Global Ports Forum

Australia declares resources boom is over

mobile.reuters.com/article/idUSBRE87M03220120823?irpc=932

“The resources boom is over,” said Aussie Resources and Energy Minister Martin Ferguson – the boom at the surrounding port will probably be over, as well.

BHP’s Port Hedland outer harbor plan will be on hold.

Olympic panic: is the mining boom at an end?

www.abc.net.au/news/2012-08-24/janda-mining-boom-or-bust/4219410

A contradictory view?

“Michael Janda says it’s unlikely Australia’s mining investment boom will come to an immediate thudding halt.”

U.S. Navy Ship Collides With Tanker Near Strait of Hormuz
By Wael Mahdi and Isaac Arnsdorf
August 12, 2012 5:47 AM EDT
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The U.S. Navy said one of its guided-missile destroyers collided with an oil tanker near the Strait of Hormuz in the Persian Gulf.
The collision between USS Porter and the Panamanian-flagged bulk oil tanker M/V Otowasan occurred at about 1 a.m. local time, Bahrain-based U.S. 5th Fleet spokesman Lieutenant Greg Raelson said in a phone interview today. The collision was not combat-related and overall damage to the ship is being evaluated, he said.
Strait of Hormuz is a narrow waterway carrying a fifth of the world’s traded oil that Iranian officials have threatened to block in retaliation for sanctions targeting the country’s nuclear program. The U.S. Navy has said it would move to stop any Iranian attempt block the waterway.
The tanker, owned by Tokyo-based Mitsui OSK Lines Ltd. (9104), can hold 2 million barrels of crude oil and is 95 percent full, according to ship-tracking data compiled by Bloomberg. The vessel loaded at Mesaieed in Qatar and was sailing to Fujairah, the region’s largest refueling port in the United Arab Emirates, the data show.
“We have had no reports of any spills or leakage,” 5th Fleet’s Raelson said.
To contact the reporters on this story: Wael Mahdi in Manama at wmahdi@bloomberg.net; Isaac Arnsdorf in London at iarnsdorf@bloomberg.net
To contact the editor responsible for this story: Shaji Mathew at shajimathew@bloomberg.net

UPDATE 1-BP sells UK LPG distribution business to DCC
Wed Aug 8, 2012 9:30am BST

LONDON, Aug 8 (Reuters) – BP said on Wednesday it has agreed to sell its liquefied petroleum gas (LPG) distribution business in Britain to DCC, a support services group, for $63 million.

The British oil company’s UK LPG business supplies industrial, commercial and domestic customers, with annual sales of approximately 87,000 tonnes of bulk and cylinder LPG.

It employs 116 and operates from 13 locations throughout Britain with a fleet of 62 delivery vehicles.

BP said it was retaining its automotive LPG business, which will move into its UK Fuels Value Chain, which runs the company’s fuels business including service stations.

(Reporting by James Davey; Editing by Paul Sandle)

Cnooc Hired U.S. Lobbyists Prior to Nexen Announcement

Chinese energy giant Cnooc Ltd. (883), whose efforts to buy a U.S. oil company in 2005 sparked an outcry over foreign ownership, hired two Washington lobbying firms just before announcing its plan to buy Nexen Inc. (NXY)

Cnooc, owned by the Chinese government and based in Beijing, agreed July 23 to pay $15.1 billion for Nexen, a Calgary-based company that operates in the U.S. portion of the Gulf of Mexico. It is Cnooc’s biggest North American deal since it walked away from Unocal Corp. under congressional pressure and the largest overseas acquisition by a Chinese company.

If approved, the Nexen takeover would mark the first time a Chinese company would be the operator of leases in the U.S. Gulf of Mexico, instead of a minority stakeholder. Nexen now operates 90 leases in the Gulf, where it’s the 29th-largest oil producer and 42nd-largest gas producer, according to the most recent operator ranking by the Interior Department from July 16.

The purchase of U.S. assets by foreign companies can be blocked on national security grounds.

Cnooc’s takeover of Nexen will probably be reviewed more closely than other international deals, Iain McPhie, a lawyer at Squire Sanders LLP in Washington, said in an interview. “The Chinese just raise strategic issues that an acquirer from the United Kingdom and France don’t raise,” said McPhie, who’s not involved in this transaction.

U.S. Review

Cnooc and Nexen said in a July 24 filing with the U.S. Securities and Exchange Commission that they intend to put the deal to the Committee on Foreign Investment in the United States for review.

The committee, a division of the Treasury Department, has the power to impose conditions on foreign acquisitions, including the “extreme” step of forcing a divestiture of the U.S. assets, said McPhie, who has represented clients before the committee.

“We bought energy assets in the U.S. before and we have experience on how to get regulatory clearance,” Cnooc Chief Executive Officer Li Fanrong said on a conference call with reporters on July 23. Spokesmen for Cnooc and Nexen didn’t immediately respond to requests for comment on their efforts to get the deal approved in the U.S.

