lng – an emerging giant “how the growing lng trade might affect the conventional tanker...

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LNG – An Emerging Giant “How the growing LNG trade might affect the conventional Tanker Industry” LNG – An Emerging Giant “How the growing LNG trade might affect the conventional Tanker Industry” E A Gibson Shipbrokers Ltd. Audrey House 16-20 Ely Place London EC1P 1HP Riccardo Crivari Tel: +442076671164 +447789926131 E A Gibson Shipbrokers, April 2005 INTERTANKO 2005

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Page 1: LNG – An Emerging Giant “How the growing LNG trade might affect the conventional Tanker Industry” LNG – An Emerging Giant “How the growing LNG trade might

LNG – An Emerging Giant“How the growing LNG trade might affect the conventional Tanker Industry”

LNG – An Emerging Giant“How the growing LNG trade might affect the conventional Tanker Industry”

E A Gibson Shipbrokers Ltd.Audrey House16-20 Ely PlaceLondon EC1P 1HPRiccardo CrivariTel: +442076671164 +447789926131

E A Gibson Shipbrokers, April 2005

INTERTANKO 2005

Page 2: LNG – An Emerging Giant “How the growing LNG trade might affect the conventional Tanker Industry” LNG – An Emerging Giant “How the growing LNG trade might

LNG – An Emerging Giant“How the growing LNG trade might affect the conventional Tanker Industry”

E A Gibson Shipbrokers, April 2005

Electricity GenerationPlants (CCGT)

Industrial, Chemical sector as feedstock

Residential/Commercial Heating-AC

Dry Natural Gas

LNG – An Emerging Giant“How the growing LNG trade might affect the conventional Tanker Industry”

Page 3: LNG – An Emerging Giant “How the growing LNG trade might affect the conventional Tanker Industry” LNG – An Emerging Giant “How the growing LNG trade might

LNG – An Emerging Giant“How the growing LNG trade might affect the conventional Tanker Industry”

E A Gibson Shipbrokers, April 2005

Electricity GenerationPlants (CCGT)

Industrial, Chemical sector as feedstock

Residential/Commercial Heating-AC

Dry Natural Gas

LNG transportation

LNG

REGASIFICATION & GAS NETWORK

LNG – An Emerging Giant“How the growing LNG trade might affect the conventional Tanker Industry”

Page 4: LNG – An Emerging Giant “How the growing LNG trade might affect the conventional Tanker Industry” LNG – An Emerging Giant “How the growing LNG trade might

LNG – An Emerging Giant“How the growing LNG trade might affect the conventional Tanker Industry”

Electricity GenerationPlants

LNG transportation basically competes with…..

REFINING

MERCADO INTERNO

Industrial, Chemical sector as feedstock

Residential/Commercial Heating-AC

Crude Oil

Fuel Oil

E A Gibson Shipbrokers, April 2005

LNG – An Emerging Giant“How the growing LNG trade might affect the conventional Tanker Industry”

Page 5: LNG – An Emerging Giant “How the growing LNG trade might affect the conventional Tanker Industry” LNG – An Emerging Giant “How the growing LNG trade might

LNG – An Emerging Giant“How the growing LNG trade might affect the conventional Tanker Industry”

Electricity GenerationPlants

REFINING

MERCADO INTERNO

Industrial, Chemical sector as feedstock

Residential/Commercial Heating-AC

Crude Oil

Fuel Oil

Fuel Oil

LNG transportation basically competes with….. DPP trading in Tankers

E A Gibson Shipbrokers, April 2005

LNG – An Emerging Giant“How the growing LNG trade might affect the conventional Tanker Industry”

Page 6: LNG – An Emerging Giant “How the growing LNG trade might affect the conventional Tanker Industry” LNG – An Emerging Giant “How the growing LNG trade might

LNG – An Emerging Giant“How the growing LNG trade might affect the conventional Tanker Industry”

DPP trading in Tankers is a well-establishedmature business

LNG – An Emerging Giant“How the growing LNG trade might affect the conventional Tanker Industry”

LIQUID

Abundant Supply

Sophisticated & Transparent Price Scheme

Markets

Physical(Wet/Cash) Paper

WIDE RANGE OF PARTICIPANTS

E A Gibson Shipbrokers, April 2005

FLEXIBLE

Wide availability of vessel size & type

STS operations & Back-haul schemes mature

WIDE COMBINATION OF FLEET OWNERSHIP: Majors, Independent Owners, Traders/Charterers as disponent Owners.

