Sailing on LPG s New Tides: Strategies for adapting in a new era of diversification in Supply & Demand. Clarksons Platou Gas

Transcription

1 Sailing on LPG s New Tides: Strategies for adapting in a new era of diversification in Supply & Demand Clarksons Platou Gas Clarksons Platou Gas/Japan LPG Conference March 218

2 <= No. of Vessels No. of vessels No. of Vessels Dramatic change in the VLGC fleet continues Age Profile of the VLGC Fleet Forward Availability yrs yrs yrs yrs Orderbook Fleet Development Base Scrap Scenario f 219f 22f Fleet Development High Scrap Scenario f 219f 22f Deliveries Removals Clarksons Platou Gas/Japan LPG Conference March 218

3 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Spot Rate - $ pmt TCE $ per month The VLGC Freight Market: How low did it go? Baltic VLGC Index: AG-Japan Average 199-Ytd Average 199-Ytd 218 (exc 14/1) Assessed Earnings Take a Hit VLGC's OPEX Range Clarksons Platou Gas/Japan LPG Conference March 218

4 MMT U.S exports continue to gain market share in Asia Seaborne LPG Exports Seaborne LPG Imports Asia/Global China India 6. 3 Japan South Korea Indonesia 2 Others % 7% Approx 67% Imports (excluding coastal movements) AG US Africa North Sea Non-US Americas Asia Asia Americas Europe Balance 1% 6% Clarksons Platou Gas/Japan LPG Conference March 218

5 Week 1 Week 4 Week 7 Week 1 Week 13 Week 16 Week 19 Week 22 Week 2 Week 28 Week 31 Week 34 Week 37 Week 4 Week 43 Week 46 Week 49 Week 2 Week 3 Week 6 Week 1 Week 4 Week 7 Week 1 Week 13 Week 16 Week 19 Week 22 Week 2 Week 28 Week 31 Week 34 Week 37 Week 4 Week 43 Week 46 Week 49 Week 2 Week 3 Week 6 MT MT 217/18 VLGC Volumes ex US & Middle East v Freights Ex US Ex Middle East 8 $ PMT Volume Lifted US-ARA US-Chiba (via Panama) 1, 4 $ PMT Volume Lifted AG-Japan 1, Source: Clarksons Platou Clarksons Platou Gas/Japan LPG Conference March 218

6 Jan'13 Apr'13 Jul'13 Oct'13 Jan'14 Apr'14 Jul'14 Oct'14 Jan'1 Apr'1 Jul'1 Oct'1 Jan'16 Apr'16 Jul'16 Oct'16 Jan'17 Apr'17 Jul'17 Oct'17 Million MT Million Tonne Miles (Avg Laden Distance x Total Tonnes) 8% 8% 8% 87% 87% 9% 91% 93% 92% % Utilisation of the Fleet 9% 9% 97% West/East Arbitrage volumes increasingly important VLGC US Liftings by Destination Utilisation falls, despite rising laden distances Tbc Africa East N.W.E Med Americas % East 1% 9% 8% 7% 4, 3, % Utilisation Tonne-Miles 1% 9% % going East % % % 21 41% % 217 9% 6% % 4% 3% 3, 2, 2, 9% 8% % 1% 1, 8%. % 1, 7% Clarksons Platou Gas/Japan LPG Conference March 218

7 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Primary number of cargoes cancelled/deferred Flat Netbacks cents/gallon (exc Terminal Fees) U.S Cargo Cancellations & Netback Prices Export volumes also driven by pricing 14 Cargo Cancellations Mt/B Asia +1 (via Neo-Panama) Source: Clarksons Platou Clarksons Platou Gas/Japan LPG Conference March 218

8 1/216 2/216 3/216 4/216 /216 6/216 7/216 8/216 9/216 1/216 11/216 12/216 1/217 2/217 3/217 4/217 /217 6/217 7/217 8/217 9/217 1/217 11/217 12/217 1/218 2/218 % 6% 6% % 1% 4% 6% 4% 1% 2% 21% 19% 14% 13% 31% 39% 36% 47% 43% 6% Northbound/Southbound 68% 84% 89% 88% 9% 1% VLGC Eastbound Movements & Neo-Panama Utilisation Split of U.S/East Liftings via Panama & Cape. Neo Panama Utilisation levels % US-Asia Transits via Cape Neo Panama Transits - Number 2H16 29% (post new locks) % 1% 9% 8% 7% 6% Southbound Northbound % 4% 3% 2% 1% % Source: Clarksons Platou Clarksons Platou Gas/Japan LPG Conference March 218

