raks............pssst, page-47

"Mundoga s's trading activities declined in the second half of the 80's and it was left with an asset base of its older refrigerated vessels. These assets were subsequently picked up by the LPG trader Enron and then sold on, with the Mundogas name, to the Hong Kong-based entrepreneur, Robbie Brothers."




The Story of LPG - Ships and Traders 3/22/02

Ships and Trading

America was largely self-sufficient in LPG. But Japan, Europe, and South America had developed markets which became reliant on imported supplies. Ships had to be designed and built to move this volatile cargo safely and economically from loadport to disport.

The pioneers in this business turned out in large part to be enterprising individuals, rather than major oil and gas companies; and it was these individuals, and the companies that they formed, which shaped the early seaborne trade in LPG and established a role for the independent trader that has more or less continued to this day.

The first LPG to be shipped internationally was, as we have seen, transported in the deck tanks of cargo liners. The Norwegian shipowner, Oivind Lorentzen, had deck-mounted 10-ton skid tanks installed on his liner ships operating between the US Gulf and Brazil. This method became too costly, however, as LPG trade volumes increased.

The technology for storing and transporting LPG under pressure on land had already developed and the same approach was followed in the early ship designs.

The first specialized LPG vessels to trade were in fact dry cargo ships converted and refitted with cylindrical pressure tanks by the Bethlehem Steelyard in Beaumont, Texas. The first of these, completed in 1947 for Warren Petroleum, was the 6,050 cubic meter Natalie O. Warren (with 68 vertically installed tanks in five holds) and the next, delivered two years later for Lorentzen, was the 3,000 cubic meter Ultragas (with 29 vertical and two horizontal tanks). The steel tanks had to be designed of such thickness so as to withstand working pressures up to 17 kg. per square centimetre.1

At the same time, Esso began converting T2 ships for combined LPG and petroleum products carriage. Their initial venture in this field, the Esso Sao Paulo, included 8 vertical pressure tanks installed in the vessel's centre tanks. The Esso El Salvador and Esso Brazil followed with similar configurations. The combined transport of LPG and petroleum products proved to be somewhat cumbersome for Esso to manage in their trade to Brazil and they sold out their business in 1954.

The first purpose-built LPG pressure tanker was the Rasmus Tholstrup, ordered by the Danish company, Kosangas, in Sweden in 1953. This vessel had twelve vertical pressure tanks and a carrying capacity of 600 cubic meters. Later on in the 1950's, pressure tankers with cargo capacities ranging from 200 to 1,000 cubic meters became commonplace in Europe.

They were built bigger for Caribbean and South American trades where shipping distances were longer. In 1956, Tropigas2 ordered the 2,000 cubic meter tanker Marian P. Billups and, two years later, the larger 2,850 cubic meter Fred H. Billups. The design of these vessels reduced the number of tanks and consequent complex piping systems that had been a feature of the earlier vessel conversions.

Some even larger pressure tankers continued to be built for specific purposes.3 But an efficient design - given the thickness of the tanks - usually limited the carrying capacity to around 2,500 cubic meters.

The solution for larger payloads was refrigeration. By cooling the cargo, the pressure can be reduced and there is a consequent reduction in the thickness and weight of the cargo tanks.

What was needed for the vessel design was:

(a) onboard refrigeration equipment to maintain the cargo within specified temperature and pressure limits;
(b) steel in the tanks which would remain ductile at the low temperatures of LPG; and
(c) tank insulation that would protect the hull structure.

In 1959, Gazocean, with its team of young engineers (later reorganized as a separate company, Technigaz), had the first of these vessels of semirefrigerated design, the 920 cubic meter Descartes, constructed at the La Ciotat yard in France. This vessel was able to operate at a reduced working pressure of 9 kg. per square centimetre.

The semi-refrigerated vessel designs of the 1960's achieved further reductions in working pressure requirements (to 5-7 kg. per square centimetre) and enabled the cargo tank capacity to increase, first to 2,000 cubic meters and later to 4-6,500 cubic meters.4

The early charterers, such as Gazocean, were traders and operated within the environment of a fluctuating and seasonal LPG trading market. They needed vessels with the flexibility to trade LPG out of different loadports and disports and to be able to trade other liquid cargoes such as anhydrous ammonia, butadiene, and vinyl chloride monomer (VCM), depending upon market conditions.

