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SHIPS AND TRADERS
Ships and TradingAmerica 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, Tropigas 2 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.
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..
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.
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 -5oC carriage
temperatures).
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
Specific Gravity Carriage Temperature (?C)
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.
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.
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.
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.
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.
MundogasTwo 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 US 6 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 under
time-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 Gasbras.
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.
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.
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
The company pioneered industry use of re-heaters 8 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
Bronzini 9 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.
8 The Mundogas term was “borrea.”
9 Who came over from Ultragas and Gazocean respectively.
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.
GazoceanRene 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 1959 10 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.
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.
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).
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.
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.
MultinationalThe 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.