LPG World Shipping 2015

2015 • The journal linking the international LPG marine transportation chain

A new era for LPG and chemical gas shipping

“We have been able to maintain the overall fleet utilisation rate at around the 97 per cent mark over the past 10 years”Director of Fleet & Technical Operations, Paul Flaherty, see page 47

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www.lngworldshipping.com LPG World Shipping | November/December 2015

LPG WORLD SHIPPING COMMENT | 35

Mike Corkhill, Consultant Editor

A ll that LPG has ever needed to flourish is a distribution infrastructure.

For decades gas was the unwanted byproduct of crude oil production and vast quantities were wasted through flaring. Meanwhile, local populations that lacked other fuel stripped their land bare to burn wood and other vegetation in their fireplaces.

Today, thankfully, there is much more awareness of the perils of deforestation, desertification, atmospheric pollution and the waste of valuable sources of fuel.

There are also, again thankfully, much greater volumes available of natural gas and its natural gas liquid (NGL) byproducts, including LPG and ethane. Exploitation of the vast shale oil and gas resources in the US, in particular, is bringing major new supplies of LNG, LPG and ethane to the global marketplace.

This has prompted a wave of gas carrier and terminal construction. The LPG shipping sector that has felt the most immediate and striking impact is very large gas carriers (VLGCs) of 75,000m3-85,000m3.

In 2013-2014 the VLGC orderbook expanded at an unprecedented rate. There are now 75 VLGCs on order, equal to 41 per cent of the existing fleet in capacity terms. All but a handful will be delivered by the end of 2016.

Most new VLGCs will carry US LPG exports on long intercontinental routes to customers in Asia. VLGCs continue to enjoy record-high freight revenues, even though the influx of newbuildings has begun in earnest – suggesting that the market can support the large volume of new tonnage.

For the moment no other type of cargo vessel can match the earnings logged by large LPG carriers. The rest of the LPG and petrochemical gas carrier fleet is enjoying the trickle-down effects of buoyancy in the VLGC sector.

Despite not commanding anywhere near the

revenues of the larger vessels, smaller ships are intrinsic to gas-shipping expansion. A significant percentage of large-parcel cargoes discharged by VLGCs at major hub terminals is then distributed by coaster to regional depots.

SurplusMeanwhile ethane, an important petrochemical feedstock, is becoming available in quantities beyond the needs of US domestic industry. The surplus of this attractively priced product is of interest to chemical producers in Europe and Asia.

The launch of US ethane exports has spurred construction of new loading and receiving terminals and existing ethylene crackers are being upgraded to process the new feedstock.

US ethane has also sent naval architects back to their drawing boards to design innovative gas carriers to bring economies of scale to shipping this demanding cargo over long distances.

A new gas-shipping era is dawning and the maritime industry has risen to the occasion to ensure that the new supplies of fuel and chemical feedstock coming to market reach as many customers as possible. LNG

A new era for LPG and chemical gas shipping

All kinds of gas carriers are building on their customer portfolios

Increasing quantities of US LPG and new volumes of ethane have hit the market as global demand for both products is rising

LPG World Shipping | November/December 2015 www.lngworldshipping.com

36 | ANALYSIS

VLGCS RIDE HIGH ON LPG GROWTH

The rapidly expanding fleet of very large gas carriers (VLGCs) has

an ever-growing volume of cargo to carry. At one point some feared that the 2013-2014 surge in orders for large, fully refrigerated LPG carriers of 85,000m3 was overly ambitious: now, it seems, the shipowners got their sums right.

The in-service fleet comprises 181 VLGCs; 75 are on order. Of 37 ships scheduled for 2015 delivery, 14 had been handed over by August. Of the remaining orderbook, 44 are due for completion in 2016 and eight in 2017.

The Middle East is the largest export region, having shipped 31 million tonnes per annum (mta) in 2014. However, LPG loadings by Qatar, the United Arab Emirates and Saudi Arabia have plateaued.

The US, thanks to its abundant shale oil and gas resources, has been the main driver in recent years for growth in global seaborne trade in LPG.

US exports reached 14 mta in 2014, making the country the world’s largest single supplier of LPG to the international market. About two-thirds of this volume, which was 60 per

cent up on the 2013 figure, was shipped in VLGCs.

At the beginning of this year forecasts for US LPG exports in 2015 indicated a 16-20 mta range. Supporters of the lower-end figure highlighted the significant decline over the past year in the price of naphtha, a competing petrochemical feedstock.

After nine months of trading in 2015, the optimists appear to have got it right. US exports in April 2015, for example, totalled 2 mt and have since more or less sustained that monthly output.

