LONDON Shipping magnate John "Big Wolf" Fredriksen has quietly bought a dozen new, fuel efficient tanker vessels in recent months and said he may spend billions of dollars more as the global shipping crisis has created opportunities too good to pass up.
Norwegian-born Fredriksen, 67, predicted the crisis would last another two or three years, driving many shipping firms and shipyards out of business, and the survivors would be the few low-debt companies backed by long-term owners with liquidity and an established name.
"The good days we had are over for quite some time," Fredriksen told Reuters in a rare interview. "The market will return, but only in two or three years, and until then it's going to be pretty desperate."
"When the market goes to hell, it's more of an opportunity than a problem," said Fredriksen, whose personal wealth is estimated at $11.3 billion by Forbes magazine.
Shipping firms went on a binge of ordering new vessels, designed to transport anything from crude oil to iron ore and containers, between 2007 and 2009. The new capacity hit the seas just as global demand imploded from prolonged economic turmoil.
Charter rates and asset values plummeted just as bunkers fuel costs soared to new record highs, pushing many firms close to or into default.
Fredriksen, who has rivaled earlier tanker tycoons such as Greece's Aristotle Onassis, owns major or controlling stakes in tanker operator Frontline, deep sea driller Seadrill, LNG shipping firm Golar LNG and dry bulk firm Golden Ocean
Earlier this year he sold down $1 billion of his Seadrill stake to free up cash for acquisitions and analysts said the money, if properly leveraged, could be used for $4 billion worth of purchases.
"That's not far from the truth," said Fredriksen, who came from a working class family and started off as a messenger boy at a shipping company in Oslo.
"Of that, we've already committed around $400 million. However I've typically done deals owning 30 to 50 percent of the projects or companies, so if I can do $4 billion owning only 30 percent, then we can effectively do $12 billion worth of deals."
Fredriksen said his first buys, done through his private entity to avoid attention from competitors who often copy his tactics, included 10 medium range (MR) product tankers and two Aframax oil tankers, as the price charged by shipyards has halved in recent years and probably hit bottom.
Fredriksen's listed Frontline and unlisted Frontline 2012 entity owns around 50 crude tankers, making the Fredriksen empire the world's largest operator.
WANTS MORE NEWBUILDS
"We are still looking at more product tankers, this has only been a start. We're also working on large bulk carriers with forward delivery in 2014 or 2015 because we think there's going to be massive scrapping this year and next," he said.
However, it was still too early to buy very large crude carriers (VLCCs) and Fredriksen was also not looking to immediately increase an already large orderbook for liquefied natural gas carriers.
New Aframax carriers, which transport up to 120,000 metric tons (132,277 tons) of crude oil, sell for around $51 million each, Morgan Stanley said recently, down from $75 million in 2008. A new MR product tanker will sell for around $34 million, down from $52 million in 2007.
Although the sector's biggest problem is overcapacity, new vessels, which burn up to a quarter less fuel, are also the way forward for those who can afford them. Firms with liquidity will buy new ships, cutting down on costs and opening an even wider gap between them and the indebted, struggling firms.
"Most of the companies are just not going to make it. If this will last for another two years, and we think it will, a lot of companies will disappear, said Fredriksen, who made much of his fortune in the "tanker wars" of the 1980s during the Iraq-Iran conflict, transporting crude at the risk of missile fire.
Fredriksen, who lives in London and gave up his Norwegian citizenship in 2006 for a Cypriot passport, said he may consider buying distressed firms or assets but only if prices were extremely depressed. Older assets were not his prime target.
"Most of these companies are sitting owning the wrong kind of assets," Fredriksen said, sitting in his office decorated with pictures, paintings and models of crude carriers.
PT Berlian Laju Tanker, Indonesia's largest oil and gas shipping group, defaulted earlier this year while Danish bulk and tanker firm Torm A/S has been seeking to renegotiate deals with creditors.
Fredriksen said his firm had all the liquidity it needed to get through the crisis and he was not looking to further cut his stake in Seadrill, having sold down to 23 percent from 28 percent earlier this year.
However, the listing of Seadrill's Brazilian unit, which could raise up to $500 million, is still planned for the second half of 2012, said Fredriksen, who once rejected an offer for his Chelsea home, reported at $200 million, from Russian billionaire Roman Abramovich, because "I don't need his money."
With oil companies engaged in a decade of aggressive exploration, he predicted further upside for Seadrill as oil firms need rigs and few shipyards have the expertise to construct them.
"(Oil firms) are all short (on rigs) and will be short at least until 2015/2016 because there are just not enough rigs around... Oil companies will all have to stall part of their drilling programs because there's limited drilling capacity."
Fredriksen, an avid salmon fisher and hunter, said he passed on last week's auction of Norwegian Edward Munch's painting, the Scream, because at $120 million, it was simply "too expensive."
"I could buy several tankers for that money."
Though the shipping sector's crisis has caused Fredriksen many headaches, he was not even thinking about retiring.
"If I retire, what would I do? That's worse than thinking about (the shipping crisis.) Will I sit by the pool and drink gin and tonic? That's not me."
(Reporting by Balazs Koranyi; Editing by Alistair Scrutton and Anthony Barker)