Wexler & Walker Public Policy Associates registered to lobby on behalf of Cnooc July 12. Its lobbyists include Bud Cramer, a former Democratic representative from Alabama, public records show.

Lobbyist Hired

In May, Cnooc hired Hill & Knowlton Strategies to lobby Congress on issues relating to the environment and natural gas, according to public records filed with the Senate.

Both firms are part of WPP Plc (WPP) in Dublin.

Allison Cohen, a spokeswoman for Hill & Knowlton, said the firm didn’t comment “on our clients or prospects.” A call to Wexler and Walker wasn’t immediately returned.

Hill & Knowlton employees have been lobbying Canadian government departments, ministers and officials for Cnooc, according to a website registry run by the Office of the Commissioner of Lobbying of Canada.

Cnooc, China’s largest offshore oil and gas explorer, hadn’t paid a firm to lobby Congress since its 2005 attempt to buy Unocal, according to public records. Unocal was eventually bought by San Ramon, California-based Chevron Corp. (CVX)

When it withdrew its Unocal bid, Cnooc said in an announcement that “unprecedented political opposition” to its proposed purchase was “regrettable and unjustified.”

Schumer Letter

Senator Charles Schumer, a New York Democrat, urged Timothy Geithner, who as Treasury secretary is the chairman of the committee on foreign investment, to withhold approval of the purchase until China agreed to provide U.S. goods with more access to Chinese markets, according to a letter sent today.

“It is rare that we have so much leverage to exert upon China,” Schumer said in a statement. “We should not let this window of opportunity pass us by.”

Schumer expressed overall support for the deal, saying it “will benefit the United States and help ensure the continued resurgence of our domestic energy sector.”

Nancy McLernon, chief executive officer of the Organization for International Investment, said the purchase by foreign companies of U.S.-based assets has become less politically charged since then.

“There is a widespread recognition of the value of foreign investment in the U.S.,” McLernon whose Washington-based group includes U.S. subsidiaries of Iberdrola SA (IBE) in Bilbao, Spain, and Tokyo-based Sony Corp. (6758), said in an interview.

Nexen’s other oil and gas assets include production in Nigeria and the North Sea, as well as oil-sands reserves at Long Lake, Alberta, where it already produces crude in a joint venture with Cnooc.

To contact the reporters on this story: Jim Snyder in Washington at jsnyder24@bloomberg.net; Rebecca Penty in Calgary at rpenty@bloomberg.net

To contact the editors responsible for this story: Jon Morgan at jmorgan97@bloomberg.net; Susan Warren at susanwarren@bloomberg.net

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Abu Dhabi Exports First Pipeline Oil Bypassing Hormuz

July 16 (Bloomberg) — Abu Dhabi started exporting its first crude from a pipeline that bypasses the Strait of Hormuz, shipping the fuel from the neighboring sheikhdom of Fujairah to a refinery in Pakistan.

The link, stretching from Abu Dhabi to Fujairah on the Gulf of Oman, began loading a shipment of about 500,000 barrels, Mohamed Al-Hamli, oil minister for the United Arab Emirates, said yesterday at the inauguration ceremony. International Petroleum Investment Co. spent $4.2 billion building the 423- kilometer (263-mile) link, Managing Director Khadem al-Qubaisi said at the ceremony in Fujairah.

Abu Dhabi, the U.A.E.’s capital and holder of more than 90 percent of its oil, built the export route for crude to avoid Hormuz, a narrow waterway carrying a fifth of the world’s traded oil that Iran has threatened to block in retaliation for sanctions targeting the country’s nuclear program. Construction costs were 27 percent higher than the $3.3 billion contract awarded to China Petroleum Engineering & Construction Corp. in 2008 and was delayed by 11 months.

“The pipeline will get used if they keep the price to load crude from Fujairah the same as loading from inside the Gulf,” said Robin Mills, head of consulting at Dubai-based Manaar Energy Consulting and Project Management. “It means that Abu Dhabi is just swallowing the cost of the pipeline, as it has been built for strategic reasons. If this was a commercial venture, they would have built it years ago.”

Political Maneuvering

An Iranian lawmaker, Mohammad-Hassan Asferi, said yesterday the pipeline’s limited capacity would keep it from obviating the need of regional suppliers to export most of their oil through the strait. The line is “propaganda and political maneuvering guided by the Western countries, especially the United States, which aims to reduce the strategic importance of the Strait of Hormuz,” according to state-run Press TV. Asferi serves on Iran’s national security and foreign policy committee.

The link can transport 1.5 million barrels a day of Murban crude from Habshan, a collection point for Abu Dhabi’s onshore oil fields, across a desert and mountains to Fujairah. The system can pump as much as 1.8 million barrels a day at periodic intervals, officials said yesterday. The U.A.E., the fifth- biggest oil producer in OPEC, pumped 2.61 million barrels a day in June, data compiled by Bloomberg showed.