Developers of US shale

No other cargoship sector is earning as much or expanding as fast as the very large gas carrier (VLGC) segment

Rising US exports and Asian demand are absorbing a record VLGC newbuilding orderbook


ANALYSIS | 37

resources have shown resilience in maintaining production levels despite diminished returns for all global energy producers. US LPG exports may even top 20 mta this year.

LPG serves a supply-driven market. Its versatility as a petrochemical feedstock, a residential or vehicle fuel, and a product with many industrial applications ensures that volumes will find a home.

LPG import nations China, India, Indonesia and Thailand are showing particularly strong growth in demand.

China imported 7 mt of LPG in 2014, up from 4 mt in 2013, needing propane feedstock for the 14 new propylene dehydrogenation (PDH) that will boost the country’s plastics production.

India, which uses the product primarily for domestic cooking fuel, has just recorded its 26th consecutive monthly increase in LPG consumption. Imports are on target to reach 9 mta this year, and will meet half the country’s needs.

At the start of the US LPG export surge a few years ago most cargoes were shipped in small and midsize gas carriers from Gulf ports to Latin America and Europe.

However, in today’s rapidly evolving global marketplace there has been an increase in VLGC shipments from the US Gulf to Asia in 44,000-tonne parcels.

Approximately one-third of US LPG output is now directed to Asia, boosting the VLGC fleet’s tonne-mile performance and absorbing all the newbuilding tonnage.

This traffic will increase in 2016 when the enlarged Panama Canal locks enter into service. Today the canal can accommodate only 75,000m3 LPG carriers, about 10 per cent of the VLGC fleet, whereas all VLGCs will be able to utilise the new link.

The expanded waterway

makes it possible to replace 44-day eastbound voyages to Asia via the Suez Canal or the Cape of Good Hope with 25-day westbound sailings. In terms of tonne-mile demand the reduced distances will be offset by a continued rise in LPG volumes.

Fleet factsStatistics compiled by broker Clarksons show five Asian yards were behind all the VLGCs delivered or due for delivery in 2006-2016. These shipbuilders have proved more than capable of meeting the increased demand for tonnage.

Hyundai Heavy Industries (HHI) accounts for 60 per cent, Daewoo Shipbuilding & Marine Engineering (DSME) 13 per cent, Mitsubishi Heavy Industries 13 per cent, Kawasaki Heavy Industries 7 per cent and Jiangnan Shipyard 7 per cent.

Newbuilding prices have remained steady over the past five years, in the range of US$75-80 million per vessel.

VLGC freight rates reached record highs last year and have maintained healthy returns so far in 2015, despite the influx of newbuildings.

Avance Gas, for example, reports that spot freight rates for its VLGCs continued to firm in the second quarter of 2015, recording an average time charter equivalent (TCE) rate of US$86,938/day, up from $64,832 in the first quarter.

The company, which operates a fleet of 14 LPG carriers of 83,000m3 each, achieved TCE earnings of US$59.1 million in the second quarter, up from US$40 million in the first.

Ship efficiencyVLGC owners are also reducing their operating costs, primarily by introducing design features on newbuildings that improve propulsion-system efficiency and handle cargo more flexibly.

Dorian LPG is a case in point. The operator has launched an ambitious eco

vessel newbuilding programme to take its fleet to 19 HHI-built VLGCs by April.

Dorian claims its new ships cut fuel consumption by 17 per cent compared with the previous generation of propulsion systems, whether running on heavy fuel oil or marine gas oil.

The company puts the savings down to the use of MAN B&W’s ME-G electronically controlled, long-stroke diesel engines. The newbuildings have also been fitted with the new design of Babcock LGE’s reliquefaction plant.

The latest equipment has an improved cooling capability, which allows the carriage of propane with up to 8 per cent ethane in the mix, versus the upper limit of 2.5 per cent for traditional plant.

In April 2015 Dorian LPG established the Helios VLGC pool with Singapore-based Phoenix Tankers, a Mitsui OSK Lines affiliate.

Initially, the two partners contributed four VLGCs but both have since added to the pool. LNG

Approximately one-third of US LPG output is now directed to Asia

Dorian’s VLGC newbuildings are more fuel-efficient and provide more flexible cargo handling flexibility than its older vessels

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SHIPBUILDING | 39

Ethane carriers enter the deepsea gas tradesA new type of gas ship will deliver a US shale byproduct to chemical plants worldwide to use as feedstock

E thane has emerged as a new liquefied gas carrier cargo on deepsea routes as a result of the US shale gas revolution.

It is one of the five components of the natural gas liquids (NGLs) in which the rising output of US shale oil and gas is rich. It is also by far the cheapest and, along with propane, is the most abundant NGL and is an ideal petrochemical feedstock.

