The four new cruise ships – part of a previously announced nine-ship strategic partnership for the world's largest cruise company – will be the largest ever built based on guest capacity. The vessels will feature a revolu- tionary “green cruising” design as the first-ever cruise ships powered at sea by Liqueied Natural Gas, the world’s cleanest burning fossil fuel MIAMI, June 15, 2015 — Carnival Corporation & plc, the world's largest travel and leisure company, today announced it has signed a multi -billion dollar contract to build four next-generation cruise ships with the largest guest capacity in the world. The contract with Meyer Werft is part of larger previously announced strategic memo of un- derstanding with leading shipbuild- ers Meyer Werft and Fincantieri S.p.A for nine new ship orders be- tween 2019 and 2022.

The four new ships will also feature a revolutionary “green cruising” design. The ships will be the first in the cruise industry to be powered at sea by Liqueied Natural Gas (LNG) -- the world’s cleanest burn- ing fossil fuel, representing a major environmental breakthrough. The company said two of the ships will be manufactured for AIDA Cruises at Meyer Werft's shipyard in Papenburg, Germany. Additional information about the ships, includ- ing which new ships will be added to each brand, will be made availa- ble at a later date.

Based on Carnival Corporation’s innovative new ship design, each of the four next-generation ships will have a total capacity of 6,600 guests, feature more than 5,000 lower berths, exceed 180,000 gross tons and incorpo- rate an extensive number of guest-friendly features. A major part of the innovative design involves making much more efficient use of the ship's spaces, creating an enhanced onboard experience for guests. Pioneering a new era in the use of sustainable fuels, the four new ships will be the first in the cruise industry to use LNG in dual-powered hybrid engines to power the ship both in port and on the open sea.LNG will be stored onboard and used to generate 100 percent power at sea – producing another industry first innovation for Carnival Corporation and its brands. Us- ing LNG to power the ships in port and at sea will eliminate emissions of soot particles and sulfur oxides.

In addition to the two ships be- ing built in Germany, Meyer Werft – which had the capacity to accommodate these four ship -building orders in its produc- tion schedule -- will also build the two additional ships de- tailed in today’s announcement at its shipyard in Turku, Fin- land. Each new ship will be speci􏰂ically designed and developed for the brand and the guests it will serve, underscoring the company's goal to consistently exceed guest expectations and provide f􏰂irst-time and repeat guests with the vacation experi- ence of a lifetime on each and every cruise.Carnival Corporation CEO Ar- nold Donald said the contract is consistent with the company’s measured capacity growth strategy to replace ships with less efficient capacity with new- er, larger and more fuel eff􏰂icient vessels over time. "We are looking forward to executing on the next step in our fleet enhancement plan," said Donald. "At a cost per berth in line with our existing order book, these new ships will enhance the return profile of our fleet. These are exceptionally efficient ships with incredible cabins and public spaces featur- ing a design inspired by Micky Arison and Michael Thamm and developed by our new build teams." Arison is chairman of the board of directors for Carni- val Corporation & plc and Thamm is CEO of the Costa Group, which includes AIDA Cruises and Costa Cruises. Added Donald: “It will be excit- ing to see our shipbuilding team bring these new ships to life. Every step of the way, our focus is on designing state-of-the-art ships that provide a vacation experience our guests will love, and we are putting all of our creative energy and resources into making sure we achieve that goal.” “These ships will expand our leadership position for the Costa Group, the market leader in all the major European markets,” said Thamm. “These will be spectacular ships designed specifically for our guests who sail on our Costa Group brands.” Bernard Meyer, CEO of Meyer Werft, said: “In past years, we have built seven highly successful ships for AIDA Cruises. We are honored that Carnival Corporation has entrusted us with the implementation of this ambitious shipbuilding program, and we look forward to building these four magnificent ships.”

The new ship order will allow the Costa Group to continue to build on its leader- ship position in the European cruise mar- ket – a market in which f􏰂ive out of 10 cruise guests in 2014 sailed onboard a Costa Group ship. The Costa Group – along with Princess Cruise Lines, also part of the Carnival Corporation family -- also occu- pies the leading position in the rapidly growing cruise market in China. As part of each shipbuilding company's long-term strategic partnership with Car- nival Corporation, additional new ship or- ders are being explored over the coming decade.

About Carnival Corporation & plc

Carnival Corporation & plc is the largest cruise company in the world, with a portfolio of 10 cruise brands in North America, Europe, Australia and Asia, comprised of Carnival Cruise Lines, Holland America Line, Princess Cruises, Seabourn, AIDA Cruises, Costa Cruises, Cunard, P&O Cruises (Australia), P&O Cruises (UK) and fathom.

Together, these brands will operate 100 ships in 2015 totaling 219,000 lower berths with eight new ships scheduled to be delivered between 2016 and 2018, along with an additional four ships to be delivered between 2019-2022. Carnival Corporation & plc also operates Holland America Princess Alaska Tours, the leading tour companies in Alaska and the Canadian Yukon. Traded on both the New York and London Stock Exchanges, Carnival Corpo- ration & plc is the only group in the world to be included in both the S&P 500 and the FTSE 100 indices.

Up until a year ago, the shipping industry was ordering ships in droves. This year, orders of new vessels have fallen to a record low and companies can’t get rid of ships fast enough.

About 1,000 ships that have the combined capacity to haul 52 million metric tons of cargo will be dragged onto beaches, cut into pieces and sold for scrap met- al this year. That is second only to the record amount of capacity of 61 million so-called dead weight tons that were scrapped and recycled in 2012.

The global economic slowdown is putting shipping through its most bruising period since the 2008 financial crisis. Companies including Maersk Line, a unit of Danish conglomerate A.P. Møller Maersk A/S, Germany’s Hapag Lloyd AG and China Cosco Bulk Shipping Co. have 30% moreb capacity in the water than cargo. As the companies, mostly based in Europe and Asia, fight for bigger shares of the global market, freight rates have dropped so low they barely cover fuel costs.

