations, leading to higher demand than supply for such ships. Moreover, the existing fleet of this type of vessels worldwide is aging, with many expected to be taken out of service, creating a need for fleet renewal. However, shipyards cannot build the same number of ships that are leaving the market, which we expect will create challenges in the availability of VLCCs over the next ten years.
Therefore, our goal was having a new and competitive fleet while ensuring we have enough ships to secure a significant market position. Hence, we recently signed an agreement with Hanwha Ocean to build four VLCCs, expected to be delivered by the end of 2026 and early 2027.
What about being the first maritime entity in the Middle East to complete an ESG report?
This initiative stems from the country's general direction through Oman’s Vision 2050 for achieving net-zero emissions. Additionally, as a governmental and global company at the same time, we strive to make our ships more environmentally friendly as efficiently and quickly as possible. This has both commercial and environmental implications, as charterers will consider environmental requirements, giving us a market priority. Furthermore, we aim to contribute to environmental preservation. Our fleet comprises both old and new ships, and we strive to ensure our fleet does not exceed an average age of 15 years. Older ships incur higher maintenance and operational costs and emit more harmful emissions, so the competitiveness in the market will be less.
Regarding LNG carriers, we signed an agreement in the end of 2022 to build two gas carriers tied to long-term charter party with a well-known industry player. The investment in gas carriers is substantial, and these long-term charter parties provide us with market competitiveness. We currently have six large gas carriers, in addition to these two new ships, and we have plans to expand our gas carrier fleet. We also have a plan to modernize our fleet of oil tankers, particularly for oil derivative tankers. As for bulk carriers, we expanded into this sector in 2019 by purchasing seven UltraMax vessels in 2017, with further expansion plans in place.
What about expansion plans in the coming years? Are these plans tied to a specific timeline?
Expansions can be achieved by building or purchasing new ships that are less than five years old. The fifth-year marks the first maintenance year, so we prefer to have the ship with us and perform its maintenance in Asyad's drydock in Duqm to understand the ship's needs and condition. Every five years, we have a strategic plan to work on, which allows us to determine the number of ships we might purchase. Generally, we are considered an oil tanker company, since this type of carrier forms more than 45% of our fleet. However, we have other sectors, and we are diversifying our fleet so that if the oil tanker sector is affected, we have ships in other sectors that contribute to the company's operations.
Through our market analysis in the past period, it became clear that we should have invested in containerships last year, in 2023. However, the containerships market was not encouraging for investment last year, and the geopolitical situation in the region is challenging. Currently, the containerships market has improved compared to last year, but it remains highly sensitive. Our focus on this market is limited and aims to provide the country with strategic security in terms of logistical transport. Nevertheless, our primary focus remains on oil tankers. The bulk materials sector also serves as a significant support, as the Omani market is very promising in the field of bulk cargo carriers, and we want to leverage the existing opportunities in this field, that’s why we want to invest in it.
When we talk about expansion, what is the goal you seek to achieve globally, especially in the oil and gas sector?
The choice of the name "Asyad" was not made randomly. Oman has a long maritime history, having once been an empire that dominated the seas with a vast commercial and military fleet. Therefore, at Asyad, we aim for Oman to be among the leading nations in the maritime shipping, and we have the necessary capabilities to achieve this. Asyad represents the logistical arm of the Sultanate of Oman, and today we are working on making the logistics sector interconnected with all parts of the world by linking Omani ports with each other and with global ports for various uses.
We have another goal which is to encourage Omani youth to work in this promising field, as nations are built by the efforts of their people, we want to rely on Omani youth in managing this fleet, whether in offices or on ships. Additionally, the prevailing geopolitical situations require every country to have independence in all matters, that’s why we aim to cover a very important sector, which is logistics. And we strive to have an active role, both within the Sultanate and globally.
Today, we not only represent Asyad but also Oman, and we want to maintain the image and prestige of our country.
Currently, there is a focus on the importance of sustainability, zero emissions, and alternative fuels.
How do you assess the awareness of players in the maritime industry about the importance of environmental considerations?