The NGL fraction is now available in quantities beyond the needs of the US chemical industry. Chemical producers in Europe, India and China keen to utilise the surplus have signed long-term contracts for output from two new US ethane export terminals.

Sunoco Logistics is bringing on stream an ethane-loading facility at its Marcus Hook complex near Philadelphia on the US east coast, which will have the capacity to export up to 1.9 million tonnes per annum (mta). Ethane will be processed from the NGL output of the Marcellus shale gas play in eastern Pennsylvania.

Enterprise Products Partners (EPP) is building a bigger ethane-export terminal at Morgan’s Point on the US Gulf coast. The facility, at the entrance to the Houston Ship Channel in Texas, is due for commissioning in the third quarter of 2016 and will have an ethane loading capacity of 7.6 mta.

Global flowsTraditionally, ethane was used primarily in chemical plants adjacent to where it is processed, not traded in global markets.

The only current seaborne movements of note are the 1 mta shipped from Kårstø on Norway’s west coast to ethylene crackers at Rafnes, also in Norway, and Stenungsund in Sweden. The Statoil-operated Kårstø complex processes gas from the North Sea but output from this source is declining.

Ineos, Borealis and Sabic have stepped in to take advantage of competitively priced US ethane to feed their European

petrochemical complexes. In some cases this has required revamping their ethylene crackers to use ethane rather than naphtha feedstock.

Ineos has signed up for 650,000 tonnes per annum (tpa) of Marcus Hook output for its Rafnes cracker and 315,000 tpa for its Grangemouth plant in Scotland.

Borealis will purchase 365,000 tpa of Marcus Hook ethane for Stenungsund and Sabic Europe has signed up for 1.4 mta of Morgan’s Point output for shipment to its Teesside plant in northeast England.

Another Morgan’s Point customer

Owner Evergas Navigator Gas

Ocean Yield

Jaccar/UEC Reliance

27,500

6

semi-ref

DFDE LSDF LSDF tbc tbc

Evergas Navigator Gas

Hartmann Hartmann tbc

Ineos Borealis** Sabic Oriental Energy

Reliance

semi-ref semi-ref semi-ref fully ref

4 3 5 6

35,000 36,000 86,000 87,000Capacity (m3)

No in series

Yard

Gas carrier type

Propulsion system

Ship operator

Charterer

Sinopacific/Yangzijiang

Jiangnan Sinopacific Sinopacific Samsung

DFDE – dual-fuel diesel-electric. LSDF – low-speed dual-fuel

** Borealis has chartered the first of the four Navigator ships

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40 | SHIPBUILDING

is Reliance of India. EPP has agreed to load 2.3 mta for the longhaul run to the Reliance petrochemical complex at Jamnagar and other ethane crackers in India nominated by the customer.

Excluding these long-term contracts, about 2.6 mta of output from Marcus Hook and Morgan’s Point remains uncommitted.

Fit for purposeThe new ethane trade flows made it necessary to build a new breed of gas carrier. Various designs have emerged to accommodate different voyage lengths and create economies of scale.

Ethane has a vapour pressure of 3.85 MPa at 21.1˚C, a boiling point of -88.5˚C and a specific gravity of 0.54, as opposed to 0.45 for methane. For carriage by sea ethane must be either fully refrigerated, compressed to a high pressure or have both temperature and pressure controlled.

In terms of existing gas carriers, ethane can be transported in semi-pressurised/fully refrigerated (semi-ref) liquefied ethylene gas carriers (LEGCs).

Ineos has been a first mover determining the type of ships it needs for transatlantic shipments, arranging with Evergas to charter eight semi-ref newbuildings of 27,500m3 from two yards in China. Sinopacific delivered the first two ships, JS Ineos Insight and JS Ineos

Ingenuity, in July 2015 and JS Ineos Insight paid its first visit to Marcus Hook five weeks later.

Evergas terms the ships its Dragon-class series. The multipurpose gas carriers can carry LNG as well as LPG and the full range of petrochemical gases. The two Wärtsilä 6L20DF dual-fuel engines on each vessel burn LNG and ethane as well as heavy fuel and marine diesel oil.

Navigator Gas followed Evergas’ lead, ordering four LNG-powered, 35,000m3 ethane/ethylene/LPG carriers in China in April 2014. On delivery in April Navigator Aurora, the first in the series, will enter a 10-year charter to Borealis, transporting ethane from Marcus Hook to Stenungsund.

Simultaneously, Hartmann of Leer in Germany ordered three 36,000m3 ethane carriers to be built in China to its new Ecostar 36K design, partnering with the Norwegian shipowner Ocean Yield. To begin delivering in the second half of 2016, Sabic will use the vessels to ship ethane from Morgan’s Point to its revamped steam cracker on Teesside in the UK.

