By Reuters

Update Adds in Iranian and U.S. Response and Vessel Details

Iranian patrol boats intercepted a cargo ship in the Strait of Hormuz on Tuesday and forced it into Iranian territorial waters by firing shots across its bow, prompting the U.S. Navy to send a destroyer and reconnaissance plane to monitor the situation.

Iranian Revolutionary Guard boats confronted the MV Maersk Tigris, a Marshall Islands-flagged vessel, as it was traversing one of the world’s most important oil shipping channels and forced it to divert toward Larak Island near Bandar Abbas, where it was boarded by Iranian forces, U.S. officials said.

The Iranian action occurred amid heightened tensions over the conflict in Yemen, where a Saudi-led coalition supported by Washington has been bombing Iranian backed Houthi rebels, who have seized much of the country and sidelined the U.S.-backed president.

Saudi jets bombed the airport in Yemen’s capital on Tuesday to prevent Iranian planes from landing. The ship seizure also came at a sensitive time as Tehran is inching toward a final deal with major powers on its nuclear program.

The Maersk Tigris, which is managed and crewed by Rickmers Shipmanagement, is on-hire to Maersk Line.

Alerted by a distress call from the Maersk Tigris, the U.S. Navy dispatched the destroyer USS Farragut toward the scene as well as a reconnaissance aircraft, the Pentagon said. Army Colonel Steve Warren said firing shots across the bow of a cargo vessel was “inappropriate” and seemed “provocative.”

The incident came just four days after Iranian patrol boats surrounded a U.S.-flagged vessel, the Maersk Kensington, and followed as it was in the same area, a U.S. official said. No warning shots were fired in that incident.

Iranian officials sought to play down the ship seizure, saying it was a civil matter with no military or political dimension.

U.S. officials said they were concerned and monitoring the situation, but an initial review indicated the United States did not have a legal obligation in a maritime environment to defend a Marshall Islands-flagged ship with no American crew.

Reuters tracking data showed the Maersk Tigris, a 65,000-tonne container ship, anchored off the Iranian coast between the islands of Qeshm and Hormuz. It had been listed as sailing from Saudi Arabia’s Red Sea port of Jeddah, bound for the United Arab Emirates port of Jebel Ali in the Gulf.

Iran’s state news agency, IRNA, quoted a source in the Islamic Revolutionary Guards Corps (IRGC) as saying the guard had seized the vessel and 34 crew. Rickmers said there were 24 crew, mostly from eastern Europe and Asia.

The IRGC is Iran’s elite military force and operates its own land, naval and air forces under a command chain separate from the regular armed forces.

Mohammad Saidnejad, head of Iran’s Ports and Maritime Organization, said a court in Tehran had given the order to seize the ship. “A legal complaint from an Iranian private company resulted in the seizure of a Marshall Islands-flagged ship in Iranian waters,” Saidnejad was quoted as saying by IRNA.

NUCLEAR ACCORD

The incident was unlikely to derail efforts by the United States and five other powers to secure a final nuclear deal with Iran, even though it was likely to stoke further opposition in the U.S. Congress, risk consultancy Eurasia group said.

Under the proposed nuclear accord, Tehran, which denies seeking to build nuclear weapons, would win sanctions relief in return for slashing the number of its uranium enrichment centrifuges and accepting intrusive international inspections.

“We believe the U.S.’s and Iran’s top priority, by far, is to secure a deal on the nuclear issue, and that the sides will likely resolve this issue quickly,” Eurasia’s Cliff Kupchan said. The seizure may have been a response to the U.S. placement of ships off Yemen to prevent Tehran from sending arms to Yemeni Houthi fighters, he added. Iran denies arming the Houthis.

A spokesman for the Singapore-based Rickmers Shipmanagement, Cor Radings, said he did not know why Iran had acted. He said Iranian forces fired warning shots near the container ship and boarded it. He said the company was concerned for the crew.

The vessel had been following a normal commercial route between Saudi Arabia and the United Arab Emirates, he said.

A U.S. government official said the ship was intercepted at 0905 GMT. The closest U.S. warship, the USS Farragut, was more than 60 miles (100km) away, he said.

