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Keep it tight
MARKETS Its reputation for taking a comparatively civilised approach to business means that the LPG tanker sector is emerging from the recession rather faster than some other tanker segments, with little prospect at present of any supply overhang to disturb rising earnings
Asian demand for LPG is lending support to rates for larger tonnage as tensions in the Middle East keep ships out of the market. Indeed, with few large ships positioned in the Middle East Gulf for the end of May and brokers saying that cargoes moving out of the Middle East are at an all-time high, rates for very large gas carriers are likely to stay firm. Certainly, specialist LPG broker Lorentzen & Stemoco is taking this view.
“The West premium has been reduced and some owners have even ballasted vessels West to East to take advantage of the East market’s strong development,” it said in its May gas report. Certainly, the Baltic Exchange LPG index moved up to $70/tonne mid-month in response although it had slipped back to just below that level by the end of May.
Lorentzen & Stemoco said that Saudi Aramco had no volume reduction for its June cargoes noting, however, that enthusiasm for free-on-board cargoes was dampened somewhat as freight rates for VLGCs climbed upwards. Fearnleys’ opinion of the June outlook was that “the freight market has lost its upside potential for now”, noting that Saudi Aramco was quoting a 15 per cent drop in propane and butane prices for June, which was not as much as the market had been anticipating, suggesting that buyers will – if they can – wait for another adjustment in July.
Nevertheless, as of end May spot freight rates remained at or near their recent peak. Monthly spot rates for 82,000 m3 vessels were assessed by Fearnleys at $1,275,000, down only 5.5 per cent from their high of $1,350,000; the 20,000 m3 semi-refrigerated sector was returning on average $790,000 per month, only a little off the $800,000/month peak, and Asian coastal vessels are being quoted at their highest level for years.
Bring it on
But it is not just in the Middle East that LPG production is ramping up. Shell’s massive Prelude development off Australia will generate both LPG and LNG. Engineering contractor Technip has recently awarded a contract to FMC Technologies to supply LPG offloading systems for Prelude; this builds on FMC’s role in the development, which already includes subsea equipment contracted last year.
The new agreement between FMC and Technip Samsung Consortium is to supply offshore loading systems for the Shell Prelude Floating LNG project. FMC is to build seven footless marine loading arms for LNG and LPG at the facility. No value on the deal has been released, according to reports in the trade press.
Texas LPG cargoes could receive a boost on the news that US firm Targa Resources Partners, which processes and transports natural gas, is considering further expansion of its gas export terminal in Texas, offering extra cargoes for VLGCs.
The prospect of extra LPG volumes on the world markets seems to be encouraging cargo owners to tie up LPG shipping capacity, which is not necessarily in great supply. Brazilian oil major Petrobras is said to have extended the charter of the 82,000 m3 Maersk Virtue, built in 2007, from AP Møller-Maersk. It took the ship a year ago at a combined fixed/spot-related rate. The Brazilian energy company has also taken the 2006-built, 38,000 m3 Alessandro Volta for a year at an undisclosed rate.
Market sources say that Cuban interests have fixed the 5,800 m3 Norgas Pan, built in 2009, from Oslo-based Norgas Carriers for a year at in excess of $400,000 per month. The deal includes an option for a second year, according to shipping weekly Tradewinds. Trader Vitol has extended charters on two 5,000 m3, 2008-built sisterships, Helena and Sabrina, for another year and Algerian energy company Sonatrach has taken the 5,600 m3, 1999-built Gaschem Weser on a one-year timecharter.