Despite Trump trade deal, US natural gas exports to China face obstacles

In Freight News 15/05/2017

American drillers and natural gas exporters may see limited benefits from the U.S. deal with Beijing to open Chinese markets to U.S. natural gas, analysts say.

The deal, announced by the Commerce Department on Thursday, paves the way for Chinese companies to negotiate long-term contracts to purchase liquefied natural gas from American suppliers. Beijing will allow private and state-controlled companies to import U.S. LNG and encourage them to invest in import infrastructure, a person familiar with negotiations told The Wall Street Journal.

Shares of Cheniere Energy popped 4 percent on Friday after the company told Reuters it has held “extensive negotiations” over the past month with Chinese state-owned companies about increasing LNG shipments to China.

Commerce Secretary Wilbur Ross said Friday the deal would help to “liberate American energy.”

“China is the world’s largest buyer of LNG. Now that market really is going to be open to the American producers,” Ross told CNBC’s “Squawk Box.”

In fact, Japan is the largest market for LNG, followed by South Korea and then China, according to the International Gas Union. But China is the world’s fastest-growing market for LNG, according to energy research firm Wood Mackenzie.

The deal positions the United States to capture part of that growth, which would represent $26 billion a year in purchases by 2030 at today’s prices, according Massimo Di-Odoardo, head of global gas and LNG research at Wood Mackenzie.

However, he cautioned that U.S. LNG’s fortunes in China “will depend on its competitiveness versus other global alternatives and Chinese buyer appetite for exposure to U.S. gas prices.”

Alan Bannister, regional director for energy pricing at S&P Global Platts, noted on Friday that shipping LNG to China from the U.S. Gulf Coast — where much of the export capacity is planned or being built — would be inefficient and unlikely.

“China is much nearer and much cheaper to ship from Australia, for example, or Qatar,” he said. “What I think we’re more likely to see in the real world is that U.S. Gulf Coast LNG will primarily go to Europe.”

China imported 26.1 million tons of LNG in 2016, up 32.6 percent on year, IHS Fairplay reported. The shipping news outlet noted that Australia accounted for 46 percent of China’s LNG imports in 2016, or 12 million tons. Qatar supplied 19 percent, while just around 200,000 tons came from the United States in 2016.

Limited U.S. LNG export capacity

Any uptick in exports to China would have to wait until the United States builds more of the expensive facilities where natural gas is cooled into liquid and loaded onto specialized tankers.

Only one LNG export terminal is operating in the Lower 48 states: Cheniere Energy’s Sabine Pass facility in Louisiana. Alaska has also exported LNG, primarily to Japan, for decades.

Four other facilities under construction in Texas, Louisiana and Maryland are slated to come online by 2021, pushing U.S. export capacity to 9.2 billion cubic feet, according to the U.S. Energy Information Administration.

On Friday, Ross blamed the Obama administration for holding up approvals for more than a dozen LNG export facilities. “Presumably that will be cleared out now and we will get that going,” he told CNBC.

As of January, 13 LNG export terminals were proposed to the Federal Energy Regulatory Commission, the body that approves them.

This week, the Trump administration moved toward getting those terminals approved by nominating two commissioners to FERC. The agency has been hobbled since January, when one of the three remaining commissioners stepped down, leaving FERC without a quorum.

But some analysts say market forces, not the pace of government approval, could be a more important factor.

Asia LNG prices have fallen 56 percent since 2014, during which time applications for six U.S. export terminals were withdrawn, investment banking firm FBR noted last week.

FBR acknowledges that the average review period for remaining projects has risen, but concluded that “market headwinds appear to be a larger contributor to slow development than just the 21% increase in project approval time.”

LNG capacity growth between 2015 and 2020 is projected to exceed demand growth by nearly 50 percent, causing utilization rates at export terminals to fall below 90 percent next year, FBR said, citing EIA data. It is expected to recover to 93 percent by 2021.

“Given these headwinds, investment in new capacity has virtually dried up, increasing the risk of tighter markets in the next decade,” FBR said.

However, Wood Mackenzie’s Di-Odoardo said the Commerce Department’s deal with China presents the opportunity for a “second wave of investment in US LNG” in the near term.

“Developers will now be able to target Chinese buyers directly, potentially supporting project financing. It could also support direct Chinese investment into liquefaction and upstream developments on U.S. soil,” he said.

Source: CNBC

US-China agreement connects the fastest-growing LNG supplier with the largest LNG growth market

In Freight News 15/05/2017

Last night’s announcement of the 100-day action plan between the US and China has the potential to alter global LNG trade, opening the door of the world’s largest LNG growth market to the world’s fastest-growing LNG supplier.

Under the action plan, which falls under the framework of the US-China Comprehensive Economic Dialogue, Chinese companies can now negotiate long-term contracts to source liquefied natural gas from US suppliers, the US Commerce Department said.

Commenting on the announcement, Massimo Di-Odoardo, Head of Global Gas and LNG research at global natural resources consultancy Wood Mackenzie, said: “The wider agreement represents a win for both sides. It allows President Trump to deliver on his pledge of redressing global trade imbalances and China to show its commitment to becoming an equal trade partner.