Some 17 million barrels per day (bpd), or about 30 percent of all seaborne-traded oil, passed through the Strait of Hormuz in 2013, according to the U.S. Energy Information Administration (EIA).

Iran has in the past sometimes threatened to block the strait to advance its opposition to sanctions imposed over its nuclear program.

The channel is a narrow strip of water separating Oman and Iran. It connects the biggest Gulf oil producers, such as Saudi Arabia, with the Gulf of Oman and the Arabian Sea.

At its narrowest point, the strait is 33km (21 miles) across and consists of two-mile-wide navigable channels for inbound and outbound shipping and a two-mile-wide buffer zone.

By Kathryn Stone

The United States is on track to saturate the global energy market with liquefied natural gas (LNG) exports by as early as this year putting itself on course to become one of the world’s largest LNG suppliers.

According to US Energy Secretary Ernest Moniz, four LNG export terminals are currently under construction in the lower 48 states and shipments from these terminals may start late 2015 or early 2016. At present the US only exports LNG from a single terminal on Kenai Peninsula in Alaska, but it is looking to expand operations amid rising international demand. 

Between 2010 and 2040 the market for LNG is predicted to triple, with most new demand coming from existing and emerging markets in Asia Pacific and the Middle East. Approximately 80% of new LNG supplies are expected to come from North America, Australia and East Africa. Furthermore, the US Energy Department has stated that in a decade the United States could be on par with top exporters such as Qatar, which processes over 100 billion cubic meters of LNG per year through its terminals.

At last week’s IHS CERAWeek ’15 Andy Brown, Upsteam International Director of Royal Dutch Shell, reiterated the importance of LNG resources amid increasing global energy demand. Brown pointed out that natural gas has proven to be an efficient and cost-effective alternative to traditional fossil fuels. Additionally, natural gas is the cleanest burning conventional fuel, with emissions up to 60 percent less than coal. 

According to a February 2015 report by the President’s Council of Economic Advisors, rising LNG exports from the United States would increase the country’s GDP while creating more domestic jobs.  

Also, European LNG importers are largely dependent on Russia for gas supplies. Because of the conflict with neighboring Ukraine, Russian gas transportation bypasses the Ukraine, often resulting in higher prices for importers. A rise in US LNG could dramatically reduce Russia’s dominance in the European gas market.

By Thomas Bennett, L.L.B.

Somalia remains a failed state. Poverty, the absence of enforced law, and psychopathy masquerading as a just cause foment an environment where money for gain, or money to finance terror, means that piracy in the Indian Ocean has not gone away. What started in the Somalian North as a tax on shipping is a continuing threat to global trade.

Still, piracy has abated. Nation states have acted. Armed guards have helped. The threat has been contained, or has it? It is a brave shipping company that sends an unprotected crew through the high risk area of the Indian Ocean. And if the rationale for piracy remains, then piracy remains. Somalia, lawless as it is, will wait.

Western powers will not finance armed forces to patrol the Indian Ocean indefinitely. The maritime industry will price the risk according to the threat. The probability of piracy has diminished. The business of maritime security must adjust. As the perception of threat falls, so will the cost of protection. Competition will force prices down and many armed security companies will not survive. Some will merge. Consolidation is inevitable. Or so it seems.

Maritime security is still big business. We estimate that total revenue in the Indian Ocean is $400 million a year. The supply chain ranges from nation states to former servicemen, maritime agents and legitimate dealers in arms. All vested interests. All of whom take their piece of the whole. Today, prices for transits on vanilla routes are so low that it is hard to discern how a profit is achieved. If there is no more profit to be had, then competitive tension is designed to push all but a few players in this market to mutually assured destruction.

Regulation? Not Really

Gifting weapons to non-state actors is not without precedent. This gift does, however, breach most political theory as to who should have the right to bear arms. Regulation is and was inevitable. Law only works when it is applied to all; and regulation – the benchmark against which the use of lethal weapons is measured – should have the force of law. It does not.

ISO 28007 has not worked. Some have it; some do not. There are many buyers who do not require it. There are many sellers who do not bother. BIMCO’s recent endorsement of ISO 28007 may help. It may be too late. Buying patterns are entrenched. Too many stand outside Anglo-centric regulatory initiatives. It is easy to do so, legally and practically. As former Royal Marines increasingly price themselves out of the market for guards, a once Anglo-centric market along with its regulatory attire becomes increasingly irrelevant.

