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29 March 2023 - Year XXVII
Independent journal on economy and transport policy
08:40 GMT+2
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FORUM of Shipping
and Logistics

 



Shipping and Shipbuilding Markets in 2002

I N D E X




The Liquefied Natural Gas Shipping Market
 in 2002

 

The fleet
New developments
Ship prices
The projects
U.S. market
Other developments
Summary
 

2002 ended more or less as it ended in 2001 with a major U.S. energy player in difficult financial circumstances. The previous year closed with the demise of Enron and El Paso would appear to be repeating the show this year, although with nowhere near the same implications. Last year in this report we mentioned 'd'j' vu' with reference to El Paso, who have now chartered-in five new Daewoo ships from Exmar / MOL. However, we were not to know how far our 'd'j' vu' statement would
stretch, as El Paso have again fallen foul to a general malaise within the energy companies in the U.S.. Their U.S. gas pipeline operations may survive, but it looks increasingly as if they may fall out of LNG again.

Apart from the now familiar U.S. energy company problems, Williams, CMS. Reliance' the LNG market in 2002 has seen both a shortage of cargoes and ships. Whilst most activity over recent years has focused on the U.S. market absorbing all of the surplus available cargoes recent Asian activity has seen the balance shift back eastwards. The Japanese demand increased in the last quarter due to nuclear safety concerns causing the shutdown of 7 Tepco nuclear plants. Korean winter demand also saw a market request for up to a further 36 cargoes. These two events led to all of the producers trying to increase their output to meet this demand from their traditional customers.

Unfortunately, this Tepco demand coincided with some plant shutdowns at Das Island alongwith some turbine problems on the Abu Dhabi fleet that was restricting schedules. Cargoes previously sold on a short term basis to European buyers were then re-directed towards the east where higher prices were achieved. Most recently we have even seen cargoes sold from Algeria to Kogas: Sigtto's LNG Log for 2002 should prove interesting reading!

And if the LNG shipping market was not tight enough, a U.S. submarine decided to raise its periscope into the double-bottom of the 'Norman Lady' necessitating her withdrawal from service for repairs.
  

The Fleet

In 2002, the LNG fleet has increased to 137, and by the end of the year there was an additional 56 ships on order!

Small:

capacities from 18,000 to 50,000 cbm

Total: 16

Medium:

capacities 51,000 to 100,000 cbm

Total: 15

Large:

capacities above 100,000 cbm

Total: 106

Vessel size has been slow to increase but 2002 did see the market considering the use of large 200,000 cbm ships for the longer haul dedicated routes that are planned. Depending upon how the shipyards price these new large units there could be transportation costs savings in the region of 10-15 %.

Membrane technology continues to lead the orderbooks with 64 % of the vessels on order featuring the GTT membrane. A new type of membrane system was added to the GTT portfolio when Gaz de France ordered the first CS1 vessel. The CS1 offers increased cargo capacity without increasing the external dimensions of the ship.


The breakdown on the fleet in terms of containment sytem is:

In addition there are a further 56 ships on order, or some 40 % increase, a truly remarkable statistic!
 

The spate of speculative orders that prevailed in 2000 does not seem to be repeated with all new orders being placed against firm contracts. What does seem to be changing however is the duration of the charters. Two of the Snohvit charters that were confirmed earlier this year have 12 and 8-year commitments and the recent GdF tender has asked for a possible 12-year charter period. This reduction from the typical 20 year charter would suggest a reflection in matching the charter period to that of the sales contract and/or careful attention by charterers to their balance sheets.

The age of the LNG fleet is also causing concern to some LNG members especially in the light of the major pollution incidents involving old tankers : notably the 'Erika' and the 'Prestige'. Both of these ships were carrying fuel oil cargoes, fuel typically used in power generation, and synergies with the LNG market should not be ignored. Fuel oil is a competing fuel to the emerging gas-fired power generators and fuel oil is one of the elements in most LNG pricing formulae. Any change in the circumstances surrounding the fuel oil cost will impact on LNG pricing, but phasing out of old fuel oil carriers may see a similar phase out of old LNG carriers, despite the industry's excellent safety record.