“Until now Chinese buyers have not bought long-term LNG supply from the US directly. This ensures US LNG entering the Chinese market will be politically palatable.”

Mr Di-Odoardo added: “The agreement connects the US, the fastest growing LNG supplier, with China, the largest LNG growth market. By 2030, we expect Chinese LNG demand to reach 75 mmtpa, triple 2016 imports. This is equivalent to$26bn a year at today’s prices ($7/mmBtu), and the US is keen for a slice of the pie.”

He noted that US LNG has already been coming into China, and in March this year it accounted for 7% of total LNG imports. China’s total LNG demand in 2016 amounted to 26m tonnes.

“In the longer term, the deal paves the way for a second wave of investment in US LNG. Developers will now be able to target Chinese buyers directly, potentially supporting project financing. It could also support direct Chinese investment into liquefaction and upstream developments on US soil,” he said.

Mr Di-Odoardo said the agreement confirms the Trump administration’s commitment to grow US LNG exports, following earlier announcements to expedite the environmental permitting process for new facilities.

However, it increases the pressure on competing suppliers, including new LNG projects from Australia, East Africa and Canada, as well as new pipe and LNG projects from Russia. It also undermines the niche that portfolio players, such as Shell, BP and Total, have found playing the middle man between US LNG exports and Chinese imports.

“But ultimately, whether Chinese buyers line up for a second wave of US LNG will depend on its competitiveness versus other global alternatives and Chinese buyer appetite for exposure to US gas prices,” he said.

Source: Wood Mackenzie

Pressure is on for VLCC tankers

In Hellenic Shipping News 15/05/2017

Large tankers have been under pressure over the past few weeks and this proved to be the case during the past days as well. In its latest weekly report, shipbroker Charles R. Weber said that “VLCC rates remained under negative pressure this week as demand in both the Middle East and West Africa markets posted w/w declines while the extent of the May Middle East program appeared likely to conclude below earlier expectations as Suezmax demand surged, leading to weaker VLCC fundamentals. There were 17 fixtures reported in the Middle East market, representing a 32% w/w loss, while the West Africa market observed five fixtures, off 29% w/w”.

According to CR Weber, “with 116 May Middle East cargoes now covered, there are a likely further 8 cargoes remaining uncovered. Against this, there are 29 units available (including 12 disadvantaged units) from which draws to service West Africa demand should account for six units, implying a surplus of 15 units. This compares with 12 surplus units at the conclusion of May’s second decade and a previously‐projected end‐ month surplus of 5‐8 units, and as such is likely to prompt further modest rate erosion through the start of the upcoming week. Thereafter, a rush to start the June program should allow rates to level off and, depending on the extent of early‐June demand could potentially offer fresh upside prospects by driving sentiment”.

In the Middle East, CR Weber said that “rates to the Far East concluded the week with a loss of 6 points to ws56 and corresponding TCEs declined 19% to conclude at ~$24,358/day. Rates to the USG via the Cape shed 6 points to conclude at ws29. Triangulated Westbound trade earnings lost 16% with a closing assessment of ~$33,435/day”. In the Atlantic Basin, “rates in the West Africa market followed those in the Middle East. The WAFR‐FEAST route shed 5.5 points to conclude at ws58 with corresponding TCEs off by 17% to

~$25,110/day. The Caribbean market was inactive this week with no fixtures reported. This, together with souring sentiment across alternative VLCC markets saw regional rates remain under negative pressure. The CBS‐SPORE route shed $150k to conclude at $4.10m lump sum”.

Meanwhile, in other tanker segments, “the West Africa Suezmax market remained under negative pressure this week, albeit with a moderated pace of rate erosion in‐line with a rebound in regional chartering demand as charterers shored up remaining May stems and progressed into June dates. The week’s fixture tally doubled w/w to 14 fixtures. Rates on the WAFR‐UKC route shed 2.5 points to conclude at ws72.5. Light VLCC coverage of the first decade of the June export program relative to the same period during May could help to contribute to sustained Suezmax demand strength as charterers progress further into the June program. A prospective return of the ~200,000 b/d Forcados stream would further bolster demand, though this has yet to be confirmed and no corresponding loading program has been released. Meanwhile, tonnage availability remains high, which will likely complicate rate progression even if demand remains elevated”, CR Weber said.

Finally, “the Caribbean Aframax market commenced the week with strong sentiment following last week’s strong rate environment. However, with available positions having expanded handsomely over the weekend and demand proving light throughout the week, rates corrected sharply. Just eleven fixtures were reported, representing a 35% w/w decline and a three‐month low. Rates on the CBS‐USG route shed 30 points to conclude at ws100. With further units expected to populate an already‐oversupply list of tonnage, we expect that sentiment will remain negative through the start of the upcoming week. The extent of any prospective losses, however, will likely be tied to the pace of inquiry and note that regional TCEs are now below OPEX levels, which should place a floor on further losses”, the shipbroker concluded.

