WASHINGTON, June 28 (Reuters) – With new global emissions standards looming, the marine shipping industry is increasingly looking at liquefied natural gas as alternative to high-sulfur bunker fuel, shipping and energy executives said at a global gas summit this week.
Already used to fuel ferry fleets and cruise ships, LNG is gaining traction among freight and cargo shippers, despite a reluctance by the entrenched industry to make major changes. The stakes are high: the global shipping fleet now consumes about 4 million barrels per day of high sulfur fuel oil.
“Ship owners are very conservative, they’re generally a little slower to act… But it’s going to happen,” Peter Keller, chairman of SEA\LNG and executive VP of maritime firm Tote Inc, told Reuters at the World Gas Conference in Washington.
“Every year the percentage of LNG powered ships out of the new-build market is increasing.”
LNG bunker demand from the shipping sector is expected to be between 20 to 30 million tonnes per annum (Mtpa) by 2030, up from less than 1 Mtpa today, according to forecasters.
Driving the shift are new rules from the International Maritime Organization that cut the allowed sulfur content in marine fuel to 0.5 percent from 3.5 percent by January 2020. LNG is virtually sulfur free.
It is the most significant change faced by the global shipping sector in decades, and many in the industry remain divided over what fuels ships will use and how many vessels will simply break the rules.
Keller, whose firm operates LNG container ships and is converting its cargo ships to the supercooled fuel, said the big limitation has been the so-called “last mile of delivery,” a lack of availability of the fuel at port.
But that is changing.
“In 2017, there was only one bunker vessel for LNG anywhere in the world. Today, there are five and 14 more on order,” he said, adding that the vast majority of bunker ports in the world are expected to have LNG capabilities in place by 2020.
FUTURE-PROOF FUEL
LNG production around the world continues to ramp up thanks to low-cost production in the United States and rising demand from China and other markets, where natural gas is being used to offset more carbon intensive fuels in power generation and transportation.
LNG for marine transport operates much like the LNG export industry, but on a smaller scale. Shippers sign long-term purchasing deals with producers, which allows those companies to build liquefaction capacity.
One such facility is FortisBC’s Tilbury plant, which can liquefy 5,000 gigajoules of gas per day and fuels BC Ferries’ fleet of LNG passenger ferries and Seaspan Corp’s B.C. fleet of LNG freight ferries.
Fortis sees huge opportunities for growth, not just in ferries but also for coastal freight shipping, said Sarah Smith, the company’s director of Natural Gas for Transportation.
“We need to build out a bunkering jetty at Tilbury to be able to fill bunkering vessels there,” she said, noting that British Columbia has first-mover advantage on becoming a bunkering hub.
Part of the draw of LNG over low-sulfur diesel or other alternative fuels is that even if emissions standards become more stringent in the future, natural gas falls well below any threshold.
“LNG is the fuel that is future proof,” said John Hatley, Americas VP Marine Solutions for Wartsila.
In terms of cost, building a new ship to run off LNG is comparable with traditional diesel fuel-powered ships.
But the fuel savings are immense.
“The fuel costs to operate on LNG is approximately half of what it cost to operate on ultra-low sulfur marine diesel,” said Deborah Marshall, a spokeswoman for B.C. Ferries, which runs four LNG ferries in the West Coast province.
For Keller, of SEA\LNG, the proof is in the engine room.
“When you go in the engine room of a ship, you’re typically gonna put gloves on, you’re gonna put a boiler suit on, you’re gonna do that, because it’s dirty,” he said.
“You go into the engine room of … our first LNG-powered container ship and it looks like it just came out of the yard yesterday.” (Reporting by Julie Gordon; editing by Richard Valdmanis) (c) Copyright Thomson Reuters 2018.
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Read MoreNEW YORK (BLOOMBERG) – Bitcoin erased its loss after setting a 2018 low earlier on Sunday (June 24), with the volatility reflecting increased scrutiny by government regulators on the embryonic digital-currency sector and global central bankers raising questions about its viability.
The biggest virtual currency was up less than 1 per cent to US$6,181.84 at 5.16pm New York time on Sunday, after earlier falling as much as 5.2 per cent to pierce the year’s previous low of US$5,920.72 that was set on Feb 6, according Bitstamp prices. That brought its decline from the record high of almost US$20,000 reached in December to 68 per cent.