It should not be forgotten that all LNG carriers today use fuel oil as bunkers to supplement the boil-off gas in powering the vessels. So whilst the LNG cargo is eco-friendly the bunker fuel is not. The risk of pollution still exists on the LNG vessels, not necessarily from marine accidents (collision with tugs for example) but during the more routine operation of bunkering from barges in what are typically sensitive areas.

The oldest LNG ships is the 'Cinderella', built 1964, that was initially sold for scrap but somehow escaped some 14 years ago, and the 'Hoegh Galleon', built 1974, was also sold for scrap but re-emerged with a new life after the tanks were repaired, are two examples of aged vessels that are lucky to still trade LNG today. However, these two vessels trade extensively into Spain, a country that is currently closely looking at the age of tonnage in its territorial waters.
 

Product tanker - Kersaint

Fernando Tapias 
140 500 m3, livr' en 2002 par Daewoo, propri't' de Tapias F. Naviera.

New Developments

Gaz de France broke the traditional mould in 2002 when the first diesel-electric propulsion ship was ordered from Chantiers de l'Atlantique. This 74,000 cbm vessel is due for delivery in end 2004. However, not only was a new propulsion system selected, a new type of membrane containment system will also be used. This CS1 system, a hybrid of the two existing membrane technologies GT96 and TGZIII, offers significant cost savings for the builder and optimises cargo capacity for the owner / charterer.

In light of the diesel-electric order there has been a surge in interest expressed in what is alternative propulsion to the steam turbines. This is partly due to the change in the LNG trade, where the emergence of a spot market demands the maximum amount of cargo is delivered to the customer (not usually the case in the traditional annual delivery concept) but also the recent troubles associated with gearboxes on some recently built turbine ships.

Gas turbine manufacturers have also turned their attention to LNG in the wake of a downturn in aircraft orders. Once thought extremely expensive it would now appear that market conditions have seen a more sensible approach to pricing.
 

Ship Prices

top

Whilst LNG newbuilding prices had generally been on the increase, but nowhere near the previous highs, the competitive market would seem to have returned with yards, especially the Korean shipyards, seeking new LNG orders. There are at present two tenders for new tonnage on the market and it will be interesting to see at what level the bids are set.

The graph shows the trend of pricing, with a comparison to VLCC prices, over recent years.



The yards are in general seeking orders for all shipping and those that specialise in LNG also build other types of ships. However, those orders are also drying up but a knee-jerk reaction in the aftermath of the 'Prestige' could see this change. A recently reported price war between two Korean yards seeking to secure an order for containerships could see this translate into the LNG market. There are already rumours of prices falling to the level set some three years ago when the Spanish orders were placed.

Will the E.U. relaxation on yard subsidies increase price competition? Will inventive tax incentives continue within Europe? If the answers to these questions are yes, then ships prices will remain low for the foreseeable future.
 

The projects
  • New Projects

The Norwegian project, Snohvit, finally received the final go ahead but not without opposition. Between the EU Council in Brussels and the environmentalists in Norway the pressure was very much against the project. However, in the end common sense prevailed and the project was eventually given the 'green light' in June. Some of the project partners were also instrumental in changing the future of LNG when TotalFinaElf and GdF elected to take their equity gas as fob cargoes using their own ships.

Angola did not make the progress anticipated, but although no progress was made in 2002 there should be some good news by the end of 2003. There has been a recent development in the Angola LNG project that may see an advance in the start-up date. Whilst the project was restructured earlier in the year with a new partnership agreement following the end of the civil war (which enabled a change in site location at least) and the Chevron / Texaco merger, that resulted in some slip in the original schedule, the Angolan government is taking a stand. They have slowed the pace of approvals for deep-water oil projects to synchronise with a 2007 launch of the LNG project, which could be interpreted as no LNG, no oil ! The real concern in Angola is the reduction of gas flaring which at present stands at about 85 % of its gas, and any increase in oil production would naturally increase the flaring. Political sensitivities could also be influential where the United-States are looking for diversification away from the dependency on the Middle East and thus investment in the African continent may be a necessity of Washington rather than the oil companies.

