Apr 10, 2012
Emerging trends in the world energy involve an increase in natural gas usage as an emission-free and cost-effective energy product. Greece has an important role to play in this developing energy trend as well. Its is an especially unique one, considering the country’s historical identity as a major shipping country, with a plethora of powerful shipowning dynasties with a global reach.
Liquefied Natural Gas (LNG) is transported worldwide via merchant vessels, and perceived increases in future demand mean that shipowners are making more investments in this kind of ship. Japan, which has gas needs to be filled for the next decades because of the Fukoshima nuclear disaster and China, with its growing appetite for energy, are just two examples of emerging LNG markets.
The Greek vessel acquisition programme now underway also has major implications for continuing economic relations with South Korea, where the biggest and most important shipbuilding companies are located. These acquisitions also indicate, as Balkanalysis.com reported over a year ago, that shipbuilding trends in Greece can indicate future developments in the global economy.
Meet the Tycoons
The Greek maritime sector owns 17% of all merchant vessels capacity internationally. Now, Greece’s maritime tycoons are investing heavily in LNG tankers, though it is a costly procedure and requires enhanced security and training standards for the personnel involved.
In the following analysis, we discuss acquisitions being made now by the major companies of the Livanos, Aggelikousis, Prokopiou, Economou, Tsakos, Martinos, Kanellakis and Fostiropoulos families- the major dynasties in Greece today, with historic roots in shipping, in some cases for several centuries. Further note is made of the other shipping families (Restis, Koustas, Handris, Panagiotidis and Lykiardopoulos).
Such dynasties have major clout beyond just shipping, which can extent into the worlds of politics, media, education, banking and much more. However, the present report concentrates only on their fundamental business and LNG ship purchases.
Greek Shipping Purchases: A Change in Strategy towards LNG Tankers
As will be presented in this report, these investments signal a new and important trend in the Greek shipping world, which seems to be moving away from bulk carriers, and moving more towards the more specialized energy transport sector, where it will certainly face competition from primarily Norwegian and Japanese companies.
The investments in LNG vessels by Greeks are presently estimated at 5.5bn USD, representing primarily 25 main shipbuilding contracts. The average vessel on order will have around 150,000 cubic meters of gas capacity.
GasLog, the leadership of which is located in Greece and Monaco, has ordered 6 LNG ships from Samsung Heavy Industries in South Korea, a deal reported as worth approximately 1.2bn USD. The Livanos family also owns the Sverys maritime holding and the Euronav oil tanker company, making their clout in the global shipping sector quite substantial. Their current purchases indicate the trend towards LNG to other Greek businesses.
Maran Gas Maritime belongs to the Aggelikousi family, another traditional shipping family which also has roots in the island of Chios. This island (along with its satellite islands of Oinousses and Psara) has had a great reputation for maritime industry for hundreds of years.
Maran Gas has ordered more LNG tankers from another Korean company, Daewoo Shipbuilding & Marine Engineering. “The two ships, which were on option for Maran Gas, bring to seven the number of 159,800-cbm LNG carriers that it has ordered from DSME, reported the Shipbuilding Herald on March 23, 2012.
“Scheduled for delivery in 2015, the two vessels take the company’s total LNG newbuilding programme to 11 units overall, with four 164,000-cbm vessels on order at Hyundai Samho Heavy Industries,” continued the report. The total funds being invested by the Greek company are around 1.5bn USD.
The Cardiff Marine company, which is owned by the Economou family, has also ordered four LNG vessels and has an option for another two worth around 1bn USD. It is interesting to note that the total size of the fleet of all ships Economou owns exceeds 100 units, making him one of the most influential shipping figures.
According to well-placed sources, the company will invest heavily in LNG from 2015 onwards, predicting a rapid rise in natural gas consumption, not just in East Asia but also in Western Europe. In fact, a Reuters report of August 2011 discussed how not only Greek but many other international conglomerates placing orders had pushed the South Korean capacity to its limit, putting delivery back to 2015 (when the largest gas demand was projected anyway).
“The latest deal by George Economou’s Cardiff Marine group for four LNG tankers takes the number of vessels ordered by Greece-based owners since the start of the year to 21,” stated the report, which also quoted another shipping industry source as saying that the Greeks, who are coming into the LNG tanker world for the first time, “are investing in shipping because rates are rising and ageing ships face retirement as new product comes to market.”
The Thenamaris Acquisitions- from Oil to Gas
The Thenamaris Company is owned by another family long involved in maritime business family, the Martinos clan. Two LNG ships have been ordered by them from the Samsung shipbuilders in South Korea, at a cost of 400mn USD. The Martinos Brothers, who own a string of maritime related corporations, cumulatively possess over 110 vessels. They have been major players in world oil trade for decades, and with these new orders indicate the desire to move into natural gas as well.
In September 2011 it was reported by The Shipbuilding Herald that the company “has extended its LNG order placed in July for two 160,000 cu.m units in Samsung H.I. by adding one more unit for delivery in 2014 at a price region [of] $200 mil.”
The report noted that it seems Greek companies are serious about the long-term future of their role in LNG transport, by virtue of an absence: “Greek owners are again absent from the secondhand market, while they continue their newbuilding investments in Chinese and Korean shipyards.”