Sunday’s volatility occurred as the economic adviser and head of research for the Bank of International Settlements in Switzerland said many cryptocurrencies should be regulated like stocks and bonds. A week earlier, the BIS issued a report concluding that Bitcoin is ill-equipped to ever be a form of legal tender that could store value or handle the volume of transactions that are processed in the current financial system.
On Friday, Japan’s Financial Services Agency ordered six of the country’s biggest crypto-trading venues to improve measures to prevent money laundering. The companies must submit their plans by July 23.
New pressure in Japan, one of the most crypto-friendly jurisdictions, demonstrated the market’s fragility to regulatory moves in the absence of much positive news.
Peer-to-peer money also came under fresh pressure in recent weeks after two South Korean exchanges said they were hacked. That raised concerns about the security of investor holdings.
India’s central bank gave commercial lenders until early July to stop providing services to any company dealing with digital coins, in an order that’s reportedly being challenged in courts.
Bitstamp is one of the major price sources for cryptocurrencies, which have no unified quotation system and can vary substantially among countries.
Bloomberg’s composite pricing, which includes Bitstamp and other sources, showed Bitcoin closed on Friday at US$6,070.19.
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Read MoreVIENNA (Bloomberg) — Egypt may have just issued its last LNG tender, setting the stage to resume exports next year.
Imports of liquefied natural gas may stop in the fourth quarter, allowing for exports to start early next year as Eni SpA’s Zohr and other gas fields boost production in the country and help to draw more foreign investment, Petroleum and Mineral Resources Minister Tarek El-Molla said. The final LNG import tender was issued to cover third quarter domestic requirements, and the fourth quarter should be “imports-free,” he said.
“I don’t think there will be more tenders beyond this, I think this is it,” El-Molla said Saturday in an interview in Vienna.“Local production should cover our needs.”
Egypt has to import liquefied gas at high costs to meet its energy needs, with traders from Glencore Plc to Trafigura Group Pte Ltd. winning tenders to supply the fuel in past years. However, Eni’s discovery of Zohr in August 2015 has the potential to satisfy much of the nation’s demand and may even transform the country into having a surplus of supplies.
The giant Zohr field will increase gas production to 1.7 billion cubic feet a day by August from 1.2 Bcf, the energy minister said. Egypt’s total output is 6 billion cubic feet a day, and that should increase to 6.5 billion by September, he said.
Once it has a sufficient surplus, Egypt will start compensating companies that have rights to operate the country’s LNG export terminals, including Royal Dutch Shell Plc and Union Fenosa SA, El-Molla said. Egypt expects to attract $10 billion both this year and next year in foreign investment in its oil and gas industry, he said.
“First thing we will do once we have a surplus, we will supply our partners with some of those quantities,” he said. “So many years have been passing without them getting the quantities they were supposed to receive so this is one of our priorities once we have a surplus.”
The country has also adopted a flexible gas-pricing formula to encourage investment and boost supply, El-Molla said. Egypt previously paid a fixed price of $2.65 per thousand cubic feet, and the price now is in the range of $3 to $5.88, he said. A regulatory authority was set up about two months ago and is now working on setting up a tariff system for private companies to use the state’s gas infrastructure and to license them to trade gas, he said.
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Read MoreShell completes Malaysia LNG Tiga equity sale Shell Gas Holdings (Malaysia) Limited, a subsidiary of Royal Dutch Shell plc, announced today that it has completed the sale of its 15% shareholding in Malaysia LNG Tiga Sdn Bhd (MLNG Tiga) to the Sarawak State Financial Secretary (SFS) for an agreed consideration of $750 million.
The transaction has an economic date of Sept. 1, 2017 and the net final consideration paid to Shell after adjustments for dividends the company received up to completion is approximately $640 million. SFS is an existing MLNG Tiga shareholder and with completion of this transaction, increased its shareholding in MLNG Tiga to 25%.
The other shareholders of MLNG Tiga are PETRONAS with 60% equity, Nippon Oil Finance (Netherlands) B.V. with 10% equity, and Diamond Gas (Netherlands) B.V., a Mitsubishi Corporation subsidiary with 5% equity. Malaysia LNG Sdn Bhd, a PETRONAS subsidiary, operates MLNG Tiga as part of the larger PETRONAS LNG Complex in Bintulu.
This sale is consistent with Shell’s strategy to simplify its portfolio and reshape Shell into a simpler, more resilient and focused company. Following the expiry of the MLNG Satu and Dua joint venture agreements, MLNG Tiga was Shell’s only remaining interest in the PETRONAS LNG complex. Completion of this sale demonstrates the clear momentum behind Shell’s delivery of its global divestment program.
