Russia Hones in on Arctic Shipping

By Kathryn Stone 2015-06-09 13:47:29

Russia unveiled a new plan this week aimed at dramatically increasing the country’s shipping presence in the North Sea.

Russian Prime Minister Dmitry Medvedev signed a comprehensive project that seeks to increase the amount of cargo passing through the North Sea Route (NSR) each year.

“This is the shortest route connecting Europe with the Far East, with the Asia-Pacific region, with the western part of North America,” Medvedev commented.

The northern shipping route reduces the shipping distance between Asia and Europe by about one-third, compared to the Southern route. Additionally, North Sea shipping is becoming more economically viable each year. This is due in large part to changing climatic conditions that extend the number of days a ship can operate in the Arctic.

The Prime Minister said that the use of the NSR has been so-so in recent years and that it is now necessary to increase transportation volumes beyond Soviet-era highs. Medvedev also claimed the plan would develop Russian transportation advantages and open a crucial path for mineral resources in the Arctic and throughout Asia.

Currently, the Russian government issues 600 annual permits to transport cargo in the Arctic region, and the volume of goods delivered is around 4 million tons. According to Russian figures, the volume of cargo has the potential to increase by 20 times over the course of the 15-year plan.

Medvedev stressed the need to establish of effective protocols to protect the marine environment, including eliminating risks from oil spills or other pollutants.

Work has already begun on setting up emergency preparedness centers in the Arctic and Russia has set its sights on building larger, more powerful icebreakers specifically for the region.

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The Evolution of the Oil Weapon

By MarEx 2015-06-09 20:11:56

By John Manfreda

In the age of derivatives, swaps, and electronic money transfers, a new form of warfare has emerged: financial warfare.

Recently, the U.S. passed sanctions on countries such as Syria, Venezuela, and North Korea, but the majority of energy related sanctions passed have been targeted at Iran and Russia.

An estimated 68 percent of Russia’s government revenue is derived from oil and gas exports, while 80 percent of Iran’s revenue comes from oil exports. That presents a very large target for the use of financial weapons.

To understand why financial warfare is now so commonplace, one must understand how it came into existence and what has been achieved taking such an approach.

The oil weapon first came into existence in 1965, when Egypt nationalized the Suez Canal. What resulted from this was a declaration of war by France, England and Israel. As a way to counter this invasion, Saudi Arabia decided to ban exports to England and France. This embargo turned out to have minimal economic impact, as the U.S. increased shipments to Europe and international oil companies redirected shipments to England and France.

The next embargo imposed was in 1967, when Arab states imposed an embargo on the U.S., Britain and West Germany. This embargo was enacted after a rumor surfaced that Britain and the U.S. were providing air cover for Israeli planes after Israel bombed Egyptian military airports in the 1967 war. This embargo failed, due to the fact that Arab oil revenues declined. This embargo also wasn’t enforced properly, as Western countries were still receiving oil from Arab countries.

But the most famous incident came in 1973. This was when OPEC issued a new embargo on countries that provided military aid to Israel in the Yom Kippur war. This proved to have a greater economic impact on Europe and the U.S., because Saudi Arabia displaced Texas as the world’s swing producer.

The 1973 embargo led to an increase in domestic fuel prices, shortages of gasoline and the rationing of gasoline fuel. This embargo changed the dynamics of U.S. foreign policy.

After the 1973 embargo, Richard Nixon sent his secretary of state Henry Kissinger to Saudi Arabia with a proposed deal to ensure that an embargo such as this would never happen to the U.S. again.

After some revisions, in 1976, the House of Saud and Henry Kissinger finally reached an agreement. The agreement did the following things according to Marin Katusa’s 2014 book The Colder War. The Saudi’s agreed to:

1. Give the U.S. as much oil as it desired, for general consumption and national security measures thus increasing or decreasing oil production to the benefit of the U.S.

2. To only sell oil for U.S. dollars and to reinvest profits in U.S. treasury securities.

In return, the U.S. guaranteed:

1. The protection of the Saudi Kingdom from rival Arab countries.

2. The protection of Saudi oil fields.

3. Protection from an Israeli invasion.

The Saudi’s agreed to this because, even though they had vast amounts of oil, they didn’t possess an army which could protect them from its surrounding enemies which included Iran, Iraq and Israel.

This deal not only secured a steady supply of oil to the U.S., but allowed the U.S. to expand its global footprint.

