News & Media

08 July, 2019

LNG Market News - Japan

(Source: Kaiji Press News 08/Jul/2019)

Mitsui to take part in Russia's Arctic LNG 2 project

Mitsui & Co. announced in late June that it will be participating in the Arctic LNG 2 project which is under way in Russia's Arctic Circle.

Mitsui has signed an agreement with PAO Novatek, a leading Russian company engaged in the production and sale of natural gas, to acquire 10% of the equity in the project company Arctic LNG 2 LLC for participation in the project. The share will be acquired through Japan Arctic LNG, a joint venture 75% owned by Japan Oil, Gas & Metals National Corp. (JOGMEC) and 25% by Mitsui. The acquisition will be completed as soon as the relevant regulatory approvals have been obtained. Mitsui expects to get overseas investment insurance from Nippon Export & Investment Insurance (NEXI) to cover its equity portion.

The Arctic LNG 2 project will construct gas liquefaction facilities with a production capacity of 19.8 million tons per year (three 6.6 million-ton trains). Novatek's estimate of the total development cost is currently around $21-23 billion. Mitsui said that after its participation and following a final investment decision with its partners, the project will commence production of LNG from around 2023.
LNG from the project will be delivered mainly to Asia and Europe via the Northern Sea Route. When the equity deal is completed, the project will be 60% owned by Novatek and 10% each by France's Total, China National Petroleum Corp. (CNPC), China National Offshore Oil Corp. (CNOOC) and Japan Arctic LNG.

(Source: Kaiji Press News 08/Jul/2019)

MOL builds up records in LNG markets in China, India

Mitsui OSK Lines (MOL) is adding to its presence in the LNG-related business in China and India, the two major LNG importers where demand is rapidly growing. MOL has recently concluded a contract to charter out its first LNG carrier to India's gas corporation GAIL. This means that it has got involved in almost all transport projects for India-bound LNG. In China, which is expected to become the world's biggest LNG importer sooner or later, MOL is deepening its involvement in broad areas ranging from LNG transport and ownership of LNG carriers to management and construction of such vessels. It aims to expand business in the two promising markets through its unique partnership strategy.

The global maritime LNG trading volume currently totals about 300 million tons per year. One estimate says that the volume will increase to 450 million tons in 2025. India and China are expected to pull much of the expansion.
India is currently the world's fourth-largest LNG importer after Japan, China and South Korea. Its annual imports total around 20 million tons, or only about one fourth of Japan's imports. But its imports are seen sure to grow rapidly in the future in keeping with its economic growth and promotion of air pollution control measures. Development of domestic gas reserves is in progress, but production can hardly catch up with demand growth.
MOL has been involved in almost all of India's LNG transport projects since the country started LNG imports around 2000. It has concluded a contract to charter out four LNG carriers to Petronet LNG, an LNG import and marketing company jointly formed by major Indian gas and oil companies, to haul LNG imports from Qatar and Australia. In India's first FOB deal for LNG imports, MOL has formed a consortium with Nippon Yusen Kaisha (NYK), Kawasaki Kisen Kaisha (K Line) and Shipping Corporation of India (SCI). It served as consortium leader in chartering out three of the four vessels. In 2008, it completed the transfer of shipmanagement services for its first vessel, the Disha, to SCI.
MOL has a good track record of developing business with emerging LNG importers/exporters by providing know-how to them as its partners. As illustrated by its technology transfer to SCI, it has been deepening its relationships with India from such perspective.

More recently in 2016, MOL took part in a plan by GAIL to procure LNG carrier newbuildings, including ones to be built at Indian yards. Eventually, this plan did not materialize because the Indian government's policy to have three of the nine vessels to be procured built at Indian yards with no track records of LNG ships ran into an impasse due to technical difficulties. However, "We had long and intensive talks with GAIL to see how the construction could materialize" as one MOL executive said and that seemed to have led to its latest charter deal with GAIL.

In the business peripheral to LNG carriers, MOL also took part in a project by Reliance Industries to transport ethane with six large-size ethane carriers (VLECs). Under this project, the world's first VLECs were built at South Korea's Samsung Heavy Industries (SHI) to move shale gas-derived ethane from the U.S. to India. MOL was charged with construction supervision, operation and shipmanagement. The ethane transport began in 2016. In April 2019, MOL agree with Reliance Industries on its participation in the ownership of those VLECs.

Projects to develop port facilities are in progress in India to accommodate its growing LNG imports. MOL is also taking part in one of them being pushed by Swan Energy at Jafrabad port in the western state of Gujarat. MOL will get involved in the construction, ownership and operation of a terminal at the port. It will be introducing India's first FSRU (floating storage and regasification unit) at the terminal along with an FSU (floating storage unit). It will provide technical assistance in the FSRU construction, and maintain and operate the FSRU and FSU.

MOL has also been building up its track records in China, which annually imports 54 million tons of LNG and overtook South Korea in 2017 to become the world's second-largest importer after Japan. It is relying on its partnership strategy here again. As many operators are keen to grab much of the growing market, MOL is expanding its business in partnership with COSCO Group and local shipyards. 

It has chosen COSCO Shipping LNG Investment (CSLNG), a subsidiary of COSCO Group, as its partner in ownership and management of LNG carriers in China. MOL has so far expanded the number of LNG vessels jointly owned with CSLNG to 17. MOL and CSLNG have pushed massive newbuilding projects, ordering 10 LNG carriers from Hudong-Zhonghua Shipbuilding between 2015 and 2018. All these vessels are deployed mainly to haul China-bound LNG. The first of the vessels, the 171,800-cbm Papua, is the first such vessel to be ordered from a Chinese yard by a foreign operator. MOL and COSCO jointly formed a multinational team of some 40 supervisors to ensure the quality and safety at Hudong-Zhonghua Shipbuilding, which has had fewer track records of building LNG vessels.

Earlier in 2019, MOL concluded a contract with CSSC (Hong Kong) Shipping, a leasing firm affiliated with state-run China State Shipbuilding Corp. (CSSC), to supervise the construction of up to four LNG carrier newbuildings. At the same time, the two partners signed a memorandum of understanding (MOU) on deepening their cooperative relationships in investment in LNG ships, their operation and safety control.
As seen above, MOL has ramped up its relations with China in LNG carrier construction, joint ownership, management and LNG transport. It looks to further deepen its involvement in future Chinese projects.

Whilst every effort has been made to ensure the accuracy of the information contained herein, Inchcape Shipping Services (ISS) accepts no liability nor makes any representations or warranties of any kind, express or implied, as to its completeness, accuracy, reliability or suitability.