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Golar signals further ship investments - FT.com

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February 14, 2012 11:46 pm

Golar signals further ship investments

By Robert Wright, Shipping and Logistics Correspondent

The liquefied natural gas shipping company controlled by John Fredriksen, a high-profile shipowner, provided further proof of the magnates determination to invest in new ships on Tuesday, announcing more than $400m in orders. Golar LNG, which is listed in Oslo and on Nasdaq, said it had signed contracts worth more than $400m for two vessels of 162,000 cubic metres each from Koreas Hyundai Samho Heavy Industries, with options for another two. It was also, it said, in final discussions about making more investments, both in LNG carrying ships and infrastructure-type investments likely to be either floating units for freezing gas for shipping, or for turning it back into gas on arrival. Golars announcement comes after John Fredriksen, its chairman, said that he planned to invest heavily in new tankers for both crude oil and oil products through Frontline 2012, his newest enterprise, despite the chronic oversupply of both vessel types. LNG tankers, which carry supercooled liquefied gas in vast insulated tanks, are in far shorter supply. They have been one of the few boom areas for shipping over the past year, after Japans gas demand soared in the wake of last years earthquake and tsunami. Golar said that shipyard prices are lower than normal and that new engine technology means new vessels will be significantly more economic. Mr Fredriksen, who controls 46 per cent of Golar, said in the statement announcing the new orders that new technology such as floating regasification units which have made it far easier to deliver gas in places without large gas terminals had transformed the LNG industry.

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Golar signals further ship investments - FT.com

There is also widespread interest around the world in shipping gas from the US where prices are around $4 per million British thermal units (mBtus) to Japan and Korea, where prices are around $15. The large global spreads in gas prices, the high growth in trade, and the tight availability of shipping gives this investment a solid foundation, Mr Fredriksen said. Recent months surge in demand for LNG has pushed rates to charter modern LNG carriers up from around $30,000 a day two years ago to around $125,000 now for charters lasting as long as five years. Operating costs are typically about $60,000 a day. Tor Olav Trim, Mr Fredriksens business partner, said last week that LNG carrier investments were attractive because current charter rates paid off the whole cost of a new vessel within the first five years. You have a free vessel for the rest of the lifetime, he said.

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