While Asian shipbuilders such as Sinopacific and Jiangnan in China as well as usual suspect Samsung Heavy Industries (SHI) are naturally benefitting from the spike in demand for these more sophisticated gas carriers, Asian shipping companies have yet to enter the space. Brokers Seatrade Global spoke to were non-committal, deferring to obvious considerations of long-term contracts from refiners for ship owners to bite.
A large part of the reason is that the dynamics of the trade to Asia are more complicated than that to Europe. The interest in ethane as a feedstock for the petrochemical industry has arisen in tandem with the US shale gas revolution. Used as a replacement for naptha, oversupply in the US has meant ethane prices are around half that of the usual feedstock.
Export terminals however are all on the US East Coast, making Far East shipments tricky. Not only do the ships need to be bigger for economies of scale to compensate for distance but terminal infrastructure and refinery demand also need to be considered.
“Larger vessels are needed but will be determined by various factors such as draft of load and discharge ports,” said a shipping source. He suggested vessels of around 90,000 c um would make the most sense for any potential Asia trade.
Towards the western extreme of Asia, India has an advantage. Coupled with the industrial might of a major conglomerate such as Reliance, the equation is clearly favourable. Moving further east towards Southeast Asia and up towards the Asian industrial bases in the north, the picture is less clear.
Chinese oil major Sinopec has refineries all along the eastern coast that could theoretically switch to ethane. Likewise Southeast Asian refineries could also switch, however the catch is the cost of infrastructure required. This needs to be balanced against the cheaper product cost. For example new ethane crackers run into the billions of dollars.
Other considerations include the security of cheap supply from the US and the options the expanded Panama Canal will offer.
So far, the only long-term supply deal of note has been Reliance’s project. This was being bid for by top gas players BW Gas and Exmar but in the event ended up being handled by Reliance internally with an order for six 87,000 c um very large ethane carriers (VLECs) from SHI due for delivery in 2016.
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