In the five years through 2015, owners ordered an average of 1,450 ships annually. This year orders through July fell to 293 vessels, or 11.6 million tons, according to U.K. marine data provider Vessels Value.

“Given the tremendous overcapacity, it will take much more recycling and at least two to three years of no growth in capacity to see some balance between supply and demand,” said Basil Karatzas, chief executive of New York-based Karatzas Marine Advisors Co.

In the benchmark Asia to Europe trade route, shipping rates are at an average of $575 a container this year, compared with $620 last year and $1,165 in 2014. Anything below $1,400 is unsustainable, operators say.

“Freight rates are dismal,” says Anil Sharma, president and chief executive of U.S.-based Global Marketing Systems, the world’s largest cash buyer of ships for recycling. “So you either idle ships, if you can afford it, or recycle.” Mr. Sharma said the typical age for recycling a ship is 30 years. This year the average age of ships getting scrapped is about 15 years.

“What’s changing is that young- er ships are being scrapped, but recycling won’t solve overcapacity on its own,” said Maersk Line CEO Soren Skou. “Only market growth can do this,” he said, adding that his company hasn’t scrapped many vessels this year only about 1% of its capacity but it expects to recycle more ships over the next three to five years.

Others are more active. Hapag- Lloyd scrapped 16 ships last year, or 60,000 containers, roughly 6.2% of its total capacity.

The overcapacity problem has been exacerbated by China’s slowing economy and anemic growth in Europe. Last year, Chinese imports from the European Union fell nearly 14%; Chinese exports to Europe were down 3% in the period. In this year’s first quarter, Chinese imports from the EU fell 7% from a year earlier, a decline matched by exports to Europe.

That has drastically affected the container trade. Last year, some 100 Asia-to-Europe sailings were canceled. That amounted to 10% of the traffic that moves 98% of the world’s manufactured goods, including electronics, household goods, shoes, clothing and food.

“Drastic fleet-management strategies have been implemented by container operators to reduce their exposure on oversupplied trades, and scrap- ping is one of them,” said Jona- than Roach, a container- shipping analyst at London- based Braemar ACM Ship broking.

A global commodities slump hasn’t helped. Beijing has also substantially cut down on imports of commodities such as coal and iron ore, forcing hundreds of previously chartered dry-bulk ships to be idled or recycled. The world’s largest bulk carrier, China Cosco Bulk Shipping, a unit of China Cosco Shipping Co., said in June it would recycle 53 vessels by the end of next year, or 8% of its existing fleet capacity.

In the past, recycling a ship has typically generated about one- quarter of the price of a new vessel of the same type and size. But owners say a sharp drop in the price of steel has cut the rate of return to an average of 10% to 15% of the price of a new ship.

Two years ago, in India, Pakistan and Bangladesh were paying about $460 a ton of steel.Last year it was $300 and it is now roughly $250, shipowners say. Officials at the Alang scrapyard—one of the world’s biggest, on India’s West Coast— said prices were likely to stay low through the rest of the year,as China is flooding the market with recycled steel.

Braemar ACM expects about 550 dry-bulk ships to be recycled this year, 29% more than last year and 48% more than in 2014. About 170 container ships are likely to be scrapped this year, compared with 85 last year and 164 in 2014. The scrapping of other ship types, such tankers, car carriers, general cargo ships and fishing boats, bring the year’s total to

The main engine has been set onto Crowley Mari􏰀me Corpora􏰀on’s new vessel, El Coquí, the first of two new Commitment Class ConRo (combina􏰀on container and Roll/On‐Roll/Off) ships that will be pow‐ ered by liquefied natural gas (LNG) for use in the ocean cargo trade between Jacksonville and Puerto Rico.

“This state‐of‐the‐art engine technology will add efficiency while con‐ tinuing to reduce impacts on the environment, one of Crowley’s top priorities,” said John Hourihan, senior vice president and general man‐ ager, Puerto Rico services.

“Utllizing this green technology is just another way we are demonstrating our commitment to the people of Puerto Rico, our customers and the environment. It alsobears mentioning that neither of these ships, which have been design specifically for the Puerto Rico trade, gets built without the Jones Act – a federal statute that provides for the promotion and maintenance of a strong American merchant marine.”

A video showing the progress of settng the engine may be viewed online here.

The engine was placed using a series of heavy lifts by 500‐ton cranes in the shipyard of VT Halter Marine, a subsidiary of VT Systems, Inc., where El Coquí (ko‐kee) and sister ship, Taíno (tahy‐noh), are under construction. The engine has a total weight of 759 metric tons and measures 41 feet high, 41 feet in length, and 14.7 feet wide.

“Customers will not only be able to experience the same reliable and dedicated service they have with Crowley today, but also will have the added benefit of lower emissions once these two ships join the Crowley fleet,” said Jose “Pache” Ayala, Crowley vice president, Puerto Rico. “Crowley is making a significant investment in the Puerto Rico trade to provide faster transit times while continuing with the ability to carry and deliver the containers, rolling cargo and refrigerated equipment our customers count on.”

Designing, building and operating LNG‐powered vessels is very much in line with Crowley’s overall EcoStewardship positioning and growth strategy. The company formed an LNG services group in 2015 to bring together the compa‐ ny’s extensive resources to provide LNG vessel design and construction management; transportation; prod‐ uct sales and distribution, and full‐scale, project man‐ agement solutions.

These Commitment Class, Jones Act ships are de‐ signed to travel at speeds up to 22 knots while maxim‐ izing the carriage of 53‐foot, 102‐inch‐wide contain‐ ers. Cargo capacity will be approximately 2,400 TEUs (20‐foot‐equivalent‐units), with additional space for nearly 400 vehicles in an enclosed Ro/Ro garage.