ISO 28007 may remain the standard for some. Edicts from the UK may be the benchmark for others. But economics is forcing this marketplace to change. There is a very long tail of buyers who have little time for edict, and an equally long tail of sellers who go along.

Who does, who can, police this market? Flag states perhaps. Yet the paradox of policing a market that pays well usually results in piecemeal regulation at best. After all, piracy is a diminishing threat – no vessels have been taken within corporate memory. So why change? Qui bono?

What of littoral states – those adjacent to High Risk Areas? Again, there are economic imperatives at work. Nation states and their agents do well out of maritime security. There is no overwhelming rationale for change.

What of Sri Lanka, the UAE and Oman? Sri Lanka’s place in maritime security is channelled through Avant Garde Maritime Services (AGMS) under a public private partnership with RALL, a government-owned business. AGMS is being critically evaluated by the new government. The suggestion is that the Srisena government will change the way it regulates how weapons and men are distributed to passing vessels, in which case AGMS may lose control. But Sri Lanka will not. Pre-AGMS, weapons were held on land and disseminated by the Sri Lankan Navy. Fees were paid. The state took control then; it may do so again.

As to Oman, or the UAE, or indeed any of the littoral states adjacent to the outflow of the Red Sea, there seems to be little real appetite to manage the risks attached to having floating armories within sight. Floating armories are, of course, in international waters, and the UN Convention on the Law of the Sea makes a fist of keeping these states away. However, one need only ask what Her Majesty’s government might do if there was a floating armory bobbing about within sight of Plymouth.

Which brings us back to regulation and market forces. Consolidation in the maritime security sector is inevitable. Or is it? It should be. Any standard business textbook on strategy will tell you that a market with multiple competitors will shrink to but a few. In a shrinking market, consolidation pressures are more intense. Companies will merge in order to marshal forces. Bankruptcy will emerge where sale, merger or deep pockets are absent.

Consolidation? What Consolidation?

Consolidation has not happened. Why? Some have tried to diversify (PGI). Some have gone bump (GOAGT). Some have divested then gone bump (Drum Cussac). Some are grabbing market share (Ambrey). Others do what they do well (Diapolous). The long tail? All are out there, with shrinking margins, taking risks, fighting to the death.

And it is, perhaps, in this last phrase that the clue to this market is apparent. We have seen at first hand how former soldiers start companies in the space and trade their fighting spirit from the military to the commercial. The enemy bears a different name. And absent commercial experience (which most do not have) the strategic confusion amongst alpha males in charge of such companies leads to a community of egos who cannot see the benefits of cooperation in a disparate market. Who, after all, if two companies merge, is going to step down and be subservient to the other? Better to die trying than take orders from someone else.

This is dangerous. In a poorly policed market, where the trade is civilians offering protection through resort to lethal force, a race to the bottom will result in cut corners. From four to three, from two to one guard on a vessel – a poorly trained guard at that. Economics and ego will force lip service to safety and the very reason guards are on vessels in the first place. Lose (no profit). Lose (no safety).

A Solution? What Solution?

Is there a solution that offers shipowners respite from this worst of all worlds and offers the maritime security community respite from itself? There is. The answer lies in economies of scale. It lies in better logistics. It lies in cooperation and, sometimes, in merger or sale. The market has already found the answer. Unfortunately, in its present guise it is illegal and politically untenable.

The model is this: Put a cheap guard on a salary, put him on vessel after vessel with a kit box, and float him around the Indian Ocean for a couple of months. Avoid land, make fleeting visits to floating armories, and you have a highly efficient business with very high gross margins.  Once a guard’s salary and costs are paid, the additional revenue is all gravy.

There is value in this (idealized) model. Most maritime companies do not have the infrastructure or the client base to support it. Instead, margins are decimated as a result of flights, agents’ fees, weapons’ storage costs, floating armory charges, transfers, daily accommodation costs and hotels. If the next transit is a week away, profit may be lost altogether trying to keep guards in theatre. Profit will be lost sending them home. Weapons could be in the wrong place. Kit may be travelling in the wrong direction. Clever logistics management may help. But, fundamentally, a maritime security business trading on increasingly paper thin margins has to find efficiencies to survive.

