Oslo: Lots of question marks have arisen over the outlook in the VLGC sector, amid a very overloaded global orderbook and declining oil prices, which in turn has created debate about the future for shale gas. One man with firm, respected views on VLGCs is Christian Andersen, who founded Avance Gas in September 2007 together with Stolt-Nielsen. Andersen, 54, previously worked as head of LNG in BW Gas and as founding partner of Amanda LPG Trading.
Andersen is more optimistic than some of his peers on the rates situation for 2015.
“With the increasing export from US Gulf, we expect the fleet utilisation for 2015 to be higher than 2014. 2014 was a very strong year for VLGC rates, and we expect 2015 to be stronger,” he says.
Andersen notes that the terminal capacity for 2015 has been sold on take-or-pay contracts and the majority of the product has been secured.
The Avance Gas president does concede that the VLGC orderbook is high however. Nevertheless, it can be absorbed based on projected US LPG exports, he maintains.
“We are arguing for owners to wait with further orders to be sure the current orderbook is absorbed into the market,” Andersen cautions.
Going forward, Andersen says he would like to keep Avance Gas as a pure play VLGC company. There are no plans to add to the fleet at the moment. The Avance fleet is made up of eight vessels and another six on order in China which start to deliver this quarter.
“If any M&A opportunities come around, we will be open-minded,” he says. Last year, Avance was repeatedly linked with a takeover of Dorian LPG, a deal that never quite made it. Andersen is also keen to look at possible participation in any VLGC pool plans.
As with anyone else involved in the VLGC sector, Andersen has had to reassess trading conditions on the back of the dramatic fall in oil prices and the possible knock on effects for shale gas development.
“We do not believe that fall in crude prices will lead to a cut in shale gas activity,” he says, adding: “With the new crude regime, it is likely that US’ shale oil production will be reduced. However, a vast amount of NLGs also comes from shale gas and refining, which makes us comfortable that there will be sufficient supply available for export the coming years.”
Over time Andersen says the US needs to be competitive towards other originations for the export to be maintained.
“Right now,” he says, “the geographical arbitration between US and Asia is not available. If the situation continues, we might see falling volumes second half 2016 and further. However, LPG is a very volatile product, and we believe the prices will move up and down, opening the geographical arbitrage again, which will support US NGL export.”
Avance Gas took on its first ship in 2009. In late 2010, it acquired three VLGCs in a share/cash transaction and Sungas became 50% shareholder in the company. In mid-2012, Avance Gas acquired Maran Gas’ LPG ships in a cash transaction, adding two ships to the fleet, then consisting of six modern VLGCs.
In the summer of 2013, Avance Gas did a private placement to Frontline 2012, whereby the Fredriksen vehicle became a 33% shareholder alongside Stolt-Nielsen and Sungas. In October 2013, Avance Gas acquired Frontline 2012’s newbuilding program at Jiangnan Shipyard, building the fleet to 14 units.
In October 2013, Avance Gas listed on the OTC market at the Oslo Stock Exchange and in April last year it became a publicly listed company on the Oslo Stock Exchange. [29/01/15]
