Fredriksen bets on LNG

Norwegian billionaire John Fredriksen has set his sights on LNG. So far, further prizes have eluded him. John Fredriksen, 57, suddenly emerged from the shadows to control the largest fleet of oil tankers in the world in 2001.
With a fleet of 72 vessels, Fredriksen landed on Forbes Global's billionaires list in 2001, becoming just one of two listed billionaires from Norway. He succeeded by betting early on a looming shortage of newer double-hulled tankers and by using his Oslo-based, NYSE-listed Frontline to consolidate much of the business under his control.

Now he is trying to make a similar bet in LNG; he reckons that demand, particularly in the US, will greatly outstrip supply within a few years. The US Department of Energy estimates that America will consume 890 bn cm of natural gas by 2015, 46 % more than it does. Of this amount, at least 23 bn cmpy will have to be shipped by sea to the US
To take advantage of this, Fredriksen bought Singapore-listed Osprey Maritime for $ 216 mm. Hesold off all assets except for two crude oil tankers and six LNG ships. The asset sale not only covered his purchase price but it also netted him $ 50 mm.

In May 2001, Fredriksen transferred the LNG ships to another company, Golar LNG, which he listed on the Oslo Stock Exchange. He raised $ 140 mm to fund operations and to help pay for four new LNG ships. Fredriksen retains 50 % of Golar.
He insists these ships, which are due for delivery between March 2003 and October 2004, will have no problem finding work. Maybe so, but he'll be up against such giants as Shell and ExxonMobil. Last October, Fredriksen held fruitless discussions with El Paso to lease four LNG ships from Golar to transport LNG to North American regasification terminals that El Paso is planning to construct.

In early 2002, Fredriksen bid for and received a verbal agreement from RasGas, a government-run LNG producer in Qatar jointly owned by ExxonMobil, that one of his ships would be awarded a highly profitable long-term contract to transport LNG to Italy. Fredriksen thought the deal was done, but he was subsequently told that a Japanese consortium had been awarded the contract instead.
"The missing ingredient here is charm," observes Keith Bainbridge of LNG Shipping Solutions in London. "He is pretty ruthless. People are reluctant to enter a long-term charter with him because they are not sure what he is going to do." Charm may have something to do with it. But the overwhelming fact is that partnering with a newcomer is a risky bet in this market.

It is not simply a matter of showing up with two LNG ships, says Matthew Simmons, an energy investment banker in Houston. You need fields that can supply gas for at least 20 years -- as well as pipelines, a liquefication plant, a receiving terminal and at least two LNG tankers. "You are looking at a minimum investment of $ 4 bn," says Simmons. This gives Shell and Exxon an obvious advantage. "Shell probably considers us to be a nuisance," says Tor Troeim, CEO of Golar and Fredriksen's right-hand man.
With the entrenched natural-gas players shutting him out, Fredriksen is going to the periphery for partners. In February he teamed up with Houston-based Marathon Oil to build an LNG receiving terminal and a power station estimated to cost more than $ 900 mm near Tijuana, Mexico. Pertamina of Indonesia, which is involved in the project, will be an LNG supplier.