CrowleyMaritimeSets1stMANEngine. in Dual Fuel, LNG, Marine, Milestones by Rich Piellisch Crowley Maritime is trumpeting the setting of the main engine onto its new El Coquí container ship as ‘a critical milestone.’ El Coquí is the first of two Commitment‐class LNG‐diesel dual fuel ships being built for the Puerto Rico trade. Photo from Crowley’s excellent video shows the MAN Diesel & Turbine 8S70ME‐C8.2‐GI engine ‘A‐frame’ being lowered into place.

Crowley Maritime reported “another critical mile‐ stone” as the main engine has been installed in its El Coquí newbuild, the first of two Commitment‐class ConRo (combination container and Roll/On‐Roll/Off) ships that will be powered by liquefied natural gas to connect Jacksonville and San Juan.

The engine is a MAN Diesel & Turbo‐design 8S70ME‐ C8.2‐GI built at the Tamano Works of Mitsui Engineer‐ ing & Shipbuilding in Japan. It was installed in El

Coquí by VT Halter Marine in Mississippi, where a second Commitment‐ class ship, the Taíno, is also under construction.

The engine is a MAN Diesel & Turbo‐design 8S70ME‐C8.2‐GI built at the Tamano Works of Mitsui Engineering & Shipbuilding in Japan. It was installed in El Coquí by VT Halter Marine in Mississippi, where a second Commitment‐class ship, the Taíno, is also under construction.

“This state‐of‐the‐art engine technology will add efficiency while continuing to reduce impacts on the environment, one of Crowley’s top priorities,” Crowley Puerto Rico services senior VP John Hourihan said in a release.

Placed in Stages

The engine was placed in stages via a series of heavy lifts by 500‐ton cranes at the VT Halter yard.

“This ship is basically being built around the engine,” Jensen Maritime construction manager Patrick Sperry says in a video on the El Coquíin‐ stallation. (Jensen is Crowley’s Seattle‐based naval architecture subsidi‐ ary. Also quoted in the video are Crowley new construction engineering manager Raymond Bland and construction management VP Ray Martus.)

Faster

“Crowley is making a significant investment in the Puerto Rico trade to provide faster transit times while continuing with the ability to carry and deliver the containers, rolling cargo and refrigerated equipment our customers count on,” said Crowley Puerto Rico VP Jose “Pache” Ayala.

The Jones Act‐compliant, Commitment‐class, Jones Act ships are de‐ signed to travel at speeds up to 22 knots while maximizing the carriage of 53‐foot, 102‐inch‐wide containers. Cargo capacity will be approxi‐ mately 2,400 TEUs (20‐foot‐equivalent‐units), with additional space for nearly 400 vehicles in an enclosed Ro/Ro garage.

Deep Experience in Puerto Rico

In addition to their main ME‐GI engines (the first to be built in Ja‐ pan; HHP Insight, July 30, 2014), each of the new Crowley ships will have three MAN Diesel & Turbo 9L28/32DF auxiliary engines.

Crowley notes that it has served the Puerto Rico market since 1954, “longer than any other carrier in the trade.” The firm has more than 250 Puerto Rico employees, and is “the No. 1 ocean carrier between the island commonwealth and the U.S. mainland with more weekly sailings and more cargo carried annually than any other shipping line.”

MELBOURNE, Australia—Six years ago, Big Oil was so confident in the outlook for global energy demand that it bet tens of billions of dollars to turn part of a remote Australian island known for its breeding grounds of rare sea turtles into a vast gas‐export hub.

Now, the Chevron Corp.‐led Gorgon plant has become emblematic of how quickly the assumptions that underpinned giant energy bets world‐wide have been shaken by falling energy prices.

On Tuesday, Chevron said it had started producing liquefied natural gas—natural gas cooled to a liquid form so it can be transported by ship—from the Gorgon project and the company expects to send its first cargo to customers in Asia next week. However, the plant is becoming operational at a time when investors are more skitish about the health of China’s economy, amid an oversupply of major commodities.

Last month, Chevron, which owns nearly 50% of Gorgon, was among 10 U.S. oil companies whose credit ratings were cut by Standard & Poor’s due to the oil‐price rout. Another of Gorgon’s big investors— Exxon Mobil Corp.—had its triple‐A corporate rating placed on watch by S&P for a possible downgrade.

Many experts say Gorgon, now estimated to cost $54 billion to build versus an original budget of $37 billion as site construction progresses, offers a scant return on the huge investment with energy prices at current levels. Oil prices were at around $60 a barrel—and rising—in September 2009, when Chevron, Exxon and Royal Dutch Shell PLC signed off on the project’s construction. That is roughly 60% above where oil prices sit now. Gas sales from LNG projects in the Asia‐Pacific region such as Gorgon are linked to swings in oil prices, meaning returns on investment are more vulnerable to volatility in commodity markets than export‐ oriented facilities in the U.S. In 2015, LNG prices in Asia roughly halved.

Energy companies say shareholders will benefit from a guaranteed revenue stream from Australia, backed up by a stable regulatory regime. Chevron estimates gas output from Gorgon will last at least 40 years. Also, Chevron and its partners have locked Asian customers including China into deals linked to oil prices that last up to 20 years, meaning they must pay for natural gas supply whether they need it or not.“We expect legacy assets such as Gorgon will drive long‐term growth and create shareholder value for decades to come,” John Watson,Chevron’s chief executive, said. Spokespeople for Exxon and Shell, which own about 25% of Gorgon each, declined to comment.

Last year, China’s LNG imports fell 1% as the econo‐ my cooled. At the same time, rapid growth in North American shale‐gas production sparked fears of a global energy glut that is likely to take years to clear.

“We’re looking at a world of significantly lower returns compared to the old days of the LNG indus‐ try,” said Michelle Neo, a Singapore‐based analyst at energy consultancy FGE.

