dChan - Q Origins Project Archive

Oil Traders Now Hiring Jones Act Tankers for Storage and Shipping Abroad

April 27, 2020 by Reuters

By Jonathan Saul and Devika Krishna Kumar LONDON/NEW YORK April 27 (Reuters) – Oil traders are hiring expensive U.S. vessels, normally only used for domestic shipments, to store gasoline or ship fuel overseas, five shipping sources said, in a sign of the energy industry’s desperation for places to park petroleum amid a 30% drop in worldwide demand.

Billions of people worldwide are living under confinement rules due to the coronavirus pandemic, destroying demand for gasoline and other fuels and creating a supply glut. Storage tanks onshore and floating storage in tankers on the water are rapidly filling, leaving fewer options for traders looking to sock away oil.

Several shippers said they have started to book Jones Act (JA) vessels for foreign voyages or to store refined products. The century-old Jones Act requires that vessels traveling between domestic ports be owned and operated by U.S. crews, and they are generally more expensive than other vessels.

“It’s very unusual to use JA tankers for international trips,” one shipping source said.

Those restrictions, and lack of availability, typically make the tankers more expensive than foreign-flagged vessels that go to other countries. Around 45 products tankers are JA compliant, shipping data reviewed by Reuters showed.

Rates for foreign-flagged fuel tankers such as medium-range and long-range vessels leaving from the United States have jumped to about $60,000 and a record $100,000 a day, compared with Jones Act medium-range tanker rates of about $55,000 to$70,000 a day, the sources said.

Refiner Motiva Enterprises is among companies looking to potentially charter a Jones Act vessel for an overseas voyage, shipping sources said.

Motiva did not immediately respond to a request for comment.

Inventories of gasoline in the United States have surged to a record and U.S. refiners are operating at about two-thirds of capacity. Roughly 85% of worldwide onshore storage was full as of last week, according to Kpler data.

“The Jones Act sector is mirroring what we are seeing with the wider oil tanker market with a surge in demand for tankers as refiners can’t sell gasoline or oil products. Utilization of Jones Act tankers is at 100%,” said Basil Karatzas of New York-based shipping finance advisory firm Karatzas Marine Advisors & Co, which is active in the Jones Act market.

He said some older JA tankers that had been planned to be scrapped may end up being used as storage.

Long-range tankers can carry between 345,000 barrels and 615,000 barrels of gasoline or between 310,000 barrels and 550,000 barrels of light sweet crude.

Jones Act tankers usually are employed under time charters for over a period of a year. (Reporting by Devika Krishna Kumar in New York and Jonathan Saul in London; Editing by Franklin Paul and Leslie Adler)

https://gcaptain.com/oil-traders-now-hiring-jones-act-tankers-for-storage-and-shipping-abroad/

Floating Power Plants Are Taking to the High Seas

May 1, 2020 by Bloomberg

By Anna Shiryaevskaya (Bloomberg) — As economic lockdowns complicate efforts to bring electricity to every corner of the planet, one company is putting generation units on ships that can sit offshore and plug into local grids at short notice.

Karpowership is busy marketing floating power plants across the developing world, where governments are seeking extra voltage to power hospitals and other facilities to keep the lights on during the coronavirus pandemic.

Vessels can hook into an onshore grid quickly, sidestepping the red-tape and construction issues involved with building a traditional power plant. And these ships come with their own fuel — liquefied natural gas and fuel oil — tapping into markets that are currently oversupplied.

“We can deploy them in less than 30 days,” Zeynep Harezi, chief commercial officer of Kapowership, said by phone from her office in Istanbul where the ships are designed.

The generators on the ships can produce between 36 megawatts to 470 megawatts of electricity and are already fully financed. While the ships use fossil fuels and present a challenge to the global drive for cleaner energy, they remain among the few solutions for feeding power to remote areas.

Such ships can work well in places with high barriers for onshore power stations or that lack access to gas pipelines, the International Gas Union said in its annual LNG report. There’s also risks: high cost and up-front capital requirements. Also, floating power plants concepts compete with more traditional units that run on liquid fuels, renewables and nuclear power, which may receive governmental support over LNG, the report said.

“The concept of a fully integrated floating re-gasification and power plant may be a more realistic solution to grant easy access to clean electricity production,” the IGU said. “Such fast track projects, built and commissioned at reputed shipyards, may materialize in the near future.”

Karpowership has the biggest fleet of the vessels. Starting from the first ship for Iraq, which took three years to build in 2010, it now operates 25 such ships in 11 countries from Mozambique to Cuba to Indonesia. Coronavirus hasn’t slowed work, opening some opportunities for new markets instead.

The company converts existing dry bulk vessels, buys engines in bulk and builds them “one after another, almost like a production line,” Harezi said.

The technology for the power plant is internal combustion engine, rather than more typical turbines. While more expensive to build, they are cheaper to maintain and better suited for countries in hot climates with unstable grids, which are often in desperate need for power to avoid blackouts.

At 8 to 10 cents a kilowatt-hour, Karpowership provides a power ship, a floating storage and re-gasification unit for LNG and, if required, the fuel itself.

“If the customer asks to procure LNG on our behalf, we collect offers like regular players,” she said. “We make it as transparent as possible.”

The ship can use LNG or fuel oil. Some start with the latter and then switch. The company targets for its power ships to be operating at 80% LNG-to-power by 2025.

Since traditional power plants on land can take six years or more to complete, floating units have a distinct advantage and can appear in under three months to deal with a surge in demand. While these ships often are initially thought as a bridge solution until something more permanent can be built, some of the ships stay long-term, she said.

Karpowership is building 4,000 megawatts of new capacity on 20 ships, aiming to double the fleet size in the next three to five years, both in terms of megawatts and number of ships.

And as the coronavirus pandemic keeps large swathes of economies on lockdown, Harezi said her teams living and working on power ships for three months or more present a “natural quarantine environment.”

–With assistance from Jessica Shankleman.

https://gcaptain.com/floating-power-plants-are-taking-to-the-high-seas/

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