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Flex LNG steers away from floating units as challenges emerge

Tue 29th May, 2018 3:24pm
LONDON, May 29 (Reuters) - Flex LNG  FLNG.OL , a liquefied
natural gas shipping company and part of the nautical empire of
Norwegian billionaire John Fredriksen, has dropped its interest
in operating floating regasification units due to project
failures and low returns.
    Floating Storage Regasification Units (FSRUs) have been
lauded by analysts as transformative for the LNG industry by
opening up emerging markets to supplies as the vessels are
cheaper to build than the onshore infrastructure normally needed
to receive the super-cooled gas that is transported by ship.
    But over the past year several projects have either stalled
or been delayed. FSRU projects are still very complex -- they
tend to involve governments, state companies, private traders,
shipbuilders and FSRU owners and a host of contracts and
financing, so they do not always come to fruition.
    "A while back, we looked at the FSRU market and it was very
interesting with the (shipping) rates obtained," Flex LNG Chief
Financial Officer Oystein Kalleklev, told Reuters on Tuesday.
    "Since then a lot of projects have failed and there are
several open FSRUs in the market which is depressing the rate,
while the LNG (carrier) market is recovering and has very good
fundamentals, so we'd rather focus our attention and capital on
the LNGC fleet," he said.
    Kalleklev was speaking after Flex LNG announced its first
quarter results and ordered a further two traditional LNG
carriers, adding to its fleet of six carriers on order or
already in employment.
    Flex LNG also said its chief executive, Jonathan Cook, had
stepped down. Board member Marius Hermansen will take over as
interim CEO while the search for Cook's replacement begins.
    Cook had been hired as an expert in FSRU development and so
his departure indicated Flex LNG was dropping the idea, said
Saskia Sterud, an analyst at Carnegie.
    U.S.-based Excelerate Energy, co-founded by Cook, and Golar
LNG  GLNG.O  pioneered the development of FSRUs 15 years ago and
there are now about 28 vessels stationed around the world,
according to GIIGNL, an LNG importers industry group.
    FSRUs account for about 83 million tonnes a year of LNG
regasification capacity, or about 10 percent of total global
regasification capacity, according to the International Gas
Union's 2017 report and statistics from the GIIGNL.
    Industry watchers say FSRU capacity could double in the next
year or two although concrete forecasts are difficult to make as
FSRUs can be adapted from existing LNG carriers, not just built
from scratch, and converted back. Uncertainty around projects,
their size and scope, further complicates predictions.

 (Reporting by Sabina Zawadzki
Editing by Edmund Blair)
 ((sabina.zawadzki@thomsonreuters.com; +44 207 542 4051;))
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