Friday, April 29, 2016

Markets - Newbuildings almost run dry


In a lacklustre newbuilding market, Aegean Shipping Management has ordered two Aframaxes at China’s Cosco Zhoushan shipyard, plus another two as options.
They are due for delivery in 2018. Brokers put the cost at $41.8 mill per vessel.

This latest order from Aegean was the first since taking delivery of four MRs from Daesun Shipbuilding in South Korea in 2014.

CSSC Chengxi Shipyard was reported to have won its first ever orders to build chemical tankers. This came with Sweden’s Ektank contracting four 18,600 dwt units.

The first of the four new chemical tankers is scheduled to be delivered in the first half of 2018. Financial details of the deal were not disclosed.

Oslo-listed BW LPG has signed a debt facility agreement worth $221 mill for the financing of four of its VLGC newbuildings.

The financing was raised from ING Bank, KFW IPEX-Bank, Oversea-Chinese Banking Corp(OCBC) and Standard Chartered Bank, as mandated lead arrangers, where ING Bank also acted as co-ordinator and facility agent, the company said.

“We are very pleased with this financing, which leverages the well-priced Korean ECA lending to provide an exceptional all-in cost and structure. This is a clear demonstration of BW LPG’s platform value in obtaining market leading financing. We are grateful to our lenders for their continued support,” BW LPG CEO, Martin Ackermann, said in a comment.

BW LPG has also taken delivery of ‘BW Tucana’, the seventh VLGC in its newbuilding programme of eight ships being built by the Hyundai Heavy Industries (HHI), while three VLGCs and four BW Pacific MRs have been timechartered to Nissen Kaiun.

All of the vessels are currently under construction at Japan United Marine Corp (JMU).

In the charter markets, Navios Maritime Acquisition Corp has agreed charter deals for three of its product tankers at 14% higher average charter rates.

The MR2 ‘Nave Equator’ was fixed to an undisclosed party for 18 months at $17,000 per day.The 2009-built ship is expected to generate $5.5 mill of aggregate EBITDA for the complete charter period, Navios said.

Furthermore, Navios Acquisition signed charter extensions for the MR2s‘Nave Titan’ and ‘Nave Orion’, for another year, following the charterers’ options being exercised.

“Pursuant to the options, the applicable increased base rates are $15,306 and $14,813 (net) per day, respectively, plus profit sharing,”Navios said.

Brokers said that two of the three vessels were fixed to Scorpio and Hafnia (‘Nave Titan’).

The 2013-built vessels are expected to generate around $6 mill of aggregate base EBITDA for the one-year charter extensions.

Navios Acquisition also said that it has contracted 91.5% of its available days for 2016.

Gener8 Maritime took delivery of the VLCC ‘Gener8 Nautilus’ on 20th April, 2016 from Hyundai Samho Heavy Industries.

She is the ninth of 21 VLCCs due to enter into Gener8 Maritime's fleet. Upon delivery, the ‘Gener8 Nautilus’ entered Navig8's VL8 Pool.

Meanwhile, Navig8 Product Tankers has entered into a $130.3 mill senior secured credit facility agreement for post-delivery financing for four 74,000 dwt LR1s.

The loan, agreed with Citibank, London Branch and Caixaban, will be used for vessels which were either constructed or are currently under construction at South Korea’s STX Offshore & Shipbuilding.
The loan, which will also cover the 87,500 cu m VLGC ‘Navig8 Experience’ delivered in March, 2016, provides financing of around 65% of the contract price of the four ships.

The financing is split between two separate tranches - a $26.1 mill commercial tranche and a $104.2 mill tranche insured by Korean Trade Insurance Corporation (K-Sure tranche).

“Thus far, we have raised over $1.3 bill through a combination of equity, senior debt and sale and leaseback financings. We will continue to seek diverse and inexpensive sources of capital, as we continue to accept deliveries from our newbuilding programme,” said Nicolas Busch, Navig8 Product Tankers CEO.

Concordia Maritime has signed a new consecutive voyage contract for the P-MAX tanker ‘Stena Polaris’. This contract, which comes into effect in May, 2016, is for one year.

The contractual partner is one of the world’s largest oil and gas companies, Concordia said, without naming the company.

“This is a new niche trade that we have identified together with our customer. The new contract clearly demonstrates that we have found an arrangement that creates value for all parties. The customer has a specific transport need for which the large load capacity of the P-MAX tankers will be well suited. For our part, the contract is fully in line with our commitment to concentrate employment on niche trades where there is potential for premium rates,” said Kim Ullman, Concordia Maritime CEO.

‘Stena Polaris’ has been employed on one of the same customer’s niche trades to Australia and New Zealand since spring, 2014. The vessel will be mainly used to transport light oil products from Singapore to island groups in the Pacific Ocean.

China Shipping Tanker reportedly fixed the 2007-built ‘Yasa Golden Bosphorus’ for 12 months at $26,000 per day, while the recently sold Aframaxes ‘SN Claudia’ and ‘SN Olivia’ were reported as fixed to ST Shipping for 12 months at $22,500 per day each.

