Print Jul 06, 2022

Interview with Mr Cyril Ducau, CEO of Eastern Pacific Shipping “Standing at the forefront of maritime innovation”


-On 6th June, the first day of the Posidonia, EPS announced it intends to order an ammonia dual-fuel gas carrier which will be built at Hyundai Heavy Industries (HHI).

As an independent tonnage provider, we are one of the leaders in ammonia shipping today About half of our MGC and LGC fleet carries ammonia as cargo and our crew is fully trained to handle it. In addition, we have a very good understanding of the trade and strong client relationships in place

These new buildings will be LPG and ammonia carriers. We think it is logical for the first step of an ammonia-fueled ship because you can use ammonia from a cargo tank. This project will be carried out through a partnership with HHI, ABS, and Singapore MPA.

-EPS group's investment program is always forward-thinking and capturing the best timing. What are the basic investment policies that your company focuses on?

We are guided by a simple philosophy: Sustainability begins with Accountability. With this mindset as our guide, we invest in three key areas: fleet rejuvenation, the adoption of technology, and the use of alternative marine fuels.

Our company now has more than 200 ships. As one of the industry’s leaders, we make it a point that we must try to break the barrier. We lead by example. You cannot just sit back and say, “We cannot”, “It is not possible” or “We are not ready”. Now, our dual-fuel vessels account for 56 of our 70+ newbuilding order book.

We understand that there will not be a single solution that will get us to net zero tomorrow but if you add various solutions together, you can lower the emission quite dramatically today.

We are lucky because we have diversification across all segments. Also, we are part of the industrial group with oil refineries and commodities companies. We feel that we have a good understanding of where things are going. I think IMO 2023 regulations, EEXI and CII, will be a game-changer for the industry. You must adapt because if not your fleet is going to be obsolete.

-How does EPS group balance GHG reduction and economic efficiency?

There is a cost to pay for decarbonization features on ships, but the world and industry are moving towards sustainable business practices. We are already seeing charterers requiring clear emission lowering agendas from tonnage providers before even considering other commercial aspects.

For big charterers like CMA-CGM, MSC, BHP, Rio Tinto and Equinor, it's very important for them to have tonnage which is efficient and environmentally friendly. We see that companies are willing to pay a premium for ships that meet these criteria.

This trend will only continue to grow. By investing today, we can lead the energy transition by making a positive impact on environmental preservation while also ensuring long-term security for the business.

-How about a fleet deployment policy.

We look at portfolios. For instance, we have long-term charter contracts for containerships and ethane carriers for up to 15 years. Then we have a medium-term charter for up to five years for Newcastle max, Capesize new buildings, some tankers, and MGCs. Also, we have spot ships of Aframax, most MR tankers, and existing Capesizes. It is a good mix. Overall, we have secured our time charter contract’s backlog almost as big as the value of the fleet.

-How about your policies in finance?

We prefer moderate leverage, around 50%. We finance with our balance sheet. Our reputation is also very important. More than 30 banks are lending to us. There are all sorts of institutions, European banks, Asian banks, Japanese banks, and Chinese leasing houses. We also have done JOLCO transactions for new building container ships last year.

-Please tell me about your expectations for future partnerships with the Japanese maritime industry.

EPS has always had a long, rich history with Japanese shipyards, financial institutions, shipyards, charterers, ship owners and trading houses. This started in the early 1980s when Mr Idan Ofer started frequently visiting the Japanese shipping community and building trusted business relationships. Now, Mr Yosuke Hayasaka represents our Japanese office, and I visit Japan very often.

Shipping’s progress is a collaborative effort. We look forward to strengthening our existing and mutually beneficial shipbuilding and financing relationships in Japan while simultaneously working together on ways to improve decarbonization, seafarer wellbeing, and maritime innovation efforts.

-How do you select Japanese/Korean/Chinese shipyards?

It depends on the ship types. We find that with the Japanese yen depreciating now, the Japanese yard will recover its competitiveness against the Korean yard. We very much like Japanese high-quality ships and look forward to continuing our partnership with Japanese shipyards.

Recently in Japan, we built MR product tankers at Onomichi Dockyard, chemical tankers at Asakawa Shipbuilding, and container ships at Imabari Shipbuilding.

-Could you tell me the shipping market prospects?