Nikos Roussanoglou, Hellenic Shipping News Worldwide

The Great Race: Bulkers And Boxships Battle For The Lead

In International Shipping News 15/05/2017

In recent years, in generally difficult market conditions, it has been no surprise that many sectors have seen a significant removal of surplus tonnage. This has been particularly notable in the bulkcarrier and containership sectors, and in the case of the Capesizes and the ‘Old Panamax’ boxships, it has been a bit like the famous race between the tortoise and the hare but with even more changes in leadership…

At The Start

Back in 2012, Capesize demolition was on the up with the market having softened substantially in 2011 on the back of elevated levels of deliveries. Meanwhile, ‘Old Panamax’ containership demolition (let’s simply call them Panamaxes here)was also on the rise with earnings under pressure. Across full year 2012, 4.7% of the start year Capesize fleet was sold for scrap (11.7m dwt) and 2.6% of the Panamax boxship fleet (0.10m TEU). In both cases this was working from the base of a fairly young fleet, with an average age at start 2012 of 8.2 years for the Capes and 8.9 years for the Panamax boxships.

The cumulative volume, as a share of start 2012 capacity, of Capesize demolition remained ahead of Panamax boxship scrapping until Sep-13, by which time 7.3% of the start 2012 Panamax boxship fleet had been demolished compared to 7.2% of the Capesize fleet. In 2013 the Cape market improved with increased iron ore trade growth whilst the boxship charter market remained in the doldrums. In 2013, Cape scrapping equated to 3.2% of the start 2012 fleet (7.9m dwt); the figure for Panamax boxships was 6.0% (0.24m TEU). The fast starter had been caught by the slow burner.

Hare Today…

But by 2015, Cape scrapping was surging once more, regaining the lead from the Panamax boxships. By May-15 the cumulative share of the start 2012 fleet scrapped in the Capesize sector was 13.7% compared to 13.4% for the Panamax boxships. Iron ore trade growth slowed dramatically in 2015, whilst the Panamaxes appeared to be enjoying a resurgence with improved earnings in the first half of the year ensuing from fresh intra-regional trading opportunities.

…Gone Tomorrow

But the result of the race was still not yet clear. Today the Panamaxes are back in front again, thanks to record levels of boxship scrapping in 2016, including 71 Panamaxes (0.30m TEU) on the back of falling earnings, ongoing financial distress and the threat of obsolescence from the new locks in Panama. Despite a huge run of Capesize scrapping in Q1 2016 (7.5m dwt), the cumulative figure today for Capes stands at 22.3% of start 2012 capacity, compared to 25.4% for Panamax boxships, remarkably similar levels.

Where’s The Line?

So, today the old Panamax boxships are back in the lead, but who knows how the great race will end? Capesize recycling has slowed with improved markets, but Panamax boxships have seen some upside too, even if the future looks very uncertain. Hopefully they’ll both get there in the end but no-one really knows where the finish actually is. That’s one thing even the tortoise and the hare didn’t have to contend with. Have a nice day.

Source: Clarksons

New 38th Amendment of the IMDG Code becomes mandatory from January 2018. Are you up to date on the regulations for handling and transporting Dangerous Goods?

In International Shipping News 15/05/2017

From January 2018 the new 38th amendment of the IMDG Code will become mandatory. Already applied on a voluntary basis since January 2017, the amendments are quite extensive and may require additional training of your employees in order to be in full compliance. Maritime Academy’s training course has been fully revised in line with the new amendment.

The dramatic consequences of the mishandling of Dangerous Goods continue to make the headlines the world over. We have all seen the images of spectacular explosions and fires onboard vessels and been shocked by the loss of lives, cargo and property.

Since its inception in 1965, and being made mandatory from 1st January 2004, the IMDG Code has been continuously updated and revised for technical and transportation requirements of specific substances in order to keep up with the rapid expansion in the number of new products and changes in the shipping industry as a whole.

The challenge actually starts way before the vessel leaves the port because the whole supply chain is compromised if the correct procedures are not followed right from the start. The need for awareness and regular training of all involved parties is clear. Refresher training on the new amendment every two years is highly recommended.

The latest revisions to the Code are contained in IMO Resolution MSC. 406 (96) as amendment 38-16 which was adopted on 13th May 2016. Due to the large number of changes to the Code, the resolution incorporates the complete amended text of volumes 1 and 2 of the Code. The 2014 Supplement to the Code has not been amended and continues to be valid.

Contracting governments may apply the new requirements, in part or in whole, on a voluntary basis from 1st January 2017. Mandatory compliance of the revised IMDG Code 2016 (38-16) will be required from 1st January 2018.

