UPDATE 1-Golar LNG sees strong charter rates until 2017

Tue Feb 21, 2012 12:46pm EST

By Oleg Vukmanovic

London Feb 21 (Reuters) - Golar LNG, a liquefied natural gas (LNG) shipping company led by billionaire John Fredriksen, expects improved tanker earnings until 2017 as an increase in Japanese demand reduces the supply of available vessels.

The Norwegian shipper said on Tuesday it saw a robust growth outlook for the LNG market after its October-December net income more than tripled, driven by sustained cargo diversions from Europe to Asia.

The changing trade patterns have increased vessel journey times and depleted the number of vessels available for charter while demand surges and a wave of new LNG supply comes on stream, leading to a scramble for tonnage.

The cost of hiring an LNG tanker has increased by more than five times since the summer of 2010 to $145,000/day currently.

Market prices have been in backwardation, a pricing structure that reflects strong demand in the near term and weaker demand in the future.

But Golar sees "structural tightness" in the shipping market for 2012-2014 supporting rates as far out as 2017, "as the major players realise the underlying strength of existing shipping demand", the company said in its financial statement for the fourth quarter of 2011.

"Backwardation has weakened in the LNG shipping charter market," it said.

"The company believes that this curve has flattened somewhat, particularly for three-to-seven-year charter periods."

Driving demand for shipping are new liquefaction projects in Australia and the Middle East, which will bring more fuel to market in 2014-2015, as well as fast-growing demand in Asia, Golar said.

The earthquake that crippled Japan's nuclear industry last year sent Asian LNG prices sky-high as the country ramped up gas imports to produce electricity.

In the near term, Golar expects that new liquefaction plants starting in 2012 will further stretch the global shipping fleet and potentially bolster tanker rates.

The start-up of Australia's Pluto and Angola LNG projects, together with de-bottlenecking at existing plants that will free up more supply could add 14 million tonnes of LNG, or 5.2% percent of total current production, by the end of the year, it said.

"In the same timeframe only two conventional-size vessels are expected to be delivered, both dedicated to lift project volumes from Malaysia and Angola," it said.

Golar's net income rose to $17.2 million in the fourth quarter from $5 million in the year-ago period.

It proposed a quarterly dividend of $0.325 per share.

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