There is continued discussions on Iran LNG from the South Pars field, but given continued threat of hostilities in that region there will be continued uncertainty on this project. Furthermore investment in 'green field sites' is always the most difficult aspect of a project when the long-term buyers are no longer there. The main competition for Iran is the existing LNG operations in Qatar which appear to have the ability to expand at very short notice. The infrastructure at Ras Laffan will always give Qatar a commercial lead against a new project that will be stretched for capital investment.

The same problems exist in Yemen as for Iran, except that the threat of terrorism is more real in that region. LNG projects require huge investment and financial institutions will always assess the risk to their investment, always choosing the least risk. Thus allocating funds to Qatar or Oman expansions, for example, is always easier than start-up projects in sensitive political arenas.

Egypt is finally realising the ambition of being an important LNG player with the final agreement for its second LNG project. GdF signed an agreement to purchase the entire output from the first train of the BG led consortium and now BG is actively pushing for expansion of the second train, which is now expected in early 2006.

There is however greater emphasis on African projects, apart from Angola and Nigeria LNG, as the USA seeks non-Arab sourced hydrocarbons. There is at least one more Nigerian project at the planning stage and another in Equatorial Guinea. Both of these projects will be seeking the 'Americas' market.

  • Expansion Projects

The main activity in the increase in LNG production capacity involves expansion schemes in existing LNG plants. We have seen Nigeria LNG, Atlantic LNG, Qatargas and RasGas, Australia LNG and MLNG all develop expansion schemes.

Financing is always the key to a successful project and that typically requires firm long term contracts from gas buyers. Unfortunately, some of the new gas buyers are not in a position to guarantee their off-take quantities, Dabhol and Petronet in India being prime examples, and so new projects seeking similar markets struggle to attract finance, unlike those existing plants who already have significant cash flows.

 

U.S. Market

The US market remains the biggest potential target for future LNG growth. Domestic supply of gas is diminishing whilst long term demand, from the power sector, continues to grow. With only four existing terminals there is a finite capacity of about 16 million tonnes with a further 12.3 million tonnes expansion planned, and all on the East coast.

There are several projects for new terminals in the Baha peninsula of Mexico plus two for the Gulf of Mexico but now there is the likelihood of a new terminal in northern California, a concept many thought impossible not long ago. The regional demand is highest in California but the slim prospect of siting a terminal there caused the rush for the Baha peninsula. However, it now seems that reality has beaten off unjustified fear and the move is on to build a Californian terminal. We should know more on this by the end of 2003.

The Bahamas is another favoured location to site a receiving terminal, Tractebel having bought the old Enron site in the West, with El Paso holding onto its proposed site, in the East, for the moment. The advantage of the Bahamas is the proximity to the Florida market.

Despite new security measures having been introduced to the Boston harbour where Tractebel's Everett terminal is located, LNG is expected to continue to be imported into the New England area. Whether this would continue should Irvine's new proposed terminal for Nova Scotia get approval is still unknown. The continued threats of terrorist attacks hold a cloud over the continuance of the Everett terminal, which is close to Boston city centre and at the end of Logan Airport runway. Not that LNG offers any greater danger to the city compared to LPG, oil or chemical carriers.

The long-awaited re-opening of the Cove Point terminal should occur in the third quarter of 2003. New owners, Dominion Energy, having acquired the terminal from Williams, have three customers BP, Shell and the new user Statoil who recently purchased El Paso's capacity at this terminal, along with its SPA from Snohvit.

With the forecast for U.S. gas prices around the $4.00 per mmbtu, the U.S. market should continue to be the stimulus for many LNG projects and if the West coast terminals come into existence then the Asian producers should also become involved in this market, rather than just the Middle East and African producers.

There would also seem to be the prospect of more new terminals on the East coast of the U.S. with Federal Energy Regulatory Commission (FERC) apparently relaxing the tight reins on approval of new sites.
  