Unless, of course, it has that critical mass of men, equipment and transit volume. If it has, then clever logistics and financial modelling are key. Critical mass is an absolute. And if critical mass is not an option, common sense, clear strategic thinking and sound commercial management should force decent maritime security companies to find partners to buy or merge with.

Get it right and profit will increase as logistics, financial modelling, economies of scale and buying power combine to force gross and net margins up. Get it wrong and bankruptcy or closure looms. Many maritime security companies understand decent logistics, efficiencies and the bottom line. But they have not the client base to action it. Instead, it is actioned in a piecemeal way. It is actioned in an illegal manner. This has led to the sharing of men and, in particular, weapons. Sharing weapons is illegal, it is politically charged, it is extremely dangerous.

Weapons for Hire – The Beginning of the End

Although no one has an absolutely precise figure to hand, we believe that there are at least 40,000 licensed weapons floating about or stored, ready for use, in the Indian Ocean. They sit on floating armories, adjacent land or are in theatre under use. These weapons are not tracked on a real-time basis. Companies are only put to proof when asked. In other words, regulation requires the sector to know what weapons they have and where they got them from.

Under UK law, weapons cannot be leased, or licensed, or ‘lent.’ Heavy sanctions wait for those companies that do. But the congruence of economic necessity and piecemeal regulation (many maritime security companies have nothing to do with the UK) means that weapons are passed between companies and used on a mate’s basis. For some, if weapons are not shared, the efficiencies that the smaller companies need to survive through sharing will be lost. It is beg, borrow or go bust.

Weapons swapping, sharing, hiring and licensing – it all leads to the same thing. It is not politically sustainable for enough arms to service a third world army to be bobbing about the sea with little idea as to who has what. The UN has taken notice, the U.S. State Department has taken notice, the EU has worked it out and the British Foreign Office has been briefed.

Unless the gift of allowing private citizens to bear arms is to be taken away (or managed) by nation states once again, sensible actors within the maritime security space need to consider how best to service their shareholders and maximize profit in a highly responsible manner – merge, consolidate, sell. Choose economies of scale, clever logistics, astute modelling and commercial cooperation. There really is no alternative.

Weapons cannot and should not be traded at armories or elsewhere. It is the beginning of the end. Equally, shipowners and charterers need to utilize their power and refuse to partake in this race to the bottom. It is, after all, the preservation of the safety of their men that is the end-game. And those that advise the maritime sector – its trade associations and the professional services who have done so well over the last five years, have to stand up for corporate social responsibility.

We live in dangerous times. Somalia remains a failed state. Terrorism is prevalent in theatre. Meaningful regulation is piecemeal. Profit is being decimated. Corners are being cut. Weapons may start to go missing. There is a choice, a viable commercial solution for maritime security companies facing home truths. They must take it before it is too late. – MarEx  

Thomas Bennett LLB MSc (Oxon) is the owner of VHenry & Co. and VHenry & Co. Limited. The former is a legal practice, the latter an advisory business, each specializing in the needs of the security sector. thomas.bennett@vhenryltd.comwww.vhenryco.com

The opinions expressed herein are the author’s and not necessarily those of Marigon.

By Reuters

Four Petrobras oil platforms off the northeast coast of Brazil have halted production after a leak of about 7,000 liters of oil was detected coming from a pipeline linking them, a local oil workers union head said on Friday.

Brazil’s oil regulator, ANP, confirmed the leak in the Camorim field, 16 kilometers (10 miles) off the coast of the city of Aracajú, and said it had been contained by Petrobras.

Stoessel Chagas, director of the Sindipetro-ES, which represents Petrobras offshore oil workers in Brazil’s Alagoas and Sergipe state, said the leak was detected coming from a pipeline linking the PCM-5 and PCM-6 production platforms.

Petrobras confirmed the spill in a statement, adding that even though nearly all of the oil had been collected or dispersed, the company expects some small particles to reach shore.

Petrobras said it expects to complete repairs of the leak on Friday.

The four platforms that halted output are PCM-5, PCM-6, PCM-8 and PCM-9, which together produce 400 barrels of oil and 60,000 cubic meters of natural gas a day, according to ANP data.