The 1999-built MR ’Ocean Quest’ was thought fixed to Petrobras for three years at $17,500 per day, while a 2006-built Handysize was believed fixed for two years at $15,500 per day.

In the S&P sector, Aframaxes were the pick of the bunch on brokers’ reports. For example, the 1996-built sisters ‘CE-Merapi’ and CE-Breeze’ were reported sold to Turkish interests for around $18 mill en bloc.

Indonesian shipowner Soechi was said to have picked up the 1999-built Aframax ‘Jag Laxmi’ for $13.6 mill, while Indian interests were thought to have purchased the 2003-built Aframax sisters ‘Phoenix Alpha’ and ‘Phoenix Beta’ for $40 mill en bloc. Another 2007-built Aframax was also said to be on subjects to Asian interests.

Finally, four newbuilding MRs at STX Jinhae were reported sold to Chinese interests for $140 mill en bloc. They are due for delivery in 2017.  

AET to buy remaining shares in Paramount


Last week, AET agreed to purchase the remaining 50% of Paramount Tankers that it currently jointly owns.
It is currently owned under a 50/50 joint venture agreement with Golden Energy Tanker Holdings. Paramount Tankers owns and operates six Aframaxes.

Commercial management is undertaken by AET and technical management is provided by Enterprises Shipping and Trading.

AET President & CEO, Capt Rajalingam Subramaniam, said:“We are continually looking for opportunities to ensure sustainable growth in our business and to own/operate modern tonnage, which serves our customer needs globally.

“Acquiring the Paramount JV in its entirety allows us to own and operate all six vessels on our own. We are the commercial managers for the vessels and have commenced taking over the technical management. The vessels are of a high quality design and built to our lightering specifications and can trade worldwide to serve our global client needs. This transaction demonstrates our commitment to our customers, shareholders, stakeholders and the industry we operate in.

“Paramount Tankers has been an extremely successful joint venture and I’d like to thank our partners for their unwavering support over the past six years.”

AET expects the transaction to be concluded by September, this year. 

Thursday, April 28, 2016

India buys more Nigerian oil amid supply glut

 Oil price rises ahead of OPEC meeting

India says it has absorbed more Nigerian oil as a supply glut continues to affect major oil producers.
Despite the purchase, there were still close to 10 million barrels unsold for May loading.

The Indian refiners made the purchase via tenders.

Less than 10 million barrels of May loading were left for spot trade in May, but Erha programmes had not emerged. Traders said if they did not book ships to load the oil within the week, there could be issues securing vessels in time.

June loadings were at their lowest of the year due to the absence of Erha and Forcaodos.

A compilation of loading programmes for Nigeria’s oil exports has shown the country intends to ship a low amount of crude oil in June.

Nigeria’s initial oil export plan for June showed crude loadings poised to fall to the lowest level so far this year.

The exports, on 52 cargoes, totalled 1.57 million barrels per day (bpd), compared with a revised May programme of 1.6 million bpd aboard 55 cargoes.

The export plans did not include Erha, which is the subject of a disagreement between ExxonMobil and Nigeria’s NNPC.

There has still been no May loading programme issued for the grade.

If Erha export cargoes are issued, it would likely push the June exports above April, the previous 2016 low, when just under 1.60 million bpd were scheduled for export.

Nigeria’s oil production has been hampered by a force majeure on the Forcados stream that has been in place since February.

Nigeria’s NNPC has said repairs on the pipeline that feeds Forcados to the export terminal will take until June.

According to the April OPEC monthly oil market report, the issues pushed Angola’s oil production levels above those of Nigeria.

Despite the country’s diversification efforts, crude oil remains the major income earner for Nigeria.

The sub-nationals in the country heavily depend on revenue from oil sales at the monthly Federation Accounts and Allocation Committee (FAAC) to fund their activities.

The government, led by President Muhammadu Buhari, has said it wants to diversify the economy by boosting agricultural, mineral and other non-energy sectors.

Monday, April 25, 2016

The ISIS money man: Biggest intelligence raid in US Special Forces' history exposes spreadsheet-loving jihadi accountant behind terror group's $1million-a-day oil operation

  • Abu Sayyaf was killed in a May, 2015 raid by US Special Forces in Syria
  • Documents seized in the raid gave more intelligence than 'any Special Forces operation in history,' a State Department official has said
  • Recent review of documents revealed how Abu Sayyaf ran ISIS oil fields
  • He was known as fearsome boss who oversaw cash-only fuel trade
  • In oil field salary negotiations, slave ownership was taken into account
  • Picture shows Abu Sayyaf counting huge stacks of cash from oil sales 
  • Even after US destroyed 30% of ISIS oil infrastructure, daily sales still amount $1 million, documents reveal

Documents seized in the raid that killed a top ISIS oil executive last year have revealed details on how the terror group ran its $1million-a-day oil operation.