Other Developments

We have previously referred to the fleet age profile, old-ship disasters and the arrival of alternative propulsion. Larger size vessels, of up to 200,000 cbm, are under consideration by ExxonMobil and TotalFinaElf for their new proposed long-haul trades from Qatar whilst 145,000 cbm would appear to be the optimum size for new orders today. The 145,000 cbm size is more or less the maximum size acceptable to all existing terminals and as flexibility is very much the key focus on modern LNG trade any increase in this size is not expected in the near future, unless the new CS1 containment system gains wider use. The main advantage of the CS1 is the increase in cargo capacity for no change in external dimensions of the vessel.

As for the age profile, we would seriously question the industry's love affair with old tonnage when the rest of the shipping industry is looking carefully at the age of ships. Furthermore, with increased efficiency of the modern tonnage and the possibility of wider use of electric propulsion coupled with relatively low new ship prices, the case for fleet renewal should be given wider consideration.
  

Summary

LNG shipping will continue to grab headlines in the near future, hopefully for good reasons rather than adverse incidents such as the 'Norman Lady' accident with a U.S. submarine. The fleet size is growing at a rate previously unheard of and with 137 active and 56 on order the magical figure of 200 ships should be reached by 2007. As the new chosen preferred fuel for the future, the growth in LNG trade should continue and with it the LNG shipping industry.

Evolution cannot be ignored and for LNG this will be shorter charter periods, more flexible trading routes with less 'tram-line' operations. There should be progression towards alternative propulsion away from the very high fuel consumption represented by steam turbines, and this may be hastened after the delivery of the Gaz de France 74,000 cbm in 2 years time that will be fitted with a diesel-electric engine. It will be worth noting the pioneer's effect this new technology will have on the market.

New ship prices are expected to remain about the present level and stay there for the future with the anticipated arrival of the Chinese yards entering the 'club' in 2006. It should not be forgotten that it was the emergence of the new 'members' in Korea that assisted in the fall of LNG prices in the mid'90's.
 