The first oil exported from Fujairah is priced the same as Murban crude loaded inside the Gulf, three people with knowledge of the matter said this month. Abu Dhabi may later devise a separate formula including a premium to account for the cost of using the pipeline, said the people, declining to be identified because the matter is confidential. Abu Dhabi officials yesterday did not comment on pricing.

First Cargo

Abu Dhabi’s first export cargo from Fujairah is destined for Pak Arab Refinery Ltd., a joint venture between Pakistan’s government and IPIC, Al-Qubaisi said. IPIC owns a 40 percent stake in the plant, which regularly uses about 40,000 barrels a day of Abu Dhabi crude, of the 100,000 barrels it consumes daily, he said.

Abu Dhabi earlier shipped a test cargo from Fujairah to its own refinery at Ruwais, inside the Persian Gulf, said Abdul Munim Al-Kindi, general manager of Abu Dhabi Co. for Onshore Oil Operations. As the main oil producer at the emirate’s onshore fields, the company, known as Adco, will operate the pipeline and gradually ramp up capacity by year-end, he said. The network is designed to load tankers at three offshore buoys, he said. IPIC will likely charge Adco “a few cents per barrel” for use of the pipeline, Al-Qubaisi said.

Alternative Route

Al-Hamli, the oil minister, said the link gives buyers an alternative location from which to receive crude. It will allow them to fill very large crude carriers, or VLCCs, the largest class of tanker capable of carrying 2 million barrels of oil. Filling such vessels in the Gulf of Oman will reduce shipping traffic in Hormuz, he said.

“The pipeline is going to be beneficial because our clients will be able to lift bigger cargoes,” he said. “Currently you can only lift 1 million barrels a day from Ruwais. From Fujairah now our clients now can bring in VLCCs and lift more.”

IPIC’s al-Qubaisi said his company plans to $4 billion to $5 billion to build a refinery in Fujairah with a capacity of about 250,000 barrels a day to produce for local sale and export, further enhancing the port’s importance as a hub for the processing, storage and shipment of fuels. The company said in a bond prospectus in October the refinery would produce 200,000 barrels a day at a cost of about $3.5 billion.

IPIC is working with another state-owned investment fund, Mubadala Development Co., on a project for a terminal at the port for imports of liquefied natural gas. Fujairah is already among the world’s three biggest refueling ports for commercial ships, along with Singapore and Rotterdam. Fujairah is one of the U.A.E.’s seven sheikhdoms.

To contact the reporters on this story: Anthony DiPaola in Dubai at ; Ayesha Daya in Dubai at

adipaola@bloomberg.netadaya1@bloomberg.net
To contact the editor responsible for this story: Stephen Voss at

sev@bloomberg.net
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Billionaire Fredriksen Sees Golar LNG Rates Surging

By Isaac Arnsdorf – Feb 21, 2012 8:35 PM GMT+0800

Rates for tankers hauling liquefied natural gas are rising for a third year as expanding Japanese demand for the fuel attracts cargoes from the Atlantic, extending voyages at a time of shipping capacity shortages.

Rising requirements from Japan mean Golar LNG Ltd. (GOL), which operates nine LNG tankers and is controlled by shipping billionaire John Fredriksen, will report a fourfold gain in 2012 net income, according to the mean of 11 analyst estimates in a Bloomberg survey. Golar is reactivating four-decade-old mothballed ships after rates doubled in 2011 and are forecast by analysts to advance another 58 percent in 2012.

Enlarge image
Billionaire Fredriksen Sees Golar LNG Rates Surging

Kimimasa Mayama/Bloomberg News

A liquefied-natural-gas (LNG) tanker, leaves a berth in Yokohama City, Japan. Shipments to Japan are swelling to a record after March’s earthquake and tsunami shuttered about 90 percent of the nation’s nuclear power.

A liquefied-natural-gas (LNG) tanker, leaves a berth in Yokohama City, Japan. Shipments to Japan are swelling to a record after March’s earthquake and tsunami shuttered about 90 percent of the nation’s nuclear power. Photographer: Kimimasa Mayama/Bloomberg News

Traders redirected 13 ships to Asia from Europe or the U.S. in the past month, data compiled by Bloomberg show. LNG from Nigeria, the largest exporter in the Atlantic, sold for 93 percent more in Japan than in the U.K. in January, up from 40 percent 11 months ago, according to New York-based Poten & Partners.

“This bottleneck cannot be corrected overnight,” said Fotis Giannakoulis, a New York-based analyst at Morgan Stanley. “It will take years, and it is an opportunity for a lot of LNG shipowners to generate premium returns.”

Shipments to Japan, the biggest LNG buyer, are swelling to a record after March’s earthquake and tsunami shuttered about 90 percent of the nation’s nuclear power. Gaps between LNG prices around the world will last five more years because production is growing fastest in the Atlantic while demand is being led by Asia, Morgan Stanley estimates.