Some of the changes include:

• More stringent controls for transportation of Lithium Batteries by way of new additional marking, labeling and special provisions.
• The dangers of Polymerizing substances has been addressed by allotting them to Class 4.1 under new UN numbers.
• Eight new United Nations (UN) numbers have been added (UN 3527 to UN 3534), covering polyester resin kits, polymerizing substances both solid and liquid, and engines and machinery.
• The anomalies that existed in previous editions with respect to transport of vehicles and machinery have now been ironed out and streamlined for all persons using the code by allotting separate UN numbers
• to them while differentiating them under different Classes in the DG List.
• Several new packing instructions have been introduced. Various ISO standards have been newly incorporated into the applicable packing instructions for gases, provisions for design, construction and testing of UN pressure receptacles and multiple-element gas containers.
• The introduction of 11 new special provisions.

Mandatory training

Overall, the IMDG CODE 2016 Edition, amendment 38-16, is a document that underlines the principles of continuous improvement and shows the way to making the transportation of goods by sea ever safer and surer.

All persons involved or in any way connected with Dangerous Goods transportation by sea are required to undergo mandatory training according to Chapter 1.3 of the Code.

DNV GL’s Maritime Academy offers a fully revised course Handling and Transport of Dangerous Goods (IMDG Code Training) and supports the participants to become familiar with the changes in the Code.

Source: DNV GL

World’s Biggest Container Line Scales Down Bond-Market Reliance

In International Shipping News 15/05/2017

The world’s biggest container shipping company and Denmark’s largest issuer of corporate bonds may rely less on debt markets in the near future.

A.P. Moller-Maersk A/S has ample liquidity and plans to cut capital expenditure, both of which reduce the need for new bond sales, according to Chief Financial Officer Jakob Stausholm. He also pointed to the century-old conglomerate’s plans to sell its energy business as a complication that makes now an awkward time to tap debt markets.

“It’s a bit complicated issuing bonds at the moment because you need an open window and right now there are a lot of things we are working on so finding an open window isn’t easy,” the CFO said in a phone interview. “We are well financed with a long maturity profile on our debt so our financing doesn’t require a lot of new issuance.”

Maersk issued five bonds in the first half of 2016, but hasn’t sold any since. Instead, the company has turned to banks for financing. Last month, the Copenhagen-based company announced it has established a syndicated loan facility to finance a $4 billion acquisition of container line Hamburg Sued.

“The bank facility was the right solution,” the CFO said. “We could tailor-make it so it fitted precisely the cash flow we expect in connection with the acquisition, which we couldn’t do with a bond. As we are working on so many changes, it’s convenient to get financing in place that fits the acquisition in exactly the right way.”

The conglomerate has given itself an end-of-2018 deadline to come up with a plan to list, sell or find another way to split off its energy units, which include Maersk Oil, and focus on its transport operations. These are led by Maersk Line, which carries more freight on its container liners than any other company on the planet.

To be sure, Stausholm says the bond market will remain an “important” source of financing for Maersk, and reiterated a commitment to keeping the company’s investment grade rating.

S&P Global Ratings has assigned Maersk a BBB grade, which is two steps above junk, but the grade carries a negative outlook. Maersk has a similar Baa2 grade with a negative outlook at Moody’s Investors Service, which in December downgraded the company from Baa1.

Maersk has 16 bonds out, totaling about $7 billion with a weighted average maturity of just over 4 years, according to data compiled by Bloomberg. That makes it the biggest non-financial Danish issuer of company bonds.

“It’s very difficult to predict” how many new bonds Maersk will issue over the next two years, the CFO said. “The separation of the energy divisions could play a part, although it’s too early to say. We need to make some choices first.”

Maersk’s first-quarter results showed that the energy unit it plans to divest contributed most to profits.

Work on separating the energy business “is progressing well,” Stausholm said. “We’re pleased that our energy division made good money in the first quarter, and all things equal, it will be easier to find solutions for a company that makes money.”

Source: Bloomberg

Cyber-technologies for future hull surveys

In International Shipping News 15/05/2017

Today, assessment of the structural condition of a vessel mostly takes place during survey, i.e. during physical tank entry. New inspection techniques such as drones and self-localizing cameras could enable cost efficient full visual mapping of tank condition on a 3D ship model. A COMPIT 2017 paper by Christian Cabos et al. (DNV GL), www.compit.info, outlines a vision of how such techniques could allow structural condition assessment to be performed remotely in the (not so far) future, reducing risk, cost and time in such surveys.

The outlined concept combines three key technologies that have evolved from research to maritime industry application over the past decade: the “Digital Twin” concept, Virtual and Augmented Reality, and drone technology including machine vision. Drone technology, Virtual Reality, and 3D Product Data Modelling are not new to maritime world, but it is the intelligent combination of these technologies that now unlocks the potential of smarter surveys.

Digital Twins form the backbone of planning and assessing

The “Digital Twin” is a computer model of the ship, in this case the hull structure. The concept has progressed from 3D models in CAD systems over product data models (adding required thickness following Class Rules, steel quality, as-built information, etc.) to the “Digital Twin” (adding corrosion history based on thickness measurements and inspections, “as-is” condition with associated strength and vibration performance, captured photos of surveys, etc.). The backbone software at DNV GL for this purpose is ShipManager Hull. Photos of the structure captured by a camera with tracking system (taken by a surveyor or a drone) can be mapped on the virtual structure in the “Digital Twin” resulting in a realistic representation of the structural condition at a given date.