›››File
FROM THE HOME PAGE
ESPO urges EU and European governments to lay out funding schemes for the installation of OPS in ports
Brussels
Satisfaction with the preliminary settlement agreement on the infrastructure for alternative fuels
UIRR recalls that it is possible to develop European intermodal transport and the necessary measures have already been suggested
Brussels
The association agreed with the dismal analysis of the European Court of Auditors ' sector.
Agreed on how to install electric charging stations for cars and trucks on the roads of the EU
Brussels
Preliminary agreement between Parliament and Council also for hydrogen filling stations
Nearly 2,000 workers in the Italian shipbuilding industry paid with irregular pay
Venice
Nearly 2,000 workers in the Italian shipbuilding industry paid with irregular pay
This is an income stream of six million euros, not subject to taxation or contribution.
The WSC against the bill that in the USA would repeal antitrust exemptions to foreign shipping companies
Washington
Foreign maritime monopolies-indicted by Costa Costa-have manipulated the maritime transport sector. Butler : misunderstanding how VSA helps supply chain to work better
BRT and the Italian subsidiary of the Geodis have been placed in judicial administration
Milan
A systematic exploitation of several thousand workers would emerge from the investigation.
Carnival realizes the best wave season ever
Carnival realizes the best wave season ever
Miami
New record bookings of cruises in both the North American and European markets
A new historical record of cruising traffic in Italian ports was expected in 2023.
Fort Lauderdale
A new historical record of cruising traffic in Italian ports was expected in 2023.
According to Cemar, passengers will be 12.8 million, with a 37.6% on 2022 and a 9.2% on the 2019
APM Terminals cooperates with Hateco in the realization of the new container terminal in Haiphong
APM Terminals cooperates with Hateco in the realization of the new container terminal in Haiphong
Two million euros for tax evasion in the logistics and home delivery sector
Trieste
Reported 20 entrepreneurs
Austria's Gebrüder Weiss has inaugurated a new logistics terminal in Tyrol
Reutte / Lauterach
It is located in Reutte, near the border between Austria and Germany
Maersk-SIPG agreement for bunkering of green methanol in the port of Shanghai
Shanghai
Expected supply from ship to ship of the new container ships ordered by the Danish company
ESPO, ships should use cold ironing systems in ports, if available, already before 2030
Brussels
Ryckbost : It is hoped that the requirements for ships related to when to use electricity at berth clarify the matter
ECSA, EU agreement on ship fuel gives strong political signal and provides clear climate goals and guidance for industry
Brussels / Rome
Assshipowners, welcome our main instances
T&E, today's EU decision marks the beginning of the end of dirty fuels in the shipping industry
Brussels
The organisation highlighted the need to prevent the agreed standards from presenting loopholes
Agreement of the Parliament and of the EU Council on the use of fuels for decarbonisation of shipping
Agreement of the Parliament and of the EU Council on the use of fuels for decarbonisation of shipping
Brussels
From 2034, the share of renewable fuel will have to be more than 2% percent. Emissions will have to be reduced by 2% percent by 2025 and by 80% percent by 2050. From 2030 container ships and passenger ships will have to use ground electricity in major European ports
Subscribed to the contract to sell the yards Hellenic Shipyards to the Greek shipowner Prokopiou
Subscribed to the contract to sell the yards Hellenic Shipyards to the Greek shipowner Prokopiou
Athens
The tender had been won with an offer worth 62.5 million euros.
ESPO presses why the ports that play a significant role in the EU's energy supply are also admitted to the TEN-T network
Brussels
According to the association, it is necessary to also take into account their role in the acceleration of the spread of renewable energies
In 2022 OOIL achieved record economic results
Hong Kong
In 2022 OOIL achieved record economic results
Drop in performance in the second half of the year
In 2022 French ports handled 293.7 million tonnes of cargo (+ 5.1%)
Ports
The figure is -6.0% percent lower than that of the pre-pandemic year of 2019.
Grimaldi signs agreement for the 67% acquisition of the Igoumenitsa Portuale Authority
Athens
Grimaldi signs agreement for the 67% acquisition of the Igoumenitsa Portuale Authority
"Our goal is to make the Greek airport realize its full potential for the benefit of all stakeholders, from shipping, transport and tourism to the local community," said Emanuele Grimaldi, who is also the first person to be able to make the Greek government.
Fedespedi, in 2022 container traffic in Italian ports increased by 2.4%
Milan
Overall decline of -1.0% of volumes in other container ports in the Mediterranean
In 2022 the port of Hamburg recorded a new record of goods from and for Austria
Hamburg
They amounted to 6.3 million tonnes (+ 12%)
Guidelines for the safe transport of lithium-ion batteries in containers
Guidelines for the safe transport of lithium-ion batteries in containers
London
They have been published by CINS, International Group of P&I Clubs, ICHCA and TT Club
Strong criticism of the Court of European Accounts to EU policies for the development of intermodal transport
Luxembourg
Values-objective to increase the share of sustainable modes of transport these are termed unrealistic
