VLGC

The details of a trade deal between the U.S. and China, announced June 26 by Commerce Secretary Howard Lutnick and confirmed by China, remain sparse. Once they are finalized, the requirement for U.S. exporters to obtain a Bureau of Industry and Security (BIS) license to send ethane to China should be lifted, but the effect on trade flows is already apparent. In today’s RBN blog, we review the impact of the BIS license requirement, the still-pending imposition of fees on vessels owned or operated by China, and the risk that comes with using the energy industry as a bargaining chip in trade talks. 

The U.S. government recently released the final rules for the Section 301 fees proposed earlier this year, intended to address the dominance of China’s shipbuilding industry. According to the new rules, exports on Chinese-owned, -operated or -built vessels are mostly excluded — great news for U.S. energy producers and exporters, especially in the NGL sector. In addition, things are starting to change in the LPG markets due to the U.S./China tariff war. Propane vessels are being diverted, at least one ethane cargo has been scrapped, and China is reportedly looking into exempting ethane from its 125% import tariff. In today’s RBN blog, we look at what the latest developments mean for the U.S. energy industry. 

After the $5 billion-plus expansion of the Panama Canal is dedicated this Sunday, June 26, the first “New Panamax” vessel scheduled to pass through the canal’s new, longer, wider locks will be the Lycaste Peace, a Very Large Gas Carrier (VLGC) that is transporting propane from Enterprise Products Partners’ Houston Ship Channel export terminal to Tokyo Bay in Japan. What remains to be seen, though, is how many other supersized vessels carrying propane, liquefied natural gas (LNG) or other hydrocarbons will follow, and how soon. Today, we mark the formal opening of the newly enlarged Atlantic-Pacific short-cut with a look both at the game-changing potential of the expanded canal and the realities of today’s energy and shipping markets.

Fueled by soaring domestic production of natural gas liquids (NGLs) like propane and butane, U.S. liquefied petroleum gas (LPG) export volumes the past three years have rocketed to the top, surpassing exports by the old Big Three of LPG: United Arab Emirates, Qatar and Algeria. But that rise in LPG exports may be ending, and the share of exports made from Gulf Coast docks may be in for a decline. More propane and butane will be pulled from the Marcellus and Utica to the docks at Marcus Hook, PA, and demand for propane on the Gulf Coast—from new propane dehydrogenation plants and flexible steam crackers—will be climbing. That suggests that less LPG may need to be exported from the Gulf Coast to keep the market in balance. In today’s blog we continue our look at the soon-to-open Panama Canal expansion with an updated examination of U.S. LPG export terminals along the Gulf Coast.

After a series of construction setbacks, the Panama Canal expansion is finally expected to come online by mid-2016. The wider, deeper canal locks will enable any LPG ship (up through Very Large Gas Carriers, or VLGCs) on the planet to take the time- and money-saving short-cut, and also will accommodate all but a few of the world’s biggest liquefied natural gas (LNG) vessels. That can only help U.S. liquefied petroleum gas (LPG) and LNG exporters, who for competitive reasons need the low transportation costs to Pacific Basin markets that shipping in super-bulk will provide. Today we discuss how the expansion project may boost exports of hydrocarbons from the U.S. Gulf Coast.

On Monday, September 3, 2007, dignitaries and thousands of Panamanian citizens watched a huge explosion level a hill near Paraiso, a village north of Panama City. That day launched work on a project that would eventually cost more than $6 billion (U.S.) to double the capacity of the Panama Canal and allow for the passage of longer and wider ships. Nearly nine years later on June 26, 2016, the expansion is finally scheduled to be open for business.   The new canal capacity will be a major event in global energy markets, especially for growing volumes of U.S. natural gas, liquified petroleum gas (LPG) and petroleum product exports.   In honor of this historic development, RBN will take you there!   Rusty will be traversing the canal this Thursday, April 14th and will have the skinny on what is happening in Panama right now, with pictures to show for it.  In today’s blog we set the stage for our voyage across the Panamanian Isthmus.

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.

The Panama Canal expansion, set for a January 2016 debut, will slash the travel time for larger ships ferrying U.S.-sourced LNG and LPGs from the Gulf Coast (or East Coast) to Japanese and other Asian buyers. And—no surprise here--for ship charterers, time is money, and the ability to make three roundtrips instead of two every three months is a big deal. Being able to use ships with larger, “New Panamax” dimensions is welcome news to Asian utilities awaiting delivery of American LNG, and to Asian petrochemical manufacturers seeking to diversify their LPG sourcing and/or shift from naphtha to LPGs as their preferred feedstock. In today’s blog, we continue our look at what longer, wider and deeper canal locks mean for U.S. hydrocarbon exports.

At our School of Energy International LPG session earlier this month, Kelly Van Hull presented RBN’s outlook for global liquified petroleum gases (LPG)  production – showing the US poised to become the world’s top exporter of LPGs within the next year or two - displacing Qatar. While most U.S. LPG exports go to Latin America today, a growing portion will move to Europe and Asia in the future. The limited fleet of very large gas carriers (VLGCs) used to ship LPG is growing rapidly with a record new build order book of 72 ships – 45 percent of today’s fleet of 161 vessels. Spot freight rates assessed daily by London’s Baltic Exchange are also at record levels of $82/MT this week. Today we take a closer look at international LPG ship chartering.

Exports of liquefied petroleum gases (LPGs) from the U.S. to international markets - are expected to nearly double from 466 Mb/d in 2014 to 825 Mb/d in 2018 as production from gas plant processing exceeds domestic demand. There are two LPG export terminals on the Houston Ship Channel that have been responsible for most exports, another six around the country that have exported some LPG over the past year, and still another four new-builds that have been announced.  That’s a lot of volume and a lot of dock capacity.  One question is whether there are enough LPG ships to handle all of these exports.  Today we introduce our review of this question, looking at the specialized vessels used to ship LPGs.