Drones will be our eyes on site

Drones are increasingly used for a multitude of applications, e.g. aerial photography. However, standard GPS technology for drone orientation is not applicable inside massive steel environments such as ships. Instead, drone orientation may be enabled through automatic indoor positioning technology, e.g. using 3D maps based on the Digital Twin. Remote connectivity will allow directing the drone to additional close-up capturing. E.g., suspect areas detected in the pre-scan imagery can be followed up through remotely advising the drone to re-visit specific locations and obtain more detailed imagery. On top of regular cameras, drones may supply infrared, ultraviolet or ultrasound measurements. For higher time efficiency, hull inspections would be preferably done in a pre-scan unattended by the class surveyor, following a prepared inspection plan. The resulting images could automatically be mapped onto a 3D model. As long as autonomous drone flight is not possible, pre-scanning can be performed through a remotely guided drone carrying an indoor positioning system or even a service technician carrying a camera system. This procedure is still much more efficient than the current survey practice.

Hull condition will be surveyed in Virtual Reality

Virtual Reality (VR) refers to the technologies to navigate through 3D computer model where stereoscopic vision and the associated depth perception adds to the realism. After the pre-scan, inspection data captured on board (images and measurement readings) can be attached to the Digital Twin 3D model. The surveyor can assess the hull condition in Virtual Reality from his office and even invite other stakeholders, such as colleagues or owner representatives, who are physically somewhere else, into the same virtual space for e.g. decision support and sharing insights. Or, in complicated cases, an expert from helpdesk can be brought into the same virtual space for decision support.

In such a virtual environment, the hull condition can be assessed and documented very quickly. Moving around (e.g. examining bulkhead plates from both sides by simply walking through the virtual bulkhead and turning around), accessing thickness measurement results, comparing to previous records, etc. becomes fast and easy. Automated algorithms for image recognition can direct the surveyor to locations with suspected cracks, deformations, heavy corrosion wastage, coating break-down, etc.

Findings, repair measures, memo to surveyor, etc. can directly be recorded on the structure in the “Digital Twin” (such as the ShipManager Hull). With integrated reporting, no additional work is necessary for the surveyor after leaving the virtual ship – documentation is done when survey is done. Results can be presented and explained to the owner representative in a virtual meeting on-board the virtual ship in an efficient and most intuitive way.

Not the same, but equivalent?

To what extent can Virtual Reality replace physical presence in the real world? A class surveyor on board during survey uses more than his eyes. Touch and feel (Is a surface smooth or wet? Is this shiny liquid oil or water?), smell (e.g. for smoke or cargo vapours in a closed space), and hearing (e.g. hammering on a surface to test the acoustical response) are used in surveys, but not an option in the outlined virtual surveys. For equivalent safety, future surveys would then need to compensate for the “lost senses”. One lever would be more frequent and more extensive examination of the structure in the easier and cheaper virtual surveys based on drone scanning. Another lever would be employing additional senses for the drone, such as hyperspectral imaging (= infrared and ultraviolet). Thereby corrosion or coating breakdown could be detected with higher likelihood than with the visible spectrum perceived by the human surveyor on site now.

From vision to reality

The technologies described above are in different development stages between prototype and field testing.

Today, hull inspection techniques using camera-equipped drones are starting to be accepted, e.g. for inspections of large cargo holds when visual confirmation of good condition is sufficient. The effort for survey preparation on board is thereby dramatically reduced. But so far, drone inspections require two persons for the survey: the drone pilot with clear line of sight to the drone and the surveyor interpreting the screen image. The surveyor also needs the line of sight to the drone to understand its current position. Drone inspection techniques for narrow spaces – where no line of sight to the drone is possible – and contactless thickness measurement are subject to research. Once in place, the technology would allow voyages or even short unplanned downtimes of the ship to be effectively used for the pre-scanning of the hull structure.

Several systems for automated indoor positioning of cameras and sensors are currently under development. Already images captured in closed spaces can be properly associated to 3D models. With some further development, the same technology will allow drones to orient themselves inside a ship with sufficient precision.

DNV GL have developed a working prototype demonstrating how hull condition can be assessed and documented in a virtual space, based on its VR Survey Simulator SuSi. The prototype allows VR users to experience a water ballast tank of a VLCC. Users can examine emulated thickness measurement data and drone footage, search for locations with corrosion, cracks or buckling and document possible findings. Emulated data from previous inspections of the ship and sister vessels can be compared with the actual tank condition.

Source: DNV GL

Government of Canada introduces Oil Tanker Moratorium Act

In International Shipping News 15/05/2017

The transportation system is something Canadians rely on every day, from getting us to work, or bringing us the products we use in our homes. The Government of Canada is working to ensure that goods are transported in a safe and responsible way while protecting our marine environment and clean water.

