Image (c) Shutterstock/Aleksandar Mijatovic

By Nicholas-Andrew Iliopoulos, Special to Piracy Daily

The release earlier this month of an official Chinese government report showing that the threats that country faces come mostly from the sea serves to underscore the importance of safeguarding national security through effective maritime security—including state-of-the-art counter-piracy efforts.

As Xinhua noted, in “China’s Ocean Development Report (2013)” distributed by the China Institute for Marine Affairs under the State Oceanic Administration, the Asian giant’s determination to “strengthen its capability to handle international maritime affairs over the next 20 years” remains—according to the report—based on maritime security policies that have not changed fundamentally.

Which, in my opinion, is where counter-piracy operations come in as part of considerations regarding the second-largest global economy’s high-seas voyage into the future.

As an oil production boom in the United States causes exporters who provided for American markets to seek other clients—especially prized relations in an energy-thirsty China—the world oil tanker trade is itself expanding at its quickest rate in the past decade.

The oil being shipped requires tankers to trek significantly longer routes, while adding to the number and location of shipping choke points, as well as challenges such as growing vulnerabilities to piracy.

Meanwhile, Chinese naval efforts against piracy in the Gulf of Aden have won plaudits from officials representing such different interests as those of Iran and the United States. And, as the Pentagon told the U.S. Congress in its annual report two weeks ago, Chinese military modernization has “become increasingly focused on investments in military capabilities to conduct a wider range of missions … including counter-piracy …”

All of this is happening as we experience a historic change that, though in its infancy, is destined to transform the economics of our planet. With new work driver China at the wheel, the developing world is rapidly overcoming the developed one. Experts point out that the Chinese economy will be almost the same size as that of the United States by 2025. Twenty-five years after that, the first ten GDPs in the world are projected to be as follows: China, the U.S., India, Brazil, Mexico, Russia, Indonesia, Japan, UK, and Germany.

In the maritime community, the emerging future seems like a hallowed reflection of a not-so- distant past, as Christopher Columbus would know first hand. China was the greatest maritime nation in the world for almost four and half centuries, from the consolidation of the Song Empire until the remarkable seafaring expeditions of the early Ming (1405-33) under Admiral Zheng He.

As China moves forward, it is confronted with a virtual army of senior foreign executives who, seeking to establish their businesses, are eager to penetrate the Chinese red-hot economy and together achieve growth and profitability. As can already be seen, not all of them succeed, with failure rates in China attributed, according to conventional wisdom, to a lack of cultural fit, familial issues, and inadequate support from the head office. Many executives are ill equipped to tackle China’s unique challenges. Leading in China—as in
other Asian shipping markets as well—requires a range of skills that goes beyond (and in some cases conflicts with) conventional standards of business teaching and practice. Thus, prevailing attitudes of management for accomplishment need to be reworked.

They demand cultural understanding and adaptability, market knowledge, the ability to perceive and respond to rapid change, and support from headquarters. Western roles ought to be retuned, when not recast, with the focus being:

• Strategic yet hands-on,
• Disciplined yet entrepreneurial,
• Process oriented yet sensitive to people,
• Authoritative yet nurturing,
• Firm yet flexible,
• and Action driven, yet circumspect.

There is a long list of books being put to use about Chinese business etiquette and ethics; however, what one learns in China is neither written nor taught in classrooms. The bottom line on how ready an executive is to lead in China should focus on (as we do at AdvanFort Company):

• Dealing with Government
• Managing Business Conduct
• Developing the Workforce
• Competing for Customers and Markets
• Coping with Complexity

Despite all the lip service paid to these goals, levels of practical understanding about China remains shockingly low. Therefore lessons learned from previous working experience in China remain the key to a positive experience, particularly the need to “shift the prism a little so you can see things differently.”

Is it too late to enter China?

