Asia’s First LNG Tug Delivered

By MarEx 2015-07-03 19:41:14

China National Offshore Oil Corporation (CNOOC) has taken delivery of Asia’s first tugboat Hai Yang Shi You 525, designed to operate solely on LNG as ship’s fuel.

Hai Yang Shi You 525, the first of two tugs built by the Zhenjiang shipyard for CNOOC, features a propulsion package based on twin Rolls-Royce Bergen C26:33L9PG engines and a pair of Rolls-Royce US 205 CP azimuth thrusters to ensure the tugs have rapid maneuvering and strong bollard pull capabilities.

A successful sea trial has proven an extra gain for both ship speed and bollard pull.

Richard Wang, Rolls-Royce, Senior Vice President – Commercial Marine, said: “We are proud to be powering Asia’s first gas-powered tug so shortly after delivering Borgøy, the world’s first LNG-powered tug, to Norwegian owner Buksèr og Berging.

“This order marks a new era for tugboat propulsion technology in China. As its shipbuilding industry shifts focus from standard designs to more sophisticated tonnage, more owners and operators will see the benefit of using cleaner, more efficient fuelling solutions for their vessels.”

John Knudsen, Rolls-Royce, President – Commercial Marine, said: “We congratulate CNOOC and the Zhenjiang shipyard on the completion of Asia’s first gas-powered tug. China is one of the world’s largest importers of natural gas and already has the LNG infrastructure in place. This is a pioneering project in Asia and its success has been dependent on the excellent cooperation between CNOOC, Shanghai Bestway Engineering, Zhenjiang Shipyard and Rolls-Royce.”

The decision to operate on LNG follows the Chinese government’s 2011 plan to strengthen its maritime base with the manufacture of high-end, ecologically-efficient ships and technology.

The Bergen C26:33 gas engines reduce CO2 emissions by 25 percent and NOx emissions by up to 90 percent. Oxides of sulfur and particulate are also removed, minimizing emissions along coasts and inland waterways.

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Nippon Foundation’s Sasakawa Receives IMO Award

By MarEx 2015-07-03 19:18:21

The Council of the IMO has decided to award the prestigious International Maritime Prize for 2014 to Yohei Sasakawa, Chairman of the Nippon Foundation, for his contribution to the work of IMO over many years and, in particular, his personal commitment to supporting the development of future maritime leaders and his contribution to the enhancement of safety and security in vital shipping lanes.

In particular, the Council noted Sasakawa’s long-standing dedication to maritime education and training through the initiatives of the Nippon Foundation and its unstinting support to the World Maritime University (WMU), based in Malmö, Sweden and the IMO International Maritime Law Institute (IMLI) in Malta.

Sasakawa was born in Tokyo, Japan, and joined the Nippon Foundation as a trustee in 1981. He served as President from 1989 and became Chairman on July 1, 2005. The Nippon Foundation is a private, non-profit foundation whose mission, through social innovation, is to achieve a society where all people support one another. Its overall objectives include assistance for humanitarian activities, both in Japan and overseas, and global maritime development.

In nominating his candidature for the International Maritime Prize, the Government of Japan drew attention to Sasakawa’s leadership of the Nippon Foundation’s efforts to improve the quality of maritime experts around the world by supporting the WMU. Since 1987, the “WMU Sasakawa Fellowship,” sponsored by the Nippon Foundation, has offered a two-year Master’s degree program. Sasakawa has personally devoted himself to establishing the Sasakawa Fellows’ network, now numbering 543 people from 64 countries, to facilitate international maritime cooperation.

Sasakawa has also worked with other international institutions, including IMLI and the International Tribunal for the Law of the Sea. His dedicated efforts, leading to the development of ocean-related capacity-building programs around the world, have produced more than 1,000 graduates from 128 countries.

In the field of maritime safety and security, Sasakawa has been instrumental in supporting the establishment of the Cooperative Mechanism in the Straits of Malacca and Singapore, through which governments and industry work together to protect the environment and enhance navigational safety.

