Nicola Williams Clarksons Gas Department IHS Asia LPG Seminar, J une 12-14 2013 www.clarksons.com www.clarksons.com Spot Earnings Volatility & Pricing VLGC Rates Freight as % of Landed Costs www.clarksons.com Newbuilding Price Movements
SECA/ECA Global EU Sulphur Directive ~ Revised Annex VI entered into force in J uly 2010 introducing ECAs Entered into force in May 2005 Additional rules for all ships at berth in EU ports from J an 2010 Data source: IMO/ EU * 2020 global reduction may be delayed subject to feasibility study ~ For inland waterway vessels and ships at berth in European Community ports, Impact of Regulatory Changes
Up to 3 different grades of bunker fuel required in some trades
Not considered technically feasible to reach level of 0.1% sulphur with heavy fuel oil implies use of gasoil
Price differential
Potential costs to adapt engine room
Scrubbers may be used to reduce the SOx emissions
LNG as a fuel www.clarksons.com Fuel Savings Eco Newbuildings
Assessed Annual Bunker Cost Savings Fuel efficiency gains in newbuildings expected to impact trading economics
Strong financial incentive in an environment of high oil/bunker prices & impending change in Regulations
Developments expected to impact bottom-line $ pmt economics. Could we see a two-tier freight market developing?
Based on a 5 Mt/ day Fuel saving Data Source: Clarksons
www.clarksons.com LPG Pricing
Propane Pricing Butane Pricing www.clarksons.com US Export Volume Growth Terminal Exp. Source: Clarksons Estimated Export Capacity as of end Year (Maximum Capacity) +3.5-4.5 +2.3-3 www.clarksons.com US Gulf VL/LGC Liftings by Destination 2012/13 Liftings In 2012, approx 12% of the volume found a home East of Suez Arbitrage Movements www.clarksons.com 3.9 5.9 2.1 4 2.6 Vessel Demand Sensitivities for Load/Disport Alternatives 2.5 2.1 2.8 Load Discharge via Est.Total Days RV (inc in Port, Bunker & Canal Transit Time) 1 M MTPA = VLGC equivalent US Japan Panama 62 3.9 US Japan via Cape of Good Hope 94 5.9 US N.W.E 34 2.1 US Chile Panama 33 2.1 US Brazil 39 2.5 W.Africa Chile 44 2.8 W.Africa Japan via Cape of Good Hope 64 4.0 AG Japan 41 2.6 Sensitivities of Shipping Demand by Source of Origin/Destination Panama Expansion Impact on Vessel Demand www.clarksons.com On Purpose Petchem Production Growth Planned Projects by Volume & start-up date
New Propylene Dehydro capacity should provide a boost to Propane Demand Some of this will translate into additional import demand in Asia, most notably in China PDH also more appealing in the US as Propane availability rises (due to shale production) and as prices are more competitive. Increased use of Ethane as a steam cracker feedstock is also tightening Propylene supply
Source: Clarksons, ICIS & industry announcements N.B includes projects under study/planned www.clarksons.com Deficit/Surplus of Vessels (LHS) Global Seaborne LPG Trade Outlook Exports by Region I mports by Region Data Source: Clarksons Export Sensitivity to I ranian Volumes www.clarksons.com Growth East v West Arbitrage Potential Demand/ Supply East Demand/ Supply West Note Based on current regional growth projections Source: Clarksons www.clarksons.com Vessel Deficit/ Surplus by Year Data Source: Clarksons VLGC Demand/Supply Balance www.clarksons.com Disclaimer
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United States v. James Edward Smith, A/K/A Smitty, A/K/A Dumptruck Smitty, United States of America v. Richard Leander Smith, A/K/A Peter, 966 F.2d 1446, 4th Cir. (1992)