Shell continues to have a strong business in Malaysia and remains committed to the country.
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Read MoreHOUSTON — Shell has announced that its affiliates, Shell Integrated Gas Thailand Pte Ltd. and Thai Energy Company Ltd., have completed the sale of their 22.2222% interest in Bongkot field and adjoining acreage offshore Thailand to PTT Exploration & Production Public Company Limited (PTTEP) and PTTEP International Limited, a wholly-owned subsidiary of PTTEP, for a transaction value of $750 million.
This sale, which consists of Shell’s stake in Blocks 15, 16 and 17 and Block G12/48, was announced on Jan. 31, 2018 and completion follows receipt of the necessary regulatory approvals. PTTEP is the operator of Bongkot and with completion of this transaction, increased its stake in Bongkot to 66.6667%. The remaining 33.3333% belongs to Total.
Completion of this deal shows the clear momentum behind Shell’s value-driven $30-billion divestment program and is in line with Shell’s drive to simplify and refocus its portfolio, reshaping the company into a world class investment. This announcement has no impact on Shell’s other business interests in Thailand.
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Read More(Bloomberg) — OPEC and its allies gave the final sign-off to an oil-production increase, sealing a victory for Saudi Arabia and Russia.
Major producers outside the Organization of Petroleum Exporting Countries — including Mexico and Kazakhstan — met ministers from the cartel on Saturday and endorsed a nominal output increase of 1 million barrels a day, said Ecuador’s Minister of Hydrocarbons Carlos Perez. In real terms, that would add 600,000 to 700,000 barrels a day of crude to the market over about six months, said Oman’s Oil Minister Mohammed Al Rumhy.
Friday’s OPEC agreement, reached after a last-minute compromise with Iran, was a fudge in the time-honored tradition of the group, committing to boost output without saying which countries would increase or by how much. The deal is a win for Saudi Arabia and Russia, which were the first members to suggest an increase and hold the most spare capacity. They now have the flexibility to respond to disruptions and moderate prices at a time when U.S. sanctions on Iran and Venezuela threaten to throw the oil market into turmoil.
The terms of the deal were rather convoluted. The group’s agreed production increase of 1 million barrels a day was described as “nominal” by Saudi Energy Minister Khalid Al-Falih. In reality, the accord will add a smaller amount of oil to the market because a number of countries are unable to raise their output.
No Specifics
Saturday’s agreement was just as vague as Friday’s, said one delegate. It didn’t detail how the production increase would be split between OPEC and non-OPEC nations, said Perez. Angola’s Minister of Petroleum Diamantino Azevedo said the group had agreed the principles of distribution.
On Friday, every minister seemed to have his own interpretation of what the hike meant for the market. Iran saw no more than 500,000 additional barrels a day, Nigeria predicted 700,000 and Iraq said it could be as much as 800,000. The official communiques from both meetings didn’t mention specifics, instead pledging that the group would focus on restoring its output cuts to the level originally agreed in 2016.
Some traders were far from confident that such an agreement will meet the multiple challenges OPEC faces. The situation in Venezuela is volatile, with a wide range of predictions of how much further its production could slump as its industry unravels. There are also growing signs that the renewed U.S. sanctions on Iran could have a larger impact than the 1 million-barrel-a-day reduction in exports seen in 2012.
Iran doesn’t believe its customers will get waivers from the U.S. government that would allow them to continue crude purchases, Oil Minister Bijan Namdar Zanganeh said in a Bloomberg television interview on Friday. American officials are said to have asked Japan to completely halt oil imports from Iran, going beyond the cuts demanded during the Obama-era sanctions.
Crude prices surged on Friday following the vaguely worded OPEC agreement. West Texas Intermediate crude jumped 4.6 percent to $68.58 a barrel, the biggest gain in six months.
U.S. President Donald Trump, whose tweets played a part in prompting Saudi Arabia to push for a production increase, indicated on Friday that he’ll be watching the progress of their new agreement closely.
“Hope OPEC will increase output substantially,” Trump said on Twitter. “Need to keep prices down!”
With assistance from Golnar Motevalli, Javier Blas, Elena Mazneva, Laura Hurst, Salma El Wardany, Annmarie Hordern and Julian Lee. To contact the reporters on this story: Grant Smith in London at gsmith52@bloomberg.net; Nayla Razzouk in Dubai at nrazzouk2@bloomberg.net; Wael Mahdi in Kuwait at wmahdi@bloomberg.net. To contact the editors responsible for this story: James Herron at jherron9@bloomberg.net Amanda Jordan.