Yes, it’s a tough market. And yes, your competitors may have gotten there first. But the biggest mistake would be choosing not to invest in China. Of the Fortune 500 companies, about 480 are already in there—and those who are successful know that they have to work for achievement. Around the world, executives trolling the market (including in the maritime world) usually consider the three Cs:Customers, Competitors, and the Company. Many, however, remain in danger of not grasping older cultural wisdom and, particularly when they focus on China, they ought to add one more consideration:

Context.

Commander Nicholas-Andrew Iliopoulos is the Senior Business Development Manager for AdvanFort Company.

Image: Höegh LNG

In October 2011, GDF SUEZ and CNOOC signed a cooperation agreement to work on a China-based LNG Floating Storage Regasification Unit project.  The basis of this agreement was a plan hatched a year earlier by which GDF SUEZ would sell CNOOC about 2.6 million tons of LNG starting in 2013 for a 4-year period.

Today, a charter agreement was signed by GDF Suez for Höegh LNG’s shuttle and regasification vessel, GDF SUEZ Cape Ann.  This vessel will be permanently moored and used as China’s first floating LNG storage and regasification unit for a period of up to 5 years.   Vessel commissioning and operational startup is expected in October 2013 and Höegh LNG will remain as the vessel operator.

The vessel will serve the Tianjin project under a sub-charter between GDF SUEZ and China National Offshore Oil Corporation Gas & Power Ltd (CNOOC).

Höegh LNG President and Chief Executive Officer Sveinung J.S. Støhle commented on the charter:
“Höegh LNG is very pleased to have supported GDF Suez with the flexibility of sub-chartering the vessel to CNOOC for the use as an FSRU, and at the same time establish an important presence in a rapidly growing Chinese market.”

China’s Liaoning aircraft carrier

(Bloomberg) — China unveiled plans to build more aircraft carriers after commissioning its first last year, as the country extends its influence amid territorial disputes with neighbors including Japan and Vietnam.

Future aircraft carriers will carry more fighter jets than the Liaoning, Rear Admiral Song Xue told foreign military attaches yesterday in Beijing, according to the official Xinhua New Agency. The carrier was built around a Soviet-era hull and began trials at sea last year.

The remarks signal that the People’s Liberation Army will push ahead with a modernization plan under which defense spending has more than doubled since 2006. China has been more assertive in pressing sovereignty claims against Japan as well as Vietnam and the Philippines in the South China Sea.

“This only adds publicly to what many believed to be the case: that the Liaoning is a training or ‘starter’ carrier and eventually China would build larger and more capable ones,” Taylor Fravel, a professor at the Massachusetts Institute of Technology who focuses on China’s relations with its neighbors, said by e-mail. “It suggests that today’s PLA is much more confident than in the past regarding its willingness to talk about future military programs.”

Island Tensions

At the same time, tensions between China and Japan have escalated over islands in the East China Sea claimed by both sides. Yesterday, Japanese Prime Minister Shinzo Abe vowed to use force if necessary to defend the islands, called Diaoyu in China and Senkaku in Japan.

The tensions flared as Martin Dempsey, the chairman of the U.S. Joint Chiefs of Staff, visited China. He and Chinese counterpart Fang Fenghui said April 22 they want to expand military ties.

“The heightened risk is a function of heightened rhetoric that could produce emotional outcomes at the tactical level that could frankly get away from control of the central level,” Dempsey told reporters in Beijing today.

China and Japan each issued formal protests yesterday over the presence of each other’s vessels in waters around the islands, which lie in an area rich in fish and natural gas. China also protested after members of Abe’s government visited a Tokyo shrine seen in Asia as a symbol of wartime aggression.

“Relations between China and Japan are at their worst since diplomatic ties were established in 1972,” Rumi Aoyama, a professor of Chinese studies at Waseda University in Tokyo, said yesterday. “At this point, it’s about maintaining lines of communication to make sure things don’t get worse.”

