Oando LPG

StealthGas orders two LPG carriers

• Monday 09 June 2014, 09:02
• 
• TANKERS

STEALTHGAS, the Greece-based specialist in handysize liquefied petroleum gas carriers, has added two 22,000 cu m vessels to its orderbook in an attempt to harness expanding LPG trade.The company booked the semi-refrigerated ships at Hyundai Mipo Dockyard for a total of Won106.7bn...

BP Fujian: Marketing LPG in Fuzhou - Case Solution

This case describes potential problems a firm has when selling to a developing market, as exampled by China. BP has moved in, signed up distributors, provided steel tanks for free, in hopes of quickly penetrating the marketplace. After two years bottled sales were down and plant capacity was 60% of capacity. Managers met for a strategy session and now they must decide how to proceed with their Chinese distributor partners.

1. BP had been successful in Malaysia. Should the same system work in China? Why or why not?

From the facts presented in the case, the same plant and management system was replicated in China. This does not mean that BP reproduced the same sales and partnership structure, even though BP may have approached the marketplace with the same expectations. Any such internal attitude would have been naïve. That is, BP should have conducted research on the Chinese market to insure they understood both the similarities and differences. Malaysia, a former British colony, has laws and business traditions in place that are familar to British Petroleum (BP). However, as a developing nation, with roots growing out of 50 years of communist controlled rule, there would be many different ideas about capitalism. Add the Chinese concept of “guanxi” or doing business through friends and we can easily conclude that BP should not expect the same marketing and sales arrangement to work in China. It does appear that BP had specific criteria for selecting partners, but in the heat of battle, failed to follow their own requirements.

2. How wise was it to provide bottles in order to expand quickly?

In retrospect, BP probably feels this decision should have been made more deliberately, since a significant number of partners are using the free bottles filled with local gas to sell to their customers. BP was in a hurry to penetrate the marketplace and finding local partners with certificates from the government was necessary. Setting up partners to sell for you in another culture is fraught with potential downfalls. For example, if we look at Selecting Partners on pages 148-50, the third point is to select partners that possess similar goals and values. In reflection, BP appears to have made a serious mistake in this regard. As discussed in the case, an unscrupulous dealer could under-fill the tank, avoid taxes, and use locally produced, but lower quality gas to make 50% more profit on a tank of LPG! Profit appears to be the major goal for the local partners rather than expanding BP’s distribution and local image.

3. BP managers saw the Chinese actions as being dishonest; what explanation might the Chinese dealers offer in defense?

The Chinese partners might respond that they joined forces with BP, purchased LPG at higher rates than could be obtained locally, and found that they could not succeed in the marketplace. That is, they worked to expand BP’s product in the local marketplace, but due to having to offer credit, pay bribes and give gifts, the system was not working forthem. The bottles given to the distributors may be viewed as pay for the unsuccessful effort made on behalf of BP. In reality, in many developing markets, this type of behavior is common. BP, as a large MNC with world-wide business experience, should have expected potential problems and in concert with experienced sales managers, should have monitored the progress of the partnership more closely. However, the BP managers may not have spoken Chinese and, as a result, may have put their fate into the hands of their Chinese partners.

4. What would happen if BP were to dump the existing distributor dealers?

Putting a distribution system in place is one of the most difficult and time-consuming aspects of marketing products. To set up a partnership in another culture further complicates the process. As discussed in the case, it appears that most BP partners have de facto dumped BP, so there is little downside in seeking new partners. Rather than publicize that the dealers are being dumped, it may be in BP’s best interests to look for a local partner who has an existing distribution system and who either owns or controls the system. It is very unlikely that BP can open their own distribution locations because of their limited knowledge of the local marketplace and China’s constantly changing regulations MNCs must follow to conduct business there.

5. What other alternatives does BP have? What should BP do?

BP can withdraw from the market, but this is really not an option. BP could file suit against their partners in Chinese court. Given the negative publicity and the unlikelihood of prevailing in court, this action would not be a wise one. BP can try to meet with selected “partners” and see what changes it would take to bring their actions into agreement with desired BP control. Regarding the meeting with current partners, this would be time consuming, but less so than finding new partners. One may ask why BP has waited so long to act, why there was not continual monitoring and meetings with their partners, and how BP attempted to make this a “win-win” relationship? There is little doubt that BP has the manufacturing expertise to set up a profitably run facility. It is extremely obvious that the actions alluded to in this case raises serious questions about their expertise in identifying, selecting, motivating, and retaining partners for their supply chain.

