In International Shipping News 13/05/2015
With Arab Gulf diesel exports poised to exceed imports for the first time, owners of fuel tankers are ordering more ships.
Overseas sales of refined products from the Gulf may rise 45 percent over the next decade, outpacing a 13 percent increase in crude exports. The region will become a net exporter of diesel next year, according to JBC Energy GmbH. Scorpio Tankers Inc. is adding 15 fuel tankers to its fleet while D’Amico International Shipping SA ordered two more to meet demand it expects from longer shipping routes to service the surge.
Seeking to extract more value from their resources by processing them, Saudi Arabia and other Gulf producers will add at least 1.4 million barrels a day of refining capacity over the next five years, according to BMI Research, a unit of the Fitch Group. After meeting domestic demand they will ship the more-lucrative fuels abroad, boosting product tankers whose average rates this year are the highest since 2011.
“As more and more new refineries in the Middle East go into production, there will be need for more product carriers,” Park Moo Hyun, an analyst at Hana Daetoo Securities Co. said by phone from Seoul on May 6. “It’s only a matter of time before product carriers become a bigger business there.”
Refinery Expansion
Oil producers including Saudi Arabia, Abu Dhabi and Kuwait are expanding refining capacity to reduce imports of fuel needed to meet rising domestic demand and to produce cleaner-burning diesel that fetches premium prices compared with crude oil in overseas markets.
To cope with the rising exports, D’Amico International ordered two Long Range product tankers from Hyundai Mipo Dockyard Co. for $44 million each, it said in an April 27 statement. The vessels are due to be delivered in 2017 from the South Korean company’s Vietnam shipyard.
The shipping company, whose fleet includes Handymax and Medium Range tankers, is buying the Long Range vessels because their larger cargo capacity “will be in great demand in the years to come,” Marco Fiori, chief executive officer of D’Amico, said in the statement.
Scorpio, based in Monaco, and Ireland’s Ardmore Shipping Corp. are among companies to benefit, said Hana Daetoo’s Park. Middle Eastern refinery operators may also consider creating new shipping units to haul their own products, further boosting demand for tankers, he said.
Capacity Grows
“Scorpio is the primary beneficiary of the increase in Middle East exports,” Robert Bugbee, the firm’s president, said by phone May 6. The company, which owns and operates 88 product tankers, has 12 on order and is buying at least three more, he said.
Product tanker capacity is expected to grow 7.4 percent this year and 4.3 percent in 2016 if orders for new ships aren’t made, JPMorgan Chase & Co. said in an April 8 report.
“The whole product sector is benefiting broadly” from the refinery boom, Anthony Gurnee, chief executive officer of Ardmore Shipping, said by phone on May 7. The company has a fleet of about 20 ships, most of which are Medium Range.
Saudi Arabia began operating a 400,000 barrel-a-day refinery at Yanbu on the Red Sea last year. Another plant with the same capacity is scheduled to begin operation in 2017 at Jazan in the country’s southwest. The kingdom’s oil-product exports rose 44 percent last year following the startup of a refinery in the Gulf port of Jubail, according to the Riyadh-based Joint Organisations Data Initiative.
Export Surge
Abu Dhabi National Oil Co. is doubling the capacity of the 400,000 barrel-a-day Ruwais refinery, while Kuwait’s Al-Zour plant is planned to open in 2020 with a capacity of 615,000 barrels a day. Oman will award a contract next year to build a 230,000 barrel-a-day plant to come online by the end of 2019.
The Gulf will become a net exporter of 55,000 barrels a day of diesel in 2016 after importing a net 90,000 barrels in 2015, Richard Gorry, a Singapore-based director at JBC Energy, a Vienna-based industry consultant, said by e-mail May 7. That means the region’s sales will exceed purchases for the first time on an annualized basis, he said.
Crude sales from the Middle East are still forecast to be significant and the region “is and will be a major player,” according to Gorry. Net exports will reach 16.4 million barrels a day in 2015 and will grow to 18.5 million by 2025, he said.
Brent for June settlement lost 9 cents to $64.82 a barrel on the London-based ICE Futures Europe exchange at 12:45 p.m. Singapore time.
Crude tanker rates are in the midst of a recovery after owners ordered too many ships before last decade’s global economic recession. The daily cost to send a product tanker from Saudi Arabia to Japan was $20,375 yesterday according to the Baltic Exchange, more than double that of a year earlier, data compiled by Bloomberg show.
“Fundamentals suggest better times for ship companies,” JBC’S Gorry said. “With these middle-distillate monsters, gasoil exports will grow and become more significant. This is the last real refinery-growth zone.”