How the U.S. and the Saudi’s colluded to topple the USSR

In 1982, a secret declaration for economic war with The Soviet Union was signed. This declaration included:

• No new contracts to buy Soviet natural gas

• Accelerate development of an alternate supply to Soviet gas for parts of Europe

• A plan to substantially raise interest rates on credit to the USSR

• The requirement of higher down payments and shorter maturities on Russian bonds.

This declaration made the USSR’s debt load much more burdensome, but what delivered the final blow to the USSR was the doubling of oil production from Saudi Arabia in 1986. This pushed oil prices down to roughly $10 per barrel thus vastly decreasing the USSR’s government revenue. This declaration combined with low oil prices, according to James Norman, author of the 2008 book, The Oil Card is what led to the collapse of the USSR.

Today, the international financial system is much more sophisticated. Still, using financial sanctions with the intention of creating a de facto embargo on oil is a widespread practice today – just look at the cases of Iran and Russia. – MarEx

Source: Oilprice.com

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

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Åsgard Subsea Gas Compression Installation Commences

By Wendy Laursen 2015-06-09 20:53:13

The installation of the subsea gas compression system has commenced on the Statoil-operated Åsgard field in the Norwegian Sea. The technology marks the beginning of a new era in offshore production technology.

The compression system, built by Aker Solutions, is being installed at a depth of 300 meters and will generate an extra 282 million barrels from the Åsgard field, extending its life by 20 years.

This functionality brings the industry a step closer to having a fully-functioning production and processing system on the seafloor. Gas compressors have already been installed on platforms to maintain output as reservoir pressures drop over time. Placing them on the seabed and near wellheads improves recovery rates and reduces capital and operating costs. Subsea compression also leaves a smaller environmental footprint and is safer to operate than a platform, says Aker Solutions head of technology, Hervé Valla. “The Åsgard project is an industrial game-changer that has the potential to significantly impact the subsea production market.”

Compression provides the driving force necessary to ensure a high gas flow and level of extraction and can contribute to significant improvements both in the level of extraction and operational life of a number of gas fields. Subsea processing, and gas compression in particular, is an important technology for developing fields in deep water and in exposed areas, says Statoil.

A Special Installation

The Åsgard project will see two 11.5MW subsea compressors installed in a 74 x 44 x 20m subsea station weighing around 4,800 tons. A total of 22 modules will be installed and connected to make up two identical compressor trains weighing 1,500 tons each.

The installation work is being carried out by the North Sea Giant, which was rebuilt for the purpose. The modules vary in size, and the smallest are being installed via the vessel’s moonpool. Modules with a maximum weight of up to 70 tons can be installed in this way. However, several of the modules are too large for installation via the moon pool, and the ship’s crane system has been modified to incorporate a so-called special handling system.

This lifting system is designed to carry a load of up to 420 tons and can operate in up to nine-meter high waves. Each module is lowered into the sea via a crane and guided into place with a ROV and cables.

“This crane system makes the installation work safer and more efficient. To ensure quality at every stage of the process, all operational crew have practiced the operations in a specially designed simulator. We have also performed a number of sea trials prior to installation,” says project director Torstein Vinterstø.

The installation sequence has been carefully planned so that start-up work can be carried out on the first compressor train while work to install modules on train two continues.

Åsgard Gas

Åsgard ranks among the largest developments on the Norwegian continental shelf, including a total of 52 wells drilled through 16 seabed templates. Gas compression on the seabed will increase extraction from the Mikkel and Midgard reservoirs in the Åsgard field outside Trøndelag.

Gas from Åsgard is piped to the Kårstø processing complex, north of Stavanger. The heavier components, such as ethane, propane, butane and naphtha are separated out at Kårstø. The dry gas is piped to continental Europe. Åsgard supplies about 11 billion cubic meters of gas annually to European customers.

Statoil Looking to Innovate Further

Statoil is leading the industry in the deployment of subsea equipment. Statoil CEO Eldar Sætre recently stated that over the last ten years, the cost of subsea developments has increased by 250 percent. According to analysts Douglas-Westwood, subsea spending will continue to rise, but Sætre has plans to deal with that.

Sætre says that the rule has been that every operator- and almost every project – has tailor made their own solutions to their seemingly unique challenges. “Increased standardization could become a game changer. We think of it as putting LEGO blocks on the seabed, and we are working together with our suppliers to achieve this mission.”