Chagas, who confirmed that the leak had been contained, said production from the platforms was expected to resume by Saturday.

“The little leaks from these platforms are constant due to the lack of maintenance,” said Chagas, who added that Petrobras has been using clamps to plug the leaks. “We joke that there is more clamp than pipeline” in the system, he said.

The ANP said it was in contact with the Brazilian navy, which is monitoring the dispersion of the oil slick. It added that it may open an investigation of the incident and will continue to monitor the situation.

By Shane McCarthy

The tanker industry has always been very volatile, but few swings in history can match what the industry has dealt with this past year. New fuel regulations, slumped global demand, fear of overproduction and uncertainty of oil futures have dominated headlines the past 12 months. For ship owners and managers, the silver lining here is that the low price of oil has meant significantly lower bunker costs resulting in good spot returns. Still the questions remains, just how long will that last?

Oil prices slumped nearly 60 percent between June 2014 and January 2015 and while some in the industry are optimistic following a recent surge, others see a long road ahead before we see $100 a barrel again(1)_.

Current market conditions have caused industry leaders like BP’s Bob Dudley to liken the current glut to that of the 1980s where it took 4 years for prices to recover. Oil companies seem to be bracing for the long haul as we have seen drastic cuts in company spending, most notably Royal Dutch Shell Plc who announced more than $15 billion in spending cuts(2). Drewry Shipping Consultants predicts a positive short term outlook for tanker rates, due in large part to strong cargo demand fueled by floating storage and a modest fleet supply growth for 2015, owners and operators will need to capitalize now before another unexpected swing changes everything.

For the short and medium term, owners and operators have the difficult task of capitalizing on a favorable market, while simultaneously positioning themselves for the future. Keeping costs down, while remaining ahead of the curve – easier said than done right?

Capitalizing on today’s market

The price of oil has fallen nearly 60% from June to January(3). This drop in price has given owners and operators the option to defer on retrofitting their tankers, a major concern in 2014 through the start of the New Year.

With low sulfur bunker prices as low as they might ever be, owners are not interested in undertaking a $5-10 million per vessel investment when low sulfur fuels are lower than what high sulfur fuels were 8 months ago.

This month Platts’ survey of dirty tanker and dry bulk ship owners showed that they are holding back from installing this technology on their vessels due in large part to bunker prices being so inexpensive(4).And while scrubber technology companies are optimistic that the market will recover and the sense of urgency to invest in scrubbers will buoy, some forecasts from the world’s leading analysts do not support the idea of a quick comeback. Optimistic forecasts like Bloomberg’s at $74 and $75 a barrel for 2016 and 2017 respectively are only 70% of its price in June where it reached $107 a barrel(5).

Greenships’ ECA retrofit study released in 2012 estimated that the payback time for a retrofitted vessel operating in 50% ECA is approximately 6 years and 8 years for 25% ECA operation(6). You can expect those payback periods to be longer than first expected due to the extreme low price of oil, while the price of scrubbers has remained constant. And while it is true that the payback period of the scrubber is primarily sensitive to the price spread between HFO and MGO, CAPEX and absolute HFO price have more of an impact than first estimated with fuel costs being this low. So if not in scrubbers, where do owners and operators invest?

Positioning for the future

While today’s market doesn’t resemble pre-2008, there is still room for owners and operators to use favorable rates to position themselves for future success.

With existing concern over an influx of new buildings scheduled for 2016, a trend to look out for is owners and operators investing more in technology and innovation, pivoting from the idea of technology as a “nice to have” to a critical business system that could propel them to the next level.

This industry has long been criticized for lagging on tech innovation. Recently there has been a small surge in the industry’s adoption of progressive technologies including cutting edge ship simulators, voyage management software, electronic charts, etc., but heavy pushback still exists and advocates of technology and system innovations still remain in the minority. Look for this surge to strengthen and continue with the price of oil down. Unlike investment in new buildings or other traditional shipping investments, software can be purchased and maintained relatively inexpensively, eliminating potential debt, not to mention it won’t inflict additional fear of flooding the market.