BLENDING

Plenty Storage available and easy to operate

Standard or Tailor Made Blending

BUSINESS ACTIVITY COVER ANY RANGE OF SCHEMES:(SPOT, SHORT TERM, MEDIUM TERM, LONG TERM)

Oil a Commodity “The Transportation & Handling”

Page 7: LNG – An Emerging Giant “How the growing LNG trade might affect the conventional Tanker Industry” LNG – An Emerging Giant “How the growing LNG trade might

LNG – An Emerging Giant“How the growing LNG trade might affect the conventional Tanker Industry”

LNG Trading still has some miles to catch up

LNG – An Emerging Giant“How the growing LNG trade might affect the conventional Tanker Industry”

RIGID

Traditional Supply-Driven Model

Conservative and Vertically Integrated Business

Very Capital Intensive

LONG-TERM PRICING CONTRACTS AS

DRIVING FORCE TO GUARANTEE IRR

RIGID DESTINATION CLAUSES – LNG

quality is an issue

FEW & SELECTED RANGE OF

PARTICIPANTS

LNG “The Commodity” “The Transportation & Handling”

E A Gibson Shipbrokers, April 2005

SHIPPING CAPACITY AS A FUNCTION OF WHOLE

PROJECT (Transportation cost comprises about 25% of

total LNG chain cost)

LNG SHIPPING OPERATION IS VERY PRUDENT &

CONSERVATIVE.

OWNERSHIP SCHEME LIMITED TO OIL & GAS

MAJORS AND STATE-OWNED COMPANIES (High

entry barrier)

LNG or DRY NAT. GAS STORAGE TO TRADE

VERY LIMITED (High cost)

LIMITED BLENDING OPTIONS (only possible in

distribution gas networks)

MAJORITY OF LNG CONTRACTS LONG-TERM (20+ YEARS)RIGIDITIES IN THE SYSTEM LIMIT SHORT-TERM TRADING

(CURRENTLY AROUND 8% TOTAL LNG VOLUME TRADED)

Page 8: LNG – An Emerging Giant “How the growing LNG trade might affect the conventional Tanker Industry” LNG – An Emerging Giant “How the growing LNG trade might

LNG – An Emerging Giant“How the growing LNG trade might affect the conventional Tanker Industry”

LNG – An Emerging Giant“How the growing LNG trade might affect the conventional Tanker Industry”

E A Gibson Shipbrokers, April 2005

On “Commodity” Trading

-LNG competes with Oil/Fuel Oil mainly in the Pacific Basin & Europe generating a demand shift between the commodities

Is there any current impact evident?

Page 9: LNG – An Emerging Giant “How the growing LNG trade might affect the conventional Tanker Industry” LNG – An Emerging Giant “How the growing LNG trade might

LNG – An Emerging Giant“How the growing LNG trade might affect the conventional Tanker Industry”

LNG – An Emerging Giant“How the growing LNG trade might affect the conventional Tanker Industry”

E A Gibson Shipbrokers, April 2005

On Shipping

-In essence the transportation of each commodity keeps its own path and rhythm without any apparent effect on each other.

On “Commodity” Trading

Is then any current impact evident?

-LNG competes with Oil/Fuel Oil mainly in the Pacific Basin & Europe generating a demand shift between the commodities

Page 10: LNG – An Emerging Giant “How the growing LNG trade might affect the conventional Tanker Industry” LNG – An Emerging Giant “How the growing LNG trade might

LNG – An Emerging Giant“How the growing LNG trade might affect the conventional Tanker Industry”

LNG – An Emerging Giant“How the growing LNG trade might affect the conventional Tanker Industry”

E A Gibson Shipbrokers, April 2005

On Shipping

-In essence the transportation of each commodity keeps its own path and rhythm without any apparent effect on each other.