$147,000 a Day

LNG tanker rates rose to $97,630 a day last year from $43,663 in 2010, according to Fearnley LNG, a unit of Norway’s second-largest shipbroker. Daily rents will average $147,000 in 2012, the median of six analyst estimates compiled by Bloomberg shows. Costs surged as shipowners failed to keep pace with an expansion in the supply of LNG, liquefied by cooling natural gas to about minus 160 degrees Celsius (minus 256 degrees Fahrenheit).

Fredriksen, Golar’s 67-year-old chairman, is betting the rally won’t end any time soon. The company is spending $400 million on two new LNG carriers and may double the order because global price gaps and trade growth make the ships a good investment, according to a Feb. 14 statement.

Demand for LNG vessels will rise 12 percent this year, RS Platou Markets AS, an Oslo-based investment bank, estimates. Two new tankers will join the fleet of 374 ships, an expansion of less than 1 percent, according to London-based Clarkson Plc (CKN), the world’s largest shipbroker. The carriers need equipment to hold about 155,000 cubic meters (5.5 million cubic feet) of liquid that expands to 95 million cubic meters in gas form, equal to about 25 percent of peak daily winter demand in the U.K., Europe’s biggest gas market.

Record Japan Cargo

Shipments to Japan will expand 3.9 percent to a record 79 million metric tons this year, estimates Arctic Securities ASA, an Oslo-based investment bank. January imports rose 28 percent from a year earlier to a record 8.15 million tons, according to the Ministry of Finance.

The flow of extra cargoes to Asia is worsening the shortage of shipping capacity because the journey to Japan from Nigeria is about 8,700 miles longer than the voyage to the U.K. European LNG demand will decline this year and next as the region contends with a mounting debt crisis, according to Barclays Capital. Imports will also contract in North America because of increased gas supply from deposits trapped in shale rocks, the bank’s analysts wrote in a report Jan. 23.

Oil Rout

Fredriksen’s other shipping investments, spanning oil tankers, dry-bulk carriers and container ships, are suffering from industry-wide gluts. Frontline Ltd., the billionaire’s tanker company, split in December to withstand the worst rout in rates since 1999.

The same slump is hurting other owners. General Maritime Corp., the second-largest U.S. oil-tanker owner, filed for bankruptcy in November. Bigger competitor Overseas Shipholding Group Inc. (OSG) suspended its dividend Feb. 9.

Golden Ocean Group Ltd., Fredriksen’s dry-bulk commodity- shipping company, fell 25 percent in the past year in Oslo trading. The Baltic Dry Index, a measure of the cost of hauling coal and iron ore, plunged 45 percent in that span, according to the London-based Baltic Exchange, which publishes freight rates along more than 50 maritime routes.

Gains in LNG tanker rates may slow next year as fleet growth accelerates. Shipyards will deliver 22 new vessels in 2013, equating to a 5.9 percent increase, according to Clarkson. There are 57 new carriers on order, figures compiled by Redhill, England-based IHS Fairplay show.

Nuclear Capacity

Japan’s economy contracted an annualized 2.3 percent in the fourth quarter, the Cabinet Office said Feb. 13. The country is still contending with last year’s disaster, which led to the meltdown of the Fukushima Dai-Ichi nuclear plant. Japan had 6.4 percent of its nuclear capacity operating as of Jan. 27, according to industry data compiled by Bloomberg.

Economic growth in South Korea, Asia’s second-biggest LNG buyer, will slow to 3.3 percent this year from 3.6 percent in 2011, according to the median of eight economist forecasts compiled by Bloomberg. China, the third-largest importer in the region, will expand at an 8.5 percent rate, the slowest in more than a decade, the median of 21 estimates shows.

Asia, accounting for about 60 percent of global LNG demand, will raise imports by 10.2 million tons this year as shipments to Europe and the U.S. fall 4.4 million tons, Barclays estimates. Supply in the Atlantic will increase 7.3 million tons, compared with 3.6 million tons in the Pacific and a 2.2 million-ton decline in the Middle East.

Stena Orders

Stena Bulk AB, a Swedish owner of 80 ships, may double its fleet of LNG vessels because of the booming Asian trade. There’s about an 80 percent change Stena will order at least four new vessels next month, adding to its current three, Chief Executive Officer Ulf Ryder said yesterday in an interview in Gothenburg.

Nigerian LNG cost $17.12 per million British thermal units in Japan and $8.87 in the U.K. last month, compared with $14.38 and $10.27 in March, according to Poten, an industry consultant. After taking transport and re-gasification costs into account, profit from selling the gas to Japan was $13.64 on Jan. 31 against $7.17 to the U.K. That compares with respective levels of $11.96 and $8.93 in March.

Asian LNG buyers are also seeking supplies from outside the region because Indonesian exports are declining as domestic demand strengthens. Shipments may drop to about 300 cargoes of LNG this year from 362 last year and 427 in 2010, Gde Pradnyana, a spokesman for the nation’s oil and gas regulator BPMigas, said in December.

