Stranded Chinese LNG Carrier Blocks Exports from Australian Terminal
A stranded Chinese LNG tanker is blocking one of Australia’s export terminals and is starting to draw the attention of the global energy markets. The concerns were sparked today, November 28, when Australia’s upstream producer Origin Energy announced it has commenced “turning down production” to reduce the flow of gas to the LNG facility after several shipments have been deferred.
The Chinese-owned LNG tanker CESI Qingdao (95,600 dwt) is a regular caller at the terminal as part of a dedicated export operation with the vessel operating under a long-term time charter with Chinese energy company Sinopec (China Petroleum & Chemical Company) which is also one of the three investors in Australia Pacific LNG. The ship was built by Hudong-Zhonghua Shipyard and delivered in 2017 to a JV between Sinopec, COSCO Ship, and Mitsui O.S.K. Lines (MOL). With a capacity of 174,000 cbm she is one of six carriers built in a class of ships specifically for the transport of LNG from the terminal to China for Sinopec.
The problem began on November 21 when the vessel arrived for one of its regular calls at the terminal on Curtis Island near Gladstone, Australia, which is operated by ConocoPhillips as part of Australia Pacific LNG. While the vessel was loading it lost power in what its owners are describing as a “propulsion failure,” while media reports in Australia attributed to the Australian Maritime Safety Authority said it is a generator issue with AMSA calling the vessel “unseaworthy” at this time. The laden vessel was due to sail late last week for Wenzhou, China.
Australia Pacific is one of the country’s largest producers and exporters with a capacity of 9 million metric tons annually. However, the terminal only has one dock and according to Orion the tanker “has lost power and is currently unable to leave the terminal.” They reported that no other cargo can be loaded until the situation is resolved.
Orion reports it has begun reducing production while it is taking steps to bank its non-operated portfolio production. They report that the terminal normally loads a new ship every three days and so far, two shipments have had to be deferred. AIS signals show that there are now three LNG tankers anchored off Gladstone waiting while Orion in its statement said, “It is expected that more LNG cargos will be deferred.”
The total number of cargoes to be deferred will depend on the timeframe for resolution according to Orion. They noted that ConocoPhillips is working with the vessel, its owners, and the maritime authorities to resolve the situation as quickly as possible. However, Australia Pacific is a major supplier to Sinopec and also to Japan’s Kansai Electric. The disruption comes as LNG demand traditionally increases during the colder weather season in China and Japan.
Durban Warns It Could Take 15 Weeks to Clear Backlog as 60 Ships Wait
Port officials in South Africa are reporting it is likely to take until 2024 and possibly till February to clear the current congestion that has built up at the container port in Durban. Consistently at the bottom of port rankings for efficiency, Durban is facing a crisis with more than 60 vessels reportedly waiting offshore and importers now saying they will not have expected merchandise in time for Christmas.
“The problem of port congestion is a complex one and it is something that was due to happen at some point, as a result of many years of underinvestment in equipment and its maintenance,” Transnet operator of the large container terminal at Durban wrote in a statement attributed to Board Chairperson, Andile Sangqu. “We need to caution that this is going to take some time as the lead times for some of the equipment is anything from 12 to 18 months,” said Sangqu in a media briefing.
Carriers have been warning customers for weeks that the situation in Durban had reached crisis level with the operator in part blaming bad weather in addition to staffing levels and equipment failures. Maersk at the beginning of November imposed a congestion fee between $200 and $400 per container for boxes shipped to South Africa from destinations beyond East and West Africa. MSC Mediterranean Shipping Company followed suit with a similar congestion fee and CMA CGM announced at the end of last week it will also be implementing a Port Congestion Surcharge of $200 per TEU bound for Port Elizabeth, Durban, and Cape Town beginning in December. Maersk and other carriers have also dropped port calls and announced changes to their rotation.
Transnet says with 63 vessels currently anchored off Port Durban and 20 booked for the two berths at the Durban Container Terminals it will take weeks to clear the backlog. They are working to increase the volume at the larger Pier 2 from a pace averaging 2,500 TEU a day over the past four weeks to a target of as many as 4,000 TEU daily. The historical average has been 3,300 TEU a day. Even with the increased pace at Pier 2, they warn into could be 15 weeks, which would be the beginning of February before they can catch up.
The situation is looking only slightly better at Pier 1. They are going to try to raise the volume from the current 1,200 TEU a day to 1,500 TEU over the next few weeks. They expect it could take seven weeks to clear the backlog at Pier 1.
Durban has consistently ranked low for port operations. The World Bank’s 2022 report places Durban at 365 on a list of 370 ports. Transnet, however, cites weather as well as issues of equipment availability for the current problems. Ships are reporting the wait is three to four times the average time to offload in Durban.
The company says it is prioritizing the optimization of port operations and working to improve planning and forecasting leading to better anticipation of cargo volumes. Among the steps they are taking to address the slow turnaround times is increasing staff including a fourth shift.
While saying it is an urgent intervention to address the backlogs, Transnet reports it will take time to obtain new equipment. They are working to repair and refurbish critical port equipment but said it will last till August 2024. They are buying 16 gantry cranes for delivery by the second half of 2025 and four ship-to-shore cranes for delivery in FY 2025-2026.
Similar delays are reported to also be building at Richards Bay, which is the large breakbulk port for the mining industry. Transnet said it will be conducting an emergency meeting with port officials and the industry on Tuesday to work on a plan to address the problems at Richards Bay.
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