Properties of LPG and Other Cargoes

ÿ


Specific Gravity


Carriage Temperature (oC)

Propane


0.583


-43

Butane


0.602


-1

Ammonia


0.683


-34
Butadiene 0.647 -5
VCM 0.965 -14

The 6,310 cubic meter Pascal, delivered from La Ciotat in 1967, was the first carrier to be able to load LPG either in either a "warm" (i.e. ambient temperature) or a fully refrigerated state. The vessel was one of the first to be equipped with inert gas to clean the tanks prior to changing grades.

The Humboldt of similar size, delivered from the same yard a year later, was designed with a flexible gas system which allowed up to six different products to be carried at the same time in its six horizontal cylindrical tanks.

The initiative then passed to Norway and the Norwegian shipbuilder Moss Rosenberg. By the early 1970's, Moss Rosenberg had under Mikael Gronner developed standardized designs for semi-refrigerated vessels in size ranges from 2,000 to 15,000 cubic meters. The company promoted their vessels aggressively to the industry, often building them on speculation for yard account without any firm charters in hand. The ships that they built formed the basis for the LPG and chemical gas trading in the Atlantic basin in the 1970's.

The Danish shipowner A.P. Moller took delivery of their first 12,000 cubic meter semi-ref ship in 1972 and became the leading operator in this segment of the fleet, controlling 15 vessels in the 12-20,000 cubic meter size category by the mid 1990's. Their 20,500 cubic meter Hans Maersk, delivered in 1993, has a maximum LPG carrying capacity of 12,000 tons in its four cargo tanks. Longer-haul LPG trades required much bigger cargo payloads, however. That was the problem facing prospective importers of LPG into Japan from the Middle East and other distant supply sources in the early 1960's.

The pioneer in a new LPG vessel design was Bridgestone Liquefied Gas, a joint-venture formed between Bridgestone Tire of Japan and the American oil company, Phillips Petroleum. This company worked with Conch International Methane, a specialist in cryogenic technology, Shell Oil, and others on a design for the first fully refrigerated LPG carrier.

The new tanks to store low-temperature LPG in this vessel would have to be free-standing and fully insulated within the ship's hull to prevent any cold escaping and damaging the hull.5 But they did not need to be cylindrical in shape (as was the case with pressurized and semi-refrigerated vessels) and could be much more efficiently moulded to fit the contours of the ship.

The first vessel of this type, the 28,875 cubic meter Bridgestone Maru, was ordered at the Mitsubishi Heavy Industries yard in Yokohama and delivered in 1962. The Bridgestone Maru II, delivered in 1964, started the modern practice of using the inner hull of the vessel and part of its side shell as the secondary barrier to protect the hull structure.

Later designs increased the cargo carrying capacity to 50,000 cubic meters and to 75-78,000 cubic meters, the standard size for VLGC's (very large gas carriers) transporting 40-45,000 tons of LPG in long-haul trades today.

The first generation of VLGC's was built for Japanese imports. Demand for these ships in the West was to come later. Initially, fully-ref ships were employed in the ammonia trades. As longer-haul LPG trades developed in the 1970's, Mundogas, Gazocean, and the British shipowner P&O led the step - up in ship-sizes ordered. The Monge, completed in 1977, was the first VLGC newbuilding for Western account.

Mundogas

Two of the technological innovators in LPG transportation, Mundogas and Gazocean, were also pioneers in its trading. A third trading company, Multinational, enjoyed a meteoric rise and fall during the 70's. These three companies were the main players in international LPG trade prior to its globalization in the 1980's.

Mundogas, an enterprise begun on a pre-war alliance to supply Brazil between a US supplier (Socony Vacuum/Mobil), a Norwegian shipowner (Oivind Lorentzen), and a Brazilian buyer (Panaversal/Ultragas) - emerged in 1956 as a separately constituted trading company in the US6 under their joint ownership.

The first vessel acquisition was the Natalie O. Warren from Warren, renamed Mundogas Oueste. The company also traded the three Liberty ships which had been converted by Lorentzen into LPG tankers, the Ultragas, Ultragas Sao Paulo, and Gasbras Norte. Starting in 1950, these vessels had transported LPG in 1,000-1,500 ton lot-sizes from Houston to the ports of Rio de Janeiro and Santos in Brazil.

Later, Lorentzen had special-purpose pressure tankers built to operate undertime-charters with Mundogas.

LPG import requirements were expanding. Ernesto Igel was building up Ultragas's retail sales network in Brazil,7 while his son, Per, handled supply and trading aspects at Mundogas. Lorentzen meanwhile had also moved into downstream distribution with its acquisition and development of Gasb ras.

Fred Jackson, who came from Mobil, oversaw the expansion in the late 60's. A second import market, Argentina, was opening up by then. Towards the end of that decade, Brazil and Argentina together were importing close to 800,000 tons per year, with Mundogas supplying a major share of these volumes. The principal source now was Venezuela, rather than the US Gulf.