Drove Away

Eight Chinese vessels were in waters administered by Japan as of 3 p.m. yesterday, the Japanese Coast Guard said. Xinhua said Chinese surveillance ships “drove away” Japanese fishing boats in the waters, citing the State Oceanic Administration.

Defense ministry officials from both countries may hold talks on the islands, Japanese Chief Cabinet Secretary Yoshihide Suga said in Tokyo. The Asahi newspaper today said director- general level talks could take place as soon as this month to discuss the establishment of a maritime communications hotline.

“It appears that something like that is being arranged, and Japan’s door is always open to diplomatic talks with China,” Suga told reporters. “It’s true we have discussions with China about issues such as this.”

China has also pressed its claims in the South China Sea. Last month, a Chinese ship fired on a Vietnamese fishing vessel in an area of the sea claimed by both sides. Chinese and Philippine vessels squared off early last year over claims to a reef known as Scarborough Shoal.

Foreign Attaches

Zhang Zheng, the Liaoning’s captain, told the foreign attaches that the carrier’s crew had mastered the ship’s weapons systems, Xinhua reported. Song said that the J-15 fighter aircraft needed more trials before becoming operational on the carrier, according to the report.

China has the world’s second-biggest military budget after the U.S. Its military has deployed missile systems capable of destroying aircraft carriers. Such anti-ship missiles have been placed across China’s southern coast facing Taiwan, U.S. Army Lieutenant General Michael Flynn, the Defense Intelligence Agency director, said in an April 18 statement to the Senate Armed Services Committee.

–Michael Forsythe, with assistance from Tony Capaccio in Washington, Isabel Reynolds and Takashi Hirokawa in Tokyo and Henry Sanderson in Beijing. Editors: Nicholas Wadhams, John Brinsley

Copyright 2013 Bloomberg.

Port operations for Sino Iron Project.

SYDNEY, April 22 (Reuters) – China’s CITIC Pacific is delaying completion of its $8 billion Sino Iron project in Australia until late May because of engineering problems, the latest in a series of setbacks to plague China’s single-largest foreign mining investment.

Sino Iron had already missed a February start date for the project, which was originally expected to ship its first ore in 2010 to Asian steel mills eager to cut reliance on mega-suppliers Vale, Rio Tinto and BHP Billiton

Image: CITI Pacific

CITIC Pacific is set on Tuesday and Wednesday to face Australian mining magnate Clive Palmer’s company Mineralogy Pty Ltd, which holds lease rights to the project, in the Supreme Court of Western Australia in a dispute over royalty payments.

Mineralogy believes CITIC Pacific should already be paying royalties, distilling the case down to a clause in the right-to-mine pact that states a royalty must be paid when the ore is taken.

Mineralogy contends “taken” means when ore is mined. CITIC Pacific’s interpretation of the term is when ore passes the primary crusher.

Palmer says CITIC Pacific owes him as much as A$200 million in back royalties, including penalties. CITIC Pacific has denied the accusations.

Iron ore prices are showing greater resilience amid a wider outflow of capital from commodities, such as copper, which saw its biggest weekly loss last week since late 2011.

Iron ore is benefiting from restocking of inventories by steel mills in China, suggesting any supply disruptions could have a greater impact on market fundamentals than would happen in a softer market.

Chinese steel production rose by just over 10 percent in the first three months of 2013, while the three major suppliers managed collective annual production growth of just 1.4 percent in the first quarter.

“As defects are exposed and repaired during the commissioning process, future stability of the production line will be improved,” CITIC Pacific said in a statement late on Friday. “First shipment of iron ore concentrate is expected to be in the second half of May 2013.”

Metallurgical Corp of China , the firm building the project, is sticking to an eventual production rate of 24 million tonnes of iron ore concentrate, which is used to make high-iron content pellets fed to its own steel mills and those of other producers in China.

CITIC Pacific and MCC were in a separate dispute over delays and cost increases after CITIC Pacific last year revealed a four-fold increase in the budget, to $8 billion.

