Shipping and ferry operations

Steady course in changing conditions

Who could have anticipated that oil prices would fall by 50% at the end of year 2014? We had it in one of our business scenarios, but it was certainly not our base case. Six months ago it was hardly possible to find anybody who was speaking about an oil price around the USD 50/barrel level. Currently it is difficult to find an analyst that envisages high oil prices in the short term perspective. Most of our businesses are both volatile and unpredictable, but we have to use that to our advantage.

For Stena it is less about trying to anticipate the future and more about having financial and intellectual ability to act, adjust and adopt to change. With falling oil prices our strategy of having a diversified portfolio of activities is put to the test. The falling oil prices is positive for our ferry activities and we are currently seeing strong tanker markets, even though its correlation with oil prices is less evident. Overall the performance of our shipping businesses improved during 2014 and we anticipate the trend to continue during 2015.
 
Our drilling activities have, in terms of financial returns, outperformed other shipping activities in Stena for almost ten years. The strong performance in the drilling segment has ­enabled us to invest counter-cyclically. Over the past few years we have taken significant positions, for example the world’s two largest RoPax ferries now trading between Hoek of ­Holland and Harwich. Another example is that Stena RoRo successfully acquired ten second hand vessels, at favorable prices, over the past three years.

Yet another example is the ten IMOIIMAX product tankers, acquired together with partners and to be operated by Stena Weco, that are being delivered with three-month intervals from early 2015. We were able to take these positions, at attractive prices, despite that the underlying businesses themselves did not warrant such investments. Now the tide has turned and these assets will surely carry us through the next part of the cycle.

We are in good shape. But we must never rest or relax.

Irrespective of whether markets are up or down, our focus and ambition is to be “best in class” when it comes to operations and business execution. The transportation of goods will never stop, and if we continuously are our customers’ first choice we will always have employment for our vessels. Operational excellence, through high quality, high service level, reliability and being very close to our customers, is therefore our strategy. Through the network of 22 ferry routes in Stena Line, by way of Stena Sonangol, the world’s best performing Suezmax pool, and Stena Weco/Golden Stena Weco, now operating about 60–70 MR and Intermediate tankers, we have platforms that give us scale and reach to be able to manage our assets better than any competitor. Further developing these platforms by enhancing our ability to create value for our customers and reducing our costs are the key priorities for the next years. The age profile of our fleet and the capabilities our vessels represent, give us the opportunity to avoid larger new investments in the medium term. We are in good shape.

But we must never rest or relax. Operational excellence requires constant vigilance and focus on every detail. With over 150 large vessels trading around the globe, we carry significant operational risk and our crews are our most important asset. The shipping industry is continually improving its track record when it comes to emissions, spills and accidents. However, every incident is a failure and the consequences can potentially be significant. Further increased focus on safety and adopting best practices across our different companies will, all going well, lead to a year without fatalities, with no discharges to the sea and no collisions. Our ability to improve ourselves and to set a standard for our industry is crucial for our long term success. In northern Europe the whole shipping sector is being put to the test by the new rules on sulphur emissions, the SECA. We continously have to be able to demonstrate that we are the most environmentally friendly and cost effective way of transporting goods. In 2014 we connected the ferry Stena Danica to the district heating grid (“fjärr­värmenätverket”) in Gothenburg, powered by 100% green energy. In 2015 Stena Germanica will be the world’s first vessel to be powered by methanol, a quantum leap when it comes to reducing emissions. Fuel efficiency, sustainability and safety are issues that traditionally have been hallmarks of Stena and they will, to an even larger degree, be part of our future.

Carl-Johan Hagman

Emissions from fuels in relation to ­bunker oil with 1% sulphur content

The graph shows emissions of different fuels in relation to bunker oil with a low sulphur content (1%), which is index 100 on the scale on the left.

The world's 1st ferry to convert to methanol

Carl-Johan Hagman talks about the project that will result in the world's first ferry running on methanol.

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Next in Annual Review 2014

SUSTAINABILITY

FOCUSING ON SAFETY AND THE ENVIRONMENT