Paperwork reviewed by the Wall Street Journal shows ISIS oil man Abu Sayyaf had a job not unlike other oil executives - except he was also faced with issues like factoring slave ownership into salary negotiations, and repairing oil wells damaged in U.S. airstrikes. 

A U.S. State Department official has said that more information was obtained from the documents seized in the raid against Abu Sayyaf than from 'any Special Forces operation in history.'
Scroll down for video 
An undated picture seized in the raid against Abu Sayyaf's Syrian compound in May 2015 shows the ISIS oil executive counting large stacks of cash. Documents reveal ISIS's oil operation is largely cash-based 
An undated picture seized in the raid against Abu Sayyaf's Syrian compound in May 2015 shows the ISIS oil executive counting large stacks of cash. Documents reveal ISIS's oil operation is largely cash-based 
This file photo shows Syrian petroleum being drilled from wells in Kurdish-controlled Rimelan district
This undated file photo was posted online in January, 2014 and shows ISIS fighters marching in Raqqa
Left, a file photo shows Syrian petroleum being drilled from wells in Kurdish-controlled Rimelan district. Right, ISIS fighters march in Raqqa, the terror group's main stronghold in Syria

Spreadsheets retrieved in the raid showed ISIS's total natural resource revenues in the six months that ended in February 2015 amounted to $289.5 million - and Abu Sayyaf's operation in the Deir Ezzour and al-Hasakah provinces in north-eastern Syria contributed to 72 percent of those revenues, the Journal reported.

Abu Sayyaf, a Tunisian who had his headquarters in the al-Omar field in Deir Ezzour, was known as a fearsome boss, who would threaten to relocate workers to oil fields in Iraq, where bosses were thought to be even worse, said Ibrahim, a 36-year old former oil worker interviewed by the Journal.

But other means of intimidation were much more sinister, Ibrahim said:
'You go to work and you find someone beheaded.' 

Abu Sayyaf was killed on May 16, 2015 in a nighttime raid against his compund in north-east Syria
Abu Sayyaf was killed on May 16, 2015 in a nighttime raid against his compund in north-east Syria

Abu Sayyaf, who was given custody in September 2014 of the American aid worker Kayla Mueller after she suffered as ISIS leader Abu Bakr al-Baghdadi's sex slave, was killed on May 16, 2015 in the nighttime raid against his compound in Deir Ezzour.  

Under the direction of ISIS, Abu Sayyaf set up a system where private buyers would line up with trucks at oil fields, pay in cash for crude oil, and transport it in their own trucks, according to the Journal.

As the Daily Beast reported in December, the truckers would then sell the crude oil at a profit to local, makeshift refineries. There, fuel was produced to be sold at roadside pumping stations or in bulk to other smugglers, who go on to sell it in more populated areas.

U.S. aid worker Kayla Mueller was briefly held by Abu Sayyaf prior to her death in February 2015
U.S. aid worker Kayla Mueller was briefly held by Abu Sayyaf prior to her death in February 2015

In the end, the 'greater amount' of ISIS-produced oil was purchased by Syrian president Bashar al-Assad's regime, according to the U.S. Treasury Department.

'[Assad's regime and ISIS] are trying to slaughter each other and they are still engaged in millions and millions of dollars of trade,' said Adam Szubin, acting under secretary for Terrorism and Financial Intelligence with the Treasury Department, Reuters reported in December. 

Some of the ISIS-produced oil also ended up in Turkey, the Treasury Department claimed. 

The large profits ISIS made from oil prompted the U.S. to heavily target the group's oil infrastructure in its air raids. The campaign successfully dented ISIS's oil profits, making it less profitable today than taxation, the Journal reported. 

However, even after U.S. air strikes destroyed 30 percent of ISIS's oil infrastructure, the terror group still makes about $1 million every day from selling oil, and the corporate structures set up under Abu Sayyaf remain intact, according to the Journal. 

The terror group maintains its oil operation in part by offering handsome salaries to skilled oil workers: more than three times an average Syrian salary - $50 per month - for an accountant, and about eight times an average salary for a drilling technician.
It also factors in how many slaves and dependents a worker has when deciding salaries, the Journal reported. 

According to the Journal, some of Abu Sayyaf's duties were taken over in March by the French jihadist Abu Mohammad al-Fransi, who reports to his predecessor's boss, Haji Hamid.

Pemex raises death toll at petrochemical plant explosion to 28

A view of an area damaged by an explosion at Mexican national oil company Pemex's Pajaritos petrochemical complex in Coatzacoalcos, Veracruz state, Mexico, April 21, 2016. REUTERS/Angel Hernandez
A view of an area damaged by an explosion at Mexican national oil company Pemex's Pajaritos petrochemical complex in Coatzacoalcos, Veracruz state, Mexico, April 21, 2016. 

Mexican state oil giant Pemex said on Friday that the death toll from a petrochemical plant blast in the southeastern oil hub of Coatzacoalcos had risen to 28, in the latest fatal accident to befall the beleaguered company.

