Lloyds List: Shake-up at Shell marks changing tide in LPG business (ShellNews.net) 3 March 05
THE liquefied petroleum gas carrier market may not be experiencing tumultuous changes similar to those in the higher profile liquefied natural gas carrier sector but significant events are afoot.
Chief among them, it could be argued, is Shell's decision to divest its LPG distribution and marketing business.
Shell is one of the largest players in the market, handling 4m tonnes of branded LPG annually and employing 4,000 people in 50 countries.
The energy major is involved in the shipment of several million tonnes of LPG by sea.
Tonnage cover is normally met by either contracts of affreightment and time charters, or spot charters, depending on the trading area.
Shell's LPG business produced earnings before interest, tax, depreciation and amortisation of $400m, which could result in a price tag in the region of $3bn.
This estimate is based on the fact that analysts say similar transactions in the industry have been valued at six to eight times Ebitda.
Shell has said that the complexity of the transaction may mean a deal will not take place until late this year.
The problem is unravelling LPG from the company's other businesses in each country.
However, the significance of a sale to the LPG carrier market will not come clear until the name of the buyer is known.
Repsol YPF, the Spanish energy giant, is reported to be one of the interested parties.
Such a deal would create the world's largest LPG group, with sales of about 7.5m tonnes.
At the same time, several other potential buyers, including private equity firms, are said to be eyeing Shell's LPG business.
In LPG shipping itself, there have also been some recent developments of note.
In February, the National Shipping Company of Saudi Arabia disclosed it was investing $50m in acquiring a 30.3% shareholding in Petredec, a leading LPG trader and shipowner. Petredec controls a fleet of 53 vessels delivered and on order aggregating almost 800,00 cu m.
This transaction not only represents NSCSA's debut in the gas trades but also the company's first share acquisition of an existing shipping company.
Petredec was also in the news a few weeks earlier when the company ordered two very large gas carriers at Hyundai Heavy Industries in a deal worth $166m.
The 82,000 cu m vessels are scheduled for delivery in 2008.
They are thought to be the first VLGCs ever contracted by Petredec in the company's 25-year history.
Shipbroker Fearnleys noted that the Petredec order reaffirmed 'the trend of LPG traders securing newbuildings on their own'.
In January, Petredec was also reported to be the charterer supporting an order for a VLGC by Yuyo Steamship at Japanese shipbuilder Mitsubishi Heavy Industries.
Another noteworthy development was the debut of Japanese shipping giant K Line in the ammonia sector. In December, the Japanese line went to Daewoo Shipbuilding and Marine Engineering to build two 38,000 cu m fully refrigerated ammonia'LPG carriers.
The ships will go on long-term charter to Yara, which is the world leader in mineral fertilisers.