Today, the Government of Canada introduced C-48, the proposed Oil Tanker Moratorium Act in Parliament. This Act will deliver on the Prime Minister’s commitment to Canadians to formalize a crude oil tanker moratorium on British Columbia’s north coast. This legislation will prohibit oil tankers carrying crude and persistent oils as cargo from stopping, loading or unloading at ports or marine installations in northern British Columbia. It will provide a high level of protection for the coastline around Dixon Entrance, Hecate Strait and Queen Charlotte Sound.

The proposed moratorium area extends from the Canada/United States border in the north, down to the point on British Columbia’s mainland adjacent to the northern tip of Vancouver Island, and also includes Haida Gwaii. Vessels carrying less than 12,500 metric tonnes of crude or persistent oil as cargo will continue to be permitted in the moratorium area to ensure northern communities can receive critical shipments of heating oils and other products.

The legislation proposes strong penalty provisions for contravention that could reach up to $5 million. The legislation also proposes flexibility for amendments. Further refined petroleum products can be removed from the list on the basis of science and environmental safety. Products may also be added on this basis.

The proposed Oil Tanker Moratorium Act is another action that the Government of Canada is taking as part of the $1.5 billion Oceans Protection Plan (OPP). The OPP is a national strategy to create a world-leading marine safety system that provides economic opportunities for Canadians today, while protecting our coastlines and ensuring clean water for our kids and grandkids. The largest investment ever made in our oceans and waterways, the Ocean Protection Plan involves new measures to improve marine safety and responsible shipping; protect Canada’s marine environment; and create new partnerships with Indigenous and coastal communities.

Quotes

“The Government of Canada is committed to demonstrating a clean environment and a strong economy can go hand-in-hand. Tabling this legislation is another step towards fulfilling our promise to formalize the tanker moratorium on British Columbia’s north coast. This, and other actions we are taking to improve marine safety through the Oceans Protection Plan, will protect the coasts and waterways that Canadians depend on for generations to come.”

The Honourable Marc Garneau, Minister of Transport

Quick Facts

• Since January 2016, the Government of Canada has held approximately 75 engagement sessions to discuss improvements to marine safety and formalizing the oil tanker moratorium. The Government has consulted extensively with Indigenous groups, and has also consulted with industry stakeholders and communities across Canada
• The proposed legislation applies to the shipment of crude oils defined by the International Convention for the Prevention of Pollution from Ships. It also applies to related oil products that are heavier and, when spilled, break up and dissipate slowly. A complete list of these persistent products included in the moratorium is outlined in a schedule to the proposed Act.
• The proposed legislation complements the existing voluntary Tanker Exclusion Zone, which has been in place since 1985.
• The Government of Canada is continuing to engage Indigenous groups, as well as coastal communities and Canadians across the country, to share their ideas on how we can work together through the Ocean Protection Plan to create a stronger marine safety system and better protect our coasts.

Source: Transport Canada

Cheniere in talks to boost LNG shipments to China

In Freight News 15/05/2017

Cheniere Energy Inc said on Friday it has had extensive negotiations with China about increasing U.S. liquefied natural gas exports, as a new trade deal paves the way for a second wave of LNG investment in the world’s fastest growing gas supplier.

The Trump Administration on Thursday said it reached an agreement with China to increase trade access for some U.S. companies to China, which is expected to include LNG exports.

That should benefit several companies building LNG export terminals in the United States, as the U.S. is forecast to become the third largest LNG exporter by the end of next year.

Cheniere is currently the only company able to export large cargoes of LNG from the continental United States, giving it a leg up now to ink long-term contracts with China, the world’s largest growth market for gas.

“We’re heartened by this trade deal for its potential to increase Chinese access to American LNG,” Cheniere spokesman Eben Burnham-Snyder told Reuters.

“We have had extensive negotiations with the Chinese over the last month,” he said. Cheniere has also shipped LNG to 20 other countries around the globe, and is in talks to ship to more.

Shares of Cheniere jumped as much as 5 percent to $49.50 on Friday to their highest since February, and the stock has more than doubled since Cheniere’s Sabine Pass terminal first opened in February 2016. Shares closed up 3.3 percent to $48.68.

Since the shale boom in the U.S. a decade ago, energy companies have been building export facilities, with as much as 6 billion cubic feet per day of capacity due by the end of 2018.

“In the longer term, the deal paves the way for a second wave of investment in U.S. LNG,” said Massimo Di-Odoardo, Head of global gas and LNG research at natural resources consultancy Wood Mackenzie.

“Developers will now be able to target Chinese buyers directly, potentially supporting project financing. It could also support direct Chinese investment into liquefaction and upstream developments on U.S. soil,” he said.

Those companies include Dominion Resources Inc, Kinder Morgan Inc, Sempra Energy and Freeport LNG, which are building LNG export terminals, and Exxon Mobil Corp, Veresen Inc, Venture Global LNG and Tellurian Inc, which hope to build new export terminals.

Under the plan, which falls under the framework of the U.S.-China Comprehensive Economic Dialogue, Chinese companies can now negotiate long-term contracts to source LNG from U.S. suppliers, the U.S. Commerce Department said.