Gorgon is Chevron’s biggest global bet on LNG and it will produce up to 15.6 million metric tons of LNG a year, plus enough gas to generate electricity for 2.5 million Australian homes.

Gorgon, along with seven other gas‐export facilities in Australia and neighboring Papua New Guinea, promised to help redraw the energy map by moving the epicenter of the global gas trade away from the politically volatile Middle East. About $180 billion was commitied by companies including Chevron,ConocoPhillips and France’s Total SA to Australia’s gas‐export industry between 2009 and 2012.

As well as concerns raised by the impact of falling prices on margins, onshore LNG projects are costly because they require refrigeration tanks and a network of transportation pipelines, while in many cases sea channels need to be created for LNG tankers to arrive at ports and load up.

In addition, Gorgon’s checkered record since starting construction has undermined confidence in its returns.

The project “is the poster child of rampant cost inflation gone wrong in the Australian LNG industry,” said Neil Beve‐ ridge, a Hong Kong‐based senior analyst at Sanford C. Bernstein. He estimated that the project’s overall cost could come in at close to $60 billion, or roughly $4,000 a ton of capacity—about twice the current break‐even estimate based on current prices.

Gorgon’s construction on isolated scrubland off Australia’s northwestern coastline coincid‐ ed with a parallel investment boom in other resources such as iron ore and gold.

The result was that Chevron had to pay more to hire people—from pipe fitters to welders—while the construction frenzy helped to drive up the cost of raw material imports such as steel. A strength‐ ening Australian currency inflicted more pain for Chevron, which had calculated its costs in U.S. dollars.

Barrow Island’s status as a government‐protected nature reserve since 1910 also brought complications. Chevron and its partners had to comply with strict environmental conditions, ranging from shrouded lights to avoid disturbing the nightime mating of marine turtles to some of the world’s toughest quarantine procedures to cut the risk of invasive species being brought in by workers.

Chevron expects the project to add a little more than 200,000 barrels a day to its production when fully operational. That compares with the company’s output of 2.67 million barrels a day in the final three months of 2015. Gorgon and another Australian LNG project, known as Wheatstone, together accounted for nearly half the US$15.4 billion that Chevron invested in oil and gas in 2014.

However, such LNG projects will welcome long‐term cargo revenue and analysts recognize their future potential, despite current price concerns.

“If you look from the point when the investment decisions were taken, back between 2009 and 2011, then the project economics are pretty marginal and have suffered,” Giles Farrer, a research director at consultancy Wood Mackenzie Ltd. in London, said. “[But] if you look at the point where we are now, the projects are going to deliver fantastic revenue.”

For moving containers during 2015 than 2014, and the group reporter a $2.5bn net loss for the fourth quarter of last year.

US railroads including Union Pacific, the largest, have also recorded big falls in profits for the fourth quarter. Companies that ship dry bulk commodities are in precarious financial positions after rates to charter vessels fell to the lowest levels since the Baltic Dry Index was set up in 1985 to track such data.

One key question now is how far the sharp falls in prices for moving goods are a leading indicator of further de‐ mand problems in a global economy shaken by China’s deepening slowdown.

The general picture of gloom is countered by conditions in oil tanker markets. Here, despite some recent falls in rates, owners can still generate profits by charging $50,000 a day for a very large crude carrier. It is also noteworthy that Maersk forecasts growth in world container trade of 1 to 3 per cent in 2016, not a downturn in traffic. The air freight market — often quick to slow down in a downturn — is experiencing modest growth. US railroads, while losing traffic in many areas, are benefiting from the booming domestic car market.

Erik Stavseth, analyst at Oslobased Arctic Securities, says demand to move freight in many markets appears to be slackening. But he says that in most shipping markets the problem is that owners were too optimistic about future growth levels and overinvested in new vessels.

Mr Stavseth points to the oil tanker market as one of several cases in the global economy that illustrate the delicate balance between supply and demand. While the low oil price has stimulated demand for crude and hence the need to move it, the biggest factor in the tanker sector’s positive performance is that the market is short of ships. “That tanker rates are strong doesn’t really underline that the economy is great,” says Mr Stavseth. “It just underlines that the supply‐demand balance is positive.” There is little doubt that conditions in the market to move dry bulk commodities are catastrophic.Average short‐term rates to charter Capesize carriers — the largest kind were at $2,756 per day on Thursday, well below their roughly $8,000 operating cost. Paul Slater, a shipping finance expert based in Florida, says China’s de‐ mand for commodities has waned not only because of its economic slowdown but also because of changes in the coun‐ try’s buying practices. The Chinese government under Xi Jinping has brought order to once chaotic commodity‐buying practices, greatly reducing China’s stockpile.

But overall demand is flat ratherthan declining and few industry observers believe a surge could revive the dry bulk ship market, which has been swamped by ves‐ sel deliveries that expected to increase the world fleet by 4 per cent this year.

“There’s really an extreme over‐ supply of vessels, built on the premise that China doesn’t slow down,” says Mr Stavseth.

Most industry observers believe container shipping lines' problems reflect world economic conditions more closely than trends in other transport segments. Container shipping lines such as Maersk and Hong Kong's Orient Overseas International, parent of Orient Overseas Container Line, carry manufactured and semi-finished goods. They are consequently far more exposed to worldwide consumer demand.

Container throughout at the Port of Singapore, the world’s second busiest container port after Shanghai, was down 8.7 per cent in 2015 on the rec‐ ord 33.9m 20‐foot equivilant units han‐ dles in 2014. Maersk said container de‐ mand grew by 0 to 1 per cent in 2015.

But even in this market, the problem has been least as much shipping lines’ over‐optimism in forecasting future demand and buying big new ships as it is underlying weakness in demand. N

Drewry, the London‐based shipping consultants, calculate that shipping lines earned and average $2,063 per 40‐ foot container in 2014, but that the figure fell to $1,570 in 2015, and is down to $1,548 so far this year.