Tech projects have never been at the top of the priority list when budget time rolls around for shipping companies. Year after year these projects have been put on the back burner where others have been thrust to the front. We live in a digital age, with smart devices all around us. SaaS software companies in our industry have developed technologies that cater to the perpetual connectedness of our industry and society as a whole. Owners and operators can now search on any particular vessel, whenever, wherever. Chartering and Operations can fix and manage vessels in their voyage management system on their iPhones at the pub or at the pitch. Management has access to real-time advanced KPIs and fleet analytics outside of Excel, in more manageable, readable dashboards on their mobile, tablet or computer. The impact these innovations can have on an organization can be exponential and lasting.

Tech savvy companies also have a leg up on their competitors when trying to attract new talent. This can be all the difference for a company hitting or missing on top talent. Being able to float the latest and greatest, most intuitive and responsive technology to prospective employees reinforces the prospect’s vision of the company as an industry leader, well positioned for the future. This is not only an extremely powerful recruiting tool, but also further promotes morale within an organization.

Strengthening systems and staying ahead of the curve in regards to technology could be the answer that shipping companies may be looking for in the short and medium term. Once perceived as an afterthought in this industry, software and system innovations are gaining steam and expect to see an increased investment. These tools position organizations for both immediate and future success, empowering their employees and partner organizations, while keeping operating costs relatively low in an opportune market.

References

Kennedy, Will, and Ryan Chilcote. “BP Chief: No Hope of $100 Oil for ‘Long Time’.” Bloomberg. 3 Feb. 2015. Web: http://www.bloomberg.com/news/articles/bp-chief-no-hope-of-100-for-a-long-time-as-stocks-build

 Smith, Geoffrey. “Shell slashes spending by $15 billion as oil price bites” Fortune. 29 Jan. 2015. Web: http://fortune.com/2015/01/29/shell-slashes-spending-by-15-billion-as-oil-price-bites/

 3. Brent crude closed at $115.19 a barrel on June 19th. On January 30th Brent crude had fallen to $47.52 a barrel. A 58.75% drop in price. Web: http://ycharts.com/indicators/brent_crude_oil_spot_price

4. Jameson, Nick. “Shipowners Hold Back on Scrubber Investments.” Bunkerworld. 5 Feb. 2015. Web: http://www.bunkerworld.com/news/Shipowners-hold-back-on-scrubber-investments-134540.

 “Kennedy, Will, and Ryan Chilcote, loc.cit.

 ECA Retrofit Study. Comparison of Various Abatement Technologies to Meet Emission Levels for ECA’s.” Green Ship of the Future.Web: http://www.greenship.org/lowemissionconceptstudy/ecaretrofitstudy/.

This entry has been created for information and planning purposes. It is not intended to be, nor should it be substituted for, legal advice, which turns on specific facts.

By Wendy Laursen

Around 115 passengers and crew on Royal Caribbean Cruise Line’s Legend of the Seas have reported ill with vomiting and diarrhea.

The ship is coming to port in San Diego, California on April 14, 2015. 

“Royal Caribbean is undertaking direction from the CDC to inhibit the sickness and prevent further outbreaks,” the company said in a blog post.

The news follows that this week of at least 100 people sick on Celebrity Cruises vessel Celebrity Infinity.

The U.S. Centers for Disease Control and Prevention (CDC) reported that 95 of 2,117 passengers and five of 964 crew members were ill during the vessel’s March 29 to April 13 cruise.

The ship returned to San Diego, California on April 13. “At Celebrity Cruises we have high health standards for all our guests and crew,” the company said in a statement.

Norovirus is the most common cause of acute gastroenteritis in the United States, with up to 12 million illnesses each year resulting in up to 71,000 hospitalizations and about 800 deaths, according to health officials.

Earlier outbreaks of gastrointestinal sickness occurred on Celebrity Infinity in 2013 and 2006.

There have now been five outbreaks of sickness this year on cruise ships calling at the U.S. The other outbreaks occurred on Norwegian Pearl, Celebrity Equinox and Grandeur of the Seas.

By MarEx 

Japan on Monday said it hoped to resume its Antarctic whale hunt around the end of this year, after providing further information to win over an international panel that says its whaling plan does not prove the need for killing the animals.