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Read MoreMELBOURNE, June 22 (Reuters) – Australia no longer faces a looming gas shortage, thanks to government pressure on exporters to divert the commodity into local markets and a reduced demand forecast for gas-fired power, according to estimates from the nation’s energy market operator.
“No supply gaps are forecast before 2030 under expected market conditions,” the Australian Energy Market Operator (AEMO) said on Friday in its annual outlook for gas.
That is starkly different from a year ago, when dire warnings from the body about potential shortfalls in eastern Australia from 2018 onward prompted the government to threaten to curb liquefied natural gas (LNG) exports.
The nation’s three east coast LNG plants, operated by Royal Dutch Shell, ConocoPhillips, and Santos, averted those curbs by promising to plug the expected deficit.
Their moves, combined with greater availability of LNG on the global market, the start-up of a new pipeline from the Northern Territory to Queensland, and growth in wind and solar power diminishing the need for gas-fired power, have eliminated the feared shortage, AEMO said.
“Alongside international market changes, newly committed electricity generation resources have resulted in a favourable increase of gas availability for the east coast market,” AEMO executive general manager David Swift said in a statement.
More than 4,000 megawatts of wind and solar power are due to start up in the next two years, which should ease demand for gas-fired power except when renewable generation is low, he said.
AEMO cut its gas consumption forecast for 2019 by 55 petajoules from its last estimate made in September, while increasing its gas production outlook from fields in the southern states by 16 PJ.
In September, it had predicted a supply gap of between 54 PJ and 107 PJ for 2018, or up to 17 percent of market demand.
An extra 8 PJ of gas has also been freed up for the local market as a global LNG glut has given overseas buyers more supply choice, AEMO said.
While producers told the market operator output would increase from southern gas fields, AEMO’s forecasts “still show that further exploration and development will be needed to meet demand from as early as 2022”, Swift said.
Production forecasts from gas producers show an increase in output of 144 PJ between 2019 and 2022, AEMO said, while flagging those new supplies will be more costly to produce than existing production.
The sharply changed view has not deterred groups considering importing LNG to southeastern Australia within the next two years, as they see the assumptions on future gas production as bullish and view LNG import terminals as much cheaper to install than developing new gas fields.
“For the sake of a new entrant and a compelling, certain product, I just think imports win, hands down,” said James Baulderstone, chief executive of Australian Industrial Energy, one of at least three groups considering importing LNG.
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Read MoreSwitching to LNG is the preferred solution for shipping companies to adopt in order to meet the International Maritime Organisation’s (IMO) stringent new international emissions standards for marine bunker fuels, according to the findings of a survey by Deloitte.
However, a lack of refuelling and bunkering infrastructure has been identified as the key barrier to the large scale adoption of LNG as a transport fuel.
The survey of over 80 senior energy industry leaders from across the Asia Pacific region was conducted at the second annual Deloitte Energy Trading Summit in Singapore recently.
Survey respondents cited the retrofitting and/or redesign of the existing shipping fleet to accommodate the LNG bunker fuel option as the second biggest barrier to adoption, followed by the price competitiveness of LNG versus liquid fuels. However, despite the challenges, over two-thirds (68%) said if the marine fuel market switches to LNG, it will have a positive effect on their overall business.
Bernadette Cullinane, Deloitte Global LNG leader and Australia oil and gas lead said: “LNG is particularly well placed to benefit from the IMO’s emissions legislation. Our survey results are clear recognition the stricter standards will open the door for cleaner marine fuels like LNG and low sulphur marine gas oil to displace heavy fuels.
“Almost every maritime authority in the world that offers bunkering is now taking a serious look at LNG as an alternative to fuel oil. Whilst infrastructure is an issue, it is being built, and new vessels have been designed, built and are on order.”
Cullinane added that with the globalisation of the LNG market, companies are actively looking at new applications and new markets for gas.
“One of the biggest opportunities for LNG over the next decade will be in transportation, particularly as a marine fuel,” she said.
“This option is rapidly gaining momentum, presenting an attractive market opportunity for LNG producers.
“With competition from alternative fuels, especially renewables in the power generation space, LNG needs to develop new customer markets to absorb supply and justify investment in new production facilities.
“Transportation is a terrific opportunity for LNG suppliers to tap into a growing market. By expanding the customer base, it’s a play that will help underwrite and de-risk future supply developments.”
