As we come close to the start of 2020, both the production forecast, and the reality, jump ahead another year. Decisions have been made in advance to order new VLGC buildings, although with a lack of any real perceived urgency, and a stutter attributed to all the uncertainty associated with IMO 2020. We have discussed the reasons before, the long memories of the traditional ship owners for when rates struggled to cover operating expenses (OPEX), that has discouraged them from investing in new buildings on any scale at all.
I was a little stunned to read during my morning LinkedIn flick through, that BW LPG’s CEO Martin Ackermann has decided to step down at the end of the year, after five years at the helm. I was lucky enough to share a panel discussion with Martin in Houston this year at RBN’s “Energy Xport Con”, and although I’ve only known him for a short while, I was impressed how focused, and cool he was under the spotlight of the U.S. energy, and particularly NGL players.
Yesterday we were looking at the OPEC announcement to cut crude oil production by 500 M Bbls/d, and the subsequent announcement that Saudi Arabia would maintain its voluntary and additional 400 M Bbls/d production drop. Just to show how difficult it is to gauge reality from rumour, there were strong noises coming out that earlier, Saudi Arabia and Venezuela had actually proposed a 500 M Bbls/d increase, even though this was of course strenuously denied.
Rumours surfacing, resurfacing, announcements, pronouncements, you guessed it, it’s OPEC time again. It seems more and more the case that whatever OPEC announces our attention in the LPG world, and for that matter the rest of the energy market, switches to Saudi Arabia, and whether Prince Abdulaziz bin Salman has said anything, he normally has to!
Throughout most of the SIMON SAYs blogs produced so far I’ve concentrated on the refrigerated LPG market, transported mainly on very large gas carriers (VLGCs), between continents and across large spans of water, to get the supplies to their end destination. Of the approximately 105 million Mt of LPG shipped by sea, the movements by VLGC account for about 70-75 per cent of this trade, but what are the reasons for the other quarter of seaborne volumes being moved by other modes of transport, and what are the striking differences.
I’ve always been fascinated with the way deals are done, the process of negotiation between two parties, maybe with someone in the middle, maybe not. It can be exciting, frustrating, win some, lose some. I think I was more a guy who wanted compromise, while I ended up doing deals with a number of traders hanging out for the last cent, even though I’m sure I would have done more with them if only they had shown a sign of compromise, it’s always good to blame the other party.
Although last week was shortened by the Thanksgiving holiday, a few more pieces seemed to be falling into place in the U.S., and for that matter when moving out of the U.S. as well. If we then add in a few what might or might not happen questions, it was actually an eventful last week of November. Then came the attention on the U.S. from Asia, concern may be, as well as from a small number of trading houses nestling in the major cities of Europe. But why the concern?
It was a late night, early morning, and I was still digesting my turkey, corn-bread stuffing and pecan pie, when I realized it was “Black Friday”, fortunately for me my wife hadn’t. Oh, by the way the Thanksgiving dinner was great, but of the 20 people invited, there wasn’t an American in sight. So, as we enter December will Black Friday discounts start to have the same influence on the LPG market, I don’t think so, it’s still looking as if the buyers are having to step up to the mark, and maybe more.
I hope it’s been a good Thanksgiving for producers, mid-streamers, exporters, consumers, in fact anyone connected with the U.S. NGL business. I was pleased to see that I wasn’t the only one linking propane to Thanksgiving, as I came across a lovely website and a blog produced by Blue Rhino, who appear to be an “exchange of cylinder” driven retailer. Well they have published a blog called “The Beginner’s Guide to the Perfect Thanksgiving Meal”, and in the first paragraph they have mentioned the word “grill” 4 times, just to make sure I have an idea of what’s coming next.