No sector illustrates the complexities of the demand swings currently sweeping freight markets as well as the US’s rail‐ road industry.

According to the Association of Ameri‐ can Railroads, the number of carloads moved in the first five weeks of 2016 fell 15.7 per cent on the same period last year. Movements of containers and truck trailers — together known as in‐ termodal traffic, which is counted sepa‐ rately — were 4.8 per cent up.

The carload figures were domi‐ nated by a 30 per cent decline in coal traffic. This is a reflection of falling worldwide demand for the US’s high‐quality metallurgical coal and power companies’ grow‐ ing preference for gas for generating electricity.

The low oil price, mean‐ while, helped to depress once‐buoyant movements of oil and refined products.

The increase in intermodal shipments looks positive. But that trend reflects mainly the end of last year’s go‐ slow at US west coast ports, which held up many container movements.

While global economic weakness has sent earnings tumbling at operators of dry bulk vessels, and also put container shipping com‐ panies’ profits under pressure, a very different set of factors has played out in the market for mov‐ ing crude oil.

The crude price collapse since mid‐2014 has increased de‐ mand to move oil, while ship‐ owners, who suffered a prolonged period of weakness in 2012 and 2013, did not place the excess orders that dry bulk ship‐ owners and container shipping lines did.

Tanker owners have also benefit‐ ed from changes in the oil market following the crude price rout. More of the world’s oil supplies are now coming from low‐cost producing areas led by the Gulf, and this makes tanker voyages longer, and therefore soaks up more capacity.

But there are some signs of weak‐ ness in the tanker market. For example, shipowners face a sud‐ den surge of competition with the return to the market of Iran’s oil tankers, following the lifting of international sanctions.

Air freight is particularly vulnera‐ ble in economic downturns. When demand softens, shippers tend to move freight from expen‐ sive aircraft to far cheaper con‐ tainer ships.

Data from the International Air Transport Association, the air‐ lines’ representative body, sug‐ gest such a process might be under way. They show a gap open‐ ing up between world trade growth and the more sluggish expansion of the air cargo sec‐ tor.

Trade nevertheless continues to grow, albeit very modestly. Traffic in December 2015 was 0.8 per cent up on the same month in 2014.

Conditions for air cargo opera‐ tors, however, have deteriorat‐ ed sharply. Record deliveries of large passenger jets with sub‐ stantial cargo holds meant that capacity to move air freight was 6.5 per cent up year‐on‐year in December. Only 43.9 per cent of available capacity was used.

These difficult conditions were the backdrop to Boeing’s decision last month to slow production of its 747 jumbo jet, which sells mainly to cargo operators.

Supply of German manufacturer’s energy efficient marine engines to Japanese market complies with stringent environmental regulations.

Japanese engine manufacturer JFE has entered a new cooperaon agreement with MAN Diesel & Turbo for MAN's 32/44CR, 35/44DF, 48/60CR and 51/60DF modern four‐stroke engine types. The agreement applies to marine newbuild projects for ships to be deployed on japanese domestic trade routes, and where the shipyards and shipowners involved are located in Japan. JFE has produced and supplied medium‐speed diesel engines since 1964 under the SEMT pielstick license, which was acquired by the MAN Group back in 2006.

The aforementioned MAN Diesel & Turbo common rail engines cover a power range of 3,600 to 21,600 kWand their well‐proven, state‐of‐the‐art, fully electronically‐controlled,common rail injection system is suitable for both heavy fuel oil and distillate fuels. This technology,developed in‐house by MAN Diesel & Turbo and fully optimized for its engines, provides superior performance in terms of fuel consumption and smoke emissions, especially at part load, com‐ pared to the same engines’ IMO Tier II versions that feature conventional injection system.

Upon customer request, the common‐rail engines can be provided with ECOMAP capability, an innovative feature for the MAN 32/44CR and 48/60CR engines: the flexibility of the CR‐ system permits the engine to be programmed to follow differ‐ ent SFOC/power characteristics, with each having an optimal efficiency at different load points. Hence, the customer is provided with the potential to realize a beer fuel economy through changing the engine’s operating profits. Especially aboard vessels with multi‐engine installations, the combination of such CR engines with an intelligent power management system enables the maximal exploitation of the engines’ flexibility potential.

The dual‐fuel engines covering the power range of 3,180 to 18,000 kW can be operated in the Otto (gas mode) or Diesel (diesel mode) cycles from LNG in the former to more traditional HFO, MDO or MGO in the latter mode. Significantly, the dual‐fuel engines can switch between these fuels at any engine load between 15 to 100 percent maximum continious ratting (MCR) without disruption to the power supply. Extremely environmentally friendly operation is achieved in gas mode when using LNG as fuel with negligible sulphur (SOx) and particle emissions, while carbon dioxide (CO2) and nitrogen oxide (NOx) emissions are respectively reduced by 20 and 85 percent compared to diesel mode. Accordingly, running the engines in gas mode complies even with the stringent IMO Tier III levels without the need for any exhaust ‐gas after‐treatment

G50ME-C9 Engine Successfully Passes TAT

MAN Diesel & Turbo’s G50 engine has successfully passed its Type Approval Test at Mitsui in Japan. Upon entering service, the engine will power the world’s first ethane‐fuelled eco‐ friendly LEG (Liquefied Ethane Gas) carrier – the first of three such vessels to be built in China by SinoPacific Shipyard for the German shipowner, Hartmann Reederei.

Finland Breaks the Ice on LNG

Due for delivery in Q2 2016, Finland’s new icebreaker Polaris is the world’s first to feature dual fuel liquified natural gas (LNG) and diesel propulsion, earning the icebreaking vessel designations as the Finland’s most powerful and the world’s greenest.