China LPG buyers close to signing 2014 term import deals with Iran: sources

Singapore (Platts)--7Nov2013/354 am EST/854 GMT

At least three Chinese companies are in the final stages of negotiations with three LPG producers in Iran for term supply deals for 2014, industry sources said Thursday.

The deals would mark the first time buyers in China had secured LPG from Iran via annual supply contracts, the sources said.

Some importers have been buying Iranian LPG on a spot basis in recent months after Chinese companies acquired older very large gas carriers, or by using ships time-chartered by Iranian firms, to skirt international sanctions on oil product exports from the Middle Eastern producer.

"They are preparing to lift Iranian LPG. They are going to have high demand and one of their supply sources is Iran," a shipping source familiar with the matter said. "These people have the ships to carry large liftings in Iran in 2014."

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A Middle Eastern source said the three Iranian producers involved in the talks were Petrochemical Commercial Co. or PCC, National Iranian Oil Co. or NIOC, and National Iranian Gas Co. or NIGC, while the Chinese companies included Jovo Energy, Guangdong Zhenrong and Zhangjiagang Oriental Energy.

"They are in the final stages of negotiations, or around 70% complete, and the agreements will be completed within the next two months," he said.

The cargoes would comprise 70% propane and 30% butane, with volumes not yet known, he added.

The source said Chinese importers were taking both propane and butane to feed petrochemical plants and to meet growing demand from power utilities.

Chinese sources said Jovo Energy might have already concluded a one-year contract with an Iranian supplier. Under the purported deal, the company will receive one 40,000 mt parcel of LPG each month starting November, 2013, with the cargoes priced on a floating basis, according to the sources.

Jovo recently imported one LPG cargo together with Zhuhai NewOcean, a subsidiary of Hong Kong-listed NewOcean Energy Holdings that sells LPG imported to its terminal in Zhuhai to the domestic market, the sources said.

A VLGC has discharged some tonnes at Zhuhai port and is expected to head to Dongguan this week, sources said. Platts vessel tracking software cFlow showed the cargo from the Persian Gulf was carried on the VLGC Gas Crystal and is now at Dongguan.

Jovo, which has a terminal at Dongguan, denied it had bought Iranian LPG, but confirmed it was expecting an LPG cargo to arrive within two days.

Guangdong Zhenrong, controlled by state-run Zhuhai Zhenrong, is in talks with an Iranian supplier for an LPG term contract, market sources said. A company source with Guangdong Zhenrong said she did not know about the matter.

Zhuhai Zhenrong is also responsible for bringing in part of China's term Iranian crude imports.

Zhangjiagang Oriental Energy denied it was in talks with Iranian suppliers for an LPG term contract. Another East China source said Oriental Energy may use Sinochem as an agent to liaise with Iranian suppliers.

The company is expected to bring in eight VLGCs a year from Iran, according to market sources. Sinochem was not available for comment Thursday.

Oriental Energy is among four Chinese petrochemical producers that are building propane dehydrogenation, or PDH, plants and has sealed term contracts to buy propane from the US.

Market sources said Chinese buyers would not normally import LPG directly from Iran, instead changing port in the Middle East before taking Iranian cargoes into China, they added.

Sources at PCC, Iran's top exporter of petrochemical products, did not respond to Platts queries. CHINA RETURNING TO REGULAR IMPORTS OF IRAN LPG

East Asian shipping sources said companies such as Tianjin Southwest Maritime and Shandong Shipping, which are striving to develop China's fledgling LPG fleet by building new VLGCs or buying older vessels, would possibly provide the carriers needed to ship the cargoes for the three Chinese importers once contracts have been sealed.

Vessels plying the Iran-Asia route since May include the Sam Russ, Gas Beauty, Schumi, Gas Jasmine, Senna Princess, Maple 2 and Gas Crystal, shipping sources said.

Iran could have delivered LPG into China on a regular basis earlier had its tanker companies owned VLGCs, as they do VLCCs for facilitating crude oil shipments, trade sources said earlier.

The country resumed LPG shipments in May, with cargoes bought by South Korean traders, even though an EU ban on propane and butane trade due to its nuclear plans, which had brought the producer's exports to a near halt late last year, remains in force.

