Fredriksen's Golar Receives Record Rate to Store LNG at Sea (corrected)

Image courtesy Wilhelmsen

(Corrects storage location in first paragraph of story published Aug. 9. Company corrects rate in second.)

(Bloomberg) — Golar LNG Ltd., a company controlled by shipping billionaire John Fredriksen, said it received a record rate to store liquefied natural gas on one of its carriers in the Persian Gulf.

The $185,000 a day the vessel will earn for the 14-day booking is the highest ever paid for a short-term charter, Tor Olav Troeim, a director of the Hamilton, Bermuda-based owner, said in an interview in London yesterday. He declined to name the company that booked the ship. Golar LNG advanced 45 percent to $40.50 a share in New York trading in the past year, giving the company a market value of $3.2 billion.

Shipping rates have risen to a record after an earthquake and tsunami in Japan in March last year shuttered almost all the nation’s nuclear plants. That spurred unprecedented purchases of LNG as an alternative power-generation fuel by the world’s largest importer. The industry’s biggest bottleneck is a shortage of vessels to deliver cargoes, according to the Paris- based International Energy Agency.

“Two years ago we would never have been able to do a deal like that,” Troeim said of the storage transaction. “We had four very tough years and we made nothing. Now we are making the ships back in three years.”

Surging Rates

LNG carrier rates for periods of less than three months have soared from as low as $20,000 daily in the first half of 2010, according to data HSBC Shipping Services Ltd., the shipbroking and consulting firm that the bank is selling to its management. There are two more ships to be delivered this year out of a total fleet of about 370 vessels, according to Clarkson Plc, the world’s largest shipbroker.

The estimated deficit of LNG carriers expanded to 17 ships this year from 10 in 2011, according to data from Pareto Securities AS, an Oslo-based investment bank. The shortage will narrow to 13 vessels in 2013 and become a surplus of 11 the following year. Demand for LNG will rise by between 5 percent and 7 percent a year through 2025, led by China, it anticipates.

Golar is the largest investor in new LNG carriers with 13 ships on order worth about $2.6 billion, Troeim said. Companies associated with Fredriksen account for 17 percent of all orders for the vessels at Asian shipyards by capacity, figures from Clarkson show.

Reduced Size

Natural gas is super-chilled into liquid form at about minus 160 degrees Celsius (minus 256 degrees Fahrenheit), shrinking the fuel to about 1/600th of its original size so that it can be shipped.

World Shipholding Ltd., a company indirectly controlled by trusts established by Fredriksen for the benefit of his immediate family, owns almost half of Golar LNG, according to data compiled by Bloomberg. Fredriksen is also Golar’s chairman and president.

Existing investment plans to add capacity for liquefaction plants where natural gas is chilled show demand for between 180 and 370 new LNG carriers by 2020 if all the projects go ahead, according to Pareto.

The projections for strengthening demand and rising earnings spurred owners to accelerate ordering of new vessels. There are 72 LNG carriers due to be delivered from ship yards between 2013 and 2015, Troeim said. That won’t turn an under- supply into a surplus as the new ships start trading, he said.

“If the market is bad in a half-year it means nobody will order,” he said. “That will bring the market back into strength again.”