In a statement, Pemex said it had identified 25 bodies and that three more were still unidentified. It added that 18 people remained hospitalized. Pemex has said the accident was caused by a leak, but has not fully explained what happened.

The oil firm said it would continue to scour the blast site, but that progress was slow, given the scale of the damage.

The massive explosion took place on Wednesday afternoon at the facility's chlorinate 3 plant in the Gulf state of Veracruz, sending a black cloud of smoke hundreds of meters into the air and giving off a powerful smell of ammonia.

The blast occurred at a vinyl petrochemical plant that is a joint venture between Pemex's petrochemical unit and majority owner Mexican plastic pipe maker Mexichem. Pemex operates the larger petrochemical complex where the plant was located, known as Pajaritos.

The plant produces some 900 tons a day of vinyl chloride monomer, also known as chloroethene, an industrial chemical used to produce plastic piping. The joint venture had forecast sales of $260 million this year.

Earlier on Friday, Mexichem Chief Executive Officer Antonio Carrillo told Reuters that the company had declared force majeure on one internal contract in the wake of the blast.

He said Mexichem would have a better idea of the impact of the blast on the company in the coming weeks.

In February, a fire killed a worker at the same plant, the latest in a litany of safety disasters that have plagued Pemex.

In 2013, at least 37 people were killed by a blast at its Mexico City headquarters, and 26 people died in a fire at a Pemex natural gas facility in northern Mexico in September 2012.

A 2015 fire at its Abkatun Permanente platform in the oil-rich Bay of Campeche affected oil output and cost the company up to $780 million.

(Reporting by Gabriel Stargardter and Lizbeth Diaz; Editing by Tom Hogue)

Friday, April 22, 2016

Trying to make sense of it all

Oman Shipping Company’s VLCC FIDA Joins VL8 Pool

Is the abundance of crude that triggered the collapse in oil prices, which undoubtedly offered multiple benefits to tanker markets since late 2014 set to end or will it continue?
Last weekend’s Doha meeting seemed to have broken up in disarray, as neither the Iranians or the Libyans attended, while Saudi Arabia tried to cap Iran’s output.  

The cheap oil increased seaborne trade to existing and new markets, supported land based commercial and strategic storage, while increased price volatility and stimulated arbitrage driven shipments.

At the same time, excess crude supply not only elevated floating storage (mainly for operational reasons) but also translated into delays and inefficiencies in the supply chain, London brokers Gibson said in a report written just before the meeting.

Finally, owners were able to take advantage of lower bunker costs.

The prolonged period of low oil prices hurts both OPEC and non-OPEC producers alike. US crude output is being hit the hardest and production started to decline during the middle of last year.

The latest EIA projections - again released before the meeting - are for total US crude output to drop by over 0.8 mill barrels per day this year and by around 0.55 mill barrels per day in 2017 to just over 8 mill barrels per day.

Although so far only modest changes in production were seen in other non-OPEC countries, major cutbacks to oil company CAPEX will apply the breaks on future potential. There is also considerable pressure on budgets of producing countries where revenues from oil sales are used to finance fiscal policies.

Although US crude output is falling, global production is at or close to record high levels.

Last January, when Iran’s nuclear sanctions were lifted, authorities in Tehran claimed that the country’s crude output will increase by 0.5 mill barrels per day within weeks and by another 0.5 mill barrels per day during the following six months.

The reality is somewhat different, as the IEA estimated that Iranian crude production was at 3.3 mill barrels per day in March, up by 0.3 mill barrels per day from January. The volume of Iranian crude/condensate in floating storage also remained at high levels. In fact, the number of VLCCs used for storage of Iranian barrels increased modestly by the end of March, relative to January estimates.

Despite these developments, Iranian crude production is still expected to continue to rise throughout 2016, although the pace of growth could be limited.

For the tanker markets, any freeze or even a rise in production would mean more demand. It would also mean that delays and inefficiencies the industry is now facing are unlikely to fade overnight, Gibson concluded.

Initial reaction to the Doha meeting was that by breaking up without an agreement to freeze production, this can only be good for the tanker sector. 

Thursday, April 21, 2016

Pemex CEO Races to Find Partners as Financial Woes Deepen

Two years after Mexico passed sweeping energy reforms, the new CEO of Petroleos Mexicanos is racing against time to bring in partners that can revitalize its money-losing refineries and rescue it from an 11-year slump in oil output.

"If Pemex hasn’t found partners by next year, we are going to be in deep trouble,” Chief Executive Officer Jose Antonio Gonzalez Anaya said in an interview Tuesday at Bloomberg’s headquarters in New York.
Jose Antonio Gonzalez Anaya
Jose Antonio Gonzalez Anaya
Photographer: Michael Nagle/Bloomberg
Gonzalez Anaya is promising investors and analysts that they’ll hear by Thanksgiving how he plans to attract international oil companies to partner with Mexico’s troubled oil giant. To provide short-term financing while the company waits for alliances to be formed, Pemex will return to the bond market to issue about $1.5 billion this year, he said.
Pemex has been pummeled by the worst plunge in oil prices in a generation and a decline in production that has stretched for more than a decade. Gonzalez Anaya is aiming for 100 billion pesos ($5.77 billion) of cost cuts this year to stem the company’s losses, which reached $32 billion last year and will continue in the first quarter. To do that, he is looking for partners in the "entire line" of Pemex’s business, including about $2 billion in deals with private equity firms KKR & Co. LP and First Reserve Corp.