MCC has since agreed to contribute $858 million to complete the project. (Reporting by James Regan; Editing by Clarence Fernandez)

(c) 2013 Thomson Reuters, Click For Restrictions

Credits: Agência Vale

By Karl Plume

April 18 (Reuters) – By Ruby Lian and Manolo Serapio Jr

SHANGHAI/SINGAPORE, April 18 (Reuters) – A giant iron ore carrier owned by top global producer Vale called at a port in eastern China this week, marking the first entry of the ships since Beijing banned them in January 2012.

China banned the Brazilian miner’s mega ships, called Valemaxes and measuring around 400,000 deadweight tonnes, over safety concerns and to protect its own ocean-freight industry as a glut in vessels globally dragged down shipping rates.

It was unclear if China had lifted its ban on the vessels to allow the Valemax to enter the port, although Vale has said it has been in talks with Chinese authorities to regain entry.

“We’ve been aware of this on Tuesday evening and already reported this to the National Development and Reform Commission and Ministry of Transport,” Zhang Shouguo, secretary general of the China Shipowners’ Association told Reuters by phone.

Ministry of Transport officials were not immediately available for comment. Vale’s offices in China declined to comment, according to a spokeswoman. Officials at Vale’s headquarters in Rio de Janeiro also declined to comment.

The Valemaxes, the world’s biggest dry bulk vessels, are big enough to hold three soccer fields end-to-end on their decks. They can carry enough ore to make about 270,000 tonnes of steel.

The ships are central to Vale’s efforts to cut transport costs and better compete with Australian miners BHP Billiton and Rio Tinto , whose mines are closer to China, the world’s biggest iron ore consumer.

EN ROUTE TO SINGAPORE

Vale Malaysia, measuring 402,285 dwt, entered the Lianyungang port in China’s Jiangsu province on Monday and left on Wednesday after unloading its cargo, according to Reuters shipping data and sources with knowledge of the matter.

A shipping source in China said the ship unloaded about 220,000 tonnes of iron ore and was still carrying nearly 87,000 tonnes when it left the port. The ship is headed for Singapore and expected to arrive on April 26, according to shipping data.

Before this week, the last time a Valemax entered a Chinese port was in late December 2011 when the 388,000-dwt Berge Everest called at the port of Dalian in what shipping sources said then was probably a fluke.

No Chinese ports have regulatory approval to receive dry bulk carriers of more than 300,000 tonnes. Most of the ships, though, were built in Chinese shipyards and partly financed by the country’s international development bank.

With Beijing closing ports to the Valemaxes, Vale built a floating transhipment hub in the Philippines to stay closer to its biggest market. A permanent, land-based transhipment centre in Malaysia is scheduled to open in 2014.

Still, Vale said it was losing $2-$3 per tonne in iron ore shipping costs because of China’s ban on its Valemaxes since Vale has to transfer the ore from the Valemaxes at sea to smaller vessels to deliver them to China.

Vale expects to have a fleet of 36 Valemax ships sailing by the end of this year, Vale’s Rio de Janeiro press office said on Thursday. Of those ships, 19, including the Vale Malaysia, will be owned directly by Vale. The rest will be owned by third parties and operated under fixed cargo contracts with Vale.

Vale preferred shares, the company’s most-traded class of stock, fell 1.1 percent to 30.66 reais in late Thursday trading in Sao Paulo.

(c) 2013 Thomson Reuters, Click For Restrictions

A Chinese fishing vessel that ran aground in Tubbataha Reef, a UNESCO World Heritage site, on Monday is pictured in Palawan Province, west of Manila April 10, 2013 in this picture provided by Naval Forces West. REUTERS/ Naval Forces West

The Philippine Coast Guard (PCG) has uncovered 400 boxes of butchered anteaters from a cargo hold of the Chinese fishing vessel that ran aground on Tubbataha Reef last week.