“We are happy for all support in moving forward with U.S. LNG exports…We view this announcement as a step forward in improving the balance of trade,” said Joi Lecznar, a spokeswoman for Tellurian, which is developing the $13-$16 billion Driftwood LNG export facility in Louisiana, expected to enter service in 2022.

Until now, Chinese buyers have not bought long-term LNG supplies from the U.S. directly.

China, however, has bought U.S. LNG through short-term, or spot, deals. The only long-term contracts it has for U.S. LNG are with companies, like Royal Dutch Shell PLC, which themselves have agreements to buy gas from Cheniere’s Sabine Pass or other U.S. export terminals.

Sabine Pass in Louisiana entered service in February 2016, making it the first and only big LNG export facility in the lower 48 U.S. states. The United States has been a net importer of natural gas for 60 years; that is expected to change in 2017 as a result of LNG exports.

China was the third biggest importer of U.S. LNG in 2016, having imported 17.2 billion cubic feet (bcf) on six vessels, according to federal energy data. For the first two months of 2017, China imported 30.9 bcf of gas on 10 tankers.

One billion cubic feet is enough gas for about five million U.S. homes.

By 2030, Wood Mackenzie projects Chinese LNG demand will reach 75 million tonnes per annum or 10 bcfd. That would be worth $26 billion a year at current prices ($7 per million British thermal units).

“The U.S. is keen for a slice of the pie,” Di-Odoardo said, noting that U.S. LNG accounted for about 7 percent of total LNG imports into China in March.

The Trump Administration earlier announced plans to expedite the environmental permitting process for other new facilities, such as Veresen’s Jordan Cove project on the Pacific Coast in Oregon.

Source: Reuters (Editing by Marguerita Choy)

S&P Liquidity: The Shipping Market ‘Chameleon’?

In International Shipping News 08/05/2017

Many of shipping’s asset markets appear to offer a fairly reasonable level of liquidity most of the time, but just like the “Karma Chameleon” in the 1983 No.1 song, sometimes this can “come and go” due to a variety of factors. Recently, it appears that S&P market liquidity has been coming on strong in the main volume sectors, and once again there appear to be a number of different drivers behind the changes…

You Come And Go…

As in all economic asset markets, liquidity can change its hue according to the market environment, depending on the appetite of potential buyers and sellers to transact at a given level against a backdrop of a range of factors, including the availability of finance. From much lower or dropping levels of liquidity just a year or so ago, it seems that today S&P market liquidity has been on the up, with things looking increasingly active recently. The graph indicates, for the three main volume sectors, the monthly level of liquidity in terms of the volume of reported sales (in vessel numbers) on an annualised basis, as a percentage of the existing fleet at the start of each month. A 6-month moving average (6mma) is then taken to remove some of the month-to-month volatility and illustrate the general trend.

By George! A New High…

The lines on the graph (unlike in the song lyrics they’re not “red, gold and green”…) show how quickly the liquidity has risen in the main sectors. For bulkcarriers the 6mma has jumped from 4.1% in Feb-16 to 7.2% in Apr-17. In the tanker sector, it increased from 3.3% in Apr-16 to 4.6% in Mar-17, and in the containership sector it has leapt from 2.3% in Feb-16 to 5.5% last month. On a combined basis across the three sectors, the 6mma has increased from 3.5% in Feb-16 to 6.0% in Apr-17, and the monthly figure for Feb-17 reached 9.7%. The 6.0% figure represents the highest 6mma level of liquidity since the onset of the financial crisis in late 2008 (the low point being 2.5% and the average across the period 4.3%).

S&P’s Big Hits…

However, on inspection the drivers look a little different. In the bulkcarrier sector, as has been widely reported, with some improvements in freight market conditions buyer appetite appears to be back, and has driven pricing upwards. Reported sales volumes in the first four months of 2017 stood at 277 units, up more than 50% y-o-y. In the tanker sector, liquidity appears to be coming back after a period in which, against easing markets, prices may have been too high for buyers’ tastes. Again, volumes in the first four month are up by more than 50% y-o-y. In the boxship sector, meanwhile, it’s different once again, with distressed sales to the fore after the cumulative impact of markets which have until now been in the doldrums for some time. Mar-17 saw an all-time record monthly level of containership sales (44) and the year to date figure is closing in on the full year 2016 total.

In The Culture Club?

So, S&P liquidity can come and go, and recently it has clearly been on the way up. For those trying to transact to access tonnage, or exit the market, that’s a big help, and it’s good news too for asset players, an enduring part of the shipping market’s culture. Have a nice day!