Bringing in partners may include giving up an operating interest in some of its refineries, which lose 100 billion pesos a year, according to Gonzalez Anaya. Pemex still plans to modernize its refineries to improve efficiency, though doing so will require financial and technical assistance from a partner, he said.

"There a lot things that, within the new rules, they don’t necessarily have to be run by Pemex," Gonzalez Anaya said in an interview on Bloomberg TV with Erik Schatzker. He said that Pemex is open to have a majority operator in upstream and downstream areas "in the entire structure," and he’s already in talks with some potential partners.

Pemex, which celebrated Mexico’s opening of the country’s long-standing government oil production monopoly in 2013, has yet to capitalize on the legislation that allows the company to create joint ventures to boost crude production in areas where it lacks the technical ability to do so, such as in deepwater fields. Its six refineries have deteriorated as the company has delayed maintenance and failed to invest enough money to modernize the plants. That has kept Mexico dependent on fuel imports, particularly from the U.S.

Capital Infusion

Pemex’s first quarter earnings are likely to be "very bad" given the slump in Mexico’s crude prices during the first three months of the year, Gonzalez Anaya said. Pemex finished 2015 with more than $87 billion in debt, according to the company’s fourth quarter earning statement.

Mexico announced on April 13 that it would give Pemex a capital injection of 73.5 billion pesos to pay off outstanding debts to oil service providers and absorb some of the company’s pension liabilities. The infusion comes as the spread between Pemex and Mexico’s sovereign debt is the widest between all state-owned oil companies and the countries that control them, according to data compiled by Bloomberg.

The purpose of the trip for Gonzalez Anaya, who was accompanied in New York by Chief Financial Officer Juan Pablo Newman and Mexican Finance Minister Luis Videgaray, was to explain the February budget adjustments and the recent government aid package, he said.

Deficit Target

"The bottom line for us is that we have taken these two big steps, in terms of the budget adjustment and the government support, and they give us a solid financial foundation to do the structural things," he said. "But we need to do the structural things, otherwise it’s not going to work."

Asked if he will be able to deliver on a financial deficit target for the year set at 100 billion pesos, Gonzalez Anaya said "Yes. I’m going to try really, really, really hard to do that."

The meetings held with banks and credit rating companies marked the first time in at least three decades that Mexico’s Finance Minister and the Pemex director held a joint meeting with investors, Gonzalez Anaya said. The meeting was used to "send a clear signal that the government is behind us," he said.

Wednesday, April 20, 2016

Kinder Morgan shelves $3 billion pipeline project

 Kinder Morgan issued $1.6 billion in preferred shares this week. Photo: Kinder Morgan

Energy giant Kinder Morgan Inc. has suspended additional work and spending on its Northeast Energy Direct project, a controversial natural gas pipeline proposed through Massachusetts and New Hampshire.

Kinder Morgan said on Wednesday that the company didn’t receive the extra commitments from big customers that it needed to proceed with the $3.3 billion project. As a result, Kinder Morgan said in a statement, “there are currently neither sufficient volumes, nor a reasonable expectation of securing them, to proceed with the project as it is currently configured.”

Kinder Morgan’s initial approval of the project, through its Tennessee Gas Pipeline subsidiary, was based on existing contracts with gas utilities as well as the expectation that others would sign on to buy gas from the line. Executives at the Texas company were also counting on an unprecedented shift in New England’s market that would allow electric customers to be assessed for pipeline construction costs.

Kinder Morgan cited several reasons for this shortfall, including the fact that it remains far from assured whether New England states will be successful in setting up rules to allow electric customers to be charged for gas pipelines.

Kinder Morgan’s statement didn’t mention the concerns raised by the project’s numerous opponents, including residents of towns that would be affected by the pipeline’s construction and environmentalists who worried that the size of the project could make New England too dependent on natural gas.

“Kinder Morgan is stopping the pipeline because it is both expensive to ratepayers and simply not needed,” George Bachrach, president of the Environmental League of Massachusetts, said in an email. “Massachusetts has the capacity to develop its own energy in solar, wind and hydro. In the process, we can create new industries and jobs here, rather than exporting our dollars and jobs to fossil fuel states.”

State Senate president Stanley C. Rosenberg, one of a number of Western Massachusetts politicians who opposed the project, said in a statement: “Kinder Morgan’s decision to suspend the Northeast Energy Direct (NED) project is a game changer. This allows us to have a broader discussion about how to meet Massachusetts’ energy needs.”

