Increased US exports of liquefied petroleum gas (LPG) amid higher shale oil production will boost demand for ships that carry gases such as propane, butanes and ethane, according to the director of an Athens-based shipping firm.
Shipments of LPG from the US rose to a record 506,000 barrels a day in April, up 65% from a year earlier, Energy Information Administration data show. Production of the gases has grown as high oil prices and improvements in horizontal drilling and hydraulic fracturing techniques have allowed producers to tap into crude and gas trapped in layers of shale rock more than a mile beneath the Earth’s surface.
“The US shale oil revolution is the main game-changer for the LPG market,” said Latsco Shipping boss, Paris Kassidokostas-Latsis.
“We are very optimistic on further growth of demand for LPG ships, especially from the US on the back of shale.”
LPG in the US, used for cooking and heating and as a feedstock for the petrochemicals industry, is mostly produced as a byproduct of natural gas.
US crude output reached 8.48million barrels a day in the week ended June 13, the highest since October 1986, while natural gas output is forecast to hit a record for the fourth straight year.
The ample supply of gases has depressed prices along the US Gulf Coast, benefiting petrochemical manufacturers and encouraging exports.
That has increased demand for the largest ships hauling LPG, known as VLGCs, that can hold about 80,000 cubic meters.
The cost to transport 1million tons of LPG on a VLGC on the benchmark Middle East to Japan route was $128.19 on Monday, 66% higher than 12 months ago, according to the London-based Baltic Exchange.
Latsco operates four VLGCs, each with a carrying capacity of 82,000 cubic meters, seven medium-range product tankers with total capacity of 343,815 deadweight tons and four long-range product tankers with combined capacity of 335,654 deadweight tons. Product tankers carry refined petroleum products.
The company ordered 12 ships in 2013, including four VLGCs from South Korea’s Hyundai Heavy Industries, three long-range product tankers from Hyundai Samho Heavy Industries and five medium-range product tankers from Hyundai Mipo Dockyard “worth just under $700million,” Kassidokostas-Latsis said.
“The long-term fundamentals are strong for the products market in general,” he said.
The order represents the Latsis Group’s “vigorous return” to shipping that, along with a reorganization of Latsco, opens a new chapter in its 70 year-old maritime history, according to Kassidokostas-Latsis.
The Latsis family’s interests extend to refining, real estate and banking. Spiro Latsis, the son of deceased shipping tycoon Yannis Latsis, has a net worth of at least $3billion, making him Greece’s richest man, according to the Bloomberg Billionaires Index.
The family has stakes in the country’s largest refiner Hellenic Petroleum, in real-estate developer Lamda Development, and controls Zurich-based private-banking company EFG International.
The EIA projects the US will be a net exporter of LPG through 2040, because of continued increases in natural gas and oil production.
Shale gas production in the US will grow to 19.8trillion cubic feet in 2040 from 9.7trillion cubic feet in 2012.
Greece has the world’s largest merchant fleet with over 3,400 vessels accounting for almost 16%of global carrying capacity, according to the Greek Shipping Ministry.