Thursday in Livorno a workshop on autonomous navigation
Livorno
Event organized as part of the 5G Maritime Autonomous Surface Ship project
In 2022, China's Sinotrans reported record profits despite a -12.5% percent decline in revenue.
Beijing
In 2022, China's Sinotrans reported record profits despite a -12.5% percent decline in revenue.
The reduction of business volume has been generated in the segments of maritime shipments and e-commerce
In 2022, short sea shipping in Spain experienced a slight decline of -0.4% percent.
Madrid
In 2022, short sea shipping in Spain experienced a slight decline of -0.4% percent.
The only international shipping of ro-ro cargoes marked an increase of 8.0% percent (for the first time since the 2016 percent drop in traffic with Italy)
Pimlico Shipping (Brothers Cosulich) buys a revamped
Genoa
The ship, of 7,967 tpl, will be rented to bare boat from the Argo Shipping
SAILING LIST
Visual Sailing List
Departure ports
Arrival ports by:
- alphabetical order
- country
- geographical areas
Giorgio Bucchioni has passed away, a reference point of breaking and national portions.
Giorgio Bucchioni has passed away, a reference point of breaking and national portions.
The Spezia
Among the institutional assignments, he was Chairman of the Port Authority of Spezia and Confindustria La Spezia
Liberty Lines orders three more monocarena naval vehicles at Spanish shipyard Armon
Belrose
Liberty Lines orders three more monocarena naval vehicles at Spanish shipyard Armon
They will add to the nine already commissioned
Ceremony of laying of the keel of the Silver Ray by Silversea Cruises
Papenburg
The luxury cruise ship is under construction at Meyer Werft
Launched in China the first of two LNG Small Scale & Bunker ships for Fratelli Cosulich
Genoa
Will be taken in delivery in September
The CDA of Interporto Padova unanimously approved the draft budget 2022
Padova
Profit after taxes in line with that of the previous financial year
In Genoa, a centre for the development of new technologies for decarbonisation of shipping has been inaugurated.
Genoa
CapLab will be managed by Ecospray Technologies and the DICCA of the University of Genoa
Collaboration Agreement between the AdSP of the South Tyrreno and Ionian Seas and the University of Calabria
Cowithout
The agreement covers several areas of activity and expertise
In 2022 the transits of trucks through the Swiss Alps decreased by -1.7% percent. Stagnation of rail transport
Bern
In 2022 the transits of trucks through the Swiss Alps decreased by -1.7% percent.  Stagnation of rail transport
Still far away the goal of the transfer of the loads from the road to the rail
In the only fourth quarter of 2022, HHLA Group revenues grew by 4.9%
Hamburg
Operating profit fell by -8.8%
Touax closes 2022 with record revenue
Paris
Expected in 2023 normalization of the container market
E-fuel should only be reserved for air and sea transport
Rome
It highlights an analysis of Transport & Environment, which considers them not useful to decarbonisation of road transport
Agreement between five international organisations to increase the safe transport of cargo in containers
London
Memorandum of understanding subscribed by CINS, CHIRP, COA, ICHCA and SMDG
The port of Livorno initiates an agreement with the Uruguayan ANP for the development of traffics, in particular of forest
Livorno
The port of Livorno initiates an agreement with the Uruguayan ANP for the development of traffics, in particular of forest
In 2022, the labronic climber handled 2.13 million tonnes.
Rixi reassures on the implementation of the sea rollover of the Fincantieri shipyard of Sestri Ponente
Genoa
Rixi reassures on the implementation of the sea rollover of the Fincantieri shipyard of Sestri Ponente
MIT will launch the discussion with Italian Railway Network for moving the railway line
Maersk Air Cargo inaugurates an aeromerci service Europe-China
Copenhagen
Maersk Air Cargo inaugurates an aeromerci service Europe-China
It is the first air link for the transportation of goods between Denmark and Asia
In 2022, rail transport to and from the port of Livorno grew by 35.8%
Livorno
Drop of -35.4% in the Piombino stopover
In February, drop in freight traffic in the ports of Algeciras and Barcelona
Algeciras / Barcelona
Decreases of -12.3% and -11.6% respectively
PSA stores 2022 with record financial performance
PSA stores 2022 with record financial performance
Singapore
Revenue up 71.2%
PORTS
Italian Ports:
Ancona Genoa Ravenna
Augusta Gioia Tauro Salerno
Bari La Spezia Savona
Brindisi Leghorn Taranto
Cagliari Naples Trapani
Carrara Palermo Trieste
Civitavecchia Piombino Venice
Italian Interports: list World Ports: map
DATABASE
ShipownersShipbuilding and Shiprepairing Yards
ForwardersShip Suppliers
Shipping AgentsTruckers
MEETINGS
Thursday in Livorno a workshop on autonomous navigation
Livorno
Event organized as part of the 5G Maritime Autonomous Surface Ship project
On April 18 Assiterminal will be confronted with politicians and practitioners on the challenges of portugal
Genoa
Meeting at the headquarters of the Federation of the Sea in Rome
››› Meetings File
PRESS REVIEW
Port concession saved Nigeria's economy N3.9tr - Haastrup
(Vanguard)
Can the return of international cruises bolster Japan's beleaguered tourism industry?
(The Japan Times)
››› Press Review File
FORUM of Shipping
and Logistics
Relazione del presidente Daniele Rossi
Napoli, 30 settembre 2020
››› File
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