Jon Chesto can be reached at Follow him on Twitter @jonchesto.

China wants ships to use faster Arctic route opened by global warming


BEIJING (Reuters) - China will encourage ships flying its flag to take the Northwest Passage via the Arctic Ocean, a route opened up by global warming, to cut travel times between the Atlantic and Pacific oceans, a state-run newspaper said on Wednesday.

China is increasingly active in the polar region, becoming one of the biggest mining investors in Greenland and agreeing to a free trade deal with Iceland. 

Shorter shipping routes across the Arctic Ocean would save Chinese companies time and money. For example, the journey from Shanghai to Hamburg via the Arctic route is 2,800 nautical miles shorter than going by the Suez Canal.

China's Maritime Safety Administration this month released a guide offering detailed route guidance from the northern coast of North America to the northern Pacific, the China Daily said.

"Once this route is commonly used, it will directly change global maritime transport and have a profound influence on international trade, the world economy, capital flow and resource exploitation," ministry spokesman Liu Pengfei was quoted as saying.

Chinese ships will sail through the Northwest Passage "in the future", Liu added, without giving a time frame. 

Most of the Northwest Passage lies in waters that Canada claims as its own.

Asked if China considered the passage an international waterway or Canadian waters, Chinese Foreign Ministry spokeswoman Hua Chunying said China noted Canada considered that the route crosses its waters, although some countries believed it was open to international navigation.

In Ottawa, a spokesman for Foreign Minister Stephane Dion said no automatic right of transit passage existed in the waterways of the Northwest Passage.

"We welcome navigation that complies with our rules and regulations. Canada has an unfettered right to regulate internal waters," Joseph Pickerill said by email.

Maritime experts say shipping companies would most likely be deterred by the unpredictable nature of Arctic ice, the total absence of infrastructure in the region, relatively shallow waters, a lack of modern mapping and increased insurance costs.

The route would also be strategically important to China, another maritime official, Wu Yuxiao, told the China Daily.

Melting sea ice has spurred more commercial traffic, and China wants to become more active in the Arctic, where it says it has important interests.

Chinese ships, even merchant vessels, using the Northwest Passage could raise eyebrows in Washington.

In September, five Chinese Navy ships sailed in international waters in the Bering Sea off Alaska, in an apparent first for China's military.

(Reporting by Ben Blanchard; Editing by Clarence Fernandez and Jonathan Oatis)

Russia Wins $50 Billion Ruling in Decade-Old Fight With Yukos

France seizes Russian assets in connection with Yukos lawsuit

Russia succeeded in its battle to overturn a $50 billion arbitration ruling after a Dutch court ruled that the panel of judges who issued the record-setting award to the former owners of Yukos Oil Co. had no right to review the dispute.

The ruling by a court in the Hague Wednesday was a sweeping victory for the country in its more than decade-old fight with the owners of what was once Russia’s biggest oil company. The court said that the arbitration panel misinterpreted a treaty that Russia signed, but never ratified, according to a copy of the judgment.

The decision may free up accounts and property belonging to state companies targeted by GML Ltd., a holding company belonging to four former Yukos owners, in attempts to collect the award. Russia’s legal team will file a motion to overturn asset seizures in Belgium and France, said Andrey Kondakov, the general director of the International Center for Legal Protection, which is coordinating Russia’s defense.

“This will make Russian companies operating in foreign countries feel more comfortable,” Evgeny Minchenko, head of the International Institute for Political Expertise in Moscow, said by phone. “It also improves Russia’s image abroad as a whole.”

Ruling Overturned

Yukos was dismantled amid billions of dollars of tax claims that its former chief Mikhail Khodorkovsky called revenge by the Kremlin for his funding of opposition parties. He is campaigning in exile for the ouster of Vladimir Putin. The Russian president issued a pardon to free Khodorkovsky in 2013 after a decade in prison on convictions for fraud and tax evasion linked to Yukos.

“This is a victory for the rule of law and justice has prevailed,” Kondakov said. “This is the first time in 20 years that the district court has overturned an arbitration ruling.”

The decision showed that the West has decided to ease pressure on Russia, Khodorkovsky said on his Twitter account.

GML plans to appeal the decision, GML director Tim Osborne said on a conference call. The shareholders will continue enforcement proceedings for the tribunal’s award despite the ruling, which misapplied the laws governing the treaty, he said.

Coming Battles

The Kremlin is prepared for battles to continue. “We fully understand that this is not the end of the story,” Putin’s spokesman Dmitry Peskov said. “We are talking about a judicial process. I wouldn’t want to politicize it.”

The finding in favor of Russia runs counter to some arguments by hardliners who want the Kremlin should abandon values championed by Europe and the U.S. The Yukos case is an example of an information war against Russia, Alexander Bastrykin, the head of Russia’s Investigative Committee, wrote in an article in Kommersant-Vlast magazine Monday.