Profit Jumps

Demand for LNG carriers will be “strong” for “years to come” as new production projects are completed and demand from Japan and China strengthens, Golar said in a statement today. Fourth-quarter net income surged to $17.2 million from $4.71 million a year earlier and 2011 profit was $46.7 million.

Golar’s net income will jump to $194.2 million this year, analyst estimates compiled by Bloomberg show. The shares, up 1.9 percent in 2012, will rise to 289.11 kroner ($50.72) in the next 12 months, the average of 10 estimates shows, implying a 7.5 percent climb. The stock almost tripled in 2011, and only two of the 16 analysts whose recommendations on Golar are tracked by Bloomberg advise selling.

“Going forward, we expect the arbitrage to be the norm, rather than something that is strange,” said Per Christian Fett, an LNG broker at Astrup Fearnley in Oslo. “Even if we had more ships, the arbitrage would still be there. There are not enough volumes to close it.”

To contact the reporter on this story: Isaac Arnsdorf in London at iarnsdorf@bloomberg.net

Oil Tankers Seen Falling 42% as Japan Weakens Most Since Tsunami
By Rob Sheridan
February 27, 2012 7:01 PM EST

The largest drop in Japanese oil consumption since last year’s earthquake and tsunami may cause tanker rates to plunge 42 percent next quarter, threatening the biggest rally in shares of shipping companies since 2005.
Demand in Japan, the second-largest destination for supertankers after China, will drop 19 percent in the second quarter from now, according to the International Energy Agency in Paris. Daily rates for the 1,000-foot-long ships will average $17,000, compared with $29,280 now, the median of nine analyst estimates compiled by Bloomberg show. Investors may profit by buying forward freight agreements, traded by brokers and used to bet on shipping costs, which anticipate $10,883.
The six-member Bloomberg Tanker Index (TANKER), including Frontline (FRO) Ltd., rallied 11 percent this year on prospects for daily crude demand to surpass 90 million barrels for the first time ever. That’s masking the slump in Japanese consumption and the weakest annual gain in Chinese oil buying since at least 2006. Shipowners are relying on both nations to help curb a capacity glut as the fleet expands to a three-decade high.
“Owners need all the help they can get,” said Erik Nikolai Stavseth, an analyst at Arctic Securities ASA in Oslo, whose recommendations on the shares of shipping companies returned 36 in percent in the past year. “Such a big decline in Japanese consumption is really negative because it is still such an essential source of demand.”
Largest Shipbroker
Frontline (FRO), based in Hamilton, Bermuda, reported a fourth- quarter net loss of $343.7 million on Feb. 17 after reorganizing to withstand the worst rout in rates in 12 years. The most modern vessels and outstanding orders at shipyards were sold to a new entity called Frontline 2012 after the company said in November it risked running out of cash.
Just one of 27 analysts covering Frontline recommends buying the shares after they jumped 22 percent this year in Oslo trading. The stock will decline 34 percent to 20.53 kroner ($3.66) in the next 12 months, according to the average of 19 analyst estimates compiled by Bloomberg.
Rates for very large crude carriers, or VLCCs, fell 7 percent this year. They averaged $22,137 in 2011, the lowest level since 1999, according to data from London-based Clarkson Plc, the world’s largest shipbroker. A decline to $18,000 may make tanker rates unprofitable once more after this quarter’s gains. Frontline, until last month the biggest operator of the vessels, says it needs $23,900 to break even.
Crude rose 10 percent to $108.68 a barrel in New York this year amid mounting concern that international sanctions on Iran over its nuclear program will disrupt oil supply from the Middle East. Fewer cargoes from the world’s biggest producing region would further weaken demand for tankers.
Cash Reserves
While the projected second-quarter average would still be unprofitable for many owners, it’s better than several months last year. Rates were below that level from July to October, Clarkson data show. A measure of the combined losses of the members of the Bloomberg Tanker Index will narrow by 50 percent this year, according to analyst estimates compiled by Bloomberg.
China is taking steps to accelerate growth. The People’s Bank of China said Feb. 18 lenders would need to set aside less cash for reserves, the second such easing in three months. Exports and imports fell for the first time in two years in January and new lending was the lowest for that month in five years, government data show.
Latin America
The IEA doesn’t expect Japanese oil demand to return to the depths seen after last year’s natural disaster, when consumption plunged 19 percent to 3.92 million barrels a day in the second quarter. This year’s projection is for a 19 percent decline to 4.15 million barrels.
Japan’s economy will expand 2.1 percent in the three months ending in June, compared with a 1.5 percent contraction a year earlier, the median of 18 economist estimates shows. The temblor and tsunami shut about 90 percent of Japanese nuclear capacity, leaving it more dependent on fossil fuels.
Global oil demand will rise 0.9 percent this year as gains in parts of Asia, Africa, Latin America and the Middle East exceed declines in North America and Europe, the IEA estimates. Seaborne trade in oil will swell 3.1 percent, Clarkson projects. That’s still less than the 6.5 percent expansion it anticipates for the VLCC fleet.
The shipping industry has been contending with a capacity glut since 2009 as the biggest global economic contraction since World War II coincided with the start of the largest shipbuilding program in about four decades. Owners ordered more vessels in 2007 and 2008 when daily rates rose as high as $229,484, and those carriers are still leaving yards across Asia now.
Container Line
Outstanding orders for VLCCs equate to 12 percent of current capacity, with 21 new vessels being built, according to figures from Redhill, England-based IHS Fairplay Ltd. Each ship can haul about 2 million barrels of oil, more than France consumes in a day. The VLCC fleet already expanded 15 percent since the middle of 2008 to its biggest since 1982, with a combined carrying potential of 1.4 billion barrels of crude, or more than two months of U.S. demand, the data show.
There are similar gluts across the industry. The Baltic Dry Index, a measure of costs to haul coal and iron ore, fell 58 percent this year, according to the Baltic Exchange in London. A.P. Moeller-Maersk A/S (MAERSK), owner of the largest container line, said Feb. 17 it was cutting capacity from Asia to Europe, the second-biggest international trade route, after rates tumbled. About 90 percent of world trade goes by sea, the Round Table of International Shipping Associations estimates.
Energy Consumer
While the second quarter tends to be the weakest as refineries carry out maintenance, the projected drop this year would be the biggest since 2006, excluding the slump in Japanese oil demand caused by the earthquake and tsunami in March. Growth in the nation’s economy will slow for at least three consecutive quarters from June, the median of as many as 18 economist estimates compiled by Bloomberg showed.
Compounding that will be weaker gains in China’s net crude purchases, with state-owned China National Petroleum Corp. (CNPZ) anticipating a climb of 5.9 percent. China’s economy, the world’s biggest energy user, should grow 8.2 percent this year, the slowest pace since 1999, the International Monetary Fund forecast in January. Chinese refineries may be using 77 percent of capacity by May, 7 percentage points less than now, according to Oilchem.net, a Shandong, China-based researcher.
About 15 percent of laden VLCCs are bound for China at any one time, with about another 9 percent going to Japan, ship- tracking data compiled by Bloomberg show. The Asian countries’ distance from producing regions in the Middle East and West Africa ties tankers up for longer relative to European destinations, increasing income for owners and reducing the number of available vessels.
Annual Loss
Teekay Corp. (TNK), located in Vancouver and up 6.7 percent in New York trading this year, and Hamilton, Bermuda-based Nordic American Tankers Ltd. (NAT), ahead 23 percent, have the biggest weightings in the Bloomberg Tanker Index. Neither company operates VLCCs. Each will report a third consecutive annual loss for this year, analyst estimates compiled by Bloomberg show.
“A big drop in demand from Japan and China would be a significant negative for oil shipping,” said Marius Magelie, an analyst at ABG Sundal Collier in Oslo. “The market is already very, very challenging, because there are just too many vessels.”
To contact the reporter on this story: Rob Sheridan in London at rsheridan6@bloomberg.net.
To contact the editor responsible for this story: Alaric Nightingale at anightingal1@bloomberg.net.

