A liquefied natural gas tanker hired by Morgan Stanley, the bank that ships the most commodities, is hauling a cargo about 14,500 miles from the U.S. to Japan, where the fuel fetches almost seven times more.
The Arctic Spirit, owned by Teekay LNG Partners LP and on a long-term charter to Morgan Stanley, left Sabine Pass, Texas, on Feb. 23, ship-tracking data compiled by Bloomberg show. The ship, sailing to Sodegaura in Tokyo Bay, can carry about 37,000 metric tons, or 16 percent of Japan’s daily imports. The trade would earn about $16.2 million after transportation costs, estimates Arctic Securities ASA, an Oslo-based investment bank.
Japan’s gas-fired power plants are boosting output to compensate for nuclear reactors shuttered since last year’s earthquake, driving Asia-bound cargoes to a record. The U.S. has surplus natural gas extracted from shale rocks deep underground, and while it lacks a facility to liquefy that fuel for shipping, cargoes delivered to the country under longstanding contracts can be re-exported when overseas prices are higher.
“There’s a huge arbitrage,” Arctic analyst Erik Nikolai Stavseth said by phone yesterday. “When someone is willing to pay that much to move gas from A to B, it tells you demand is very strong.”
Morgan Stanley has chartered the Arctic Spirit since April 2011, said Mark Kremin, vice president of Teekay Gas Services, adding that further details are private. Ship operators sometimes re-charter vessels, meaning another trader may own the cargo. Hugh Fraser, a Morgan Stanley spokesman in London, declined to comment.
Morgan Stanley booked at least 149 vessels to haul commodities ranging from oil to coal last year, exceeding the combined charters of Goldman Sachs Group Inc. and Barclays Capital, data from shipbroker Clarkson Plc show. Morgan Stanley hired a tanker last month to ship 60,000 tons of jet fuel to Alaska from South Korea, according to shipbroker reports.
One million British thermal units of LNG costs $17 in Japan and $2.62 on the U.S. Gulf Coast, according to February data from New York-based shipbroker Poten & Partners Inc. Large, modern LNG carriers will earn a record $147,000 a day on average this year, according to the median estimate of six analysts surveyed by Bloomberg.
A record 18 million tons of LNG were diverted to Asia from the Atlantic region in 2011, a fourfold surge in five years, Steve Hill, president of LNG trading at BG Group Plc, said at a conference in New Delhi today. Current monthly diversions are also at a record, he said. LNG is natural gas that’s been cooled to a liquid state for shipping.
Japanese LNG imports rose 22.5 percent from a year earlier to 7.67 million tons in February, the finance ministry said yesterday. The world’s largest buyer of the fuel imported a record 8.44 million tons in January, trade ministry data show. The country’s nuclear plants were operating at 6.1 percent of capacity last month, the lowest level since the Federation of Electric Power Companies of Japan started compiling monthly data in April 1977.
Natural gas futures traded in New York fell 24 percent this year to $2.279 per million Btu, near the 10-year closing low of $2.269 reached March 12. U.S. production rose 6.5 percent last year to a record 28.58 trillion cubic feet, outpacing consumption that advanced 2.5 percent to 24.37 trillion cubic feet, according to the Department of Energy. The U.S. shipped 18 billion cubic feet of LNG to Japan last year, data show.