Last year, the International Court of Justice ruled that Japan’s decades-old whale hunt in the Southern Ocean should stop, prompting Tokyo to cancel the bulk of its whaling for the 2014/2015 season and submit a scaled-down plan for future hunts.

Japan has long maintained that most whale species are not endangered and that eating whale is part of its food culture.

On Monday, an expert panel of the International Whaling Commission (IWC), the global body that oversees whales, said it opposed a new Japanese whaling plan that proposed to take 333 minke whales in the Antarctic.

Japan’s commissioner to the IWC, Joji Morishita, said the country would furnish additional material before a May meeting of the IWC’s scientific panel for a final report, adding that Tokyo hoped the new data would win over the panel.

I believe that we’ll move forward with the aim of resuming whaling around the end of the year,” Morishita told a news conference, though he did not rule out the possibility of changes to the proposal.

The IWC’s expert panel said the information in Japan’s latest proposal did not enable it to determine if lethal sampling of whales was necessary.

“The current proposal does not demonstrate the need for lethal sampling to achieve those objectives,” it said, referring to the plan’s key aims.

Japan’s determination to resume whaling remains unchanged, said Morishita, echoing statements by government leaders.

Japan took the panel’s recommendations seriously, he said, but added, “They haven’t unilaterally said that it’s no good, neither have they come out on the other side with, ‘Go ahead, do whatever research you want to do.'”

Japan began what it calls scientific whaling in 1987, a year after an international whaling moratorium took effect, despite growing global opposition.

It also runs a separate whaling program in the Northern Pacific that was unaffected by the international court ruling.

Humane Society: Never Truly Research

Kitty Block, vice president for Humane Society International, has welcomed the outcome from the IWC panel: “It has been clear since Japan first started its scientific whaling hunts due to the number of whales hunted and the marketing of the meat that the purpose was never truly research. 

“Even now, after so many years and great effort on their part, Japan has been unable to convince a panel of experts that they have made a case for lethal take. This needs to also be seen in the context of the ruling from the International Court of Justice that Japan’s previous whaling program was illegal. Japan needs to recognize that its whale hunting defies science and international law.”

Japan proposes to kill 330 minke whales annually for 12 years in what it calls its NEWREP whaling program – a total of 3,996 animals, in addition to the more than 13,000 whales killed under its existing scientific permits since 1987.

Ben van Beurden

By Wendy Laursen

Royal Dutch Shell has agreed a deal with BG Group to buy the UK-based company for £47 billion ($69.6 billion) in cash and shares.

Since taking over Shell in 2014, chief executive Ben van Beurden had been trying to cut costs, and the deal is expected to enable the two oil and gas companies to reduce costs at a time when the industry is suffering from prolonged low oil prices.   “The result will be a more competitive, stronger company for both sets of shareholders in today’s volatile oil price world,” said Shell Chairman Jorma Ollila in a statement.

Shell is one of the world’s largest energy producers, with a market value of about $192 billion.

Buying BG will add to Shell’s proven oil and gas reserves by 25 percent and to production by 20 percent, including BG’s offshore oil fields in Brazil’s Santos Basin, natural gas reserves in East Africa and the Queensland Curtis LNG project in Australia.

Shell and BG said the offer is about 50 per cent above the closing price of April 7. BG Group shareholders will end up with close to 20 percent ownership in the newly formed group.   By applying its capabilities to BG’s assets, Shell believes that, by around 2020, the combined group will have two strategic growth businesses – deep water and integrated gas – that could potentially each generate $15-$20 billion in cash flow per annum. It will also have upstream and downstream capacity to generate a further combined $15-$20 billion in cash flow per annum.

BG had a market capitalization of $46 billion at Tuesday’s close, Shell was worth $202 billion and Exxon, the world’s largest energy company by market value, was worth $360 billion.

With BG, Shell would be the leading foreign oil company in Brazil. Analysts at investment bank Jefferies said they now expected Shell to surpass Exxon as the world’s largest publicly traded oil and gas producer by 2018, with output of 4.2 million barrels of oil equivalent per day.

Global LNG production was 246 million tonnes last year. The new Shell-BG group would have 18 percent of world output.

There are still a number of regulatory hurdles to be overcome before the deal is finalized with authorities in Europe, China, Brazil, the United States and Australia.