Push for LPG import terminal gains pace

Published February 21, 2012

(SINGAPORE) High oil prices and petrochemicals oversupply vis-a-vis demand are putting pressure on Singapore’s mainly naphtha-fuelled crackers – namely those run by Petrochemical Corporation of Singapore (PCS), Shell and ExxonMobil – to build an LPG import terminal to enable them to better compete with crackers, like those in the Middle East, which use such light, alternative feedstock.

BT understands that the industry is hoping to secure some land on Jurong Island shortly for the estimated US$100-120 million liquefied petroleum gas terminal, with a project go-ahead possibly by Q3 this year.

‘The LPG import project is picking up speed again,’ a source said, amid industry discussions with the Economic Development Board and Jurong Town Corporation for a project site on Jurong Island. This is likely to be near, or even at, the upcoming S$1.7 billion Singapore LNG (SLNG) terminal site.

‘We expect a decision on this around April,’ the source added.

The push for an LPG terminal here comes as crude prices rise, with Brent crude pushing US$120 a barrel recently – not far from its previous US$144 record high. This in turn makes naphtha, a refinery by-product, costlier.

PCS’ managing director Akira Yonemura in his ‘review of 2011 and directions for 2012’ message to staff, said that following a difficult 2011 for PCS, demand for petrochemicals continues weak.

‘For the petrochemicals industry, the 2012 outlook remains challenging as the (global) overcapacity built up over the last few years will take time to be absorbed, particularly with the slowdown in demand.’

‘The high crude and naphtha prices will put liquid crackers like ours under pressure vis-a-vis ethane (LPG) and other light feedstock crackers. The weak US dollar also makes us less competitive as our fixed costs are mostly incurred in Singapore dollars,’ he said.

The situation is especially critical for PCS which relies on naphtha supplies from the refineries here, while the newer Shell and ExxonMobil petrochemical crackers here are fully integrated with their respective refineries and are at least able to make use of some cost-advantaged refinery feedstock from the heaviest and cheapest hydrowax to some LPG.