On “Commodity” Trading

Is then any current impact evident?

AND WHAT ABOUT THE FUTURE..

HOWEVER, THERE IS A CURRENT IMPACT ON SHIPYARD SPACE AND THE RETURNS REQUIRED BY OWNERS ON TANKER NEWBUILDINGS DUE TO PROGRESSIVE SHIPYARD

PRICE INCREASES AS A RESULT OF MASSIVE LNG CARRIER ORDERS.

-LNG competes with Oil/Fuel Oil mainly in the Pacific Basin & Europe generating a demand shift between the commodities

Page 11: LNG – An Emerging Giant “How the growing LNG trade might affect the conventional Tanker Industry” LNG – An Emerging Giant “How the growing LNG trade might

LNG – An Emerging Giant“How the growing LNG trade might affect the conventional Tanker Industry”

World LNG Demand Forecast

0

50

100

150

200

250

300

350

400

450

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Mill

ion

Tonn

es p

er y

ear (

mtp

a)

Base Case Low Case High Case

LNG should progressively capture a big stake as energy source

LNG – An Emerging Giant“How the growing LNG trade might affect the conventional Tanker Industry”

Current LNG

ShareMark

et

Sh

are

Gro

wth

Growth in WW Energy Demand/Consumption

• First: to fill the “gap” of energy shortage due to declining oil production & increase

WW energy demand

• Then: to displace, since LNG seen as most environmentally sound form of energy

Future LNG Position

2004 2015

100

120

140

160

180

200

220

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

LNG Oil Coal

GROWTH COMPARISON BY FUEL, WORLD 2002-2015(BASE INDEX 2001=100)

LNG supply will pass from 142 mtpa (2004) to 345.7 mtpa by 2015

E A Gibson Shipbrokers, April 2005

Page 12: LNG – An Emerging Giant “How the growing LNG trade might affect the conventional Tanker Industry” LNG – An Emerging Giant “How the growing LNG trade might

LNG – An Emerging Giant“How the growing LNG trade might affect the conventional Tanker Industry”

LNG – An Emerging Giant“How the growing LNG trade might affect the conventional Tanker Industry”

E A Gibson Shipbrokers, April 2005

LNG should progressively capture a big stake as energy source

LNG Growth Driving Forces

INCREASINGLY, THE PRICING REFERENCE WILL SHIFT FROM OIL-BASED TO GAS ON GAS PRICE COMPETITION

LNG developing pricing-hubs in geographical areas and increasingly driven by electricity prices

THE EFFECT OF MARKET REFORM (Price & Logistics) WILL DISTRIBUTE RISK AMONG THE PARTICIPANTS ALONG THE LNG CHAIN

FUNDAMENTAL SHIFT TO A MODEL BASED ON MARKET DEMANDGas & Power Sector Liberalization and Deregulation

GLOBAL GAS MARKET

Page 13: LNG – An Emerging Giant “How the growing LNG trade might affect the conventional Tanker Industry” LNG – An Emerging Giant “How the growing LNG trade might

LNG – An Emerging Giant“How the growing LNG trade might affect the conventional Tanker Industry”

LNG – An Emerging Giant“How the growing LNG trade might affect the conventional Tanker Industry”

E A Gibson Shipbrokers, April 2005

LNG should progressively capture a big stake as energy source

LNG Contract Terms Outlook

Buyers are able to secure more favourable terms:Relaxation on destination clauses with flexibility in volumes and price mechanisms.Tendency towards FOB rather than Ex-ShipSuppliers to account for seasonality

LONG-TERM DEALS WILL STILL PREVAIL

WHICH MEANS

BUT POTENTIAL LNG SUPPLY AND TERMINAL CAPACITY WILL OUTWEIGH DEMAND

GROWTH WHEN COMPARED TO BASE CASE. IT IS LIKELY THAT LNG TRADING WILL BE CONSOLIDATED AS A BUYER’S MARKET FOR THE NEAR TO MEDIUM TERM