Big Power for the Prince of Wales

The U.K. Royal Navy’s Queen Elizabeth Class aircraft carriers presently under construction are due to become the centerpiece of the nation’s defense force. Upon entering operation, each ship will essentially serve as floating four-acre military base capable of travelling up to 500 miles per day.

The race to operate ever‐bigger container ships could be sail‐ ing towards the finishing flag after a consultancy said that pur‐ suing yet another big increase in size would not be cost‐ efficient.

Up to now, shipping lines have found that the larger the ship is, the cheaper it is to carry each container. The capacity of the biggest container ships afloat has risen sharply in the last five years and more than doubled since 2000.

High quality global journalism requires investment.

But Drewry Shipping Consultants said the next step‐up in size would impose such significant costs on ports that they would outweigh the advantages of moving cargo in ever‐larger ves‐ sels.

The research by Drewry comes after lines have poured billions of dollars since the financial crisis into new, bigger ships, which has contributed to the industry’s financial woes. Lines have not only had to find hundreds of millions of dollars per vessel to buy the ships but have suffered sharp earning declines as the new ships have created excess capacity, driving down fees per container shipped.

Denmark’s AP Møller‐Maersk, whose Maersk Line operates the world’s biggest container ship fleet, warned in February that the combination of factors was producing market conditions “significantly worse” than during the 2008‐09 financial crisis.

The highest‐capacity ships currently afloat — Mediterranean Shipping Company’s Oscar class, introduced last year — are 395m long, 59m wide and can carry 19,224, 20ft􏰁 equivalent units (TEUs) of containers. A 40ft container — the most commonly used size — is around two TEUs. Fifteen years ago, the biggest vessels carried only around 8,000 TEUs.

Tim Power, Drewry’s managing director, said the consultancy had modelled the overall costs of moving containers on a se‐ ries of ship sizes and had found efficiency savings on the big‐ gest ships currently afloat.

But the company then ran a simulation on a still‐larger behe‐ moth that carried 24,000 TEUs and might exceed the 400m length and 60m breadth that is the current maximum for to‐ day’s ships.

MELBOURNE, Australia—Six years ago, Big Oil was so confident in the outlook for global energy demand that it bet tens of billions of dollars to turn part of a remote Australian island known for its breeding grounds of rare sea turtles into a vast gas‐export hub.

Now, the Chevron Corp.‐led Gorgon plant has become emblematic of how quickly the assumpotions that underpinned giant energy bets world‐wide have been shaken by falling energy prices.

On Tuesday, Chevron said it had started producing liquefied natural gas—natural gas cooled to a liquid form so it can be transported by ship—from the Gorgon project and the company expects to send its first cargo to customers in Asia next week. However, the plant is becoming operational at a time when investors are more skittish about the health of China’s economy, amid an oversupply of major commodities.

Last month, Chevron, which owns nearly 50% of Gorgon, was among 10 U.S. oil companies whose credit ratings were cut by Standard & Poor’s due to the oil‐price rout. Another of Gorgon’s big investors— Exxon Mobil Corp.—had its triple‐A corporate rating placed on watch by S&P for a possible downgrade.

Many experts say Gorgon, now estimated to cost $54 billion to build versus an original budget of $37 billion as site construction progresses, offers a scant return on the huge investment with energy prices at current levels.
Oil prices were at around $60 a barrel—and rising—in September 2009, when Chevron, Exxon and Royal Dutch Shell PLC signed off on the project’s construction. That is roughly 60% above where oil prices sit now.

Gas sales from LNG projects in the Asia‐Pacific region such as Gorgon are linked to swings in oil prices, meaning returns on investment are more vulnerable to volatility in commodity markets than export‐ oriented facilities in the U.S. In 2015, LNG prices in Asia roughly halved.

Energy companies say shareholders will benefit from a guaranteed revenue stream from Australia, backed up by a stable regulatory regime. Chevron estimates gas output from Gorgon will last at least 40 years. Also, Chevron and its partners have locked Asian customers including China into deals linked to oil prices that last up to 20 years, meaning they must pay for natural gas supply whether they need it or not.“We expect legacy assets such as Gorgon will drive long‐term growth and create shareholder value for decades to come,” John Watson,Chevron’s chief executive, said. Spokespeople for Exxon and Shell, which own about 25% of Gorgon each, declined to comment.

Last year, China’s LNG imports fell 1% as the econo‐my cooled. At the same time, rapid growth in North American shale‐gas production sparked fears of a global energy glut that is likely to take years to clear.

“We’re looking at a world of significantly lower returns compared to the old days of the LNG industry,” said Michelle Neo, a Singapore‐based analyst at energy consultancy FGE.

Gorgon is Chevron’s biggest global bet on LNG and it will produce up to 15.6 million metric tons of LNG a year, plus enough gas to generate electricity for 2.5 million Australian homes.

Gorgon, along with seven other gas‐export facilities in Australia and neighboring Papua New Guinea, promised to help redraw the energy map by moving the epicenter of the global gas trade away from the politically volatile Middle East. About $180 billion was committed by companies including Chevron,ConocoPhillips and France’s Total SA to Australia’s gas‐export industry between 2009 and 2012.

As well as concerns raised by the impact of falling prices on margins, onshore LNG projects are costly because they require refrigeration tanks and a network of transportation pipelines, while in many cases sea channels need to be created for LNG tankers to arrive at ports and load up.

In addition, Gorgon’s checkered record since stating construction has undermined confidence in its returns.

The project “is the poster child of rampant cost inflation gone wrong in the Australian LNG industry,” said Neil Beveridge, a Hong Kong‐based senior analyst at Sanford C. Bernstein. He estimated that the project’s overall cost could come in at close to $60 billion, or roughly $4,000 a ton of capacity—about twice the current break‐even estimate based on current prices.

Gorgon’s construction on isolated scrubland off Australia’s northwestern coastline coincided with a parallel investment boom in other resources such as iron ore and gold.