Sasakawa has also facilitated port State control through various forms of support from the Nippon Foundation, including funding to establish the Memorandum of Understanding on Port State Control in the Asia-Pacific Region (Tokyo MoU). This support has helped strengthen PSC activities in the region, enhancing the effective implementation of IMO instruments. Sasakawa has also led the Nippon Foundation’s support for coastguard activities, including an annual regional meeting for heads of Asian coast guard agencies and a training program for prospective Asian coast guard leaders.

The Nippon Foundation’s support for research and technological development projects on maritime safety and marine environment protection have been led by Sasakawa. Providing research and development project outcomes as common property for the industry has helped towards the development of standards on emissions from ships. Research on the Northern Sea route, in collaboration with institutions in Norway and the Russian Federation, has been shared with the international maritime community, thereby directly contributing to the development and subsequent adoption by IMO of the International Code for Ships Operating in Polar Waters (Polar Code).

The International Maritime Prize is awarded annually by IMO to the individual or organization judged to have made the most significant contribution to the work and objectives of the Organization. It consists of a sculpture in the form of a dolphin and includes a financial award, upon submission of a paper written on a subject relevant to IMO.

The prize will be presented to Sasakawa at a special ceremony, to be held later in the year.

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Tankers Lining Up in Singapore

By Reuters 2015-07-03 18:50:04

Buyers trying to load record fuel oil volumes traded last month in Singapore are congesting the port’s oil terminals, while land tanks are nearly full and tens of millions of barrels of marine fuel are being held in ships, traders and shipbrokers said.

Almost six million tons, or 39 million barrels, of fuel oil were traded in June in the world’s largest market for shipping fuel during an end-of-day pricing process, pushing up rates for Aframax vessels to near seven-year highs as buyers tried to find tankers to load the cargoes.

Complaints of loading delays resulted in at least two companies being temporarily barred from oil pricing agency Platts’ daily market-on-close price assessment process, traders said.

Platts – which declined to comment – periodically bans companies from its pricing process for trading behavior, financial concerns or non-fulfillment of contracts.

“There are loads of delays in Singapore and many vessels are loaded with fuel oil, and I believe some of them have not found a home,” a Singapore-based shipbroker said.

At least 28 tankers have been hired for short-term charter by various traders, including Glencore’s shipping arm ST Shipping and Petrochina’s trading arm Chinaoil, possibly to store the excess oil, shipbrokers said.

One broker estimated that another 10-18 tankers are loaded with fuel oil unable to find buyers. Some 8-12 cheaper clean tankers have also been chartered to load fuel oil instead, and with so many cargoes changing hands, the congestion and shipping tightness are only expected to ease later in July, traders said.

“Oil bought … in June is yet to be fully disposed and now the buyers’ vessels are looking to run late for loading,” a Singapore-based fuel oil trader said.

The unprecedented trading in June was sparked in part by the Middle Eastern summer, which means more local demand for fuel oil to generate electricity for air conditioners, fewer exports of the product and higher prices in Asia.

Strong refining margins also spurred U.S. and European refiners to ramp up output, pushing excess fuel oil to Asia and triggering a stock-build.

Singapore’s fuel oil stocks surged to a record of over 27 million barrels in June, before easing to nearly 25 million barrels in the week to July 1, data from International Enterprise showed.

Fuel oil buyers in June were mainly commodity merchants Glencore and Mercuria as well as PetroChina, while the main sellers included Russia’s Lukoil, Total and merchant Vitol, according to a report by Platts, a unit of McGraw Hill Financial.

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Merchant Mariners Ensure Survival of Newly-founded U.S.

By MarEx 2015-07-03 12:06:00

Two hundred and thirty nine years ago the American colonies adopted the Declaration of Independence, establishing U.S. sovereignty. However, in 1776 the Continental Navy was under a year old and only consisted of 31 vessels. These ships were capable of using around 20 guns at most, which hardly proved a formidable match for the most powerful seafaring nation on the planet.