In a statement, the PCG said that the boxes of frozen anteaters were discovered by salvage crews attempting to refloat the distressed F/V Ming Long Yu. The statement added that the anteaters had already been butchered and dressed.

As we reported last week, the F/V Ming Long Yu ran aground on the Tubbataha Reef on April 8, just ten days after the final section of the former USS Guardian was removed from the reef. The 12 Chinese fishermen who were rescued from the vessel were later booked by Philippine authorities on charges of poaching.

The Philippine Star points out that scaly anteaters, which are locally known as balintong, are a protected species in the Philippines and are believed to be used by Chinese for medicine. Scales of the anteaters can fetch as much as $114 per kilo.

Investigators are currently in the process of determining where the anteaters came from.

M/T Yuan Yang Hu, image (c) mgklingsick@aol.com

By Chen Aizhu

BEIJING, April 2 (Reuters) – A Chinese tanker loaded crude in Iran in March, according to shipping data and an industry official, the first time a China-flagged ship has transported Iranian crude since EU sanctions imposed last July stopped insurers covering the shipments.

The United States and Europe imposed tough sanctions in 2012 that aim to choke Iran’s oil revenue and force the Islamic Republic to halt its disputed nuclear programme.

Unable to find insurance for its own vessels because of the sanctions, China has relied mainly on the National Iranian Tanker Company (NITC) to ship Iran’s crude to Chinese refineries over the past nine months.

If China has put in place a system of insurance for its own vessels allowing them to participate in the trade again, the country’s refineries could boost imports. China is Iran’s largest trade partner and biggest oil client, buying around 440,000 barrels per day (bpd) in 2012.

The Chinese-owned supertanker Yuan Yang Hu, with capacity to carry 2 million barrels of crude, called at Iran’s Kharg Island on March 20-21 and is en route to China, shipping tracking data showed.

The vessel is owned by Dalian Ocean, a subsidiary of state shipping giant China Ocean Shipping (Group) Company (COSCO).

An official at COSCO’s general manager’s office said she was unaware of the matter and the company’s press official was not available for comment.

Norwegian marine and energy insurance group Skuld said it provided protection and indemnity (P&I) cover – insurance for ocean going ships against pollution and injury claims – for the Yuan Yang Hu.

“We insure ships on a yearly basis and do not usually know what particular activity a ship is engaged in at any one time,” Skuld said in a statement. “An owner is not obliged to inform Skuld about the trade he is conducting with the vessel.”

Skuld said compliance with EU’s regulations was of the “utmost importance”.

“Any member who falls within the scope of this exclusion or engages in activity which is contrary to any other provision in the insurance terms and conditions runs the risk of prejudicing their P&I cover,” it said.

“The operation of the exclusion is automatic – the exclusion will apply without us being required to give notice to owners.”

An industry official with knowledge of the shipment told Reuters separately that the tanker’s insurance and reinsurance had been arranged in China. He was unable to provide more details.

“This is the first Chinese vessel (since the ban)… as one of the lifters got special approval from the authorities to lift Iranian oil on a trial basis,” said the official, who requested anonymity due to the sensitivity of the matter.

“Insurance is also handled by the Chinese side.”

Iran’s fleet has struggled to deliver oil to its biggest buyers China, India and South Korea, all of whom had to switch to Iranian vessels for delivery after the EU sanctions came into place.

China’s Iranian imports fell 21 percent in 2012 from 2011 to 440,000 bpd partly due to shipping problems. The fall meant China qualified for an exemption to U.S. sanctions, which require buyers of Iranian crude to continually reduce imports.

Beijing has repeatedly stated its opposition to unilateral sanctions outside of the United Nations, such as those imposed by the United States. But it qualified for an exemption anyway, after the shipping delays and a contract dispute led to the sharp fall in imports.

COSCO’s chairman Wei Jiafu told Reuters last July, just weeks after the European insurance ban took effect, that the Chinese government could follow Japan’s example and provide insurance for Chinese tankers.

