In April, the Hong Kong-based Sohmen family purchased a controlling interest in Bergesen d.y. According to Bergesen’s current deputy managing director, Jan Håkon Pettersen, the purchase will strengthen Bergesen’s position as a global leader in LNG carrier market. "This company, with its knowledge and its fleet, will have a significant influence on the international shipping community in the future, particularly in the LNG sector," he says. Pettersen will be named managing director of the new-look Sohmen-family-controlled version of the company at the end of this year.
The news of Hong-Kong-based World-Wide Shipping’s acquisition of Norway’s largest shipowners was presented in the meeting room at Bergehus in Oslo. In a room filled with analysts, advisors and journalists, Andreas Sohmen-Pao praised the Norwegian shipping environment and Bergesen’s expertise, and assured the audience that the company would continue to be run from Oslo.
According to market sources, World-Wide Shipping, the world’s largest family-owned shipowners, has made USD 1-1.4 billion on tanker operations over the past four years. The company is now hoping to increase revenues from Bergesen’s operations.
Jan Håkon Pettersen, along with the current managing director Svein Erik Amundsen, have been heavily involved in Bergesen’s big move into LNG (Liquefied Natural Gas) a sector that has attracted the Sohmen family.
The future of LNG
Says Pettersen: "The main reason that they are buying us is because of our LNG expertise. We know the business very well and are a major player in the large gas-carrier market. Also, four years ago, we embarked on a major strategic reorganisation to increase the company’s exposure to businesses that are expected to generate higher returns and more stable earnings, with particular emphasis on LNG."
Bergesen’s ambition is to be the leading independent operator, with a fleet of 15-20 LNG vessels and newbuildings – not necessarily all wholly owned – by 2010. Last year, the company ordered another four newbuildings of between 138,000 and 145,000 cbm from Daewoo, and all seven of its LNG newbuildings have long-term employment.
However, Pettersen believes that the company will not see the results of these changes straight away. "The first of the new carriers, Berge Boston, has recently been delivered and has successfully completed her maiden voyage. The second, Berge Everett, is scheduled for delivery on 17 June of this year. From 2006, these seven vessels will generate an annual cash flow of more than USD 120 million, and we are also working on new tenders and plans."
Promising markets
The market prospects are promising: Continued strong growth in demand for natural gas is anticipated in the years ahead. This growth will be driven by environmental concerns and the cost-effectiveness of natural gas, leading especially to the increased use of natural gas as an input factor in power generation.
LNG is expected to grow at an even faster rate, mainly due to increased demand for natural gas, falling LNG costs, and a demand for greater flexibility and diversity from receivers. The world fleet currently numbers 139 vessels. Of the 55 large LNG newbuildings on order, only three or four are believed to be without long-term employment. ‡
Newbuilding projects
Commenting on Bergesen’s seven newbuildings, Pettersen says: "The first two have been fixed on 20-year contracts by Tractebel. Belgium’s Distrigas has a 49 per cent stake in the first vessel, while the second one is wholly owned by Bergesen. The third vessel in the series has been guaranteed 20 years’ employment by the Algerian state-owned oil company Sonatrach, which will also purchase a 50 per cent stake in the vessel upon its delivery in July 2004."
According to Pettersen, the last four newbuildings were ordered in the first quarter of 2002, and the charterer exercised its option to increase the capacity of these vessels from 140,500 cbm to 145,000 cbm in the third quarter.
The vessels have been fixed on 20-year contracts with Nigeria LNG Ltd, a consortium consisting of Shell, TotalFinaElf and Agip (51per cent) and the Nigerian National Petroleum Company (49 per cent). Three of the vessels are due for delivery in 2005 while the fourth is due in 2006. Nigeria LNG has purchase options on all four that can be exercised after five years, ten years and then every second year for the lifetime of the contracts. Bergesen is entitled to bring in partners with stakes of up to 49 per cent in the last two vessels.
Comments Pettersen: "With these contracts, the company has established relationships with some of the most reputable players in the market, both charterers and gas exporters/importers. We will be looking to develop these relationships."
Profiting from efficiency
Echoing Pettersen’s optimism, Bergesen’s newbuilding director Lars Traaseth says: "We are working actively on several new LNG projects and the prospects for stepping up the company’s involvement in this area are good. New and more efficient technology has made LNG exports more profitable and more competitive than pipeline transportation. The price of LNG carriers has also fallen significantly over the past decade, owing to lower newbuilding prices. This is due to movements in exchange rates, stiffer price competition between Japanese and Korean yards, and productivity improvements in series production of virtually identical vessels. In future, we can expect changes in the form of larger vessels and more efficient propulsion systems to push transport costs down further and make LNG even more competitive."
"Although the future LNG market will probably feature stiffer competition between players, the long-term contract market is expected to remain the exclusive preserve of companies above a certain size and with good financing," says Pettersen and concludes, "With this in mind, we believe the Sohmen buy-in gives Bergesen an even more solid capital base and thus strengthens its ability to gain more business with new charterers."