In order to combat the British, the Continental Congress, authorized private commercial ships to act on their behalf in early 1776. The nearly 1,700 merchant ships known as privateers, became a fundamental force in ensuring the survival of the young nation.

Following the first shots of the American Revolution at Lexington and Concord, commercial vessels began carrying canons and additional weaponry to defend against the British threat. The first sea engagement of the Revolution was carried out by merchant mariners. On June 12, 1775, near the Gulf of Maine, patriots crashed into the British armed schooner Margaretta and engaged in hand to hand combat. The British crew was disheartened when their captain was mortally wounded and lost the one hour long battle. Twenty five of the combatants were killed or wounded. The victors claimed “four double fortified three pounders and fourteen swivels” and some smaller guns.

Privateers were hardly distinguishable from pirates when British vessels encountered them on the open seas. Operating under official documents known as Letters of Marque and Reprisal, privateers pillaged British ships, dividing any loot they retrieved between the ship’s owner and the government. The merchant ships focused their attacks British commercial vessels that were either unarmed or only lightly armed. They would engage in physical confrontations often killing if necessary. Pirates at the time could be hung for their offenses, however privateers were considered prisoners of war since they were officially recognized by the American government.

Privateers proved indispensable in maintaining munition supply chains. By 1777, the privateers and merchantmen brought in over 2 million pounds of gunpowder and saltpeter for the war effort.

Due to extensive blockades during the revolution, privateering often proved more lucrative than commercial trade. A mariner on board a privateering vessel could earn as much as $1,000 for one voyage, while average pay at the time was $9 per month.

The Malborough was one of the most successful privateers with over 28 hostile ship captures to its name. Also, notable at the time was Captain Jonathan Haraden of Massachusetts who was considered one of the best sea-fighters. He gained fame by successfully taking on three armed British ships at once.

When captured by the British Navy, these American mariners were given a choice: join the British Navy or prison. The conditions of captivity aboard the prison ships were inhuman. In The Memoirs of Commodore Barney, a young Continental Army soldier describes conditions of imprisonment aboard these British vessels. For fifty-three days Barney and his fellow Americans were kept in three foot high boxes with minimal food and clean water. An estimated 11,000 merchant seamen died from disease and malnutrition after being captured by the British.

Merchant mariners played a pivotal role in upholding the sovereignty of the United States in its early years. Over the course of the American Revolution privateers captured approximately 1,300 British ships and took around 12,000 prisoners. They dealt serious blows to British commercial shipping with estimated damages ranging from $300 million to $1 billion by today’s dollars.

More than 200 years later the United States owes a debt of gratitude to the 55,000 privateer patriots who fought and gave their lives to uphold American independence.

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New Record Year in Dry Bulk Demolition?

By MarEx 2015-07-03 08:51:08

The monthly average for the first six months in 2015 is 3.3m DWT. In 2014 the first half year averaged at 1.33m DWT per month.

April 2015 saw 5.36 million DWT being retired from active service, which was the highest on record ever for a single month. The record came on the back of continued poor earnings and deteriorating market conditions in dry bulk shipping, evidenced by the Baltic Dry Index (BDI) staying below 600 from 2 February to 13 May.

In 2012, which is the largest demolition year on record with 33.4m DWT leaving the fleet, the monthly average was 2.79m DWT. So could we be heading for an even higher level in 2015? The preliminary amount of dry bulk tonnage being demolished during the first half of 2015 is 20 million DWT. During the first half of 2012 we saw 18 million DWT leaving the fleet.

Chief Shipping Analyst at BIMCO, Peter Sand, Says: “As the year progresses, BIMCO expects the demand side to get stronger in connecting with rising volumes. This should positively impact the market conditions but at the same time also limit the demolition activity.

In line with our recent adjustment of expectations for demolition activity in 2015, we do not see a new record year in spite of the strong start of the year.”