THE EMERGENCE OF A SHORT-TERM/SPOT MARKET WILL PROGRESSIVELY DEVELOP

Page 14: LNG – An Emerging Giant “How the growing LNG trade might affect the conventional Tanker Industry” LNG – An Emerging Giant “How the growing LNG trade might

LNG – An Emerging Giant“How the growing LNG trade might affect the conventional Tanker Industry”

LNG – An Emerging Giant“How the growing LNG trade might affect the conventional Tanker Industry”

E A Gibson Shipbrokers, April 2005

LNG should progressively capture a big stake as energy source

WHAT IS NEEDED FOR SHORT-TERM LNG TRADING

Global Gas Market

SURPLUS & QUALITY

COMPATIBLE PRODUCTION

CAPACITY

SHIPPING CAPACITY

EFFECTIVE MARKET DEMAND

FOR SURPLUS LNG

FLEXIBILITY IN CONTRACT &

TEMINALS

Liquidity

Uncertainty

Arbitrage Opportunities

Page 15: LNG – An Emerging Giant “How the growing LNG trade might affect the conventional Tanker Industry” LNG – An Emerging Giant “How the growing LNG trade might

LNG – An Emerging Giant“How the growing LNG trade might affect the conventional Tanker Industry”

Existing Fleet end 2004World fleet (trading) 155Newbuildings delivered in 2004 20Total current fleet 175

Newbuildings -Vessels on firm orders 107 -Options to be declared 16-Net Projected Ships through tenders 37

All are minimum 135,000 m3, except one vessel of 2,500 m3, one vessel of 19,100 m3 and two vessels of min 74,000 m3.

E A Gibson Shipbrokers, April 2005

LNG – An Emerging Giant“How the growing LNG trade might affect the conventional Tanker Industry”

LNG Shipping Capacity Picture

Current Balance

Page 16: LNG – An Emerging Giant “How the growing LNG trade might affect the conventional Tanker Industry” LNG – An Emerging Giant “How the growing LNG trade might

LNG – An Emerging Giant“How the growing LNG trade might affect the conventional Tanker Industry”

E A Gibson Shipbrokers, April 2005

LNG – An Emerging Giant“How the growing LNG trade might affect the conventional Tanker Industry”

LNG Shipping Capacity Picture

LNG Fleet Forecast

507090

110130

150170190210230250270290310330

350370390410430

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

# sh

ips

LNG fleet confirmed LNG fleet confirmed + options LNG fleet required

Page 17: LNG – An Emerging Giant “How the growing LNG trade might affect the conventional Tanker Industry” LNG – An Emerging Giant “How the growing LNG trade might

LNG – An Emerging Giant“How the growing LNG trade might affect the conventional Tanker Industry”

E A Gibson Shipbrokers, April 2005

LNG – An Emerging Giant“How the growing LNG trade might affect the conventional Tanker Industry”

LNG Shipping Capacity Picture

LNG Fleet Forecast

507090

110130

150170190210230250270290310330

350370390410430

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

# sh

ips

LNG fleet confirmed LNG fleet confirmed + options LNG fleet required

Effective Surplus of Tonnage

Effective Deficit of Tonnage

PRESSURE ON FREIGHT RATES

Page 18: LNG – An Emerging Giant “How the growing LNG trade might affect the conventional Tanker Industry” LNG – An Emerging Giant “How the growing LNG trade might

LNG – An Emerging Giant“How the growing LNG trade might affect the conventional Tanker Industry”

2009 2010 2011 2012Accumulated

Required Vessels to achieve Zero deficit (*) 7 34 36 40 117

Shipyard LNG carriers potential annual production capacity (APC)

Shipyards # Vessels Potential Increase

Daewoo 9Samsung 7Hyundai 8 12 (by

2010)Kawasaki 3Mitsubishi 3Mitsui 3Izar 4Chantiers de L'Atlantique 3Hudong-Zhonghua 2 4 (by 2010)

