LNG

Flex LNG, the Norwegian shipping company with a fleet of 13 vessels and several chartered to the largest exporters, posted solid net income and increased vessel operating revenues with all ships available after previous dry-dockings.

Japanese shipping company Mitsui OSK Lines has presented its annual update on activities, praising the role of the LNG fleet as it cemented its position as the world’s third-largest shipping group behind Japan’s NYK Line and the giant Chinese company COSCO Shipping.

The overview from President and Chief Executive Takeshi Hashimoto was contained in the updated presentation called “Blue Action 2035”, involving an initial first phase of 1.2 trillion yen ($8 billion) in investments.

“To date, the group has worked to strengthen its LNG carrier business and offshore business to increase the ratio of stable earnings,” Hashimoto explained.

“In particular, MOL’s LNG carrier business has grown to become one of the world’s leading businesses in terms of both scale and competitiveness,” he added.

Long-term contracts

“Furthermore, the group intends to increase the asset allocation to areas within the shipping industry where long-term contracts can be obtained, such as crude oil carriers and liquefied petroleum gas carriers, as well as to businesses different from industrial cargo transport, such as domestic ferries and cruise ships, and to land-based businesses such as real estate property and warehouses,” the CEO explained.

“We aim for the best mix of businesses that can resist recession, maintain stable dividends, and enjoy large profits when market conditions are favorable, by striking a good balance between market driven businesses such as containerships, which offer high returns but also large fluctuations in earnings and stable revenue businesses such as LNG carriers and real estate,” Hashimoto declared.

“The opportunity to enjoy unexpected profits over a long period can be said to be an attractive feature of the shipping business,” said the CEO.

“On the other hand, however, considering the huge capital investment required for consistent fleet renewal to continue the business, the company cannot solely rely on this irregular economic boom,” he added.

Hashimoto stated that while the shipping business would continue to be the core of the group and a source of “competitive advantage that generates high returns during market boom” MOL would also be looking to diversify and invest in other businesses to help stabilize the earnings base. 

LNG stability

MOL said that LNG continued to be a “stable revenue business” while containerships was a “market driven business” along with the car-carrier fleet.

MOL said it was currently the third-largest global shipping company with a fleet of799 vessels, just behind Japan’s NYK Line with 800-plus vessels, though well behind Chinas COSCO Shipping with around 1,300 vessels

Hashimoto noted thatLNG shipping was rapidly increasing around the world as an environmentally friendly and clean energy source.

“Since first participating in LNG transport in 1983, we have accumulated considerable expertise in this field, and boast the world’s leading share in the ownership, management, and operation of LNG carriers,” he stated.

In what it called its “energy business fleet”, MOL currently has 367 vessels operating, including 158 tankers for oil and other products and 94 LNG carriers and more than 30 other gas carriers including floating storage and regasification units, ethane carriers and LNG bunkering vessels.

“We have also entered the business of transporting ammonia, which is attracting attention as a next-generation clean fuel that does not emit CO2 when burned,” noted Hashimoto.

GasLog LNG Partners with an operational fleet of 12 vessels reported annual profit of $119 million on revenues of $379M amid a strong charter market with signs pointing to very positive prospects for the rest of 2023.

Höegh LNG Holdings, the owner of 10 floating storage and regasification units (FSRUs) and two conventional carriers, posted a quarterly loss because of operational issues and ships being out of contract ahead of being re-deployed.

Höegh reported a net third-quarter loss of $45.9 million, which was wider than the $3.14M loss posted in the same three months of 2021.

The Bermuda-based company, now owned by Norwegian interests and US equity funds managed by US bank Morgan Stanley, reported higher third-quarter revenues of  $96.09M versus $86.15M in the same quarter of 2021.

“The fleet delivered a stable operating performance in the third quarter,” said Höegh.

“However, the ‘Höegh Giant’ has been idle since late April following the termination of its FSRU contract and the ‘Höegh Gannet’ was idle for a period towards the end of the third quarter while repositioning to a yard for class renewal and modifications to be carried out in the fourth quarter to prepare the vessel for FSRU operations,” explained the company.

“Furthermore, ‘Neptune’ was out of service for a period in the third quarter for regular class renewal and maintenance,” it added.

Höegh said the following the surge in demand for FSRUs earlier this year, the company has secured long-term FSRU employment for its entire fleet.

Lithuania FSRU

Additionally, the Lithuanian charterer of the vessel “Independence” has declared the purchase option to acquire the FSRU in December 2024.

The FSRU has been in operation at the Baltic port of Klaipeda since October 2014 for a charter cost of around $68 million per annum.

The charterer of the “Independence” is the energy storage company Klaipėdos Nafta.

Höegh said that its main business focus now was to prepare its FSRU fleet for the start-up of the new contracts and to ensure the projects are delivered on time, except for the potential later start of the contract in Australia.

The company added that it had settled the differences of the cancellation of an FSRU deployment on the West Coast of India.

“Following Höegh’s termination of the ‘Höegh Giant’ FSRU contract in India in April, Höegh reached an agreement with the previous charterer (H-Energy) in July dropping all claims and counterclaims against a settlement amount to be paid by Höegh and the ‘Höegh Giant’ thereafter left India,” it explained.

“The vessel was modified and prepared for FSRU operations at a yard during October-November, and will be allocated to one of the group’s new FSRU contracts,” stated Höegh.

The company said that it was also still involved in pending arbitration with the charterer of “PGN FSRU Lampung”, the FSRU deployed in Indonesia.

Outlook

Höegh said in its outlook for the coming year that the company’s main operational focus was to prepare the FSRUs for start-up of their new contracts.

“Looking further ahead, the company will start considering potential growth opportunities including expansions of its FSRU fleet with newbuilds, or the conversion of LNG carriers to FSRUs to meet the increased demand for FSRUs,” it stated.

The group expects that the results for the fourth quarter of 2022 will be impacted by three FSRUs being out of service for modifications.

“The three FSRUs will be without revenue for a period, and costs involved with the modifications may be partly expensed as operating expenses and partly capitalized as investments depending on the nature of the costs incurred,” added Höegh.

The LNG shipping company, one of the sector’s pioneers, completed its own overhaul in 2022 with a merger and is owned by Larus Holding Limited, a 50-50 joint venture between Norway’s Leif Höegh & Co. Ltd. and US equity funds managed by Morgan Stanley Infrastructure Partners.

Flex LNG, the Norwegian shipping company with a fleet of 13 modern vessels and several chartered to the largest US exporter, reported an 18 percent jump in first-quarter net income even amid spot freight market challenges at the end of the three months as the LNG trade abruptly shifted towards Europe from Asia.

Exmar, the Belgian shipping company with more than 40 vessels in its fleet focused on the liquefied petroleum gas business, narrowed its third-quarter net losses to $16.3 million as its drawback from LNG activities has been hampered by an arbitration case brought by commodities firm Gunvor, offset by a successful LNG production vessel charter to Argentina.

Flex LNG Ltd, the growing LNG shipping company listed on the Oslo bourse and based in Bermuda and whose shareholders include trusts connected to Norwegian shipping magnate John Fredriksen, more than doubled first-half revenues compared with the year before, though reported a loss as it awaited more of its own ships to begin charter operations.