New Panama Canal Brings US LNG Closer to Asia

New Panama Canal Brings US LNG Closer to Asia
The newly expanded Panama Canal has significant implications for LNG trade, reducing travel time and transportation costs for LNG shipments from the US Gulf Coast to key markets in Asia and providing additional access to previously regionalized LNG markets, according to US Energy Information Administration (EIA).

Furthermore, the canal will be able to accommodate 90 percent of the world’s current liquefied natural gas (LNG) tankers with LNG-carrying capacity up to 3.9 billion cubic feet (Bcf), while, prior to the expansion, only 30 of the smallest LNG tankers with capacities up to 0.7 Bcf, which make up 6 percent of the current global fleet, could transit the canal.
With the new locks, which provide access to a wider lane for vessels, only the 45 largest LNG vessels, 4.5-Bcf to 5.7-Bcf capacity Q-Flex and Q-Max tankers used for exports from Qatar, will not be able to use the expanded canal.

Transit through the Panama Canal will considerably reduce voyage time for LNG from the US Gulf Coast to markets in northern Asia.

A transit from the US Gulf Coast through the Panama Canal to Japan will reduce voyage time to 20 days, compared to 34 days for voyages around the southern tip of Africa or 31 days if transiting through the Suez Canal. Voyage time to South Korea, China, and Taiwan will also be reduced by transiting through the Panama Canal.

Additionally, the new canal will cut the travel time from the US Gulf Coast to South America, declining from 20 days to 8-9 days to Chilean regasification terminals, and from 25 days to 5 days to prospective terminals in Colombia and Ecuador.

In addition to shortening transit times, using the Panama Canal will also reduce transportation costs, EIA informs.

Transit costs through the Panama Canal for an average 3.5 Bcf LNG carrier are estimated at USD 0.20 per million British thermal units (MMBtu) for a round-trip voyage, representing about 9 percent to 12 percent of the round-trip voyage cost to countries in northern Asia.

Currently, about 9.2 billion cubic feet per day (Bcf/d) of US natural gas liquefaction capacity is either in operation or under construction in the United States. By 2020, the United States is set to become the world’s third-largest LNG producer, after Australia and Qatar, according to EIA.

NASSCO to Build Six Oilers for US Navy

NASSCO to Build Six Oilers for US Navy
US shipbuilder General Dynamics NASSCO has received a contract for the detailed design and construction of six John Lewis-class (TAO-205) oilers for the US Navy.

Designed to transfer fuel to the navy’s surface ships operating at sea, the oilers will have the capacity to carry 156,000 barrels of oil, including new bio fuels.

The oilers will also have significant dry cargo capacity, aviation capability and will reach a speed of 20 knots.

The first ship of the program was funded in the FY2016 budget, allowing engineering and design work to begin immediately.

The US Navy’s FY2017 budget requests advance procurement for a second ship, with procurement expected to occur in FY2018.

Currently, the San Diego-based shipbuilder is under contract to construct its fourth Expeditionary Sea Base (ESB) for the US Navy, USNS Hershel Williams, and is under contract to procure long-lead time material and engineering support for a fifth ESB.

Deep Sea Supply awarded PSV contracts

Norwegian offshore operator Deep Sea Supply has announced that it has been awarded three new time charter contracts by BP for operations in Egypt.

The PSV Sea Swift has been awarded a 2 years firm plus 1 year option contract, while Sea Spear and Sea Spark have been awarded 1 year firm plus 1 year option contracts.

All three vessels are expected to commence operations in the third quarter of 2016.

Rowan seals multiple rig contract extensions

Rowan Companies has reported a series of contract extensions in its latest fleet status report.

Drillship Rowan Resolute has received a blend and extend amendment awarded by Anadarko. The drillship has been given an extension at a dayrate of $580,000 for an estimated 273 days. Starting July 1, the dayrate will be reduced to $180,000 for an estimated 210 days followed by a return to the original dayrate of $608,000 for the remainder of the primary term.

Jackup rig Rowan Viking has been awarded a contract extension with Lundin for 270 days for $275,000 per day following the primary term. The reduced rate $282,000 is retroactive to January 1, 2016.

Jackup rig Gilbert Rowe has been awarded a contract extension with Saudi Aramco at the current rate of $69,000 to December 31, 2016 while another jackup rig Rowan Gorilla VII’s dayrate will be reduced to a standby rate (85% of operating rate) in mid-August.