Total Potential LNG/c Capacity 42 48

LNG Shipping Capacity Picture

E A Gibson Shipbrokers, April 2005

LNG – An Emerging Giant“How the growing LNG trade might affect the conventional Tanker Industry”

Highest Historic Delivery Capacity 20

(*) Considers firm orders plus options up to 2011

Page 19: LNG – An Emerging Giant “How the growing LNG trade might affect the conventional Tanker Industry” LNG – An Emerging Giant “How the growing LNG trade might

LNG – An Emerging Giant“How the growing LNG trade might affect the conventional Tanker Industry”

2009 2010 2011 2012Accumulated

Required Vessels to achieve Zero deficit (*) 7 34 36 40 117Shipyard Slots available a/c Potential Capacity 32 31 28 48 139

Shipyard LNG carriers potential annual production capacity (APC)

Shipyards # Vessels Potential Increase

Daewoo 9Samsung 7Hyundai 8 12 (by

2010)Kawasaki 3Mitsubishi 3Mitsui 3Izar 4Chantiers de L'Atlantique 3Hudong-Zhonghua 2 4 (by 2010)

Total Potential LNG/c Capacity 42 48

LNG Shipping Capacity Picture

E A Gibson Shipbrokers, April 2005

LNG – An Emerging Giant“How the growing LNG trade might affect the conventional Tanker Industry”

Highest Historic Delivery Capacity 20

(*) Considers firm orders plus options up to 2011

Page 20: LNG – An Emerging Giant “How the growing LNG trade might affect the conventional Tanker Industry” LNG – An Emerging Giant “How the growing LNG trade might

LNG – An Emerging Giant“How the growing LNG trade might affect the conventional Tanker Industry”

2009 2010 2011 2012Accumulated

Required Vessels to achieve Zero deficit (*) 7 34 36 40 117Shipyard Slots available a/c Potential Capacity 32 31 28 48 139Shipyard Slots available a/c historic deliveries 12 5 2 22 41

Shipyard LNG carriers potential annual production capacity (APC)

Shipyards # Vessels Potential Increase

Daewoo 9Samsung 7Hyundai 8 12 (by

2010)Kawasaki 3Mitsubishi 3Mitsui 3Izar 4Chantiers de L'Atlantique 3Hudong-Zhonghua 2 4 (by 2010)

Total Potential LNG/c Capacity 42 48

LNG Shipping Capacity Picture

E A Gibson Shipbrokers, April 2005

LNG – An Emerging Giant“How the growing LNG trade might affect the conventional Tanker Industry”

Highest Historic Delivery Capacity 20

(*) Considers firm orders plus options up to 2011

Page 21: LNG – An Emerging Giant “How the growing LNG trade might affect the conventional Tanker Industry” LNG – An Emerging Giant “How the growing LNG trade might

LNG – An Emerging Giant“How the growing LNG trade might affect the conventional Tanker Industry”

LNG Fleet Vectors (2008-2012)

Even at full Shipyard potential capacity and “all going well and as planned”, the fleet breakeven balance point might be only achievable some time during 2011. However, registered highest Shipyard production so far accounts for only 20 vessels/year which would move the breakeven fleet balance point to 2015 or further.

Shipyards prices are still increasing, affecting Capex and ROI evaluations of most of the LNG orders to be delivered from 2008 to 2010+.

Upward pressure on freight rates only bear a strong probability of occurrence after mid/end-2008. Could be only mitigated if vessels became available long before projects enter in operation.

LNG Shipping Capacity Picture

E A Gibson Shipbrokers, April 2005

Page 22: LNG – An Emerging Giant “How the growing LNG trade might affect the conventional Tanker Industry” LNG – An Emerging Giant “How the growing LNG trade might

LNG – An Emerging Giant“How the growing LNG trade might affect the conventional Tanker Industry”

Historic & Simulated Impact over Freight Rates

120

Time Charter RateskUS$/day

1999 2003 2005

100

80

f( Shipyard Technology improvement, Strong $ & Tight Balance)

f( Shipyard Efficiency and Surplus of Tonnage)