Mundogas invested then in its own fleet of fully -ref ships.

The Mundogas LPG Fleet in 1970

Vessel


Size (000 cbm)


Year Built

Monomer Venture


5.7


1962

Mundogas Brasilia


7.7


1961

Mundogas Atlantic


8.5


1969
Mundogas Rio 19.5 1967
Mundogas Europe 22.0 1968
Mundogas Pacific 22.0 1969

ÿThe company pioneered industry use of re-heaters8 in LPG shipboard operations, whereby "cold" or refrigerated LPG could be discharged into "warm" or pressurized shoreside tanks.

By this time, Mundogas was facing increasing competition from the European traders in its South American backyard. The company in fact lost out to Gazocean on the C&F contract into Brazil in 1968.

Their focus then shifted to Argentina and Chile and further afield. The Brazilian connection withered and Ultragas and Mobil sold out their interest, the British shipowner P&O acquiring their shares. Charlie Scott was by then President of Mundogas, with Chris Marner handling LPG trading. The Mundogas organization inherited by Howard Dutemple and Sandro Bronzini9 was in the mid 70's a trading office of 50, with branch offices in Houston and London. Thyssen purchased the Lorentzen shares in 1979 after a corporate restructure and bought out P&O in 1983.

The company moved around 1.7 million tons annually of various products, of which roughly half was LPG under its own account. Their first supply contract in the Middle East was concluded in 1974. By 1980, Mundogas was selling into Japan, into Europe (where the company also operated the Unimundo small-ship trading operation with Unigas), and into the US Gulf Coast.

Mundoga s's trading activities declined in the second half of the 80's and it was left with an asset base of its older refrigerated vessels. These assets were subsequently picked up by the LPG trader Enron and then sold on, with the Mundogas name, to the Hong Kong-based entrepreneur, Robbie Brothers.

Gazocean

Rene Boudet started his LPG career in Italy in 1956 with a shipping company, Oceangas, and a small pressure ship, the Gay Lussac. The following year, a charter opportunity with Shell Maritime of France enabled him to set up Gazocean in Paris. Over the next 22 years, Rene Boudet brought technical skills, trading flair, and vision to the business and Gazocean grew to rival and surpass Mundogas in its LPG trading activities.

His technical department, subsequently Technigaz, pioneered the first semirefrigerated LPG vessel, the Descartes, in 195910 and the first LNG membranetype tank in the Pythagore, delivered in 1964.

Gazocean's trading started with refinery LPG out of the Mediterranean and expanded, as the fleet expanded, to handle other liquid cargoes such as anhydrous ammonia, butadiene, and vinyl chloride monomer (VCM).

The company operated in part as an LPG trading company and in part as a commercial and operational manager for those shipowners who put their vessels under the Gazocean pool. The initial relationship had been with the Italian shipping company, Oceangas. Subsequent alliances were struck with Navigas in Spain and with the British Houlder group.

Gazocean expanded into South America in the mid 1960's. First into Chile; then into Argentina; and finally, in the biggest coup of all, the C&F contract into Brazil with Petrobras in 1968. Its position was later buttressed by a jointventure with Shell, Western LPG, on Shell's LPG volumes out of Venezuela.

Gazocean was able to parlay good contacts and a ready pool of ships in successfully competing for the increasing amount business that was becoming available in that part of the world.11

LPG trading activities grew again in the 1970's. More supplies were coming out of Libya and Algeria. Gazocean took up minority shares in two French import terminals and invested in the Sea-3 import terminal on the US East Coast. The company also established branch offices in Tokyo and Singapore to expand activities into the Far East.

By this time, the Gazocean pool controlled 12 fully-refrigerated ships and a further 20 small-ship pressure vessels. At its peak in 1976, the fleet, with chartered -in tonnage, moved around 2.4 million tons of LPG.

Rene Boudet and, until the mid 70's, Sandro Bronzini handled the trading activities on very much of a personal basis (although Jim Benedict, who was brought in from Shell Venezuela, did introduce a management structure for the company).

But there were problems on the horizon. The diversification into phosphoric acid and LNG carriers (with speculative ship orders) did not prove viable and this, combined with the LPG trading losses experienced in 1977 and 1978, caused a severe cash drain. Gazocean survived the crisis and was, with French government and Moroccan help, restructured. Nevertheless the changes led of the departure of the company's founder, Rene Boudet, to form a new trading company, Geogas.

