INTERVIEW: Hoegh LNG eyes eight FSRU, CEO says
Oslo-based Höegh LNG, which has been involved in the LNG industry for more than 40 years, has been putting a lot of effort in its floating LNG business, with the last order in November of 2014 bringing the company’s FSRU fleet size to seven in operation or under construction.
In an interview with LNG World News, Höegh LNG’s President and CEO Sveinung J.S. Støhle, discusses the company’s LNG business, oil slump implications on the global LNG industry, as well as the usage of liquefied natural gas as fuel for ships, and the company’s plans for the future.
Last year was very successful for Hoegh LNG’s FSRU business with the commissioning of the PGN FSRU Lampung in Indonesia, and the Independence FSRU, located in Lithuania’s port of Klaipeda.
Höegh LNG also placed an order for its seventh FSRU at Hyundai Heavy Industries.
What are your expectations for the LNG FSRU market in 2015, and has there been any progress on the charter of your seventh FSRU, currently under construction in South Korea?
“The drop in the oil price has led to lower LNG prices, which is expected to lead to higher demand for LNG. Together with a significant increase in LNG supply over the next three years, the increased LNG demand creates a solid foundation for continued growth in demand for FSRUs.
Compared to land based import terminals, FSRUs are less capital intensive, quicker to build and more flexible and have therefore become the preferred solution for new importers and countries without required LNG import infrastructure in place. Höegh LNG has identified around 30 potential FSRU projects world-wide and over the next five years we expect an average of two to four FSRU contracts to be signed per year.
Our ambition is to sign one to two of these per year. Once we have secured a contract for our seventh FSRU, we will continue with our business model to always have one uncommitted FSRU under construction, by ordering our eight FSRU.”
Floating liquefaction projects have been discussed for years until new technologies allowed these developments to be commercially viable. This market is on the rise with several vessels already being constructed.
Höegh LNG is also developing two floating liquefaction projects and an FLNG barge in North America.
What are pros and cons of the floating liquefaction market for you?
“An FLNG is cost-competitive to land based terminals, it takes half the time to construct and has the flexibility to be moved to another location. However, it is a less mature market although we notice that this is changing.
Höegh LNG has a technical solution for an FLNG and has performed several paid field specific studies for customers. We continue to focus on the North American projects, where we have two exclusivity agreements and have performed pre-FEED studies.
What is the current status of the FLNG projects that Höegh LNG is developing?
“We are waiting for these clients` decision to move into the FEED phase. Once a FEED is concluded, the client will decide whether or not to proceed with an FID. We will order an FLNG when a commercial agreement with the client has been secured.”
The oil prices dropped dramatically last year causing several projects to be delayed or even cancelled. It also had a huge effect on the spot prices.
How do you see this, and what implications will these fluctuations have on the global LNG industry, and Hoegh LNG’s business?
“As mentioned above, the LNG prices has gone down as a consequence of the oil prices. Lower LNG prices will normally lead to higher demand for LNG, especially in price sensitive markets such as India and China, and this should increase demand for new LNG import capacity.
These market trends are conducive to our growth strategy and we will continue with our business model and we aim to have 12 units (on water and under construction) by 2019.”
In January this year, IMO’s regulations regarding NOx and SOx emissions came on stream prompting many shipowners to switch to LNG as fuel for their fleets. A big part Höegh LNG’s fleet already uses natural gas as fuel.
What is your point of view regarding this, how will this affect Höegh LNG?
“Höegh LNG applies state of the art technology to minimize our environmental footprint. Our vessels are mainly powered by natural gas, which has significantly lower CO2 emissions than oil and other fossil fuels, small NOx emissions and almost no SOx or particulate matter emissions.
The high technical standard of our fleet makes us well positioned for future competition.”
Hoegh LNG’s focus for the future?
“Höegh LNG’s main focus is FSRUs where we are the leading provider. Höegh LNG’s FSRUs are based on constructing new assets with the latest and most efficient technology, with capacities tailored to the requirements of our customers.
Secondly, we will continue focusing on FLNG. Due to the capital requirements and technical specification, Höegh LNG will order after contract award based on a long term agreement with a credit worthy counterparty.
We have not been so active in the LNGC segment for the last four years as the returns have been too low. However, Höegh LNG orders LNGCs at the back of a long-term contract if the investment is accretive for Höegh LNG Partners LP.”
LNG World News Staff