60

40

Historic

LNG Shipping Capacity Picture

E A Gibson Shipbrokers, April 2005

6% to 8% Surplus

1%to 5% Surplus

Page 23: LNG – An Emerging Giant “How the growing LNG trade might affect the conventional Tanker Industry” LNG – An Emerging Giant “How the growing LNG trade might

LNG – An Emerging Giant“How the growing LNG trade might affect the conventional Tanker Industry”

Historic & Simulated Impact over Freight Rates

Time Charter RateskUS$/day

1999 2003 2005 2007

f( Shipyard Technology improvement, Strong $ & Tight Balance)

f( Shipyard Efficiency and Surplus of Tonnage)

f( Shipyard Efficiency and Surplus of Tonnage)

LNG Shipping Capacity Picture

E A Gibson Shipbrokers, April 2005

120

100

80

60

40

15% (E)Surplus

Ceiling (E) 62,000 $/d

Floor (E) 45,000 $/d6% to 8% Surplus

1%to 5% Surplus

Page 24: LNG – An Emerging Giant “How the growing LNG trade might affect the conventional Tanker Industry” LNG – An Emerging Giant “How the growing LNG trade might

LNG – An Emerging Giant“How the growing LNG trade might affect the conventional Tanker Industry”

Historic & Simulated Impact over Freight Rates

Time Charter RateskUS$/day

1999 2003 2005 2007 2012

f( Shipyard Technology improvement, Strong $ & Tight Balance)

f( Shipyard Efficiency and Surplus of Tonnage)

f( Shipyard Efficiency and Surplus of Tonnage)

15% (E)Surplus

f( Higher Shipyard Costs Currency uncertainty & Tight

Balance)

Ceiling (E) 62,000 $/d

Floor (E) 45,000 $/d

2008 2009……..

LNG Shipping Capacity Picture

E A Gibson Shipbrokers, April 2005

6% to 8% Surplus

Could reach sustained

10% deficit

Change of Trend ?

1%to 5% Surplus

120

100

80

60

40

Page 25: LNG – An Emerging Giant “How the growing LNG trade might affect the conventional Tanker Industry” LNG – An Emerging Giant “How the growing LNG trade might

LNG – An Emerging Giant“How the growing LNG trade might affect the conventional Tanker Industry”

Decision Making Process Cost - Opportunity Analysis

Standard 145,000 m3, membrane type, LNG carrier

Investment: 100% Equity 200 M$

Economic Life: 25 years

Depreciation Period: Straight Line 20 years

Resale Value: End of E.L. 30% Original Price Value

Time Charter Ranges ($/day): CASE 1 CASE 2 -Floor 45,000 80,000 -Ceiling 62,000 120,000

Currency: Constant 2005 US$ Dollars

Standard OPEX costs

Evaluation Assumptions:

LNG Shipping Investment

E A Gibson Shipbrokers, April 2005

Page 26: LNG – An Emerging Giant “How the growing LNG trade might affect the conventional Tanker Industry” LNG – An Emerging Giant “How the growing LNG trade might

LNG – An Emerging Giant“How the growing LNG trade might affect the conventional Tanker Industry”

LNG Ship Investment Return

12.3%

22.50%

3.7%

7.9%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

45000 62000 80000 120000Time Charter $/day

ROI

Floor Case 1 Ceiling Case 1 Floor Case 2 Ceiling Case 2

Decision Making Process Cost - Opportunity Analysis

LNG Shipping Investment

E A Gibson Shipbrokers, April 2005

Preliminary Results

Page 27: LNG – An Emerging Giant “How the growing LNG trade might affect the conventional Tanker Industry” LNG – An Emerging Giant “How the growing LNG trade might

LNG – An Emerging Giant“How the growing LNG trade might affect the conventional Tanker Industry”

LNG Ship Investment Return

12.3%

22.50%

3.7%

7.9%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

45000 62000 80000 120000Time Charter $/day

ROI

Floor Case 1 Ceiling Case 1 Floor Case 2 Ceiling Case 2

Decision Making Process Cost - Opportunity Analysis

LNG Shipping Investment

E A Gibson Shipbrokers, April 2005

CURRENT OVERALL OIL TANKER ROI EXPECTATIONS

Preliminary Results

Page 28: LNG – An Emerging Giant “How the growing LNG trade might affect the conventional Tanker Industry” LNG – An Emerging Giant “How the growing LNG trade might