9 M MT M MT M MT M MT M MT M MT Regional Net Seaborne Trade Balances will impact shipping flows North America Caribs/S. America Europe Africa Middle East Asia/Australasia Source: Source: Clarksons Clarksons Platou Platou Clarksons Platou Gas/Japan LPG Conference March 218

10 VLGC Demand/Supply Balance & Utilisation Scenarios US Exports at Base Case Export Growth Number of Vessels Required/Change & $, /day % Utilisation of Trading Fleet (Base) Higher Scrap Scenario Requirement Change in Fleet Supply Change in Fleet Supply (Higher Scrap Scenario) VLGC TCE ($,/day) VLGC 1 YR TC Rates ($,/day) Fleet Utilisation % Data Source: Clarksons 7 Clarksons Platou Gas/Japan LPG Conference March 218

11 Sign of the Times: Environmental Regulations Key Baltic Sea ECA in effect North Sea ECA in effect EEDI for newbuildings formally adopted North American ECA entered into force EEDI & SEEMP Mandatory (Phase ) US Caribbean ECA enters into force Lower EEDI reference line (Phase 1) EU Monitoring, Reporting & Verification MRV becomes mandatory in EU ports EU MRV certification comes into force Lower EEDI reference line (Phase 2) Lower EEDI reference line (Phase 3) Date Global NOx Tier I Limit 1.% ECA SOx Limit Global NOx Tier II Limit 3.% global SOx limit.1% ECA SOx limit NOx Tier III ECA limit * Ratification of BWMC BWMC - Ballast Water Management Convention EEDI Energy Efficiency Design Index ECA Emission Control Area BWMC applies to newbuilds & ships constructed before 8th September 217 if an IOPPC is completed on or after 8th September 214 and prior to 8th September 217.% global SOx limit MRV Monitoring Reporting and Verification BWMC applies to all other ships constructed before 8 th September 217 North Sea & Baltic Sea NOx ECAs in effect *At the MEPC 66 it was decided that, as of 1st September 21, Tier III limits within future ECAs will only apply to ships built after the date of adoption of the ECA, or a later date as may be specified in the amendment designating the NOx Tier III ECA. Clarksons Platou Gas/Japan LPG Conference March 218 SOx NOx

12 Comparison of Methods of Compliance MGO Scrubber LNG LPG/Ethane Storage tanks required for MGO/MDO Modifications to the fuel oil system may be required Are there any implications for engine efficiency and/or maintenance? Requires limited investment. However, fuel costs likely to be higher and availability of MGO/lower sulphur fuel unclear price spread between low sulphur fuel oil & HFO uncertain Requires space to install the scrubber There are various types and manufacturers to choose between Requires significant capital investment However, can run HFO Will the market be sufficiently strong to cover these investment costs or will the MGO/HFO differential be sufficiently wide to justify it? Reports on scrubbers with corrosion problems Requires gas or dual/tri-fuel engines, LNG tanks, booster pumps, double-walled piping etc Significant investment costs for the engine & modifications required Maintenance costs likely to be higher Loss of cargo space (more important for some types of vessels v others LNG infrastructure limited, spec and costs uncertain Requires investment - engine has to be able to run on Ethane or LPG, piping etc Some of the new Multigas/Ethane carriers already using Ethane as a fuel and has cost advantages Significant investment costs for the engine & modifications required, but lower than LNG Maintenance costs likely to be higher Overcomes some of the hurdles of requiring the infrastructure in place particularly if LPG or Ethane is the cargo Clarksons Platou Gas/Japan LPG Conference March 218

13 Future Proofing - LPG as a Fuel Engines ME-GI (Gas Injection) engines typically burn LNG. However, the high pressure injection is indifferent to the gas composition, so they can burn different mixtures with higher hydrocarbon content such as LPG (with modifications to the auxiliary components as the density of LPG is higher than the density of LNG) ME-LGI (Liquid Gas Injection) Engines were designed for Methanol, but can burn LPG as well as Ethanol. To date, the orders have been for Methanol as a fuel, but Propane is possible. - LGI engines would be powered by LPG as a liquid fuel (whereas GI engines are injecting LNG as a gas). The liquid fuel is injected via a booster injection valve, which raises the fuel pressure and eliminates the need for high pressure fuel lines. There is no need for cryogenic equipment used for LNG systems. Therefore, less expensive & uses fairly standard equipment - LPG components such as injectors/valves can be designed smaller than LNG components, therefore less heavy and less expensive Clarksons Platou Gas/Japan LPG Conference March 218

