Karatzas Marine Advisors & Co.
International Maritime Consultancy, Shipping Finance Advisory & Ship-brokerage
“U.S. Energy Exports,
and the Panama Canal Expansion”
United States Association for Energy Economics / NCAC
Washington, D.C., July 15th, 2016
“Safe Harbor” Statements
‘And seas but join the regions they divide’
Alexander Pope
‘In Sea affairs, nothing is impossible, and nothing is improbable’
Admiral Lord Nelson, writing from
HMS Victory in 1804
‘If you want to build a ship, don’t drum up the men to gather
wood, divide the work and give orders. Instead, teach them to
yearn for the vast and endless sea’
Antoine de Saint-Exupéry
KARATZAS MARINE ADVISORS & Co.
July 2016
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Agenda
Karatzas Marine Advisors & Co.: Introduction
The “Old” Panama Canal
Shipping Market Overview
The “New” Panama Canal and the US Energy Markets
Karatzas Marine Advisors & Co.: Contact Information
KARATZAS MARINE ADVISORS & Co.
June 2016
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Company Introduction
Karatzas Marine Advisors & Co. is New York-based firm with worldwide
footprint & strong, well-qualified management team
Active in shipping finance advisory, restructurings, maritime strategy, private
placements, vessel valuations, ship brokerage and vessel management
Clients include:
Financial institutions seeking shipping market expertise and advisory on shipping matters
Financial institutions in need of origination of transactions in shipping
Banks seeking to dispose of shipping assets and/or shipping loans
Shipowners seeking advise to access the financial markets
Shipowners seeking advisory and investors with existing ‘legacy’ concerns
Shipowners seeking financial partners to benefit from present market trough
Dry bulk, tankers, containerships and offshore
International flag business primarily, but also Jones Act expertise
Proven track record of market outperformance and delivering value to clients
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July 2016
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Company Information
Management team bears decades of diverse, proven shipping expertise, including port
operations, chartering, ship brokerage and demolitions, vessel management, shipping
finance and vessel valuations, co-placements and JVs
Company established in 2011, corporate history back to 2008; presently six employees,
on both full- and part-time basis
Impeccable credentials & references (gladly provided upon request)
Well-representative existing clientele base
Geographic Distribution – Americas, Europe (UK, Germany, Greece, Scandinavia), SE Asia (Singapore,
Indonesia, Thailand), Far East (Hong Kong, Japan) China
Corollary Industry Functions – Shipowners, Charterers, Vessel Managers / Operators, Oil Companies
(including National Oil Companies), Cargo Interests and Traders, Financial Owners & Lessors, Lenders
& Creditors, Service Providers
Shipping-market Segmentation: Tankers (crude oil, products tankers, chemical tankers), Dry bulk vessels
(capesize, panamax, supramax/handymax, handysize), Purpose-built vessels, Containerships (postpanamax to feedership vessels), Offshore & Drilling – Jones Act Assets
Capital-structure Segmentation: publicly-traded companies and privately-held companies, Fortune 10
companies and private independent owners, financially-oriented owners & lessors
KARATZAS MARINE ADVISORS & Co.
July 2016
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Agenda
Karatzas Marine Advisors & Co.: Introduction
The “Old” Panama Canal
Shipping Market Overview
The “New” Panama Canal and the US Energy Markets
Karatzas Marine Advisors & Co.: Contact Information
KARATZAS MARINE ADVISORS & Co.
June 2016
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Panama Canal Traffic by Traffic Segment
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July 2016
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Top 15 Countries of Origin and Destination of Cargo
(in long tons, 2015)
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July 2016
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Panama Canal Traffic by Traffic Segment
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July 2016
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Petroleum Traffic via the Panama Canal (2015)
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July 2016
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Agenda
Karatzas Marine Advisors & Co.: Introduction
The “Old” Panama Canal
Shipping Market Overview
The “New” Panama Canal and the US Energy Markets
Karatzas Marine Advisors & Co.: Contact Information
KARATZAS MARINE ADVISORS & Co.
July 2016
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Historical Freight Market Data
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July 2016
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World Fleet Development by Sector
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July 2016
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Agenda
Karatzas Marine Advisors & Co.: Introduction
The “Old” Panama Canal
Shipping Market Overview
The “New” Panama Canal and the US Energy Markets
Karatzas Marine Advisors & Co.: Contact Information
KARATZAS MARINE ADVISORS & Co.
July 2016
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Panama Canal Update
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July 2016
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Expanded Panama Canal (Tankers)
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July 2016
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Expanded Panama Canal Update (Tankers, in comparison)
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Expanded Panama Canal “Sanity Check”
Cost of Expansion: ~ $5.3 billion
July 1st, 2016: Containership MV ‘MOL Benefactor’ (10,000 TEU, ) pays $829,468 in
canal tolls for northbound crossing; highest canal dues ever paid, until now
At ~ $1 mil per crossing per post-panamax containership, appr. 5,500 such crossings
will be required to recoup investment. In 2015, 12,000 ocean-going vessels crossed the
Canal, in total, thus it will take several years of transits by incrementally larger
containerships to recoup investment.
It costs appr. $1,700 to transport a container from China to US East Coast, in a weak
freight market; based on full-capacity utilization, appr. $83 per container on MV ‘MOL
Benefactor’ just to cross the Canal, appr. 5% of the total freight cost.