Japan found a way around the EU ban last year when the government stepped in to provide $7.6 billion in coverage to tankers carrying Iranian crude bound for Japanese ports.

Insurance companies use reinsurers to hedge their risk, and the reinsurance market is mostly based in Europe. The EU sanctions prevent those reinsurers from participating in transactions that facilitate Iranian crude exports.

The same problem has also arisen in India for refiners seeking insurance for plants that process Iranian crude.

China largest refiner Sinopec processes nearly all the Iranian crude imported into the country, which is shipped in by Sinopec’s trading arm Unipec and state trader Zhuhai Zhenrong Corp.

Even without any new arrangement on insurance, oil traders have said deliveries have, since late 2012, “improved significantly” after NITC deployed old tankers and also took delivery of several new vessels from Chinese shipyards.

In the first two months of 2013, China imported about 410,000 bpd of Iranian crude, 3 percent more than a year earlier, according to Chinese customs data. (Additional reporting by Jonathan Saul in London, Dan Fineren in Dubai and Clare Baldwin in Hong Kong; Editing by Simon Webb and David Cowell)

(c) 2013 Thomson Reuters, Click For Restrictions

In China, demand for all fossil fuels is projected to expand, led by gas (+283%), oil (+73%), and coal (+34%) as nuclear and renewables surge over 1000%.

(c) BP

Unconventional tight oil and shale gas will continue to play a major role in meeting global energy demand, adds Dudley. Tight oil will account for 9% of global supplies while shale gas is expected to grow by 7% annually to reach 74 Bcf/d by 2030, accounting for 37% of the growth of the world’s natural gas supply.

Oil’s market share will continue to follow the same path it has taken over the past 40 years, slowly declining while coal, a cheap and plentiful energy resource, will be used on a greater scale to ensure China’s power generation needs are met.  Global coal demand however, is projected to fall from 71% today to 55% in 2030 as gas doubles its share and oil is unchanged.

BP attributes the decline of oil’s market share to the widespread use of fuel-efficient engines and its high cost, which is spurring further efficiency innovations.

(c) BP

Coal

After oil, coal is expected to be the slowest growing major fuel, with demand rising on average 1.2% a year to 2030. Over the period, growth flattens to just 0.5% a year after 2020. Nearly all (93%) of the net growth in demand to 2030 will come from just China and India, whose combined share of global coal consumption will rise from 57% in 2011 to 65% in 2030. India is expected to overtake the US as second largest coal consumer by 2024.

Oil and Gas Imports

“In the period to 2030, the US becomes nearly self-sufficient in energy, while China and India become increasingly import-dependent,” notes Dudley.

Oil however, is expected to be the slowest growing of the major fuels to 2030, with demand growing at an average of just 0.8% a year.  As the United States becomes less energy intensive and as domestic production increases, China is predicted to surpass the United States over the next 5 years to become the biggest net oil importer in the world.  By 2030, BP notes, the Chinese are projected to import 75 percent of their total oil consumption, a figure roughly the same as Europe’s total consumption.

Net oil imports to the US are projected to fall another 70 percent by 2030 virtually eliminating half of the US trade deficit, while Europe will be importing over 90 percent of its oil and 80 percent of its natural gas.

Russia will remain the biggest energy exporter in the world, while at the same time Saudi Arabia will regain its pole position as the biggest oil exporter in 2030.

Oil and Gas Production

According to BP, the United States will likely surpass Saudi Arabia this year as the world’s largest oil producer and will hold that title until surpassed by Saudi Arabia again in 2027.

This initial surge can be attributed to tight oil and biofuels production, and will subsequently decline post-2020 as the resource base dips and production costs rise.  During this same period, Russia and China will develop their production capabilities and are expected to reach rates of 1.4 Mb/d and 0.5 Mb/d by 2030.  China’s shale gas production is expected to hit 6 Bcf/d 2030.

