Frozen Gas Market Heats Up

Tuesday, June 19, 2001
While seemingly miniscule in terms of deadweight tons ordered and delivered per year as compared to the shipbuilding business as a whole, the production of gas tankers, LNG and LPG, are high-value, high prestige orders that are likely to rise significantly in the coming years. Consistently high oil prices have effectively forced the production and processing of gas, and the current trend is towards increased usage of this valuable commodity. Late last month, the gas and power division of Royal Dutch/Shell ordered two additional liquefied natural gas (LNG) carriers to support its growing global LNG business. Shell International Gas Limited ordered a membrane-type carrier from South Korea's Daewoo Shipbuilding & Marine Engineering and a moss spherical tank carrier from Japan's Mitsubishi Heavy Industries. While a price was not publicly disclosed at the time of the ordering, the market level for a typical LNG carrier is about $175 million.

The two new vessels have been secured against the background of a growing portfolio of Shell LNG projects around the world which require shipping capacity and will help supply growing demand for LNG. In its annual market report, Norway R.S. Platou reports that in 2000 there was a "huge interest" in LNG tonnage, triggered by a range of new LNG projects and low newbuilding prices. Platou claims that there were reports of contracts as low as $140 million for 138,000 cu. m. ships, marking the lowest level since the late 1980s. This pricing allowed owners to order vessels sans firm chartering commitments, resulting in 20 vessels at a cumulative 2,756,000 cu. m. being ordered during the year, bringing the world orderbook to 26 with 11 options. Ordering activity for the LPG segment also picked-up, as nine VLGCs and two mid-size vessels, a cumulative 800,000 cu. m., were ordered. This brought the total number of LPG vessels over 3,000 cu. m. ordered during the year up to 29, and the total orderbook at the end of the year, according to the Platou report, stood at 1.3 million cu. m., or about 11 percent of the existing fleet.

LNG Company To Be Listed

Norwegian shipping magnate John Fredriksen's Liquefied Natural Gas (LNG) transport company Golar LNG reported that it raised $280 million in a private placement and planned to list on the Oslo Stock Exchange, and later this year in New York. The company, which will become the first pure LNG transport company to be listed, said it had issued 56 million shares at $5 each in the placement and that Fredriksen had taken a 50 percent stake in the firm. The proceeds of the IPO will be used to buy the LNG shipping assets of one of John Fredriksen's existing tanker companies, Osprey Maritime. Four of Fredriksen's LNG tankers are tied into long-term contracts with BG Group, which recently announced it had tied up all spare capacity at CMS Energy's Lake Charles, La., facility, one of only two functioning import terminals serving booming U.S. energy markets.

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