For capesize vessel (present freight market of $6,000 pd and est. of $10,000 in fuel
expense), it will take two weeks of additional savings to justify $500,000 in canal dues.
Timing of completion of expanded Panama Canal is un-fortunate as it coincides with
multi-year lows of the shipping industry.
Real “worth” of Panama Canal will be seen when shipping markets revert to the mean,
and world economic growth is much higher than present (~1-2%)
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July 2016
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Panama Canal Unknowns
“It’s tough to make predictions, especially about the future”, it has been said.
Many variables can affect volume of future transits, trades and trading routes, and
cargoes:
State of freight market (i.e. tonnage supply and demand, economic growth, etc)
Price of oil as fuel (bunkering expense for vessels)
Port infrastructure (i.e. terminals, dredging, etc)
Cost of capital and interest rates (i.e. Capex for vessels, trade finance cost, etc)
Trading patterns (LNG has been traded on long term contracts and ‘trains’ with nascent
spot market)
Pricing models (LNG vs oil)
Regulatory and political events (emission laws, clean energy, etc)
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July 2016
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Newsflash: In the U.S., Largest Oil Reserves in the World
Financial Times, July 4th, 2016, based on report produced by Rystad Energy
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July 2016
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Newsflash: Shale Oil is Low Cost Oil
KARATZAS MARINE ADVISORS & Co.
Financial Times, July 13th 2016, based on Wood Mackenzie
Analysis
July 2016
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Thoughts on Crude Oil and Panama Canal Transits
U.S. has great potential as exporter of crude oil (swing producer?)
Lifting of export ban of crude oil in 2015
Presently, appr. 600,000 bbl per diem exported by US
Seaborne exports mostly to Europe (UK, Continent, Med)
Mostly on Panamax or Aframax tankers (400,000 – 600,000 bbl per shipment / tanker)
Still a developing trade in early stages, but so far in small parcels over short distances
India, SE Asia, China and Far East show strongest demand in crude imports
Middle East (and now Iran) likely first source
U.S. crude oil can only exported in supertankers (i.e. Suezmax, VLCC) costcompetitively to countries in the Pacific Rim
Expanded Panama Canal cannot accommodate such tankers
Possibly, transshipment via Panamax / Aframax tankers and/or pipeline and reverse
lightering of supertankers in Pacific Coast of Panama
Potentially can happen, for North Asia / China / Japan, but at different cost curves of crude oil and
seaborne shipment
EIA, June 30th, 2016: “Panama Canal expansion unlikely to significantly change crude oil, petroleum
product flows”
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July 2016
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LNG Tanker World Fleet (# of Vessels >50,000 cbm)
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LNG Seaborne Trade (mil tons)
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Panama Canal LNG Tanker Canal Dues
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June 2016
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Panama Canal LNG Tanker Canal Dues
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June 2016
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Transport Costs for LNG (160,000 cbm) from USG to Japan
Slide for comparison purposes only. Otherwise, exceptionally low shipping cost reflect weakest freight market and also
low bunkering expense.
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July 2016
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Thoughts on LNG and Panama Canal Transits
U.S. natural gas discoveries in last decade have been a game changer
Countries of the Pacific Rim likely major buyers of US LNG over time
LNG trading is moving away from ‘train’ to ‘spot training’ (similar to crude oil)
Most of the LNG tankers at present are owned by ‘independent’ shipowners, intended
for spot market trading
Transiting the Panama Canal makes economic sense for LNG tankers
Most economic route, even in historically weak times
Savings on trade finance costs, Capex for expensive cargoes and vessels
Corporate Social Responsibility by lowering emissions, etc
Transiting the Panama Canal makes also sense for newly developed large LPG Tankers,
Very Large Gas Carriers (VLGC) and also ethane Tankers
The expanded Panama Canal likely to a have symbiotic relationship with development
of natural gas markets and exports from North America
Possible competition: circumnavigating North America via the Arctic (Northwest or
Northeast Passage) – in the future
KARATZAS MARINE ADVISORS & Co.
July 2016
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Agenda
Karatzas Marine Advisors & Co.: Introduction
The “Old” Panama Canal
Shipping Market Overview
The “New” Panama Canal and the US Energy Markets
Karatzas Marine Advisors & Co.: Contact Information
KARATZAS MARINE ADVISORS & Co.
July 2016
Page 29
Contact Details
Karatzas Marine Advisors & Co.
International Maritime Consultancy, Shipping Finance Advisory & Ship-brokerage
Headquarters:
One World Financial Center, 30th Floor
200 Liberty Street
New York, NY 10821 USA
Germany Office:
Neuer Wall 80
20354 Hamburg
USA (New York City): +1 212 380 3700
GERMANY (Hamburg): +49 40 822 138 345
Email: [email protected]
Web: www.Karatzas.com
KARATZAS MARINE ADVISORS & Co.
July
2016
Thank you for your attention!
For Current Commentary on Shipping Finance, Please Feel Free to Visit Our Blog at
www.shippingfinance.wordpress.com
References and Data Sources: EIA, The Panama Canal Authority, The Financial Times, The Wall Street Journal,
The Maritime Executive, gCaptain, Clarksons Research, Karatzas Marine Advisors.
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July 2016
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