Charter

U.S. production of propane from gas processing has more than doubled since 2010 and now exceeds 1.1 MMb/d.  Together with another 300 Mb/d from refineries, that is far more propane than the U.S can use.  Consequently, U.S. exports of propane have been booming, reaching more than 700 Mb/d in July.  But that has not been enough exports to keep propane inventories from filling to the brim, now up to more than 90 million barrels, about 10 million barrels over the five year high.  About the only thing that has been holding back even more exports is shipping costs.   The cost of ships that move most of the propane to overseas markets, called Very Large Gas Carriers, or VLGCs (gas meaning LPG, not natural gas), have been high since U.S. exports started ramping up and then blasted to the moon this summer in response to huge export volumes and logistical tangles in global markets.  But that’s all about to come to an end.  There is a flotilla of new LPG vessels that were ordered many months ago that are scheduled to hit the market in 2015 and 2016.   In today’s blog we review how U.S. LPG exports are likely to respond to the coming massive increase in VLGC shipping capacity.

In December 2013 US Midstream giant Kinder Morgan agreed to spend nearly $1 Billion to get into the oil tanker business by buying two companies that own 5 US registered “Jones Act” vessels and are in the process of building 4 more. These tankers are part of an exclusive fleet of just 42 self propelled ocean going vessels that deliver oil or refined products between US ports. Booming US crude production along with constrained onshore delivery infrastructure have increased demand for tankers that can ship oil along coastal waters. Long-term charter rates for these tankers jumped to over $100,000/day in 2013 compared to an average of $56,000/day in 2012.  Today we begin a blog series looking at the US flagged tanker fleet and plans to expand it by 35 percent in the next 2 years.