LNG – An Emerging Giant“How the growing LNG trade might affect the conventional Tanker Industry”

LNG Ship Investment Return

12.3%

22.50%

3.7%

7.9%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

45000 62000 80000 120000Time Charter $/day

ROI

Floor Case 1 Ceiling Case 1 Floor Case 2 Ceiling Case 2

Decision Making Process Cost - Opportunity Analysis

LNG Shipping Investment

E A Gibson Shipbrokers, April 2005

Investment Decision LNG/c

Oriented

Investment Decision Tanker

Oriented

Preliminary Results

Page 29: LNG – An Emerging Giant “How the growing LNG trade might affect the conventional Tanker Industry” LNG – An Emerging Giant “How the growing LNG trade might

LNG – An Emerging Giant“How the growing LNG trade might affect the conventional Tanker Industry”

Current LNG shipping contract returns expectations are low and might

extend up to mid-2008 with potential recovery after 2009+ but for an

uncertain period of time.

LNG shipping Opex are high because of the need to maintain safe

operations. Shaving costs to the extreme in LNG shipping operations equates

to substantial increase in risk.

The LNG approach of “long-term contracts at reasonable returns with high

quality operators” will always be the preferred, although costly, model

Decision Making Process Cost - Opportunity Analysis

LNG Shipping Investment

E A Gibson Shipbrokers, April 2005

The Challenges

Page 30: LNG – An Emerging Giant “How the growing LNG trade might affect the conventional Tanker Industry” LNG – An Emerging Giant “How the growing LNG trade might

LNG – An Emerging Giant“How the growing LNG trade might affect the conventional Tanker Industry”

New LNG projects increase the complexity of the trading with a wider set

of trade flows, numerous destinations, significant round-voyage times and

part-cargoes (coastal trades)

Project Fleets to become more sophisticated and creative in managing a

portfolio of supply obligations with limited storage capacity.

LNG projects will require an increasing amount of flexible spare shipping

capacity to manage and secure excess spot cargoes into the highest value

gas market outlet.

Decision Making Process Cost - Opportunity Analysis

LNG Shipping Investment

E A Gibson Shipbrokers, April 2005

The Opportunities

Page 31: LNG – An Emerging Giant “How the growing LNG trade might affect the conventional Tanker Industry” LNG – An Emerging Giant “How the growing LNG trade might

LNG – An Emerging Giant“How the growing LNG trade might affect the conventional Tanker Industry”

Do the Homework: study, learn and dedicate time to understand the

LNG transportation facts and its differences with Bulk shipping

High Entry Barriers can be overcome with conservative solutions:

-“Go alone” in this business can be very

costly

Joint-Investments in regasification capacity and niche shipping

segments

Decision Making Process Cost - Opportunity Analysis

LNG Shipping Investment

E A Gibson Shipbrokers, April 2005

The Strategies

Page 32: LNG – An Emerging Giant “How the growing LNG trade might affect the conventional Tanker Industry” LNG – An Emerging Giant “How the growing LNG trade might

LNG – An Emerging Giant“How the growing LNG trade might affect the conventional Tanker Industry”

Crew availability and cost:

Although LNG ships require some different skills, the need for talented right people will

affect Bulk shipping (including LPG vessels)

Shipyard space and prices:

Availability of slots will be crucial. Prices continue to increase and Shipyards are focusing on

big returns from LNG vessel construction due to massive orders in place and expected,

therefore affecting the economic willingness to dedicate effort to other segments

Owner’s portfolio of Investment:

Investing in LNG shipping could be a solid step taken for the future generating steady

reasonable returns, but it could definitely affect the capacity to participate in other shipping

segments

…………and the Future is here, so where is the impact?