In fact, the idea of having an LPG terminal first arose when gas-rich Qatar, through Qatar Petroleum International, acquired half of Shell’s stake in the S$5.4 billion PCS at end-2009. A Japanese consortium, led by Sumitomo Chemicals, owns the other half stake.

‘PCS would have been prepared to host the LPG terminal if they had space at their site,’ sources said, adding that a floating LPG storage, using a very large crude carrier, had also been considered earlier.

Since then, SLNG – which has a greenfield site for its project on Jurong Island – has also hired a consultant, Fluor Daniels, to study the viability of having an LPG terminal alongside its liquefied natural gas terminal. Its site masterplan has catered to this possibility.

Sources said that eventually, it all revolves on the end-users – ie. PCS, Shell with its new US$3 billion cracker, and ExxonMobil which is adding a second US$5-6 billion cracker to its earlier similar-sized one here – deciding if the economics justify the project.

International LPG prices in the Asia Pacific are generally based on Saudi-Aramco contract prices, whereas naphtha prices are more market-determined. ‘So the end-users have to decide on a risk-reward basis, and how they are going to secure the LPG which is normally on an annual contract basis, but which could run up to 10 years,’ one source said.

‘Once there is consensus, the project go-ahead could come by September.’

China claims world’s biggest shale gas reserves
Ambrose Evans-Pritchard
Published: 9:47PM GMT 1 Mar 2012

Reuters
China is overly reliant on coal for power

China is planning an investment blitz to unlock its vast reserves of shale gas, convinced it can match the energy revolution under way in the US and meet a significant part of its fast-growing fuel needs.

The resources ministry said on Thursday that preliminary surveys showed the country had explorable shale-gas reserves of 25.1 trillion cubic metres, in theory enough to meet China’s gas needs for the next two centuries.

This is slightly lower than earlier figures but well ahead of the reduced US estimates of 13.6 trillion cubic metres, down from 23 trillion in earlier studies. The fields are mostly in Sichuan or in sparsely populated regions in the interior.

“China is rich in shale gas resources, which are suitable for scaled development,” said Yu Haifeng, the resource ministry’s deputy director. “But the geological conditions are complex and our exploration technology lags behind advanced countries. If the country’s shale gas output exceeds 100bn cubic meters by 2020, the fuel will become an important source of China’s energy supply.”

A report by the US Energy Information Administration last year said China’s “technically recoverable” reserves were 50pc greater than in the US. Some geologists believe total resources could be much higher, dwarfing the country’s conventional gas reserves.

China has overtaken the US to become the world’s biggest consumer of energy. Its import bill is soaring as China’s middle classes buy cars and industrialisation continues at break-neck pace. The country is overly reliant on coal for power.

Beijing has watched America turn its fortunes around by freeing up vast shale reserves through hydraulic fracturing or “fracking” and is determined to catch up, offering subsidies and an implicit price floor.

China Petroleum Corporation has already found shale gas at 20 sites and has launched a joint venture with Chevron. Royal Dutch Shell has been developing shale projects in China for the past two years, describing the potential as “very powerful”. ◼

Iran Sanctions Tighten as OSG to Frontline Halt Crude Cargo
By Isaac Arnsdorf
February 16, 2012 0:07 AM ES