The result was that Chevron had to pay more to hire people—from pipe fitters to welders—while the construction frenzy helped to drive up the cost of raw material imports such as steel. A strengthening Australian currency inflicted more pain for Chevron, which had calculated its costs in U.S. dollars.

Barrow Island’s status as a government‐protected nature reserve since 1910 also brought complicatuons. Chevron and its partners had to comply with strict environmental conditions, ranging from shrouded lights to avoid disturbing the nighttime mating of marine turtles to some of the world’s toughest quarantine procedures to cut the risk of invasive species being brought in by workers.

Chevron expects the project to add a little more than 200,000 barrels a day to its production when fully operational. That compares with the company’s output of 2.67 million barrels a day in the final three months of 2015. Gorgon and another Australian LNG project, known as Wheatstone, together accounted for nearly half the US$15.4 billion that Chevron invested in oil and gas in 2014.

However, such LNG projects will welcome long‐term cargo revenue and analysts recognize their future potential, despite current price concerns.

The Energy Atlantic, a 290-metre tanker steaming slowly through the Gulf of Mexico, is about to make history. It is scheduled to arrive on Tuesday at Cheniere Energy’s Sabine Pass liquefied natural gas plant on the coast of Louisiana, to be loaded with the first cargo of LNG to be exported from the “lower 48” contiguous states of the US.

The shipment is a momentous event for energy markets, marking the arrival of the US as a gas supplier to the world.

The plunge in oil prices since the summer of 2014 has dragged down the value of LNG, which is often sold on crudelinked contracts, and damped the excitement over US exports.The economics of shipping gas from the US were compelling two years ago, but are now marginal.Deteriorating market conditions have put the brake on any new investments in US LNG.

Even so, US LNG exports are likely to have a significant impact, holding down energy costs for consumers in Europe, Latin America and Asia. They will also provide tough competition for anyone hoping to build rival LNG plants, such as the proposed projects in east Africa, the west of Canada, or Russia. By the end of the decade, the US is likely to be the world’s third-largest exporter of LNG, after Qatar and Australia.

Combined with the new supplies from Chevron’s huge Gorgon and Wheatstone projects in Australia, which are scheduled to come on stream this year, exports from the US are making it a buyers’ market for LNG.

“There is an awful lot of LNG sloshing around the world at the moment, with even more to come,” says Frank Harris of Wood Mackenzie, a consultancy. “And that is putting downward pressure on prices.”

A decade ago, this prospect seemed wildly unlikely. US gas production was in decline and by the 2010s the country was expected to be a large importer of LNG, not an exporter.

The shale revolution, the result of advances in production techniques that made it possible to extract gas at commercially viable rates from previously unyielding rocks, meant that US production started rising again in 2006, and since 2011 it has been breaking new records every year.

Charif Souki, Cheniere’s visionary founder who was ejected from the company at the end of last year, was one of the first to see the potential for LNG exports from the US. In 2010, he submitted the first application to regulators to convert the LNG import terminal that Cheniere had built at Sabine Pass, which was being barely used because US domestic gas production was so strong, into a liquefaction plant.

Many in the industry were skeptical that the project could be made to work but the plan took a decisive step forward in October 2011 when Britain’s BG Group signed a 20-year contract to buy most of the production from Sabine Pass’s first “train”, as LNG production units are known. After that contract was signed, the trickle of proposals for similar projects turned into a flood.

The US Department of Energy has received applications to export LNG for 54 projects. If they all went ahead, they would have the capacity to liquefy about 60 per cent of the entire gas production of the US.

So far, however, just five plants have started construction: Cheniere’s Sabine Pass and its Corpus Christi project in Texas; Freeport LNG, also in Texas; Cameron LNG in Louisiana; and Cove Point LNG, on the east coast in Maryland.

Those projects have been able to make progress because they were fast enough at signing up customers on long-term contracts that guarantee their revenues. Since the end of 2014 those customers, mostly utilities in Europe and Asia, have been reluctant to make any further commitments.

The price of LNG delivered in northeast Asia, including Japan and South Korea, the world’s two largest markets, has fallen along with oil. It has dropped to about $6.65 per million British thermal units, just a third of its price of almost $19 per mBTU two years ago, according to Argus, the information service.

At that price, with benchmark US gas at about $2.40 per mBTU, plus liquefaction costs of $3 to $3.50 per mBTU, plus transport at about $2 per mBTU, LNG from Louisiana or Texas does not look commercially attractive.

Similar calculations apply in Europe. Benchmark UK National Balancing Point gas has dropped by almost a half since 2013 to about $5.20 per mBTU, meaning that LNG exports from the US to Britain are unlikely to cover all of their costs.

Since 2013, most of the new LNG projects launched worldwide have been in the US. However, the deteriorating economics make it unlikely that any new plants will be approved for a while.

The plants that have already started construction, though, are highly unlikely to be stopped. This is because the companies buying LNG from one of these plants have typically made firm commitments for 20 years under which they have to pay the charges they have promised, even if they do not use the capacity.

The US LNG projects will add to global oversupply. Bernstein Research has estimated that the world’s liquefaction capacity will in

the next three years rise by 90m tonnes per annum, which is about 35 per cent of present demand.

Nikos Tsafos of Enalytica, a research company, says US LNG should help hold gas prices down for a few years at least.

When the global oversupply is finally absorbed by rising demand, the next wave of plants in the US, including projects backed by ExxonMobil and Kinder Morgan, will be poised to benefit.

There are other promising potential new sources of LNG in the world, including the

World leaders are hammering out ways to cut their countries’ carbon emissions in Paris.But what about all the carbon dioxide—from planes and ships—emitted outside any one coun- try’s borders?

Airlines and the global maritime indus- try count among the world’s biggest CO2-emitting industries.Unlike emis- sions from power plants or passenger cars, CO2 from planes and ships ply- ing international routes aren’t tabulat- ed as part of any one country’s total emissions. Those totals are the main subject of haggling in Paris this week and next, aimed at coming up with a concrete plan to limit man-made climate change.