In the medium term, I think LNG shipping is very interesting. The spot charter rate for LNG carriers might reach $200,000 daily this winter because of strong demand from Europe against the backdrop of lack of Russian gas. The PCTC market is also going up because of a small order book and the automobile companies demand more tonnage.

-Please tell me about the basic philosophy of your "No Coal Cargo" policy. How are you breaking away from coal transportation?

Last autumn, COP26 resulted in the Glasgow Climate Pact, which is the first agreement that specifically targets the phasing down of coal, which is regarded as the most significant contributor to climate change. To support this transition, vessels commercially managed by EPS will follow a No Coal Cargo Policy. EPS has not carried coal as cargo on our commercially managed dry bulk fleet since April 2020.

The policy also aims to be a message to the maritime industry that decarbonization isn’t exclusive to how we move ships - what we move also matters.

Existing vessels in our dry bulk fleet are operated in the spot market, so all of them are under our commercial management. For example, our Capesize and Newcastlemax bulkers only carry iron ore. On the other hand, our dry bulk newbuilding vessels will be time chartered out to BHP and Rio Tinto upon delivery. Therefore, these vessels will be commercially managed by the charterers.

-EPS is planning an onboard trial of the Carbon Capture system. How do you view the importance of the Carbon Capture solution?

We believe carbon capture holds significant promise for reducing emissions for existing and future ocean-going vessels, which will play a major role in the industry’s energy transition and decarbonization efforts. It will fit any type of ship and is complementary to our other efforts to reduce emissions, including the use of biofuels. We are working on the world’s first full-scale marine deployment with a Dutch company called Value Maritime. The system we are installing will be able to capture up to 40% of the CO2 from the exhaust and we can modulate the capture ratio as needed.

We are retrofitting two of our MR tankers built at Onomichi Dockyard and they will be ready in December this year. The system consists of a high-efficiency scrubber (which also removes particulates) and a CO2 capture stage. The CO2 reacts with a special chemical and is then stored in one of our fuel oil bunker tanks, which we will retrofit by applying a special coating. The liquid is pumped out during the next port visit and will be transported via barge or truck to the end-user for CO2.

Based on the dedicated tank capacity, these ships will be able to complete a two-week rotation with a 40% effective capture rate. If you reduce the ratio to 10%, longer voyages of 40+ days will be possible which makes the system very flexible. Initially, CO2 will be offloaded mainly in Rotterdam and the CO2 will be used in greenhouses to stimulate plant growth (which is essentially a form of biogenic carbon capture); in the long run we expect to use the CO2 to produce our synthetic fuels to be re-used in our fleet. We are also working on developing CO2 offloading stations in the US, UK and other locations in Europe. We hope to expand this to Asia with an increase in demand.

-Ship management is becoming increasingly important in terms of preventing accidents and dealing with new fuels. Please tell us about your company's efforts to strengthen the ship management capability.

Our mission at EPS is to be the safe and efficient transportation provider of choice to the shipping industry. That means EPS needs to be at the forefront of innovation and build on our reputation for excellence in the way we serve our customers, run our business, and strive for environmental preservation.

High-quality ship management is the backbone of the organization. In addition, to manage the exponential growth across our fleet in a fast-changing environment, EPS is shifting its culture from managing ships to leading people. Supporting this culture shift is the EPS Life at Sea Programme - a robust initiative designed to improve the long-term mental and physical wellbeing of our team. The programme is a comprehensive set of benefits for the EPS Community, including reimagined accommodations, increased connectivity, state-of-the-art gymnasiums, dedicated physical readiness coaches, an in-house culinary consultant, culinary training for chefs, mental health support, and much more.

We also have an internal digital social network application called Beekeeper. Our 6000 onshore/offshore staff which make up the EPS Community are uploading photos, company news, and their activities every day. This allows for our entire team to be connected and engaged wherever they are in the world.

-How do you analyze the impact of the Ukraine crisis?

I believe many people can see the impact the crisis has had on the markets. For EPS our focus is the impact it has on people. We employ several hundred Ukrainians who are all affected by the conflict. We were deeply distraught, saddened and concerned with the events unfolding. That’s why we created a safe haven in Bulgaria by providing apartments to all EPS Ukrainian seafarers, office staff and their immediate family members. The apartments provide safe and secure housing to innocent people who are undergoing a harrowing ordeal.

Regarding shipping business, we stopped Russian trade after the invasion immediately.