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Access to more vessels allows Iran to step up LPG exports: sources

Iran has been building up access to a growing fleet of very large gas carriers, enabling the country's producers to export LPG to Asia on a cost and freight rather than free on board basis even before EU sanctions against its nuclear plans were eased, trade and shipping sources said Wednesday.

Around eight VLGCs have been acquired by Chinese companies registered in the UAE that have business dealings with Iranian firms, the sources said.

These vessels are among several others that have been moving Iranian LPG to East Asia, particularly China and South Korea, since shipments resumed in May after an eight-month halt due to an EU ban on shipping insurance for Iranian propane and butane, the sources said.

These VLGCs include Gas Jenny, (ex Maple 2), Gas Beryl (ex Devon), Gas Sapphire (ex Red Rum), Sea Danuta (ex BW Danuta) and Gas Crystal (ex Reference Point) and Jeanne-Marie, the sources said.

The access to a sizeable number of VLGCs comes even as the EU seeks to revise at the end of January a significant part of the sanctions package it imposed on Iran in July 2012, which one shipping source said was expected to be linked to the ban on providing insurance for tankers carrying Iranian oil.

Just over a year ago, Iran had just one aged vessel, forcing exporters to sell mainly on an FOB basis, which saw buyers struggling to get vessels agreeing to load from Iranian ports and almost halting its exports.

Reflecting mainly the sharp drop in Iranian exports following the sanctions, Middle East exports last year fell by 2 million mt from 2012 levels to around 32.5 million mt, shipping brokerage Lorentzen & Stemoco said in a report this week.

Iranian news agency Mehr, citing an oil ministry official, reported Sunday that Iran had bought via the private sector 12 new and second-hand tanker ships to carry LPG as a new strategy to salvage its sanctions-hit gas markets.

But an Iranian industry source told Platts that not all the 12 vessels are VLGCs. "Some are ethylene carrier and some chemical carriers," he said.

Another Iranian trade source said the Middle East producer now owns four VLGCs and the rest are smaller gas carriers of 3,000 dwt, 5,000 dwt and 6,000 dwt in size.

INTEREST FROM JAPANESE SHIPOWNERS

Sources had said that when Iran first resumed shipments around mid-2013, Tehran might have issued its own protection and indemnity insurance cover, commonly known as P&I insurance, for ships loading in the country.

After selling a spot cargo via tender to South Korea's E1 Corp. in May, Iran also resumed its exports to China the following month following a four-month break and has been regularly selling to Chinese buyers since, including sealing term contracts with several firms.

Among VLGCs that have transported Iranian LPG to Asian buyers over the past few months are Gas Jasmine, Schumi, Sam Russ, Gas Beauty and Senna Princess.

China had been a regular importer of LPG from Iran in past years. But Chinese customs data did not record any imports in 2012 or between January and October last year, even though traders said some buying had resumed since June. Buyers normally switch ports before taking in cargoes, so departure ports do change, which may explain why Iran is not be recorded as a departure point.

However, the latest customs data show that China imported 38,954 mt from Iran in November, from a total intake of 411,775 mt for the month.

Also ahead of the partial lifting of sanctions, which could be decided as early as January 20 at a meeting of EU foreign ministers, industry sources said three Japanese shipowners had been making enquiries on whether trading firms needed charter to move Iranian cargoes.

Japanese trading firms haven't imported LPG from Iran since early 2012 on concerns over losing shipping reinsurance amid looming EU sanctions at the time, a reversal of Iran's position as a top supplier to Japan over April-December 2011, industry sources said.

Japan last imported 44,800 mt of Iranian LPG in February 2012, which was also the total import volume for the year. It did not import any Iranian LPG in 2013, according to an official at the Japan LP Gas Association.

A shipping source said if the EU lifted its ban on reinsurance for carrying Iranian oil, Japanese lifters of LPG might also see fewer hurdles for resuming Iranian imports of the product. This is because EU sanctions do not apply to Japanese companies bringing LPG back to Japan.

"So it means that there are some movements," one Middle East shipping source said, referring to the enquiries made by Japanese shipowners, who are also expected to lift the ban on insurance cover for shipping gas. "I heard that EU P&I are also looking to lift the restriction."

Industry sources said there was negligible scrapping of LPG carriers last year and no VLGCs are expected to be demolished within the next two years, helping to boost prices of VLGCs.

A 2005-built vessel was transacted for $64.5 million, while ships built in the early 1990s had been sold around $22 million-$24 million each.

In contrast, industry analysts said newbuild prices have risen from the the lows of $70 million-70.75 million to recent quotations from South Korea around $75 million-$77 million, and more increases are expected.
Source: Platts