That omission is ratcheting up pres- sure on negotiators in Paris to figure out how to handle that uncounted CO2, and whether to force the industries’ global watchdogs to come up with a credible, separate plan to rein in air and sea emissions.

One big challenge: It’s hard to peg just how much CO2 the two industries are emitting in the first place.

A recent European Parliament report estimated between 3% and 4% of global, man-made CO2 emissions came from inter-national commercial flights and ship- ping. Left unchecked amid efforts to reduce emissions elsewhere, that share could grow to as much as 40% of global emissions by 2040, the re- port warned.

The International Civil Aviation Organi- zation, a United Nations body, puts the current contribution from internation- al aviation to global C02 emissions at 1.3%. Its shipping counterpart, the International Maritime Organization, said in a report last year that from 2007 to 2012 such emissions reached an average 3.1% of the global output.

The issue hasn’t been at the top of the climate-change agenda among negoti- ators in the yearlong run up to the Paris talks. But the threat of a more forceful approach to reining in air and sea emission has long shadowed those industries. It is also flaring anew as an irritant for environmental groups, which say executives haven’t done enough to come up with a plan on their own.

“Progress has been insufficient,” said Andrew Murphy, a representative for Transport & Environment, an envi- ronmental advocacy group. A preliminary paragraph in the draft of the Paris accord—a document global leaders hope will spell out a final, concrete plan—could require that countries work through the U.N. agencies to slice up emissions from such international trips by air and sea and apportion them to individual coun- tries.

The ICAO and IMO have taken leading roles in trying to broker the details of any agreement, and representatives of both are in Paris now. Countries with rapidly growing air- lines, or those heavily dependent on tourism, argue any moves to limit flight emissions will favor more ma- ture markets, such as those in the U.S. and Europe. The airline industry, meanwhile, has fought against what it worries would be a patchwork of national regulations and taxes that would govern its emissions.

The European Union has, for instance, threatened that the lack of a global agreement on international flight emissions could spur it to revive efforts to include them in its carbon cap-and-trade mechanism, something carriers so far successfully have fought.

“We are supportive of ICAO putting together a framework that gov- erns the entire planet,” said Mark Dunkerley, chief executive of Ha- waiian Airlines par-Carbon‐dioxide emission from ships don’t count toward national totals.

Gas as a Marine Fuel | 3rd December 2015, Central London, UK

Register online to network with latest attendees in- cluding ExxonMobil: www.smi- online.co.uk/2015gasmari nefuel.asp Alternatively, contact Marn Hughes on tel +44 (0) 20 7827 6078 or email mhughes@smi‐ online.co.uk.

Environmental legislaon is the key factor currently impacing the marine segment. While ships were traditionally powered by Heavy Fuel Oil (HFO), which produces high levels of harmful pollutants, including sulphur dioxide (SOx), international law now states that shipping fuel can contain no more than 3.5% sulphur. Further, the limit in Emission Control Areas (ECAs) or Sulphur Emission Control Areas (SECAs), which currently include coastal areas such as the Baltic Sea, North Sea and the waters surrounding North America and the Carib‐ bean, is 0.1%.

LNG is one of the only fuel sources able to comply with these strict limits and, with the majority of vessels operating in coastal areas, the need for LNG‐compliant solutions is set to become a must for operators in the very near future. Ten years from now, the majority of vessels will run on LNG and conventional vessels will have very limited trading options. This supports the CapEx argument – while you may have to pay more for your LNG‐compliant solutions in the short term, there will be significantly more val‐ ue to be gained from it down the line.

Against this backdrop, SMi’s Gas as a Marine Fuel master‐ class will examine the grow‐ ing demand for LNG as a ma‐ rine fuel as a result of an in‐ creasing emphasis on envi‐ ronmental performance and how to best prepare for it by examining how this is being implemented world‐ wide, with focus on recent developments in Europe and the US. The full‐day pro‐ gramme will also explore the recent technical and regula‐ tory developments and how you can best adapt to these changes.

The Baltic Sea / North Sea / English Channel Environmental Control Area came into force on January 1st 2015. All vessels travelling in these areas must now use low sulphur fuels. This master class will examine the issues around one of these “clean” fuels – LNG. Europe is not alone in requiring these improved environmental regimes and the master class will also touch on other areas, particularly North America who also received their first gas fuelled vessel late in 2014.

This master class will examine the growing demand for gas as a marine fuel resulting from increasing emphasis on environ‐ mental performance and how this is being implemented worldwide.

Tuesday, November 3, 2015

The world’s first LNG‐powered container vessel, TOTE Maritime’s Isla Bella, transited the Panama Canal October 30, marking a milestone not only for the maritime industry, but also for the Canal as it nears the completion of its expansion scheduled to open in 2016, the Panama Canal Authority (ACP) announced

The 3,100 TEU capacity, 764‐foot‐long American‐ flagged Isla Bella is the first of two Marlin Class containerships contracted by TOTE Maritime and built by General Dynamics NASSCO.Delivered last month the LNG‐powered vessel features increased fuel efficiency and reduces nitrogen oxide emissions by 98 percent, sulfur oxide emissions by 97 percent and carbon dioxide emissions by 76 percent.

“The Isla Bella is a true engineering feat,” said Panama Canal Administrator/CEO Jorge L. Quijano. “We are honored that this vessel, with its unique technology, transited the Canal.”

Isla Bella is scheduled to begin providing freight service in the fourth quarter of 2015 between Jacksonville, Fla. and San Juan, Puerto Rico.

Upon completion of the second Marlin Class containership, Perla del Caribe, launched in August 2015 and scheduled to enter service in the first quarter of 2016, the vessels will be the largest and most environmentally friendly LNG‐powered dry cargo ships in the world.