“This will contain the movement in Russia to reject international law because it turns out that it can be beneficial,” Gleb Pavlovsky, a former political adviser to Putin, said by phone. “At the same time, this solution should soften the image of a hostile West.”

Monday, April 18, 2016

Botched Doha deal undermines OPEC credibility, oil prices tumble

 Image result for doha

Oil prices tumbled on Monday after a meeting by major exporters in Qatar collapsed without an agreement to freeze output, leaving the credibility of the OPEC producer cartel in tatters and the world awash with unwanted fuel.

Tensions between Saudi Arabia and Iran were blamed for the failure, which revived industry fears that major government-controlled producers will increase their battle for market share by offering ever-steeper discounts.

"OPEC's credibility to coordinate output is now very low," said Peter Lee of BMI Research, a unit of rating agency Fitch. "This isn't just about oil for the Saudis. It's as much about regional politics."

Morgan Stanley said that the failed deal "underscores the poor state of OPEC relations," adding that "we now see a growing risk of higher OPEC supply," especially as Saudi Arabia threatened it could hike output following the failed deal.

Oil prices have fallen by as much as 70 percent since mid-2014 as producers have pumped 1 to 2 million barrels of crude every day in excess of demand, leaving storage tanks around the world filled to the rims with unsold fuel.

Sunday's meeting in Qatar's capital Doha had been expected to finalize a deal to freeze output at January levels until October 2016 in an attempt to slow that ballooning oversupply.

But the agreement fell apart after top exporter Saudi Arabia demanded that Iran, which was not represented, should also sign up.

The Sunni Muslim kingdom of Saudi Arabia and Shia Islamic republic of Iran compete for influence in the Middle East, where they are currently fighting proxy wars in Syria and Yemen.

Brent crude futures fell almost 7 percent in early trading on Monday before recovering to $40.97 per barrel at 0647 GMT, still down 2.15 percent since their last settlement.

Traders said only an oil worker strike in Kuwait had prevented Brent from tumbling below $40 per barrel, while a cut in U.S. drilling down to 2009 levels had prevented steeper falls there.

Benchmark U.S. crude futures were down more than 5 percent at $38.31 a barrel.

Goldman Sachs said the Doha no-deal could a "bearish catalyst" for U.S. crude prices, which it forecast would average $35 a barrel in the current quarter.


Analysts said that the failed agreement would also impact the broader economy.

"In the near-term, lower oil prices are bound to weigh on investor confidence and could exacerbate financial volatility," said Frederic Neumann, co-head of Asian economics research at HSBC.

"Concerns over financial stability in the energy sector and a further fall in drilling capex are headwinds to growth against an already fragile global economic backdrop."

With producers such as Saudi Arabia and Russia pumping near record levels and Iran also increasing output following the lifting of international sanctions against it last January, there is no end in sight for the global oil glut.

Iran was the only OPEC member not to attend the Doha talks.
Despite calls on Saudi Arabia to save the agreement, Riyadh, OPEC's de facto leader, insisted that all 13 members must take part in any freeze.

"It seems that for the Saudis politics and national pride are still more important than the price of oil," said Ralph Leszczynski of shipbroker Banchero Costa.

Iran has refused to stabilize production, seeking to regain market share post-sanctions.

"Iran has no reason to auto-sanction themselves when they are just trying to get back some of the market share they lost in recent years due the western-imposed sanctions," Leszczynski added.

While tumbling oil prices hurt producers, straining the budgets of energy exporters from Russia to Malaysia, they can also benefit consumers.

Asked whether the failed talks could result in further crude supply discounts for his company, Daniel Purba of Indonesia's Pertamina, a major importer of refined products, said: "We hope so."

As a result of the failure at Doha, Barclays said that Brent would likely average $36 per barrel during the second quarter of this year as a global glut continued unabated.

"This meeting and its outcome should have built... trust among producers for possible future cooperation and coordinated action. In this regard, the meeting was a complete failure," Barclays said, adding that "the failure of the talks gives the market another clear indication that OPEC's relevance in this market environment has faded."

(Additional reporting by Keith Wallis in SINGAPORE and Wilda Asmarini in JAKARTA; Editing by Alex Richardson)

Friday, April 15, 2016

Gulf of Guinea - a cause for concern

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The Gulf of Guinea continued to blight an otherwise cautiously optimistic piracy analysis thus far this year. 
In its first quarter 2016 piracy analysis, Dryad Maritime said that from January to March, the region saw a surge of industrial sabotage ashore, and offshore. The activity of pirate action groups (PAGs) operating with impunity in the face of overstretched Nigerian naval patrols has surged.

Around 14 commercial vessels were attacked off Rivers and Bayelsa States, with eight raids classified as ‘unsuccessful’ due to evasive manoeuvring or the crew’s evasion of capture by retreating to their ship’s citadel.

In six of these incidents, 23 crew members were kidnapped for ransom, which is proving to be a far more effective business plan for PAGs than hijacking product tankers for cargo (instances of which have fallen dramatically in the last 18 months), despite one unsuccessful attempt which was thwarted by Nigerian forces in February, Dryad said.