Shell acquired Spanish oil company Repsol’s LNG business in January 2014.

By Haifeng Wang

The spectacular collapse of oil prices in the past nine months has generated much buzz and fanfare (see chart below). Investors have piled on billions of dollars, betting a rebound of oil prices, which had been hovering around $100 per barrel for years. The action is emblematic of the famous mantra of “be greedy when others are scared, be scared when others are greedy,” and served many people well in seizing opportunities created by market chaos. However, people may have to bite the bullet if too many subscribe to this theory at the same time.

They only need to look to the shipping industry for an example of a bet that fails to materialize. When the great recession hit the shipping market, the shipping industry slid into a crisis due to a glut of supply and a sudden deceleration of the world economy, much like what caused the plunge of the oil market today. This change of fortune was anything but unusual for an industry to which regular peaks and bottoms are a hallmark.

In the wake of weak demand, shipping companies usually cut spending; weaker companies are forced out of the market or consolidated into stronger ones; new orders are slashed and more ships are retired. The market force eventually finds an equilibrium and breeds the boom as demand picks up. Yet this time was different. Viewing new ships as depressed assets, fresh capital waded in and buoyed shipping companies that were facing dreadful financial situations. More ships were brought into the fleet, widening the gap between demand and supply. Six years after the recession, the shipping industry is still wandering in a dire straight. Except for the first group of investors who cashed out, the remaining either exited with losses or stayed with a glim hope that a recovery will finally destine.   

History may repeat itself yet again in the oil industry as many are trying to snap up “cheap” assets in the industry, aggravating the problem of oversupply. Many people argue that the oil prices will begin to climb in a year or two as higher cost producers feel the pinch, so too did those who reckoned the shipping market would bounce back as “others” were driven out. However, if too many people count on others to bear the brunt, they are bound to be disappointed.

The dash into shipping and oil partly reflects the fact that assets elsewhere have been greatly inflated, as a result of loose monetary policy globally. As the search for discounted asset intensifies, industry fundamentals are either ignored or masked by a false sense of margin of error. If capital remains artificially cheap – and it will be as countries compete to depreciate the value of their currencies – money managers will continue to power money into industries that look relatively inexpensive and be locked into it when too many of them think the same way. 

This entry has been created for information and planning purposes. It is not intended to be, nor should it be substituted for, legal advice, which turns on specific facts.

By MarEx

Crews are working to clear a path through what has been called one of the biggest ice covers on the Great Lakes in decades that left 18 vessels stuck since Monday, including one freighter with a damaged hull.

The Canadian Coast Guard is working in concert with the United States Coast Guard to ensure a long line up of ships will be able to travel safely through heavy ice conditions in Whitefish Bay on eastern Lake Superior.

As of Wednesday afternoon, there were 18 vessels waiting to move. Two of those vessels have now cleared the ice field with the assistance of the Canadian Coast Guard Ship Samuel Risley.

CCGS Samuel Risley, and the United States Coast Guard cutters Mackinaw, Alder, and Hollyhock have spent several days creating tracks through the ice. Once those tracks are established then direct escorts through the ice will be made, and the ships can get underway to various locations throughout Lake Superior and towards the St Marys River. 

The Canadian Coast Guard icebreaker, CCGS Pierre Radisson, has been deployed to assist in this icebreaking mission. CCGS Pierre Radisson, home-ported in Quebec City, has just arrived on lower Lake Superior and will join this effort to get all of the ships safely underway to their destinations.

Officials say that warmer air and a sudden change of wind loosened the ice and moved it around in Whitefish Bay, trapping the vessels just northwest of the Soo Locks. The ice packed into the eastern side of Lake Superior has halted movement to the east and west, making it difficult to free the ships. The ice has backed up the shipping of Canadian grain, U.S. iron and steel and other products to one of the most important economic regions in North America.

Two U.S. cutters and the Canadian Coast Guard ship Samuel Risley have already been working to free the ships from the 35-mile ice field and will soon be joined by another powerful ice cutter.

The damaged freighter Kaye E. Barker is expected to transfer its load of iron ore before being relocated for repairs. Officials stated that they expect to have all vessels free by Thursday.