Watching The World: Japan invests in tankers

May 16, 2011
The oil and gas industry may be interested to learn that top Japanese shipping lines plan major investments in vessels to carry key natural resources such as oil and LNG.

Eric Watkins
Oil Diplomacy Editor

The oil and gas industry may be interested to learn that top Japanese shipping lines plan major investments in vessels to carry key natural resources such as oil and LNG.

"We've had many inquiries from oil majors and we won't have enough ships if we don't do anything," Yasumi Kudo, president of Nippon Yusen KK, told Japan's Nikkei business daily.

In particular, oil majors are demanding more shuttle tankers, or ships designed to transport oil from offshore fields in more than 500 m of water to onshore storage facilities.

Nippon Yusen is considering an investment of more than ¥50 billion in these tankers, which increasingly are being used in the North Sea and the Atlantic Ocean off Brazil.

Rising profits?

The Japanese firm hopes this investment will boost its consolidated pretax profit in the shuttle tanker business to ¥2 billion over 3 years and to ¥5 billion over 5 years.

Nippon Yusen plans to invest ¥500 billion on LNG carriers as well as tankers over the next 5 years. These vessels will account for more than half the firm's total number of new vessels in that period.

According to the Nikkei report, these heavy investments in vessels to transport fossil fuels represent a strategic shift for shipping companies that previously placed priority on investments in container vessels for carrying various products from machinery to clothing.

But contract fees for LNG carriers have been rising because of the growing emergency demand following Japan's nuclear crisis, along with Qatar's raising of its LNG supply capacity. The rate for LNG carriers is now more than $80,000/day, up from $50,000/day earlier this year.

Would it be surprising to learn that Mitsui OSK shipping line has placed a ¥100 billion order with a Chinese shipbuilder for four LNG carriers? The Japanese are clearly sensing a trend.

Singapore too?

A similar sense may also be under way in Singapore where Neptune Orient Lines, the world's sixth biggest container shipping firm, said Chief Executive Officer Ron Widdows will retire by yearend to be succeeded by a senior executive from state investor Temasek Holdings.

Ng Yat Chung, a former chief of Singapore's defense force, was appointed as executive director from May 1 and will become president and chief executive officer on Jan. 1, 2012.

It is noteworthy that Ng is the head of energy and resources portfolio of Temasek, which owns around two third of NOL. He is also a co-head for Australia and New Zealand and a co-head for strategy.

Energy and resources? Will Ng soon be following the Japanese lead into more tankers and carriers?

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