As yet Douglas-Westwood (DW) forecasts do not include subsea processing equipment hardware, but it is viewed as a growing trend that will be vital to enable long-term production from a number of fields. “At the moment however people are waiting to see what happens with Åsgard before going forward,” says Ben Wilby, author of DW’s report World Subsea Hardware Market Forecast 2015-2019.

Wilby says that global subsea hardware Capex will total $145 billion between 2015 and 2019, representing growth of more than 27 percent compared with the preceding five-year period.

Meanwhile Sætre calls for fundamental change, embedded into a more sustainable performance culture to help the industry manage development costs. “Standardization, simplification and industrialization. Not yet words that are immediately associated with our industry. But the potential is large in many areas.”

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Game Changer: Cuba’s Mariel Port

By MarEx 2015-06-09 21:27:32

By Milton Vescovacci

Twenty eight miles west of Havana in the northern part of Cuba is one of Cuba’s most promising projects – the Mariel Port and the new Mariel Special Development Zone. With the broadening of the Panama Canal and the new Nicaraguan Canal expected in 2019, the Port of Mariel is strategically located to receive super post-Panamax vessels and their containerized and non-containerized cargo destined for the Caribbean, U.S., South America and Europe. This could be a game changer for Cuba as the Port of Mariel will try to capture more of the high seas traffic and lucrative cargo handling activities away from its nearby competitors.

Quick Facts:

• Central location near 32 important ports in the Americas

• Dredged to 59 feet (18m)

• Terminal Operator is PSA International

• Opened in 1/27/2014

• Initial annual capacity: up to one million TEU (expected to reach three million TEU)

Plans for the Port of Mariel include a new modern container terminal, general cargo, bulk and refrigerated handling and storage facilities and the Mariel Special Development Zone (MSDZ), one of the biggest construction projects undertaken in decades in Cuba, funded in part from nearly $1 billion pledged by Brazil.

The MSDZ is not a free trade zone but a special development zone for manufacturing and assembly in key economic sectors important to Cuba (such as biotech, pharma, oil and renewable energy, agro-food, packaging and bottling, construction materials, high tech, telecom, logistics and warehousing, tourism and real estate). The initial area of the MSDZ (Sector A) will comprise 4,581 hectares around the Port of Mariel, and will be connected to Havana and other towns by rail, roads and air.

Decree Law No. 313 and its supplementary rules (Law 313) contain the legal framework for the MSDZ. The Cuban government hopes to attract foreign investment to the MSDZ through incentives provided under the Law 313, such as:

(1) corporate tax exemption for the first 10 years and then the tax is 12 percent (if exemption not extended),

(2) tax exemption for reinvested profits and labor force tax,

(3) tax exemption on sales and services and then reduced to one percent,

(4) no customs duties on capital equipment imported for investment,

(5) customs duties on raw materials at established tariffs is refunded upon export of finished goods,

(6) no tax on exports of finished goods and benefit from most favored nation status on exports with other trade treaty countries,

(7) personal income tax of 15 percent on non-permanent residents and zero percent on foreign natural persons,

(8) suit to build facilities with utilities on a standard lot of four hectares,

(9) no territorial contribution, and

(10) centralized MSDZ office to secure approvals of foreign investment and licensing, permits and authorizations expeditiously from the Cuban ministries with jurisdiction over related business activities.

Thus far, only three proposals of an estimated 300 investment proposals have been approved. If their expectations are correct, the new Port of Mariel and the MSDZ could be a game changer for Cuba’s economy.

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Costa Rica Seeks Answers on Nicaragua Canal

By MarEx 2015-06-09 15:26:00

Costa Rica is looking for answers about the environmental impact of Nicaragua’s Grand Canal project, which is intended to rival the Panama Canal.

The $50 billion canal construction plan entails dredging Lake Nicaragua to 30m (98.5 feet) almost twice its current depth. This could cause sedimentation in the San Juan River, whose southern bank is Costa Rican territory. However, the Costa Rican government claims it has been left in the dark about environmental implications for its country.

“This is why we asked Nicaragua to tell us how they were planning to prevent the sedimentation of the San Juan River. We have not received that information,” President Luis Guillermo Solís Rivera said.

“The only thing we want is information on possible environmental impacts on Costa Rica, and other than that we wish them well,” Solis told a news conference in Geneva.