Chinese imports of Iranian LPG restarted in June after a one-year break, when it took delivery of 88,000 mt from PCC, and have continued since.

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 September this year.

China imported 380,791 mt of LPG in September, data from the General Administration of Customs showed. Buyers normally change ports before taking in cargoes, so departure ports do change, which may be why Iran may not be recorded as a departure port.

Iran's nuclear chief Ali Akbar Salehi was quoted Tuesday on state broadcaster IRIB's website as saying he hoped a deal could be reached on a long-stalled probe into Tehran's suspected atomic arms research when UN nuclear agency head Yukiya Amano visits Tehran November 11.

Iran is showing greater signs of conciliation via diplomacy since moderate President Hassan Rouhani won polls in June after years of escalating tensions with the West.

--Ramthan Hussain; ramthan.hussain@platts.com
--Staff, newsdesk@platts.com
--Edited by Wendy Wells, wendy.wells@platts.com

Panama Canal expansion to make the US – world's largest LPG exporter by 2020

Panama Canal expansion to make the US – world's largest LPG exporter by 2020

Posted on : 30 Oct, 2013 

Work on the Panama Canal expansion project is going on in full swing and is expected to be completed by 2015. Once completed, the canal will allow large vessels such as very large gas carriers (VLGCs) and LNG vessels to pass through the canal very easily.

As per Bernstein Research report recently, arbitrage flow of LPG from the US to Asia will get the maximum boost once the Panama Canal opens for business.

In the current sailing routes, LPG and other petrochemical carriers have to use the Cape Horn route that takes about 41 days or the Suez Canal route that takes 43 days to reach the Asia Pacific from the East Coast of US. The Panama Canal will reduce this sailing time to 25 days.

It will not only save time, but also reduce shipping costs by 30-50%. The cost of shipping the US LPG to east Asia will be reduced to about $100/mt from the current $150-200/mt when carried via Cape Horn. This will lead to a demand of more LPG from the US and further put downward pressure on Middle East LPG export prices.

As per current estimates, US exports about 5 million mt of LPG per year, which is expected to grow to 10 million mt/year by 2015. By 2020, the US will overtake countries like Qatar and Saudi Arabia as the world's largest LPG exporter with over 20 million mt of LPG exports annually.

Apart from LPG, LNG trade flow on the US-Asia route will also expand once the Panama Canal is operational.

About 40% of the global LPG consumption and about 75% of global LPG demand growth is from the Asia-Pacific region.

Demand for LPG is growing in Asia. It is increasingly used as a feedstock for propane dehydrogenation units, which convert propane to propylene. China has recently approved the construction of 17 PDH units that will require 12 million mt/year of additional LPG. It's specualated that China will turn to the US to meet this demand.

For more details on the world LPG trade, attend 8th LPG Trade Summit in Doha, Qatar on 18-20 November, 2013. Hear Silvia de Marucci, Senior Specialist for Liquid Bulk Market Segment, Panama Canal Authority elaborate on 'The Panama Canal Expansion & Impact on LPG Trade' at the premier event.

Get more information on the event on the official webpage or contact Ms. Huiyan at +65 6346 9147 or huiyan@cmtsp.com.sg

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Afrox Wins $5.2m Sun International LPG Supply Contract

May 28, 2014 Mzwandile Jacks Business, Energy, Strategies & Solutions

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VENTURES AFRICA – Johannesburg-listed gas and welding firm, Afrox, on Wednesday said it had signed a five-year R55 million ($5.2m) contract to supply liquefied petroleum gas (LPG) to Sun International, a well-known South African domiciled hotel chain.

“Securing this major agreement against strong competition can be attributed to our…track record, national footprint and ability to access product, be it from local refineries or importing LPG during shortages,” Afrox MD Brett Kimber, said in a statement.

“This contract is significant to Afrox, and our LPG business in general, as Sun International is one of the largest operators of hotels and casinos in South Africa,” Kimber continued, adding this contract is of strategic importance in growing Afrox hospitality business.

Afrox makes its gases and other products on 41 different sites across southern Africa.

Its Bulk Scheduling Centre deals with more than 20 000 “customer drops” a month, while its transport fleet covers around 24 million kilometres a year.

Afrox employs more than 3000 people and has a national network of distributors and branded Gas & Gear centres. Its National Customer Service Centre receives more than 70 000 calls, 8 000 faxes and 20 000 e-mails a month.