The Navigator and Hartmann ships are the largest semi-ref ships ever ordered. However, they will not be the largest ethane carriers for long. To realise economies of scale shipping Morgan’s Point cargoes to India, Reliance ordered six fully refrigerated, 87,000m3

very large ethane carriers (VLECs) in South Korea in July 2014.

When delivery of the series commences in late 2016, the vessels will be the largest gas tankers that are not LNG carriers. The new Reliance vessels will be built with the Gaz Transport & Technigaz (GTT) Mark III membrane tank containment system fitted on more than 150 LNG carriers in service, albeit a more robust version to accommodate the denser cargo.

Two months after the Reliance newbuilding contract, Hartmann returned to the fray with an order for its own VLECs. Launching a new joint venture with Evergas parent Jaccar Holdings, United Ethane Carriers (UEC), Hartmann ordered a series of five 85,000m3 vessels in China.

The ships will be built to the EcoStar 85K design, which features IMO Type C pressure vessel cargo tanks. They will be, by a wide margin, the largest semi-ref gas tankers ever built and will serve under a 10-year time charter contract with Oriental Energy (Nanjing), carrying Morgan’s Point ethane to China.

Even as domestic chemical producers increase its use as feedstock, the US could still have up to 19 mta of ethane available for export by the end of the decade. That volume would require approximately 100 ethane carriers; one possible fleet mix would be 50 per cent semi-ref ships and 50 per cent VLECs. LNG

UEC’s very large ethane carriers push the design envelope for semi-ref gas carriers

DELIVERING VALUE THROUGH STRONG PARTNERSHIPS

t: +44 (0)20 7340 4850www.navigatorgas.com

42 | RUNNING HEAD sub

LNG World Shipping | November/December 2015 www.lngworldshipping.com

STEALTHGAS BUILDS ON ITS LEAD IN FULLY PRESSURISED LPG CARRIERS

“We are optimistic about the medium and long-term future for the small-size LPGC sector”

Harry Vafias, CEO, StealthGas


PROFILE | 43

The operator of the world’s largest fleet of small-size, fully pressurised (FP) gas carriers, StealthGas has embarked on an ambitious newbuilding programme to enhance its ability to distribute LPG locally to an ever-increasing

number of end-users. Nine completions over the past year have boosted its in-service

FP fleet to 51 vessels in the 3,500-8,000m3 range.A further eight gas carriers, including four semi-pressurised/fully

refrigerated (semi-ref ) tankers of 22,000m3, are on order for delivery through 2017.

The latter quartet mark a new departure for the fleet which now covers about 20 per cent of the fragmented global market for coastal FP LPG carriers.

The global seaborne trade in LPG is expected to climb from 108 million tonnes (mt) in 2014 to 131mt in 2017, primarily as a result of rising shale gas-based exports from the US Gulf.

The intercontinental delivery of LPG, including from the US, is handled by a rapidly expanding fleet of 80,000m3 very large gas carriers (VLGCs).

Growing globallyStealthGas LPGCs are utilised in coastal distribution, in small parcels, of VLGC cargoes arriving at regional hubs from overseas production sites.

At the moment about 60 per cent of the company’s fleet is to be found in Asia and the Middle East, 30 per cent in Europe and 10 per cent in South America.

The voyage duration of a typical StealthGas vessel is three to five days and, in addition to propane and butane, the ships carry cargoes such as butadiene, isopropane, propylene and vinyl chloride monomer (VCM).

“LPG consumption in the Far East, especially in China, Japan and Korea, has risen markedly in recent years,” reports StealthGas president and chief executive Harry Vafias.

“The use of LPG as domestic fuel is also expanding in a number of developing countries, in tandem with its availability. Growth regions include India and Indonesia as well as numerous parts of Africa and South America.”

The StealthGas FP fleet comprises almost 20 ships of around 3,500m3, over 20 of 5,000m3 and 10 in the 6,300-7,500m3 range.

Most local LPG terminals serviced by the shipowner can only accept vessels with an overall length of up to 100m, and the 3,500 m3 and 5,000m3 ships are ideally suited for such facilities.

The 6,300m3-7,500m3 LPGCs unload their cargoes at depots able to accommodate larger ships.

Quality buildsThe ship length limitations at many facilities and the fact that a sizeable proportion of customers, especially in the Far East, prefer cargoes in smaller parcels will ensure that FP gas carrier sizes remain unchanged in the years ahead.

However, there is room for advances in ship design and StealthGas has been among the industry leaders seeking to improve the commercial and environmental performance of FP gas carriers.

Over the years the company has constructed its vessels in Japanese and South Korean yards on the basis that the quality of the finished product more than offsets any capital cost premiums and longer lead times that may be entailed.