Nicaragua announced the start of work on the project in December, saying the proposed 172-mile (278-km) canal, due to be operational by around 2020, would raise annual economic growth to more than 10 percent. It would also give China a major foothold in Central America, a region that historically has been dominate by the United States.

Construction of the new waterway will be run by Hong Kong-based HK Nicaragua Canal Development Investment Co Ltd (HKND Group), which is controlled by Wang Jing, a Chinese telecom mogul.

“We understand that this is not a canal that is being supported by the government of Beijing,” Solis said.

In March scientist expressed concerns over the potential ecological impact the canal would have on Lake Nicaragua, the ninth largest tropical freshwater lake of the Americas.

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Brazil Launches Massive Infrastructure Plan

By Reuters 2015-06-09 12:07:52

President Dilma Rousseff of Brazil unveiled a concession program on Tuesday to draw 198.4 billion reais ($64 billion) in private investment over five years to upgrade and operate Brazilian roads, railways, airports and harbor terminals.

The logistics plan includes 4,371 kilometers of new highways, the extension of existing railway concessions and the private operation of airports in the cities of Porto Alegre, Fortaleza, Salvador and Florianopolis, according to a government presentation.

The new concessions will have access to less state bank financing in the midst of Brazil’s current drive to cut spending and reduce a bulging fiscal deficit. Bidders will be expected to partially fund projects with private financing.

The plan is meant to restore growth in Brazil’s faltering economy and boost Rousseff’s popularity which has been battered by high inflation and a corruption scandal at state-run oil company Petrobras.

The government expects 66.1 billion reais in investments in highways, 86.4 billion in railways, 37.4 billion in ports and 8.5 billion in airports. Auctions for the airport concessions will start in the first quarter of 2016.

Brazil will open 29 state-owned port terminals to private operators in Santos, the country’s largest port, and in the state of Para, and a second round of auctions will include terminals at Paranagua, Itaqui and other ports.

Brazilian development bank BNDES will continue to have a “relevant” role in financing infrastructure building, the government said, particularly railway projects that can be funded up to 90 percent by state bank BNDES.

Road concessions will have a maximum access to the BNDES’ low interest rate of up to 40 percent of the project cost as long as they raise at least 10 percent through the issue of infrastructure bonds.

Details

Russia Hones in on North Sea Shipping

By Kathryn Stone 2015-06-09 13:47:29

Russia unveiled a new plan this week aimed at dramatically increasing the country’s shipping presence in the North Sea.

Russian Prime Minister Dmitry Medvedev signed a comprehensive project that seeks to increase the amount of cargo passing through the North Sea Route (NSR) each year.

“This is the shortest route connecting Europe with the Far East, with the Asia-Pacific region, with the western part of North America,” Medvedev commented.

The northern shipping route reduces the shipping distance between Asia and Europe by about one-third, compared to the Southern route. Additionally, North Sea shipping is becoming more economically viable each year. This is due in large part to changing climatic conditions that extend the number of days a ship can operate in the Arctic.

The Prime Minister said that the use of the NSR has been so-so in recent years and that it is now necessary to increase transportation volumes beyond Soviet-era highs. Medvedev also claimed the plan would develop Russian transportation advantages and open a crucial path for mineral resources in the Arctic and throughout Asia.

Currently, the Russian government issues 600 annual permits to transport cargo in the Arctic region, and the volume of goods delivered is around 4 million tons. According to Russian figures, the volume of cargo has the potential to increase by 20 times over the course of the 15-year plan.

Medvedev stressed the need to establish of effective protocols to protect the marine environment, including eliminating risks from oil spills or other pollutants.

Work has already begun on setting up emergency preparedness centers in the Arctic and Russia has set its sights on building larger, more powerful icebreakers specifically for the region.

Details

US importers ratchet down box outlook

America’s largest retail trade group is reducing its growth forecast for summer container imports as port business returns to normal following ratification of a west coast dockworker contract.
The National Retail Federation (NRF) adjusted down box import growth estimates between June and September
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DNV GL takes view on alternative fuels

DNV GL has released a position paper, The Fuel Trilemma: Next Generation of Marine Fuels, which examines a diversifying ship fuel market and the threefold problem of affordability, sustainability and safety.
These factors will govern choices for emissions that meet regulations for CO2, SOx and NOx
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