Source: Clarksons

30 VLCCs Ordered So Far in 2017 as Tanker Newbuildings Are Too Attractive To Be Ignored For Shipowners

In Hellenic Shipping News 08/05/2017

More and more ship owners are actively looking to secure more tanker newbuildings, especially VLCC tonnage. In its latest weekly report, shipbroker Gibson noted that “the lull in new tanker orders last year coupled with accelerating pace of deliveries reduced the size of the orderbook, raising hopes that the rapid growth in fleet size witnessed currently will come to an end in 2018/19. However, the dynamics of the newbuilding market are starting to change again this year, with a notable increase in shipowners’ appetite for new VLCC tonnage. So far this year circa 30 VLCC orders have been confirmed (including the latest four firm orders from Capital Maritime) versus just 13 orders for the whole of 2016. Ordering activity in other tanker categories remains restricted, although some modest gains have been observed in the Aframax and LR2 sectors. Nevertheless, we understand that a number of owners (not just VLCC owners) are considering investment in new tonnage and are actively talking to shipyards”.

According to the shipbroker, “the latest developments have been to a large extent driven by low asset values. Newbuild prices across all sectors declined last year on the back of the turmoil in the shipbuilding industry, which has been hit by a prolonged period of low ordering activity in a number of shipping sectors, including tankers. STX shipbuilding filed for a court led restructuring, whilst many leading shipyards are going through cost cutting, consolidation and restructuring. Depleted orderbooks combined with challenging financial conditions have forced shipbuilders to compete even harder, pushing prices lower and lower. As a result, this year tanker newbuild values reached their lowest levels since late 2003/early 2004”.

Gibson said that “the latest wave of new tanker orders has occurred against deteriorating trading conditions. Spot earnings in the product tanker market have been very weak for quite some time, frequently falling to or even below the level of fixed operating expenses. The crude tanker market has fared better, VLCCs in particular; yet, even here earnings so far this year have been notably lower relative to 2016. While returns in the market are being pressured, the orderbook is still far from being modest”.

Paddy Rogers, the CEO of Euronav, spoke against the latest flurry of VLCC orders, suggesting that these orders are not needed by the market in current challenging conditions. “However, newbuild prices appear to be too attractive to resist. Apart from low price levels, ordering a new tanker now offers an additional benefit – delayed delivery due to a lengthy construction period, which will enable the owner to take control of the asset once the current phase of rapid fleet growth is over and/or is approaching its end. Furthermore, owners making a decision to order will have the flexibility to have their tonnage prepared in a most efficient and practical way for the approaching key legislation: the Ballast Water Treatment Management convention, which will come into force in September this year and the 0.5% global sulphur cap for marine fuels, effective January 2020”, said the London-based shipbroker.

According to Gibson, “there is clearly some sound logic behind ordering a tanker now, which suggests that firmer interest in newbuild tonnage is unlikely to disappear anytime soon. However, access to new finance remains at highly restricted levels, while it is more challenging to advocate the case for new investment while returns in the industry are weak and/or are deteriorating. As such, only those with strong financial muscle are likely be in a position to capitalise on the current set of circumstances”.

Meanwhile, in the crude tanker market this week, in the Middle East, Gibson said that “VLCC initially continued to compress lower, but then enjoyed increased bargain hunting attention that recreated enough momentum to make good the lost ground and in the end, move rates into slightly higher territory over last week’s close – bottom markers of ws 60 to the East now, with modern units looking for mid ws 60’s and low/mid ws 30’s the marks to the West. Owners will be hoping for the traditionally active end month phase to allow for further improvement next week. Suezmaxes posted no positive change over the week as a weaker West African scene persuaded Owners to remain in situ and compete for more limited local demand. Rates eased to around ws 80 to the East and to under ws 40 to the West accordingly. Aframaxes stayed rather flat over the period, within a ws 110/115 range to Singapore and are likely to remain rangebound well into next week too”, the shipbroker concluded.

Nikos Roussanoglou, Hellenic Shipping News Worldwide

Maersk Line to offer standalone direct service to and from North Europe out of Pipavav

In International Shipping News 08/05/2017

Maersk Line has added Pipavav as an additional port of call for its ME1 service. The ME1 will now have 3 gateway ports, Pipavav in addition to Nhava Sheva and Mundra. With the Maersk Group strategically placed at Pipavav, there would be no impact on the transit time.

This will be beneficial for the customers in northern India as they will have more options to route their ICD cargo to and from North Europe, Mediterranean and West Africa.

Mr Franck Dedenis, Managing Director, Maersk Line (India, Sri Lanka and Bangladesh) said, “We at Maersk Line continue to work towards creating a more efficient business environment. This addition is a part of our continued efforts to provide enhanced global footprints for our customers. With no impact on the transit time, the customers can look forward to a refined supply chain”

Mr Franck Dedenis, Managing Director, Maersk Line (India, Sri Lanka and Bangladesh)

The ICD rail connectivity at Pipavav will also be a major contributor towards ease of doing business. With Pipavav’s addition, the rotation of service would be as follows Jebel Ali – Jawaharlal Nehru – Pipavav – Mundra – Salalah – Jeddah – Port Tangier – Felixstowe – Antwerp – Bremerhaven – Wilhelmshaven – Rotterdam – Algeciras – Aqaba – Jeddah – Jebel Ali.

Source: Maersk Line