Tuesday, August 11, 2015 -- Perseid Meteor Shower Starts To Peak Tonight; Propane Ships; Jumping Ship

Active rigs:

	8/11/2015	08/11/2014	08/11/2013	08/11/2012	08/11/2011
Active Rigs	70	194	184	199	192

RBN Energy: the propane market and the LPG flotilla just over the horizon.

U.S. production of propane from gas processing has more than doubled since 2010 and now exceeds 1.1 MMb/d.  Together with another 300 Mb/d from refineries, that is far more propane than the U.S can use.  Consequently, U.S. exports of propane have been booming, reaching more than 700 Mb/d in July. 

But that has not been enough exports to keep propane inventories from filling to the brim, now up to more than 90 million barrels, about 10 million barrels over the five year high.  About the only thing that has been holding back even more exports is shipping costs.   The cost of ships that move most of the propane to overseas markets, called Very Large Gas Carriers, or VLGCs (gas meaning LPG, not natural gas), have been high since U.S. exports started ramping up and then blasted to the moon this summer in response to huge export volumes and logistical tangles in global markets. 

But that’s all about to come to an end.  There is a flotilla of new LPG vessels that were ordered many months ago that are scheduled to hit the market in 2015 and 2016.   In today’s blog we review how U.S. LPG exports are likely to respond to the coming massive increase in VLGC shipping capacity.

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Speaking of Ships

FuelFix reports that Kinder Morgan adds to its Jones Act fleet: 

Midstream giant Kinder Morgan said Monday it will add four new tankers to its Jones Act-eligible fleet in a $568 million deal with Philly Tankers LLC.

The ships are slated to be delivered between late 2016 and 2017. The first two tankers scheduled for delivery are already under long-term contract with an unnamed oil company, and Kinder Morgan said it expects to have contracts for the second two ships inked by early 2016.

The Jones Act requires waterborne cargo shipped between domestic ports to be delivered on ships built in the U.S., owned by U.S. citizens and crewed by U.S. citizens. The limitations have helped to support an industry of maritime shippers dedicated to moving goods along U.S. coasts.

Kinder Morgan entered the Jones Act shipping business with a $960 million deal for five ships in January 2014. The company mostly ships petroleum products, and operates its ships by contracting them out to other companies in long-term deals.

The four additional ships will bring Kinder Morgan’s Jones Act tanker fleet to a total 16 ships when they’re all completed in late 2017. The Houston-based company has seven tankers already in service and five tankers in various stages of construction or design, Kinder Morgan said Monday.

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Jumping Off A Sinking Ship

A contributor over at Seeking Alpha notes that another high-level executive jumps ship over at Tesla:

[Tesla's VP of Service} Guillen told the automaker run by Chief Executive Officer Elon Musk on Aug. 4 that he would be taking the leave, according to a regulatory filing, which didn't disclose his reason. Two days later, the board determined that Guillen was no longer an officer required to report ownership under Section 16 of the Securities Exchange Act of 1934, the filing said. He had exercised 19,250 options from April 15 through July 15, according to previous filings.

In other words, he started cashing out earlier this year, knowing that the end was coming, one way or the other.