In the BIMCO news piece Busiest Capesize Demolition Market Ever from 7 May a total of 52 Capesizes had been demolished. Today that number has increased to 68. The record from 2012 where 70 Capesizes were demolished during the full year will soon fall.

The Handysize segment was the busiest sub-segment in all of the six months when you measure activity by number of ships being recycled. A total 104 Handysizes have left the fleet for good so far in 2015. The total number of dry bulkers being demolished now stand at 262 ships for the year.

It remains to be seen if Handymax demolition activity will remain subdued. The fleet growth is the largest amongst the dry bulk-segments as newbuilt Supramaxes keep coming from the shipyards. However, earnings have out-performed all the other dry-bulk segments from mid-February to end of June, leaving little reason for engaging more often with the blow torch for Handymax owners.

“The relatively low level of Handymax scrapping is a testament to a versatile sub-segment which is able to deliver what the market wants even when the overall demand side is losing ground. Fleet growth for Handymax/Supramax segments stand at 3.5% since the turn of the year”, adds Peter Sand.

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Tanker Arrivals Create Volatility in Oil Market

By Reuters 2015-07-03 08:37:37

U.S. crude stocks unexpectedly rose by almost 2.4 million barrels last week, breaking a run of eight consecutive weekly declines and sending oil prices sharply lower.

But did the market overreact when the stock numbers were released on Wednesday – misinterpreting normal week-to-week variability in the data as a fundamental shift in the balance between supply and demand?

Tanker arrivals create quite a bit of “noise” in the weekly inventory data which can easily be confused with shifts in the supply-demand balance over short periods.

Reported crude stockpiles are driven by three factors: domestic crude production, crude imports, and refinery runs. Domestic output is fairly constant week to week, but imports and runs are highly variable.

In 2014, U.S. refineries processed an average of 15.8 million barrels per day (bpd).

Domestic crude production was around 8.7 million bpd in 2014 and the country imported around 7.3 million bpd of crude, according to the Energy Information Administration.

Almost 3 million bpd of imported oil arrived by pipeline or train from Canada, while most of the remaining 4.5 million bpd from other destinations came by tanker.

The typical very large crude carrier (VLCC) or supertanker employed in long-distance voyages carries around 2 million barrels of oil. So, the United States receives the equivalent of two to three VLCC cargoes per day or around 15-16 per week. Imported crude is reported only once it has been cleared through U.S. Customs.

But there is significant variability around these daily and weekly averages. The timing of individual tanker arrivals and completion of customs formalities therefore has a major impact on reported imports for a given week.

Charts one to three, which show weekly imports of crude between 1983 and 2015, make the week-to-week variability apparent.

From one week to the next, imports can vary by up to 2.5 million bpd or as much as 15-20 million barrels per week.

The one-week change in imports has a standard deviation of almost 750,000 bpd or about 5.2 million barrels per week.

Fluctuations in imports, as much as refinery runs, have a major impact on the one-week reported change in stock levels.

This is what seems to explain the sudden rise in inventories in the week to June 26.

Crude stocks rose by 2.4 million barrels, compared with a decline of 5.0 million barrels the previous week, and an average decline of 3.5 million barrels over the prior eight weeks.

Refinery throughput was almost exactly unchanged from the previous week at a near-record 16.5 million bpd.

The entire stock change seems to have come from a big boost in imports, which rose by almost 750,000 bpd or 5.2 million barrels per week.

The increase in imports, and reported turnaround in stocks from a 5-million-barrel drawdown to a build of 2.4 million, was well within the normal variability for both the import series and reported inventories.

While it could signal an increasing surplus of supply over demand, it may simply be due to the timing of tanker arrivals, and there is no way to distinguish between the two at a one-week level.

The market’s swift response – sending U.S. oil prices down more than $1.50 a barrel to close at the lowest level for more than two months – therefore looks like an overreaction.

By John Kemp

The opinions expressed herein are the author’s and not necessarily those of The Maritime Executive.

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