Putting that in perspective, North Dakota increased its production from 100,000 bbls/day to 1 Mb/d in a 5 year period.  Currently, the United States is producing 2.1 Mb/d of tight oil (24% of US oil production) and 24 Bcf/d (37%) of natural gas from shale.

(c) BP

How much energy is left?

BP notes that every year experts have tried to come up with estimates for how much recoverable fossil fuel exists on our planet, but the number continues to rise.

Within tight oil and shale gas alone, BP notes there are estimated technically recoverable resources of 240 billion barrels of tight oil and 200 trillion cubic meters of shale gas. Asia has an estimated 57 Tcm of shale gas and 50 Bbbls of tight oil, versus 47 Tcm and 70 Bbbls respectively for North America.

However, “it’s not what’s below the ground, it’s what’s above the ground,” notes BP.

From a production standpoint of tight oil and shale gas, more than 70% of the world’s production will still be in North America by 2030 with incremental growth elsewhere around the world.  “Above ground” factors, BP notes in their Outlook, have been the catalyst for success in bringing these resources to market.

The US has the world’s largest rig fleet with over 1,800 rigs in operation according to Baker Hughes, a majority of which can drill horizontally.

BP notes, “The competitive industry that spurs continued technological innovation, land access facilitated by private ownership, deep financial markets, and favorable fiscal and regulatory terms, will support rapid production growth.”

(c) BP

Natural Gas

BP researchers conclude that natural gas will be the fastest growing fossil fuel at 2% per year, reaching 456 Bcf/d (+144) by 2030. By volume, growth is greatest in power generation (+56 Bcf/d) and industry (+54 Bcf/d).

Supported by shale gas, BP predicts North America will become a net exporter of liquefied natural gas (LNG) in 2017, with net exports approaching 8 Bcf/d by 2030.  During that same time period, China will increase their domestic production of shale gas to 6 Bcf/d, amounting to 20% of total Chinese gas production.  ”Nonetheless,” BP notes, “given the fast growth of Chinese consumption, which by 2030 will be larger than the current EU gas market, China still requires rapid import growth (11% p.a.).”

Over the next 17 years, LNG will contribute to an increasing share of global trade as production grows by 4.3% per year.  Qatar, the current world-leader in the production of liquefied natural gas, will be surpassed in the coming years as huge facilities off Australia’s northwest shelf come on line.

Demand for LNG will grow primarily from non-OECD countries and will represent 76% of the rise in gas demand and 74% of output growth. On a regional level, Africa is set to overtake the Middle East to become the largest net LNG exporter in 2028.

By 2030, LNG will represent 15.5% of global gas consumption.

Alongside the growth of LNG volumes, BP sees a diversification of trading partners for both exporters and importers. In 1990 each exporter or importer had an average of 2 partners – by 2011 that had risen to 9 and 6 respectively. Nigeria, Qatar and Trinidad & Tobago are leading export diversification, with an average of 20 trading partners in 2011.

Another indicator of increased diversification is the decline in the share of LNG accounted for by the largest importer and largest exporter – from 68% and 39% respectively in 1990 to 23% and 31% respectively in 2011.

Carbon Emissions

While the rate of growth is moderating, carbon emissions are still expected to increase by 26% from 2011 to 2030. Most of the growth will come from non-OECD countries, so that by 2030 70% of CO2 emissions are expected to come from outside the OECD. However, per capita emissions in non-OECD regions will still be less than half those in the OECD.

The Big Picture

Mr. Dudley concludes, “The energy industry is highly competitive and investment will flow to the places that possess the right resources below ground and the right conditions above it. Highlighting the “above ground” factors that have made the US and Canada engines for energy innovation can be instructive for other nations seeking to develop their domestic energy resources.”

“The overall conclusion is that increased demand can be met as long as competition is present to drive innovation, unlock resources and encourage efficiency.”