(Updates oil price in 14th paragraph.)
Feb. 13 (Bloomberg) — Sanctions on Iran are tightening after Overseas Shipholding Group Inc., Frontline Ltd. and owners controlling more than 100 supertankers said they would stop loading cargoes from the Organization of Petroleum Exporting Countries’ second-largest producer.
OSG, based in New York, said Feb. 10 that the pool of 45 supertankers from seven owners in which its carriers trade will no longer go to Iran. Four OSG-owned ships, managed by Tankers International LLC, called at the country’s biggest crude-export terminal in the past year, ship-tracking data compiled by Bloomberg show. Nova Tankers A/S and Frontline, with a combined 93 vessels, said Feb. 9 and 11 they wouldn’t ship Iranian crude.
Previous efforts to curb Iran’s oil income and stop it from developing nuclear weapons failed because the structure of the shipping industry means vessels are often managed by companies outside the U.S. or European Union. An EU embargo on Iranian oil agreed to Jan. 23 extended the ban to ship insurance. With about 95 percent of the tanker fleet insured under rules governed by European law, there are fewer vessels able to load in Iran.
“It’s the insurance that’s completed the ban on trading with Iran,” said Per Mansson, a shipbroker for 31 years and managing director of Norocean Stockholm AB, which handles tanker charters. “Last summer, many countries started to be a little bit tougher, but the insurance is the real trigger.”
Kharg Island
OSG’s Overseas Rosalyn, which can carry about 2 million barrels, arrived at Kharg Island on Jan. 27 and departed the next day, tracking data compiled by Bloomberg show. It left about 16 feet deeper in the water, an indication it loaded cargo. The vessel is managed by Tankers International, which has its head office in Cyprus. OSG complies with all U.S. and European laws and its headquarters in New York doesn’t manage charters, OSG Chief Executive Officer Morten Arntzen said in an e-mail Jan. 30.
Tankers International told owners the pool’s vessels will no longer sail to Iran after changes to EU regulations, Arntzen said in a Feb. 10 e-mail. Insurers are no longer able to cover vessels trading in the Persian Gulf nation, he wrote.
Ship owners sometimes group their vessels to coordinate charters and improve earnings. The Tankers International pool operates 45 very large crude carriers, or VLCCs, from OSG and six other companies, including Antwerp-based Euronav NV and St. Helier, Channel Islands-based DHT Holdings Inc.
Nova Tankers
“All the owners in the pool have stated that they will not trade Iran because of the consequences,” DHT CEO Svein Moxnes Harfjeld said by phone Feb. 10. “DHT is complying with all relevant regulations and sanctions, and following recent developments our vessels have been instructed not to trade Iran.”
Frontline companies including Hamilton, Bermuda-based Frontline Ltd. and Frontline 2012 won’t ship Iranian crude, Jens Martin Jensen, chief executive officer of Frontline Management AS, said by e-mail and phone on Feb. 11 and 12. Frontline operates 43 VLCCs, according to its website.
Nova Tankers, the Copenhagen-based operator of a pool of ships including vessels owned by Mitsui O.S.K. Lines Ltd., won’t load Iranian crude because of European sanctions, Managing Director Morten Pilnov said by phone from Singapore on Feb. 9. The pool will have about 50 vessels by the end of this year, according to data on its website.
Nippon Yusen K.K., the second-largest owner of VLCCs, won’t carry Iranian oil if it means ships aren’t insured, Yuji Isoda, an investor relations manager for the Tokyo-based company, said Feb. 9. The company doesn’t yet know how its insurers will handle the EU sanctions, he said by phone.
Tighter Restrictions
U.S. and EU leaders are trying to tighten restrictions on business with Iran, which produced 3.55 million barrels of crude a day in January, 11 percent of OPEC’s total, according to data compiled by Bloomberg. Oil sales earned Iran $73 billion in 2010, accounting for about 50 percent of government revenue and 80 percent of exports, the U.S. Energy Department estimates.
The United Nations has imposed four sets of sanctions on Iran, and the International Atomic Energy Agency said in November the country had studied making an atomic bomb. The government in Tehran says its nuclear program is for civilian purposes and that documents held by the IAEA purporting to show designs and tests of weapon components are fakes.
Iran has threatened to block shipments through the Strait of Hormuz in the Persian Gulf, through which about 20 percent of the world’s globally traded oil passes. Crude futures in New York advanced 32 percent to $100.19 a barrel since Oct. 4.
Senate Bill
More trade with Iran may be blocked if a bill approved Feb. 2 by the U.S. Senate Banking Committee becomes law, making U.S. companies responsible for the actions of their foreign units when dealing with Iran. A spokesman for committee chairman Tim Johnson, a South Dakota Democrat, declined to comment.
While the Japanese government said last month it would curb imports from Iran, India’s Foreign Secretary Ranjan Mathai said Jan. 17 his country wouldn’t. China, the Persian Gulf country’s largest customer, needs the oil for development, Vice Foreign Minister Zhai Jun told reporters Jan. 11.
Founded in 1948, OSG has 111 vessels and 3,500 employees, according to its website. Its biggest shareholders include the family of board members Oudi and Ariel Recanati, who control about 10 percent, data compiled by Bloomberg show. Oudi Recanati is an Israeli citizen and Ariel Recanati is a U.S. citizen, according to a Sept. 6 filing with the Securities and Exchange Commission. Charles A. Fribourg sits on the board of OSG and Continental Grain Co., the data show.
Marshall Islands
Shares of OSG, which has 14 supertankers, fell 71 percent in the past year as a glut of vessels drove down transport rates. The company will report a loss of $178.6 million for this year, down from $204.4 million for 2011, according to the median of five analyst estimates compiled by Bloomberg.
Three other OSG vessels from the Tankers International pool called at Kharg Island in the past year, data compiled by Bloomberg show. They fly the Marshall Islands flag, which means they are registered there for regulatory purposes, according to data on the website of International Registries Inc. Almost 9 percent of the tanker fleet is flagged in the Marshall Islands, behind Panama and Liberia, according to data compiled by London- based Clarkson Plc, the world’s biggest shipbroker.
“Ship owners and brokers are now seeing a tightening of sanctions,” said Bob Knight, managing director of tankers at Clarkson in London. “This is a sign that sanctions are starting to bite.”
–With assistance from Michelle Wiese Bockmann and Rob Sheridan in London. Editors: Dan Weeks, Sharon Lindores.
To contact the reporter on this story: Isaac Arnsdorf in London at iarnsdorf@bloomberg.net
To contact the editor responsible for this story: Alaric Nightingale at anightingal1@bloomberg.net