Gazocean was still an active LPG trader in the early 80's, but had retrenched by mid-decade. The shipping pool was restructured in a looser pool arrangement as General Gas Carriers in 1983. This pool continued for another few years until it and Gazocean were finally dissolved.

Multinational

The first attempt at a global LPG trading company was Multinational, set up in London in 1971. Its three shareholders spanned the world - Phillips Petroleum from the US, the SAGA group from France, and Bridgestone Liquefied Gas from Japan.

Herman Sauer, who joined from Phillips, soon became General Manager of the newly-formed company and Charlie Mitchell, also from Phillips, Supply Manager. Lou Oakman, another Phillips recruit, headed Multinational's New York office. Shipping came to be handled by Chris Marner (from Mundogas).

During its hey -day, the company traded over a million tons per year. Access to supplies was a critical factor, as it has been for traders before and since. Multinational bought from the oil majors in Venezuela, from Occidental in Libya and Sonatrach in Algeria, and, by the mid-1970's, from various suppliers in the Middle East.

Multinational's office in New York gave the company proximity to the Aramco partners who marketed the Saudi volumes. Chevron and Texaco would have volumes that were surplus to Caltex's requirements in supplying Nippon Petroleum Gas and other importers in Japan. And Multinational was usually successful in securing these volumes when they were tendered.

The main outlets for their large-cargo traded volumes were Taiwan and Japan in the East, Spain in the Mediterranean, and the Gas del Estado tenders in Argentina. In support of these trading activities, Multinational was controlling a large LPG fleet by the mid-1970's, including eight fully -ref vessels.

Multinational Fully-Ref LPG Fleet in 1976

Vessel


Size (000 cbm)


Year Built

Trina Multina


18.4


1968

Norfolk Multina


25.1


1964

Amy Multina


26.5


1969
Bridgestone Multina 28.8 1962
Kenai Multina (LNG) 35.5 1975
Hoegh Multina 52.0 1971
Malmros Multina 53.4 1974
Providence Multina 53.4 1973

The major charter commitment was for the 50's with the Norwegian shipowner, Leif Hoegh.

Multinational was under-capitalized, however. Trading losses in 1977, coupled with mounting commitments on charter-hire and newbuilding payments, precipitated a cash crisis. The shareholders were reluctant to make available any additional funding and the company went under.

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1 Equivalent to 240 pounds per square inch. One kg. per square centimetre approximates 14 pounds per square inch.

2 Tropigas, based in Miami, had until 1954 been the LPG marketing arm of Esso in the Caribbean.

3 The Esso Puerto Rico, originally designed as a 35, 000 dwt conventional tanker, was later modified at the building yard for LPG carriage (with pressure tanks installed in each of the center tanks). The vessel, when delivered, combined 7,000 tons LPG storage with larger crude oil carrying capacity. Shell's 18,000 dwt Iridina was converted just to trade in the heavier butane and butadiene liquefied gas cargoes (at their more moderate -5øC carriage temperatures).

4 In many pressure tankers, the tanks weighed as much as the cargo. With refrigeration equipment onboard, the reduced pressure of the cooler cargo created savings in the weight of the steel needed in the cargo tanks, thereby increasing cargo payload.

5 The temperature in a refrigerated tank will change during the course of a round-trip voyage. It will rise to ambient temperature during the ballast leg unless some cargo is retained within the tank to keep the tank cold. A cargo tank warmed to ambient temperature must then be allowed to expand unimpeded within the ship's hull. Similarly, when being cooled prior to loading, it must be allowed to contract. The tanks themselves require construction with special low-temperature nickel steels. Standard refrigerated vessel design includes a double bottom which acts as an extra precaution for groundings.

6 In offices in Stamford, Connecticut. The company moved to Bermuda for tax reasons in 1967.

7 This business was extremely profitable. The story goes that, when Ernesto Igel died in Sao Paulo in the early 1960's, he left his heirs a sizeable personal fortune.

8 The Mundogas term was "borrea."

9 Who came over from Ultragas and Gazocean respectively.

10 The story has often been told how Rene Boudet returned by train from a visit to the La Spezia shipyard in Italy with a young engineer from Shell Maritime, Etienne Schlumberger. During the train journey, Shlumberger showed Rene Boudet his design plans for a new concept of refrigerating the cargo onboard. Gazocean's technical department was able to incorporate these plans into the new vessel they were building, the Descartes.

11 Roland Hautefeuille recounts in his book Gas Pioneers how, in his days with SAGA, he lost out on some business in South America. How did he lose out? "Well, we knew the terms of your offer, of course," was the response given by Gazocean. The import tender system used by buyers leaked information in those days.