Mr Vafias explains: “We work closely with five shipbuilders in

Japan and two in Korea in an ongoing drive to improve ship designs and hull hydrodynamics, to lower fuel consumption and to reduce both emissions and the overall carbon footprint of the vessel.

“As a notable example, two recently delivered, Korean-built ships of 5,000m3 are not only designed to ice-class 1B but also equipped with prototype chillers. The first to be fitted on FP gas carriers, the chillers effectively make the pair refrigerated as well as pressurised ships.”

The four 22,000m3 ships, being built at Korea’s Hyundai Mipo yard, mark the first concerted move by StealthGas into the semi-ref sector. The ships, also ice class, will be able to carry LPG with an ethane content and will be fitted with exhaust gas scrubbers.

These semi-ref newbuildings will enable the shipowner to offer customers a portfolio of short and medium-haul LPG and petrochemical gas transport solutions and obviate their need to arrange multiple charters.

Ready for better timesIn contrast to the more volatile VLGC sector, where freight rates have been at historic highs over the past year, small FP gas carriers constitute a relatively stable sector where shipping returns show much less variation.

Freight rates for small LPGCs declined over the course of 2014, driven down primarily by falling oil prices and, as a result, sliding LPG product prices.

Rates have remained at the low levels that characterise the bottom of a market cycle in this sector throughout 2015.

“We expected this downturn and that’s why we have solidified the company’s balance sheet,” states Mr Vafias. “Including the newbuildings, the company has US$1.1 billion in assets, about US$350 million of debt, approximately US$100 million in cash and one of the lowest daily operating cost break-evens in the marketplace.

“As a result we can probably sustain the pain for longer than most of our competitors and also make money during the bad times.

“In addition, our conservative vessel-employment strategy means that today 70 per cent of the StealthGas gas carrier fleet is fixed on long-term work through either time charter or bareboat charter arrangements and our pre-contracted revenues through 2022 exceed US$250 million.”

Despite the current soft market in the small-size LPGC sector StealthGas is optimistic for the medium and long-term future, not least due to the growing demand for LPG worldwide and increasing exports from the US and the Middle East.

The fleet make-up also offers encouraging signs.The remaining FP orderbook is relatively small and so far in

2015 only one further newbuilding of this type has been contracted. In addition, because 24 per cent of the small-size LPG fleet is above 20 years of age, the potential for scrapping can only increase in the years ahead.

“The small-size LPG fleet is coming into a fine and quite fragile balance,” concludes Mr Vafias, “and it is imperative that participants in our sector resist the temptation, traditionally offered by the promise of improved returns, to order a slew of new ships.

“Increased scrapping will also help. Charterers have no need to consider ships of 20-25 years and above when there is sufficient modern tonnage available. We sent two of our own older vessels for recycling earlier this year, as much to set an example for the industry as upgrade our own fleet.

“Finally, the other big imponderable for our industry going into 2016 is where oil prices are heading. I’ll leave that to the crystal-ball gazers, if I may.

“As just about everyone attempting to do so has found, predicting future oil prices is a game with no winners.” LPG


US BUILDS TERMINALS TO BOOST LPG EXPORTS

The US became a net exporter of LPG only in 2012 but since then overseas

shipments have skyrocketed. The country exported 14 million tonnes (mt) last year, more than any other country. Propane accounted for 86 per cent of the loadings and butane 14 per cent.

US shale oil and gas are rich in natural gas liquids (NGLs), the primary streams of which are propane and ethane. Thanks to the shale revolution, the country has much more LPG than it can utilise.

Overseas customers have lined up to buy competitively priced US product and a network of worldscale LPG export terminals is being built to dispatch the growing volumes.

Most US terminal

developments to date have been concentrated in Texas. The state has a number of major shale plays and an extensive gas pipeline network and vast salt-cavern storage capacity at Mont Belvieu.

The bulk of the Texas LPG being processed for export is sourced from Mont Belvieu NGL fractionators.

First-moverEnterprise Products Partners (EPP) has taken on the first-mover mantle and is the largest exporter of US LPG. The company has boosted the capacity of its Houston Ship Channel terminal in phases over the past few years to maintain its lead.

In a project completed early this year EPP increased capacity to 8.5 million tonnes per annum (mta), up from 4.5

mta previously. A new expansion phase, due for completion by the end of this year, will lift the capacity to 15.5 mta.

Until recently Targa Resources was the only other operator of a major US LPG export terminal. In 2012 the company shipped overseas from its Galena Park, Texas facility, also on the Houston Ship Channel, about 1mt of propane and butane in small, handy and midsize gas carriers.

A phased expansion project underway that year increased the terminal’s LPG export capacity to 3.4 mta by the third quarter of 2013 and 6.3 mta 12 months later. The upgrade included docking facilities to load very large gas carriers (VLGCs) up to 85,000m3.