14 Benefits of using LPG as a fuel Meets the criteria for a lower SOx marine fuel solution, PM & CO2. NOx emission reductions & IMO Tier 3 targets can be achieved if combined with other systems LPG has a higher calorific value compared to most other oil products & LNG - has the same efficiency gains as LNG No risk of oil spills whilst bunkering No need to spend additional time bunkering, if using the cargo No need for separate LPG storage tanks, if fuel comes from the cargo tanks LPG pumps, compressors etc are generally less expensive than LNG Lower maintenance costs than diesel/gasoline as burns more cleanly More efficient than fuel oil/gas oil However, LPG needs a higher pressure. There are also some safety concerns in gaseous form Propane & Butane are heavier than air and could therefore potentially be more dangerous if it leaks in the engine room Clarksons Platou Gas/Japan LPG Conference March 218

15 Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 May-13 Jul-13 Sep-13 Nov-13 Jan-14 Mar-14 May-14 Jul-14 Sep-14 Nov-14 Jan-1 Mar-1 May-1 Jul-1 Sep-1 Nov-1 Jan-16 Mar-16 May-16 Jul-16 Sep-16 Nov-16 Jan-17 Mar-17 May-17 Jul-17 Sep-17 Nov-17 $/GJ Costs could also be cheaper Propane N.W.E Low Sulphur MGO Rotterdam Clarksons Platou Gas/Japan LPG Conference March 218

16 Implications for the Market. Environmental Legislation WILL impact the freight market, as it will impact how vessels trade & costs Investment decisions will have to be made by Owners Adapt, Scrap or Wait & See? Higher fuel costs will be borne by Receivers A formula for charging for the LPG as a fuel can be established Engine/vessel designs evolving as are agreements around LPG bunkering hubs JANUARY 29, 218 South Korea's plans to pioneer LPG as a marine fuel with a GE Combined Gas turbine Electric and Steam System (COGES) powered car/passenger ferry are picking up pace. Classification society Bureau Veritas has now given the design Approval in Principle and the Korea LPG Association reports that a Memorandum of Understanding has been signed for what it says will be the world's first LPG ship bunkering hub A potential new Tide of LPG demand growth only a matter of time! Clarksons Platou Gas/Japan LPG Conference March 218

17 Disclaimer The material and the information (including, without limitation, any future rates) contained herein (together, the "Information") are provided by H. Clarkson & Co. Ltd ("Clarksons Platou") for general information purposes. The Information is drawn from Clarksons Platou's database and other sources. Clarksons Platou advises that: (i) any Information extracted from Clarksons Platou's database is derived from estimates or subjective judgments; (ii) any Information extracted from the databases of other maritime data collection agencies may differ from the Information extracted from Clarksons Platou s database; (iii ) whilst Clarksons Platou has taken reasonable care in the compilation of the Information and believes it to be accurate and correct, data compilation is subject to limited audit and validation procedures and may accordingly contain errors; (iv) the provision of the Information does not obviate any need to make appropriate further enquiries; (v) the provision of the Information is not an endorsement of any commercial policies and/or any conclusions by Clarksons Platou and its 'connected persons', and is not intended to recommend any decision by the recipient; (vi) shipping is a variable and cyclical business and any forecasting concerning it may not be accurate. The Information is provided on "as is" and as available basis. Clarksons Platou and its connected persons make no representations or warranties of any kind, express or implied about the completeness, accuracy, reliability, suitability or availability with respect to the Information. Any reliance placed on such Information is therefore strictly at the recipient's own risk. This Information is confidential and is solely for the internal use of the recipient. Neither the whole nor any part of the Information may be disclosed to, or used or relied upon by, any other person or used for any other purpose without the prior written consent of Clarksons Platou. Especially, the information is not to be used in any document for the purposes of raising finance whether by way of debt or equity. All intellectual property rights are fully reserved by Clarksons Platou, its connected persons and/or its licensors. To the extent permitted by law, Clarksons Platou and its connected persons shall not be liable to the recipient or any third party for any loss, liability or damage, cost or expense including without limitation, direct, indirect, consequential loss or damage, any loss of profit, loss of use, loss of or interruption in business, loss of goodwill, loss of data arising out of, or in connection with, the use of and the reliance on the Information whether in contract, tort, negligence, bailment, breach of statutory duty or otherwise, even if foreseeable. These exclusions do not apply to (i) death or personal injury caused by the negligence of Clarksons Platou and its connected persons or (ii) the liability of Clarksons Platou and its connected persons for fraud or fraudulent misrepresentation. In this disclaimer 'connected persons' means, in relation to Clarksons Platou, its ultimate holding company, subsidiaries and subsidiary undertakings of its ultimate holding company and the respective shareholders, directors, officers, employees and agents of each of them. This disclaimer shall be governed by and construed in accordance with English law. H. CLARKSON & CO. LTD, COMMODITY QUAY, ST. KATHERINE DOCKS, LONDON, EW1 1BF Clarksons Platou Gas/Japan LPG Conference March 218