LNG Carrier ‘British Sapphire’ Odyssey Shows LNG Market Going Local

By Anna Shiryaevskaya and Chou Hui Hong

(Bloomberg) — The tanker British Sapphire simply completed its personal model of Homer’s Odyssey.

BP Plc’s vessel, able to holding 155,000 cubic meters of liquefied pure fuel, set sail from Trinidad in mid-February seeking the best worth on world markets. It headed for Asia, modified course towards Europe when it was midway to the Cape of Good Hope, after which sailed again towards the Caribbean. It docked within the Dominican Republic after finishing a 9,000-mile, month-long journey that left it 800 miles from its place to begin, and unloaded, indicators from the ship compiled by Bloomberg from IHS Maritime information confirmed.

Unlike the crude oil market, fuel buying and selling will cut up into three regional markets by 2020, with not more than 10 % to twenty % of cargoes transferring between them, in response to Alan Whitefield, managing director of trade marketing consultant AW Energy Solutions in London. British Sapphire’s journey is defined by converging international costs for LNG which have made it cheaper for customers to purchase nearer to house.

“LNG will be more available,” Per Christian Fett, director of Fearnley LNG, an Oslo-based shipbroker, mentioned April 7 by e-mail. “The market will see less long haul and more swapping of cargoes,” he mentioned, referring to the follow of merchants exchanging shiploads to reduce transport prices.

Three Regions

Whitefield mentioned the three regional markets for LNG, which is fuel chilled to minus 160 levels Celsius (minus 256 Fahrenheit) to shrink it 600 occasions, are the Atlantic basin together with the U.S. Gulf Coast, the Caribbean, South America and Europe; a Pacific space centered on Japan and a Middle Eastern area that features India.

The shift comes as constitution charges declined to the bottom degree since 2010. The 34 vessels delivered final 12 months, probably the most since 2009, took the worldwide fleet to a file 421 tankers, in response to the April 8 annual report of the International Group of LNG Importers, or GIIGNL, a Paris-based lobbying group.

After leaving the Dominican Republic, the empty British Sapphire sailed to Trinidad in the course of March earlier than going to Nigeria to choose up LNG. It is now anchored off Brazil, the delivery information present. Robert Wine, a BP spokesman in London, declined to touch upon the tanker or the corporate’s LNG operations.

Portfolio Play

For international operators comparable to BP, the journey might have been a so-called portfolio play, whereby merchants swap cargoes to restrict lengthy journeys, in response to Malcolm Johnson, a Guildford, England-based school member of The Oxford Princeton Programme, an vitality coaching supplier.

Diversions for uncommitted cargoes could also be enticing for varied causes, together with unstable spot costs in several areas and decrease constitution charges, Johnson, who spent greater than 30 years at Royal Dutch Shell Plc in fuel jobs, mentioned by e-mail March 23.

LNG costs in Asia dropped 52 % prior to now 12 months amid extra provide and milder climate, with the premium to Europe narrowing to three.6 % within the week to April 6 from as a lot as 68 % in December 2011, in response to assessments by New York-based World Gas Intelligence of cargoes for supply in 4 to eight weeks.

‘More Challenging’

“It will be more challenging for traders from this year,” Hiroki Sato, Chubu Electric Power Co.’s common supervisor on the fuels division and head of LNG enterprise, mentioned in an interview March 4 in Singapore. “Traders cannot divert the European volumes to Asian markets” with out the danger of incurring a loss, whereas portfolio gamers can nonetheless achieve this to optimize their delivery operations, he mentioned.

Asia-Pacific consumers received greater than half their provide final 12 months from outdoors the area, in response to GIIGNL. Deliveries to Asia, which accounts for 75 % of worldwide demand, rose yearly since Japan’s Fukushima nuclear catastrophe in 2011 led to the closing of reactors. Increased use in Asia gave rise to shipments from Europe of beforehand imported cargoes.

Asia will maintain driving demand, and tankers will sail from west to east, Steve Hill, president of BG Group Plc’s international vitality advertising and marketing and delivery unit, mentioned March 4 at a market outlook presentation. Demand development in Asia outpaced international development of 1 % final 12 months, in response to GIIGNL.

Reloads Slow

The elevated demand in Asia gave rise to re-exports of beforehand imported cargoes from Europe. Because of contractual restrictions on diversions at sea, ships would make the journey from Qatar to Spain earlier than crusing again empty. Other tankers would then decide up gasoline for locations as far-off as Japan, which means LNG was touring 1000’s of miles greater than if it had gone on to Asia.

Re-exports have slowed because the Asian premium shrank, with simply seven tankers scheduled to reload in Spain this 12 months via May, in contrast with 28 in the identical interval of 2014. Since November, not one of the exports from the Iberian nation, which accounted for 60 % of reloads final 12 months, have left the Atlantic basin.

“If your market doesn’t have the need for the gas, it doesn’t matter how cheap it is, it’s not going to go there,” Keith Bainbridge, managing director of marketing consultant CS LNG in London, mentioned in an interview in London Feb. 24. “It has to go to the next market that needs it. At the moment it comes to Europe.”