Enterprise and Targa were joined by a new US Gulf

LPG exporter in February this year, when Sunoco Logistics loaded the first cargo at its 5.8 mta Mariner South terminal in Nederland, Texas near the Louisiana border.

Sunoco’s partner in Mariner South is Lone Star NGL. The pair have long-term contracts in place with Shell covering the export of eight to 10 cargoes per month from the terminal.

US refiner Phillips 66 is building a 6 mta LPG export facility alongside its Freeport oil terminal in Texas. The company expects to load 12 VLGCs per month once the new facility comes on stream, by the third quarter of 2016.

Occidental Petroleum, the US upstream independent, is also providing an outlet for surplus US LPG but its new Ingleside terminal will export less than

Terminal operators are working overtime to provide the capacity to support the emergence of the US as the world’s largest LPG exporter

44 | TERMINALS


its Texas counterparts. At press time the 2.9 mta terminal was poised to commence operations, with shipments being handled by smaller gas carriers.

An advantage that Sunoco, Phillips and Occidental are promoting for their Texas terminals is their congestion-free location, well away from the busy Houston Ship Channel.

US LPG moving on longhaul routes will become even more competitive next year due to reduced shipping costs. The Panama Canal’s new, enlarged locks will enable VLGCs loaded in Texas to reduce voyage times to Far East destinations to 25 days, down from 44 days on the Cape of Good Hope route.

East coast liftingsUS shale plays are dotted around the country and the Marcellus and Utica deposits in the Pennsylvania and New York state area are among the largest and most prolific.

Sunoco Logistics is the

first to capitalise on the export potential of these resources. It has complemented its Nederland, Texas terminal with a new LPG and ethane export complex, Mariner East, on the Delaware River at Marcus Hook near Philadelphia.

Like EPP’s Houston terminal, Mariner East is a phased project over several years. Mariner East 1’s initial propane export capability came on stream earlier this year and the next tranche – comprising additional propane exports and the ethane terminal – was due to commence operations in the fourth quarter of 2015.

Mariner East 2, also a two-phase affair, will follow Mariner East 1. Mariner East 2 should start to export propane at the end of next year and Sunoco aims to add capacity by mid-2017 through its Mariner East 2 expansion project.

Marcus Hook boasts fully refrigerated tankage for LPG and ethane and five underground NGL storage caverns.

Some 450km to the south in Virginia, DCP Midstream has begun to load butane cargoes for export in recent months at its 235,000 tonnes per annum (tpa) Chesapeake terminal. A converted propane-import terminal, Chesapeake is expected to handle two to three export cargoes per month.

West coastThe US west coast has not as yet figured prominently as an exporter of seaborne LPG cargoes, with only Ferndale in Washington State shipping the occasional summer cargo of butane to Asia and Latin America. However, evolving conditions point to a change.

Now that its traditional US overland pipeline market has evaporated, Canada is looking for new outlets for Alberta’s plentiful NGL resources. Another consideration is the fact that the western shores of North America are only 12 days’ sailing from Asia.

Calgary-based Petrogas Energy purchased the Ferndale terminal from Chevron in 2014 and plans to increase its 900,000 tpa export capability. The target products are Alberta-sourced propane and butane; the target customers, buyers in Asia.

Since the Petrogas acquisition two other firms have announced plans to build LPG export terminals on the US west coast. Sage Midstream is seeking to construct a 1.4 mta installation at Longview, Washington and a project unveiled by Pembina Pipeline calls for a 1.1 mta complex at Portland, Oregon.

Ferndale is connected by rail to Alberta’s LPG collection points, and Sage and Pembina plan to offer similar tank car deliveries by rail.

Once all these US Gulf, east and west coast terminal projects are complete, in 2017, the US will have the capacity to export an estimated 33 mta of LPG, equal to one-third of the product’s current global seaborne trade. LNG

US BUILDS TERMINALS TO BOOST LPG EXPORTS

TERMINALS | 45

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PROFILE | 47

Navigator Gas’ handysize LPGC fleet grows with the marketThe Navigator Gas vessel portfolio is the world’s largest in handysize gas carriers and in ethylene-capable tonnage

Paul Flaherty: maintaining maximum utilisation rates

S even newbuildings completed over the past year have boosted the Navigator Gas fleet of handysize gas carriers to 29

vessels, the world’s largest in this segment. The completions follow the company’s

acquisition of the 11 ships in the AP Møller-Maersk handysize fleet, agreed in November 2012 and finalised through fleet integration during 2013.

The expansion is not yet complete. The remaining Navigator orderbook stands at eight vessels, comprising four handysize ships and four midsize ethane carriers of 37,300m3.