In Southeast Asia, this region had seen a 50% drop in reported maritime crime compared to the same period in 2015 - the lowest figures recorded by the security company in 10 years.

Similarly, the end of 1Q16 represented the longest period without attacks on vessels underway or at anchor within the Singapore Strait since 1Q13. 

Somali piracy continued to be broadly contained with no confirmed attacks on large vessels since January, 2014, despite some commentators’ views that the pirates continue to ‘probe.’

Ian Millen, Dryad Maritime COO, said; “The first three months of 2016 have visibly demonstrated the dynamic nature of maritime crime and how effective action to combat it can turn the tide in favour of the good guys. There are some welcome causes for optimism in certain regions, notably the Indian Ocean where Somali piracy remains broadly contained, and in Southeast Asia, where we have seen a remarkable turnaround in a little over six months to deliver our lowest first quarter figures in a decade.

“In other areas, such as the Gulf of Guinea, the picture is a less positive one, with kidnap of crew for ransom rampant off the Niger Delta. Wider concerns, from the effects of civil war and concerns over maritime terrorism to the impact of humanitarian crises, such as maritime migration, continue to focus the minds of all with duty of care responsibilities for ships, crew and passengers, but these are manageable issues with proper planning and support.

“Despite the good progress in some regions, we should avoid complacency at all costs. Criminal enterprises are adaptable and flexible and unencumbered by ethics, morality or international corporate law. No less business savvy than legitimate, law-abiding businesses, they can and will adapt to changing market conditions, finding new, less risky and more profitable ways of making their ill-gotten gains.

“The drop off in cargo theft and increase in kidnap activity in the Gulf of Guinea, could be one such example of this adaptability. Keeping one step ahead of the criminals is the key to what we do and how we help our clients,” he concluded.

Thursday, April 14, 2016

China Imports Record Oil as Higher Margins Boosts Purchases

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  • Nation imported 91.1m tons crude in 1Q, up 13% year-on-year
  • China 1Q refining margin surged 68 percent from 2015: ICIS

China’s crude imports climbed to a record in the first quarter as higher refining margin encouraged refiners to boost purchases.

The world’s biggest energy user increased inbound shipments to 91.1 million metric tons in the first three months of the year, data from the Beijing-based General Administration of Customs showed on Wednesday. That’s equivalent to about 7.34 million barrels a day, 6 percent higher than the previous quarter and 13 percent up from the same period last year, according to Bloomberg calculations. Imports last month fell about 4 percent from February’s record to 7.71 million barrels a day, the third-highest ever.

The nation’s net oil-product exports jumped to 1.3 million tons in March, the highest in three months, Wednesday’s data show. Refiners are importing more oil to take advantage of local retail fuel prices that are frozen when oil trades below $40 a barrel. The margin for major Chinese refineries to process Oman crude was about $16 a barrel in the first quarter, 68 percent higher than last year’s average, according to ICIS China, a Shanghai-based commodity researcher.

“Low oil prices and healthy margins are supporting imports,” Virendra Chauhan, a Singapore-based analyst at industry consultant Energy Aspects Ltd., said in an e-mail. “The strong imports also reflect demand from the teapot refiners.”

Stabilizing Economy

China’s total exports in March jumped the most in a year and declines in imports narrowed, adding to evidence of stabilization in the world’s second-biggest economy. The export rebound may suggest China’s economy fared better than expected in the first quarter, with data due Friday expected to show a 6.7 percent expansion for the period.

A total of 27 independent refiners, known as teapots, have obtained or applied for crude-import quotas, totaling 89.5 million tons as of the end of February, Zhang Liucheng, chairman of China Teapot Alliance, said on March 31. Meanwhile, China awarded additional 230,000 tons of oil product export quotas to teapot refineries in a second-batch allocation, according to ICIS China.

“The teapot plants are very sensitive to refining margins and profitable oil processing in the first quarter certainly boosted their appetite for crude,” Guo Chaohui, an analyst at Beijing-based China International Capital Corp., said before the data were released.

Largest Importer

China may surpass the U.S. as the world’s largest crude importer this year with average inbound shipments of 7.5 million barrels a day, driven by independent plants’ purchases and stockpiling demand, said Zhong Fuliang, vice president with China International United Petroleum & Chemicals Co., the trading arm of the nation’s biggest refiner. The U.S. imported 7.37 million barrels a day last year, according to Energy Information Administration data.

The nation’s crude imports may fall in the second quarter as processing plants take units offline for scheduled maintenance and port congestion delays unloading of cargoes, according to ICIS China and Energy Aspects.

Inbound shipment may fall to as low as 23 million tons a month in the quarter as about 104 million tons of annual primary processing capacity will be shut for maintenance in the April-June period, ICIS China said in an e-mailed report on April 6.

Energy Aspects estimates vessel wait times at ports in Shandong province, where most independent refineries are based, have increased to as long as 30 days, it said in a note dated April 4.