The Dynagas Company belongs to the Prokopiou family and has ordered four LNG ships from Hyundai worth 800mn USD. It is worth mentioning that since 2004 Prokopiou’s other maritime companies have ordered around 70 vessels and the total tonnage his fleet owns exceeds 10m DWT- a number larger than the entire fleet of countries such as France, Italy or Brazil.
In May 2011, market intelligence firm ICIS-Herren reported that “according to a broking source, Dynagas also reserves an option to build an additional vessel. The shipping sources estimated the cost of the deal to be around $600m.”
The report added that “both vessels will be fitted with the Dual Fuel Diesel Engine system which allows the vessel to use either bunker fuel or natural gas for propulsion.”
Later, in December 2011, Lloyd’s List reported that Dynagas “appears to have clinched a fifth 160,000 cu m newbuilding order at Samsung Heavy Industries,” which will further increase the Greek firm’s clout and competitiveness.
Alpha Tankers & Freighters
In September 2011, news broke that this company, which belongs to the Kanellakis family, had ordered an LNG ship from the STX Offshore & Shipbuilding of Korea, worth around 200mn USD, with an option placed for a second one. In reporting this development, Business Week stated that the intelligence had come from Lloyd’s List, “without stating where it obtained the information.”
Delivery of the tanker was projected for April 2015. The order was “the 25th LNG gas carrier ordered by shipowners in Greece in 2011, according to Lloyd’s List.”
Almi Tankers is a mid-sized Greek company owned by the Fostiropoulos family. It has ordered an LNG tanker worth around 200mn USD from Daewoo, and our information indicates that it will consider ordering another one in the near future.
Tsakos Energy Navigation (TEN)
The Tsakos Energy Navigation (TEN) company belongs to another highly-influential Greek shipping family, the Tsakos dynasty, which also hails originally from the Island of Chios. Although they have not proceeded to order LNG tankers yet, reliable information indicates that they are about to order two vessels worth over 400mn USD from Korea’s Daewoo.
The company has been registering healthy growth and is presently in a strong position for expansion. Its 2011 Q4 report was cited by international media, including MSNBC, which stated that the company “beat expectations on revenues and exceeded expectations on earnings per share.” TEN had “chalked up revenue of $100.8 million,” the report noted.
Demand Expected To Grow
According to all specialized maritime agencies in the sector of energy trade, demand will grow globally by 2020 of at least 35% for LNG trade. The closing down of nuclear stations in Japan and Germany over the coming years, the declining gas production in the British Isles and the steady appetite of China, Vietnam, Brazil and India for energy, paint a wildly optimistic picture for increases in this sector of business. All estimations are that at least until 2050, there will be a growing demand for LNG, making those who invest now in that sector, highly compensated for that investment.
As a final note, it is interesting to compare the current phenomena with a report published by Balkanalysis.com back in January 2011, which we noted well in advance that the moves of the Greek shipowning companies could be an indicator of their confidence in the economy and future growth, at a time when all seemed dark indeed.
This is being recognized now, as a NASDAQ article of 3 April 2012 indicates. The article, titled “Greek shipping shrugging off debt crisis,” stated that while the aftershocks of the global recession have negatively affected many shipping companies, “the Greeks mastered shipping millennia ago, and solid stocks like Tsakos Energy Navigation ( TNP, quote ) and Capital Product Partners ( CPLP, quote ) are on the way back up.”
Indeed, as we had reported back in January 2011, “Greeks bought more ships in terms of value than both the Chinese and Japanese companies combined during 2010- a clear signal of overall confidence from Greek ship-owners that global trade is soon to boom, and that they should therefore seek to acquire vessels in order to meet demand before their gigantic competitors.”
Appendix (1): Largest Greek merchant shipping owners by capacity
Aggelikousis: 21 million DWT – 120 ships
Prokopiou: 10.5 million DWT – 72 ships
Economou: 8.2 million DWT – 61 Ships
Tsakos: 8.2 million DWT – 82 ships
Restis: 6.2 million DWT- 70 ships
Koustas: 6 million DWT – 70 ships
Handris: 4.6 million DWT – 31 ships
Martinos: 4.4 million DWT – 39 ships
Panagiotidis: 4.4 million DWT – 25 ships
Lykiardopoulos: 4.4 million DWT – 25 ships
Appendix (2) Main figures of Greek-owned merchant shipping sector as of early 2012
-750 maritime companies are located in Greece and have imported capital in the country in excess of 170bn USD between 2001-2011, without having received any state subsidies or credit, and without counting the effect of domestic maritime businesses (i.e., shipping lines to the Greek islands).
-The Greek-owned fleet is around 4,150 vessels (over 1,000 DWT).
-The Greek merchant navy’s total dwt is 202 million.
-Taking into consideration Greece’s low-yield agricultural production and sizeable, rather unproductive public sector and ailing industrial sector, without the positive economic effects of maritime business and tourism, the country would be indeed in extremely bad shape. Without these two key industries, Greece would have to face not only bankruptcy on its public debt, but a dramatic drop of income, on par with the poorest regions in Europe.
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