When this newbuilding programme is complete, the Navigator Gas fleet will comprise 33 vessels in the 20,500-22,500m3 size range and the four larger ethane/ethylene carriers.

Although the Navigator complement includes six fully refrigerated gas carriers of 22,500m3, the remaining 31 are built, or are building, to the semi-pressurised/fully refrigerated (semi-ref) specification.

Semi-ref vessels are more flexible than their fully refrigerated counterparts, being able to load and discharge cargoes over a range of temperatures and pressures and thus can serve a much wider range of terminals.

The Navigator semi-ref fleet boasts 14 sophisticated vessels that can transport ethylene and ethane as well as LPG and the usual range of petrochemical gases. This vessel portfolio includes the 37,300m3 ethane carriers under construction and is among the world’s largest ethylene fleets.

Market driveNavigator Gas is building its fleet to transport the growing volumes of LPG and petrochemical gases coming onto the market, much of it from the rising output of shale gas in the US Gulf area.

The low price of US shale gas and its natural gas liquid (NGL) byproducts is driving demand for the cargoes that Navigator carries on behalf of its customers at both the seller and buyer ends of the supply chain.

International energy companies, state-owned utilities and commodity traders are the principal users of the shipowner’s LPG transport services,

whereas petrochemical gases are delivered to chemical-industry clients, mostly as primary or intermediate feedstock.

The company’s ships are also capable of carrying ammonia, which is mainly utilised to manufacture fertiliser.

Handysize gas carriers, defined as those falling within the 15,000m3-24,999m3 size range, are utilised on medium- and long-haul routes that may be uneconomical for smaller vessels and can call at ports unable to accommodate larger, fully refrigerated ships.

Semi-ref gas carriers are also able to serve on routes where there are no fully refrigerated terminals.

Navigator ships account for approximately 26 per cent of the cargo-carrying capacity of this gas ship segment. Inge Steensland, the Oslo-headquartered shipbroker specialising in gas and chemical shipping, puts the global, in-service, handysize gas carrier fleet at 95 vessels, plus 33 on order.

“The ability of our flexible vessels to switch between pressurised and refrigerated LPG, petrochemical gas and ammonia cargoes on intercontinental routes enables us to make use of backhaul and triangulation opportunities to maximise our laden voyages,” says Navigator Gas director of fleet and technical operations Paul Flaherty. “Such arrangements benefit both us and our customers.

“Typical voyages for us when carrying petrochemical gases are longer in duration than those involving LPG transport as our ships are amongst the world’s largest able to carry such cargoes. Key petrochemical routes, for example, are from the Mediterranean and North West Europe to South Korea, China and Southeast Asia.”

Market entryNavigator Gas was established as an independent owner of gas carriers in 1997 and commenced operations in earnest in 2000 on taking delivery of five ethylene-capable semi-ref carriers, each with four bilobe IMO Type C cargo tanks, from Jiangnan Shipyard in China.

These 22,000m3 vessels were the world’s


48 | PROFILE

largest ethylene-capable gas carriers until the delivery this summer of Evergas’ first 27,500m3 Dragon-class ship.

One of the original five ships, Navigator Saturn, set a record in 2012 when it discharged a 12,145-tonne shipment, the biggest-ever ethylene cargo.

The shipowner has remained closely involved with Jiangnan since placing that initial contract, to the extent that all the ethylene-capable vessels in the fleet have been, or will be, built there. The most recently delivered ship, the 21,000m3 Navigator Umbrio, is profiled on page 52.

The four 37,300m3, semi-ref ethane carriers, which the yard will complete in 2016, have been designed to handle new, large-scale US exports of ethane. Among other distinctive features, the vessels will be LNG-powered, fitted with dual-fuel propulsion systems.

Full utilisationAt the end of 2014 the average age of the vessels in the Navigator Gas fleet was 6.8 years. Last year the ships delivered an aggregate 6.3 million tonnes of LPG, petrochemical gases and ammonia and made 1,288 port calls, a 46 per cent jump in the number of dockings in 2013.

Navigator Gas ships also participated in 378

ship-to-ship cargo transfer operations in 2014, primarily receiving the liquefied gases from larger, fully refrigerated ships for delivery to shallow-draft ports.

Last year’s financial performance mirrored the rise in traffic and a steady increase in time charter equivalent (TCE) earnings in the handysize semi-ref sector since 2010. In 2014 vessels in the Navigator fleet logged an average daily TCE rate of US$30,000.

Last year the company recorded earnings before interest, tax, depreciation and amortisation (EBITDA) of US$161.3m, 51 per cent ahead of 2013, and a net income of US$84.5m, a 106 per cent leap.