Industry heavyweights applaud Hapag-Lloyd and UASC merger move

News that Hapag-Lloyd will move ahead with a merger with United Arab Shipping Co (UASC) has been greeted with approval by analysts and experts contacted by Splash.

UASC announced yesterday that its six shareholding states has approved a merger deal with the German line at an extraordinary general meeting on Wednesday.

The deal would see Hapag-Lloyd (which merged with CSAV 18 months ago) have a 72% holding of the new company with UASC holding the rest.

Lars Jensen from SeaIntelligence Consulting noted how this latest merger served to heighten the stratification between large and small carriers amongst the global players.

“Should the merger be approved, Hapag-Lloyd will become the fifth carrier to have a fleet exceeding 1m teu of nominal capacity, and in essence be almost on par with COSCO in terms of global scale,” he said. (See graph)
Industry heavyweights applaud Hapag-Lloyd and UASC merger move
“The merger will be another step in what can be seen as both a consolidation and a globalisation in the industry,” Jensen continued, adding: “Six carriers are now becoming significantly larger than their competitors, a development which is sure to change the market dynamics and the strategic choices for the carriers involved in the coming years.”

He also pointed out that all the changes in the industry mean we will look at carriers differently going forward, as the national connotations for the carriers will become blurred. This is the same too for CMA CGM, which has just bought out Singapore’s flag carrier, Neptune Orient Lines (NOL).

Even though Hapag Lloyd will remain headquartered in Hamburg, it will have a much more diversified background in its ownership base, with now both strong Chilean and Arab ownership stakes – a diversification which Jensen said can be a significant asset if harnessed correctly, but also a risk if there is not consensus amongst the owners with regards to the long-term strategy.

“The merger of Hapag-Lloyd and UASC confirms that only by having the scale, a modern container carrier can survive the expected prolonged weakness of the container shipping market,” said Kris Kosmala, a Splash columnist and vice president for Quintiq Asia Pacific. “The true value of that merger, and its value in context of the realigned alliances, will be severely tested over the next 24 months,” Kosmala added. “I hope that the combination of Hapag-Lloyd and UASC will be sufficiently resilient to survive what is shaping to be the most challenging period of this industry in modern times.”

UASC tying the knot with Hapag-Lloyd will likely mean UASC will be absorbed into the new container grouping, THE Alliance, which also features NYK, MOL, K Line, Hanjin and Yang Ming.

Tobias Koenig from Lexington Maritime and another Splash columnist, commented: “The merger of Hapag-Lloyd and UASC creates a significantly stronger container line in an environment where both size and strong shareholders matter. I am happy to see Hapag-Lloyd growing and strengthening its position.”

Dagfinn Lunde from Dagmar Navigation told Splash the merger was “finally something sensible happening in the container industry”. He said it was a good follow-up to CMA CGM’s pursuit of NOL.

“UASC and Hapag-Lloyd have nice complimentary strengths. I hope the cultures can work nicely together,” Lunde concluded.

Qatargas Inks 20-Year LNG Supply Deal in Pakistan

LNG producer Qatargas has entered into a long-term Sale and Purchase Agreement (SPA) with Global Energy Infrastructure Limited (GEIL) to supply 1.3 tonnes of LNG per year to Pakistan for 20 years, with a possibility to increase this volume to 2.3 million tonnes.

The LNG will be supplied from Qatargas 2, a joint venture between Qatar Petroleum, ExxonMobil and Total which started production in 2009.

The first cargo is expected to be delivered in 2018 by Qatargas-chartered Q-Flex vessels.

“We are proud to support countries in their desire to enhance their energy security. This new agreement reinforces our confidence in Pakistan as an energy market and in its potential,” Saad Sherida Al-Kaabi, Chairman of Qatargas Board of Directors, said.

In April 2015, the company sold its first cargo of LNG to Pakistan State Oil Company (PSO), representing the first LNG agreement between Qatar and Pakistan and the first ever LNG import deal for any entity in Pakistan.

“I am particularly pleased to strengthen our relationship with Pakistan, which continues to grow as an important market in the LNG industry,” Khalid Bin Khalifa Al-Thani, Chief Executive Officer of Qatargas, said.