All four OSG Alaska class tankers to get engine upgrades

OSG president and CEO Sam Norton: “Transporting liquified CO2 is a natural next step into an exciting emerging market, consistent with OSG’s expertise with liquid cargoes.“

Tampa, Fla., headquartered Overseas Shipholding Group Inc. (NYSE:OSG) has signed a contract with MAN Energy Solutions SE that will see all four of the nearly 20-year old OSG Alaska class tankers get a comprehensive lifecycle engine upgrade that will include making them ready for methanol fueling.

As we reported earlier, in October, OSG reached an agreement to purchase the fourth of the ships, Alaska Frontier, which had been in cold layup in Malaysia since 2019 and return it to service after a reactivation that included an extensive engine upgrade. All four ships in the class, which are operated by OSG subsidiary Alaskan Tanker Company, will now get that upgrade.

“These vessels were originally built with a 40 year design life,” said Alaska Tanker Company COO Chris Merten. “With Alaskan crude oil production expected to increase by as much as 250,000 barrels per day by the end of this decade, ensuring the extended operating life of these vessels in compliance with environmental regulations has been a top priority for us and our customers. The upgrade of these vessels’ main engines should allow that goal to be achieved over the next decade, adding years of CII compliance for these vessels to generate additional cashflows through 2035. Looking out over the longer term, the methanol fuel option that these upgrades provide allows possibilities for even longer-term operation should green methanol fuel availability emerge in the decade ahead.”

The OSG Alaska class engine upgrades involve a series of technical and commercial enhancements, including:

• Engine component replacements with newer, more fuel-efficient models, leading to reduced fuel consumption and lower greenhouse gas emissions.
• Installation of advanced control systems and optimization technologies to allow crews to operate the vessels in a more efficient manner, maximizing performance while reducing overall environmental impact.
• Capability to meet Carbon Intensity Indicator (CII) regulations without sacrificing operational capacity of the vessels for years to come.
• “Ready for Methanol” capability.

The LCU program is scheduled to begin in early 2024 in conjunction with the plans to reactivate the Alaskan Frontier. The remaining three vessel engine upgrades will be conducted concurrently with scheduled vessel drydocking periods through 2026, which will mark the completion of the project.

“The decision to contract with MAN Energy Solutions for engine Life Cycle Upgrades on all four Alaska class tankers represents a major investment in the future of our company,” said OSG president and CEO Sam Norton. “When combined with previously announced commitments to reactivate the Alaskan Frontier, the aggregate investment we will be making into our Alaskan fleet over the next three years will be close to $100 million.”

“The benefits of this substantial investment will be multiple,” said Norton. “We expect improvements in fuel oil consumption, which will result not only in substantial cost savings, but as importantly in an estimated annual reduction of over 20,000 metric tons of greenhouse gas emissions based on historical trading patterns for each of these vessels. OSG has set a target of achieving a 15% reduction in annual CO2 emissions by 2030 and this investment alone should account for roughly one-third of that target. In addition, the anticipated improved emissions attained from the engine upgrades should allow all our Alaskan class vessels to operate in their historical trading patterns while maintaining compliance with current Carbon Intensity Index (CII) regulations through at least 2035.”

“The life cycle upgrade is our ‘roadmap’ solution for the engine type 48/60 installed on the Alaskan Class,” said Marcel Lodder, strategic sales manager at MAN PrimeServ. “With the conversion, the roughly twenty-year-old engines of the Alaskan fleet will not only profit from being ready for future fuels but are also reset to almost completely new condition in combination with today’s serial new build standards. We are looking forward to performing the conversions together with Alaskan Tanker Company and being part of this success story in decarbonization.”

Concurrent with entering into contracts with MAN Energy Solutions, OSG agreed to amend existing charterparties for the Alaskan Navigator and Alaskan Legend. The amendments modify the terms of the charterer’s existing extension options and provide for five additional one-year extension options for each vessel at agreed rates through 2035.