“Despite the rapid growth in our complement of active ships, we have been able to maintain the overall fleet utilisation rate at around the 97 per cent mark over the past 10 years,” adds Mr Flaherty.

“This achievement owes much to the quality and competence of our staff ashore and afloat, our ability to utilise vessel flexibility to the fullest extent and the planned, phased-in introduction of our newbuildings.

“Our chartering strategy is to combine a base of time charters and contracts of affreightment (COAs) with voyage charters. Of our at-sea fleet as of 31 September 2015, 21 were employed under time charters while eight were engaged in the spot market.” LNG

WE HAVE MAINTAINED THE OVERALL FLEET UTILISATION RATE AT AROUND 97 PER CENT OVER THE PAST 10 YEARS – Paul Flaherty

Hyundai Mipo delivered 20,500m3 semi-ref LPG carrier Navigator Capricorn in 2008

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LPG World Shipping Supplement 2015 2016-190x130mm

Dienstag, 10. November 2015 16:42:32


50 | SHIP PROFILE

Umbrio becomes Navigator Gas’ 10th ethylene carrier

The completion of Navigator Umbrio cements a long-term relationship between Navigator Gas, Jiangnan Shipyard and TGE Marine

Ship profile, Navigator UmbrioShip type: Type IIG gas carrierShipbuilder/year built: Jiangnan Shipyard (2015)Shipowner/operator: Navigator GasTechnical manager: Northern Marine ManagementFlag: LiberiaYear built: 2015Class society: DNV GLContainment system (IMO type): bilobe, independent Type CNumber of cargo grades: 2 + 1Intended sphere of operations: worldwide

MAIN PARTICULARSLOA x B x d (m): 159.9 x 24.8 x 9.4Max tank pressure IMO (barg/kPa): 5.3/630Min cargo temperature (˚C): -104Max cargo density (kg/m3): 972Propulsion system power output (kW/rpm): 7,170/ 114Service speed (knots): 16

MAIN SUPPLIERSMain engine: MAN B&W 6S50ME-C8.2 (through Hudong)Diesel genset: MAN Augsburg (through ZJMD)Cargo pumps: Wärtsilä Svanehøj deepwells (2/tank)Reliquefaction plant: TGE cascadeCargo heater/vaporiser: TGECargo compressor: BurckhardtCargo level gauges: Henri System HollandNitrogen generator: Cirmac PSA plantCargo control system: Flemming/SiemensAutomation: L3/SAMPropeller: Dalian DMD

Delivered in April, Navigator Umbrio is the last in a series of five 21,000m3 ethylene carriers built by Jiangnan Shipyard in

China for Navigator Gas for approximately US$50 million per vessel. Keel-laying to delivery took 11 months.

The completion of the semi-pressurised/fully refrigerated (semi-ref ) gas carrier boosted the in-service Navigator fleet to 28 ships, 12 built at the Chinese yard.

The shipowner has remained closely involved with Jiangnan since the shipbuilder constructed its first vessels, a series of five 22,000m3 ethylene carriers, in 2000. Jiangnan’s current orderbook for Navigator Gas comprises two 22,000m3 semi-ref LPG carriers and four midsize, semi-ref ethane carriers of 37,300m3 each.

The cargo tanks and cargo-handling plant on Navigator Umbrio and all the ships Jiangnan has built for Navigator Gas were supplied by TGE Marine Gas Engineering of Bonn in Germany.

The Chinese yard and TGE Marine have

enjoyed a close working relationship for almost 25 years. Jiangnan has the longest track record of gas carrier construction in China and TGE has supplied the cargo systems for more than 70 per cent of the ethylene carriers built worldwide over the past two decades.

Built for worldwide trading, Navigator Umbrio has four bilobe, IMO Type C, pressure vessel cargo tanks. The vessel can transport ethylene and ethane as well as LPG, ammonia and several other petrochemical gas cargoes.

Navigator Umbrio can carry three fully segregated cargo grades. Two grades can be cooled and kept fully segregated and the third grade will be carried uncooled, separated in tank No 3.

The ship also has a 200m3 deck tank for use in cargo change-of-grade operations. When carrying ethylene as a cooldown parcel, the deck tank can be maintained in a refrigerated condition using one of the ship’s cascade reliquefaction systems.

This deck tank feature is new to the handysize segment and Navigator Gas aims to utilise it to optimise voyage triangulation opportunities when engaged in the ethylene trade without having to gas-free the ship completely.

The vessel’s MAN B&W main engine, built under licence by Hudong, is of the electronically controlled ME type. The two-stroke engine and the ship’s general design are configured to enable conversion in future to use LNG or another suitable propulsion system fuel. LNG

Navigator Umbrio's deck tank makes the most of triangulation opportunities

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