The maritime sector's contributions to emissions are less than 3%, yet it is our duty to try to reduce them. However, this reduction must be done thoughtfully, because the maritime shipping sector is very sensitive. Building or purchasing a ship costs tens of millions, so there must be a commercial return.
The environment is very important, and it is our duty to protect it, but to do so, we should not sacrifice other things. About 90% of global trade is carried out by sea, so if maritime cargo transport is affected, the whole world will be negatively impacted, and there will be adverse results for environmental conservation efforts.Therefore, our approach, as maritime shipping companies to transitioning to alternative fuels and environmentally friendly ships, must be well-studied. From my modest market analysis, I noticed that some large companies have ordered ships they may not need in the next ten years, simply because they have raised their standards. Smaller companies now cannot reach the level that these large companies have attained in terms of providing environmentally friendly ships due to their high cost and the lack of ports equipped with the necessary infrastructure for refueling ships that operate on natural gas or other types of alternative fuels.
How do you view the setting of specific dates by the IMO for the transition towards sustainability mechanisms in the maritime sector? And what is your approach regarding alternative fuels?
Some decisions issued by the IMO, unfortunately, can be taken from a unilateral perspective, which will affect the industry as a whole. Large and well-known companies will implement these decisions, and we will treat them as a legal matter and comply with them. However, some players will not take these decisions seriously and will find ways to evade their implementation, leading to an unfair application of the rules. Additionally, sectors connected to maritime shipping should be obligated to follow the same regulations.
For instance, some decisions might require ships to discharge ballast water at ports, but so far, ports are not required to provide the necessary facilities for this process, which might force ships to discharge this water at sea. Regarding the transition to alternative fuels, all our new ships will operate on dual-fuel or dual-fuel ready systems, and by around 2032, our entire fleet will consist of such ships. Currently, we rely on natural gas as an alternative fuel, but by 2027 or 2028, we might consider other options like ammonia or methanol, depending on the availability of related infrastructures.
What is your outlook on the performance of Asyad Drydock in general, especially in the past year and the first half of 2024?
The company's performance has been excellent. Last year, the drydock utilization rate was above 98%, and we nearly exhausted all available slots. We purchased a floating dock to help expand the drydock operations, and it turned out that even with this purchase, there are still many opportunities to capitalize on. Therefore, there might be more expansion in the future regarding the purchase of another floating dock within the next five-year plan, from 2025 to 2029, with the purchase likely happening before 2027.
We have also expanded our capabilites to the shipbuilding sector; last year, we delivered two small offshore vessels, and this year we delivered a world-class fishing vessel to a local company. We aim to enhance our presence in this sector but on a limited scale, based on market needs.
Duqm is set to become the green hub of the Sultanate of Oman. Recently, the ship maintenance sector in the Gulf region has been affected by the situation in the Red Sea, causing many ships to change their routes and pass through the Cape of Good Hope heading to China or Singapore. Despite this, we see that the impact is superficial due to our excellent relationships with Greek shipowners.
Additionally, the drydock's location in Duqm on the global trade route has given us better opportunities than our competitors in the region, as the area is safe and situated outside the Red Sea. Hence, we have some advantages that distinguish us from other drydocks in the region.
What is your outlook for the upcoming stage in terms of opportunities and challenges?
We are very optimistic and have ambitious plans. In 2022, our fleet consisted of around 47 ships, and today the number of ships we own and operate has reached 91, and we expect to exceed 100 ships by the end of the year. The company's financial performance over the past few years has been excellent, and this allowed more investment opportunities. Regarding the drydock, there are numerous projects, largely due to the IMO's requirements, which lead to increased maintenance, development, and retrofitting projects naturally carried out in drydocks, and we hope the situation in the Red Sea does not persist for too long.
We have plans for other projects in the drydock that will increase its revenue. Overall, I believe that the development in the drydock and maritime shipping is very sustainable, both economically and commercially, and the process of developing human capital is progressing excellently.
Robban Assafina, Issue 93, Sept./ Oct. 2024, Marine Insurance, pg. 87