E A Gibson Shipbrokers, April 2005

Page 33: LNG – An Emerging Giant “How the growing LNG trade might affect the conventional Tanker Industry” LNG – An Emerging Giant “How the growing LNG trade might

LNG – An Emerging Giant“How the growing LNG trade might affect the conventional Tanker Industry”

“There are two times in a man’s life when he should not speculate : when he cannot afford it and when he can”

E A Gibson Shipbrokers, April 2005

Mark Twain

…………Is it then worth thinking twice about how, when and whereto invest in LNG transportation?

Page 34: LNG – An Emerging Giant “How the growing LNG trade might affect the conventional Tanker Industry” LNG – An Emerging Giant “How the growing LNG trade might

LNG – An Emerging Giant“How the growing LNG trade might affect the conventional Tanker Industry”

LNG – An Emerging Giant“How the growing LNG trade might affect the conventional Tanker Industry”

E A Gibson Shipbrokers, April 2005Audrey House16-20 Ely PlaceLondon EC1P 1HPRiccardo CrivariTel: +442076671164 +447789926131

E A Gibson Shipbrokers, April 2005

INTERTANKO 2005

Page 35: LNG – An Emerging Giant “How the growing LNG trade might affect the conventional Tanker Industry” LNG – An Emerging Giant “How the growing LNG trade might

LNG – An Emerging Giant“How the growing LNG trade might affect the conventional Tanker Industry”

100

120

140

160

180

200

220

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

LNG Oil Coal

E A Gibson Shipbrokers, April 2005

World Demand & Supply Outlook

GROWTH COMPARISON BY FUEL, WORLD 2002-2015(BASE INDEX 2001=100)

Page 36: LNG – An Emerging Giant “How the growing LNG trade might affect the conventional Tanker Industry” LNG – An Emerging Giant “How the growing LNG trade might

LNG – An Emerging Giant“How the growing LNG trade might affect the conventional Tanker Industry”

World LNG Demand Forecast

0

50

100

150

200

250

300

350

400

450

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Million Tonnes per year (mtpa)

Base Case Low Case High Case

E A Gibson Shipbrokers, April 2005

Page 37: LNG – An Emerging Giant “How the growing LNG trade might affect the conventional Tanker Industry” LNG – An Emerging Giant “How the growing LNG trade might

LNG – An Emerging Giant“How the growing LNG trade might affect the conventional Tanker Industry”

0

50

100

150

200

250

300

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

mtpa

America Europe Asia

E A Gibson Shipbrokers, April 2005

World LNG Demand Forecast(Regional Basis)

Base Case Scenario

Page 38: LNG – An Emerging Giant “How the growing LNG trade might affect the conventional Tanker Industry” LNG – An Emerging Giant “How the growing LNG trade might

LNG – An Emerging Giant“How the growing LNG trade might affect the conventional Tanker Industry”

Natural Gas is the favoured fuel and LNG Trade will expand dramatically

A Global gas market will consolidate but will never be like the oil market

Technological changes must not be underestimated

A two-tier market will clearly develop, with traditional long-term contractual model supplemented by the spot market whose emergence needs flexibility, risk sharing, meeting LNG quality specs, terminal compatibility and most important of all effective shipping capacity

High entry barriers and rigidities in the system will continue and place a ceiling on the proportion of LNG which will be traded on a short-term basis

E A Gibson Shipbrokers, April 2005

LNG – The Giant

CONCLUSIONS

Page 39: LNG – An Emerging Giant “How the growing LNG trade might affect the conventional Tanker Industry” LNG – An Emerging Giant “How the growing LNG trade might

LNG – An Emerging Giant“How the growing LNG trade might affect the conventional Tanker Industry”

LNG Fleet Assumptions

Some of new projects consider utilization of up to 250,000 m3

Current Supply Contracts to expire during this period will be extended, and in some cases increased, with shipping commitments attached

Planned export projects are brought on-stream as programmed

Zero Scrapping, but longer idle period and higher expenses in drydock for 40 year-old vessels by 2007-2012 period

E A Gibson Shipbrokers, December 2004

LNG MARKET ANALYSIS

LNG Shipping Capacity Picture

Balance Forecast