Chinese shipyards, whose new ship orders dropped almost half last year in a shipping slump, are venturing into offshore engineering and taking business away from Singaporean builders.

China Rongsheng secured two contracts to build one CJ46 jack-up rig, to be used as an exploratory drilling platform for oil and natural gas, with an option to construct another one, the company said in a statement.

That will mean China Rongsheng would build four of the jack rigs if the options are fully exercised.

China Rongsheng diversified into offshore engineering last year to counter the market downturn.

Last year, it received an order to build one deepwater tender barge – a flatbottom vessel used to transporting goods – with an option to build three more of the same kind.

“Having jack-up rigs is certainly a step up from building a tender barge. This is a more interesting win because rigs are more sophisticated,” said Vincent Fernando, an analyst at Religare Capital Markets based in Singapore.

However, whether these new orders for the barges and jack-up rigs would translate to profits is still uncertain because China Rongsheng has a steep learning curve in its new ventures and it would take some years before offshore engineering can overtake its traditional shipbuilding business.

China Rongsheng, which warned of a net loss in 2012, now derives most of its sales totalling 5.5 billion yuan ($885.35 million) in the first half of 2012 from shipbuilding.

The Chinese shipbuilder now holds the largest accumulated order books among Chinese builders and is a builder of Vale’s large ore carriers.

“It makes strategic sense to take orders in offshore even the profitability is low because it will give the experience and inroads to them expand offshore in the future,” Fernando added.

Shares of cash-stripped China Rongsheng, which will announce its 2012 results on Tuesday, lost more than 80 percent of their value in the past two years and was up 6 percent so far in 2013. ($1 = 6.2122 Chinese yuan) (Reporting by Alison Leung; Editing by Louise Heavens)

(c) 2013 Thomson Reuters, Click For Restrictions

Dapeng Sun, China’s first self-built liquefied natural gas carrier, was delivered in 2008 and hailed as a milestone.

Jasmine Wang and Aibing Guo

(Bloomberg) — China Shipping Development Co.’s venture will order six liquefied natural gas tankers worth about $1.2 billion by June to tap the nation’s rising demand for cleaner fuel, Chairman Li Shaode said.

“We will expand LNG transportation business to make it become a new profit growth driver as soon as possible,” Li told reporters in Hong Kong yesterday. “The deal means a 20-year shipping contract for us, which will bring us stable earnings.”

The addition of the tankers comes as the world’s largest energy consumer plans to more than double natural gas consumption to cut its dependence on coal and oil. The vessel purchase will be made by a venture owned by China Petrochemical Corp., also known as Sinopec Group, China Shipping and Mitsui O.S.K Lines Ltd. and each ship will have a capacity to carry 174,000 cubic meters of natural gas, Li said.

The vessels will cost about $205 million each and the shipping company has arranged syndicated loans to finance the deal, Chief Financial Officer Wang Kangtian said.

Hudong Zhonghua Shipbuilding Group Co., the only Chinese shipyard that has built LNG tankers, will make the six vessels, Wang said. China Shipping is also in talks with two Chinese shipyards to order an additional four, which may be announced as early as this year, he said.

China Shipping, the crude and dry-bulk carrier of the nation’s second-largest shipping company, had earlier ordered four LNG carriers from Hudong Zhonghua through its venture with Mitsui.

Sinopec in January last year agreed to pay $1.1 billion to increase its stake in an Australian LNG development led by ConocoPhillips and Origin Energy Ltd.

The purchase plan comes after China Shipping reported a 93 percent drop in 2012 net income to 73.7 million yuan ($11.9 million).

Sluggish demand and excess capacity in international and domestic markets resulted in a downturn in freight rates, the company said in a statement in January.

China Shipping fell 1.7 percent to HK$4.09 in Hong Kong trading yesterday. The benchmark Hang Seng Index rose 1 percent.

Copyright 2013 Bloomberg.