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Read MoreThe likely target will be individuals shunned by private banking and pushed into premium retail banking models.
Homegrown big tech giants like Tencent and Alibaba as well as Google and Microsoft are increasingly luring high net worth individuals for their wealth management needs which run the risk of leaving the region’s private banks in disarray.
Nearly three fourths (72.4%) of Chinese HNWIs are looking at Alibaba as a possible wealth manager provided they have all the capabilities they need whilst almost a fourth (24.1%) of Hong Kong respondents are considering Tencent and Alibaba for their wealth management needs, according to a survey by management consultancy firm Capgemini.
“The direction of travel for the industry seems clear – BigTech entry will occur at some point, with entry likely to begin with Asia Pacific followed by North America,” Capgemini said, adding that a demographic of those with US$5m and below in assets shunned by private banks and pushed into premium retail banking models stand to be the likely target of BigTechs.
Google emerges as the most-in demand BigTech for wealth management globally with APAC HNWI interest hitting 60.8%, notably higher than the global average of 36.7%. HNWIs also indicated that Microsoft, Amazon, and Apple were similar desirable BigTech firms for potential wealth management services.
The steady expansion of European players into the region’s private banking scene is also threatening homegrown lenders for the right to manage the wealth of the region’s ultra rich as the Asia market is expected to grow at a faster pace than Europe.
“We observe that all rated European private banks reported significant net assets inflows in 2017. Indeed, also in previous years some banks managed to more than offset outflows by inflows in new markets, especially in Asia,” credit rating agency S&P noted in a report.
Private banks and wealth management firms alike are therefore directing most of their budgets into maintaining their ongoing legacy systems but are also making steady investments into new tools, processes and platforms to keep up with competition and venturing into experimental areas and partnerships in startups to differentiate against competitors, noted Capgemini.
“Wealth management firms therefore have a choice between standing still or preparing for the new industry dynamic that is likely to arise over the coming years.”
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Read MoreGlobal trade tensions and signs of more oil supply coming in the second half of the year helped push crude oil prices lower in early Friday trading.
Russia and Saudi Arabia have been dropping hints that more oil could show up on the market later this year in an effort to offset chronic shortages from Venezuela and potential losses of Iranian oil barrels. On Thursday, Saudi Crown Prince Mohammed bin Salman al-Saud told Russian President Vladimir Putin that cooperating with the Organization of Petroleum Exporting Countries was bringing stability to a market that saw the price of oil swing by almost $20 per barrel this year.
“I think that the whole world benefited from this cooperation, as the volatility in oil prices, as well as other volatility occurring in this sphere, and the stabilization achieved in this sphere helped to stabilize the entire global economy,” the Saudi prince said.
A commodities report from Danish investment firm Saxo Bank said a stronger U.S. dollar, which has an inverse relationship to the price of oil, the proposals from Russia and Saudi Arabia and trade risks between the United States and China were all negative factors for commodities.
“In light of China’s theft of intellectual property and technology and its other unfair trade practices, the United States will implement a 25 percent tariff on $50 billion of goods from China that contain industrially significant technologies,” U.S. President Donald Trump said in a statement Friday.
The price for Brent crude oil, the global benchmark, was down 1.16 percent as of 9:23 a.m. EDT to $75.06 per barrel. West Texas Intermediate, the U.S. benchmark for the price of oil, was down 0.42 percent to $66.61 per barrel.
OPEC ministers meet next week to consider the impact of an effort to stabilize a market with voluntary cuts in production. Ole Hansen, the head of commodity strategy at Saxo Bank, said in a report Friday that stability was still a focus and that production likely won’t increase too much, in part because of tensions emerging among OPEC members themselves.
“Given the resistance from other OPEC producers it is likely that the production ceiling will be maintained but that an increase of between 500,000 and 1 million barrels per day will be agreed,” he said in a statement.
OPEC is doing more than it needs to under the terms of the production agreements. Iran and other members have complained, meanwhile, that Saudi Arabia was taking unilateral action at OPEC.
On the economic front, Christina Lagarde, the director of the International Monetary Fund, said Thursday that U.S. economic growth had momentum, but faces risks of its own creation.
“Unilateral trade actions can be disruptive and may even prove counterproductive to the functioning of the global economy and trading system,” she said in a statement. “As I have said before, in a so-called trade war, driven by reciprocal increases of import tariffs, nobody wins.”
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