I.M. Skaugen SE Annual General Meeting IMS – Innovative Maritime Solutions Oslo, March 18 th 2011 1
IMS ‐ Specialized marine transport services IMS ‐ Marine transport niche markets Petrochemical gas transport Small ‐ scale LNG Integrated Construction Marine transfer services 2
The IMS strategy We have succeeded in identifying and leveraging higher growth/higher margin market niches “Being global” “Innovative” Above average market Transport returns of the more market niches traditional shipping industry “Cost and Focus on higher Service” growth markets leadership
IMS business activities Crude oil transfer services Crude oil transfer services Shipbuilding Shipbuilding Petrochemical gas transportation Petrochemical gas transportation LNG transfer services LNG transfer services Small ‐ scale LNG Small ‐ scale LNG Manufacturing Manufacturing Support services worldwide Support services worldwide Crew training Crew training Petrochemical gas/LPG river Petrochemical gas/LPG river transportation transportation Marine equipment trading Marine equipment trading
IMS – think global and act local With a focus on development in ”East of Suez” ‐ Mainly Middle East region and China ‐ with a base in Singapore and headquarter functions in Oslo A global business with physical presence in offices worldwide to be on same “time zone” and speak the language adopt to the culture. China, Shanghai and Wuhan Bahrain Singapore Russia, St. Petersburg U.K., Sunderland Norway, Oslo USA, Houston Over 2 000 employees Worldwide, in excess of 85% of these are from Asia 41 Ships in operations Worldwide, but the majority in Asia 5
Our strategic positioning ‐ “East of Suez” BRICs' GDP Will Continue To Gain On The G7 40 2000 2010 35 2020 30 Why East of Suez? 25 2010 US$trn 20 • Higher economy growth 15 • More focus on logistic needs to enhance trade and 10 growth 5 0 • Increasing global trades G7 BRIC N ‐ 11 Other Developed Other Emerging Markets Markets • Higher energy consumption and a rising middle class The Expanding World Middle Class How do we do it? 4 500 China 4 000 India 3 500 • From Middle East to China World Millions of people 3 000 World ex China and India • Focus on China from a base in Singapore + 2 500 entrepreunurial and technological support from Norway 2 000 1 500 • Developing Small ‐ scale LNG to aid countries/regions in 1 000 Asia to achieve higher growth by making natural gas 500 available in the form of LNG . 0 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050 Source: Goldman Sachs
IMS Core focus ‐ Petrochemical gases and Small scale LNG Crude oil & Natural gas historical price comparison 160 14 140 12 Last Friday $101.16 120 10 WTI crude spot price 100 USD/MMBtu USD/barrel 8 80 6 60 4 40 Natural gas $24.30 2 20 Price for energy equivalent of one barrel of oil* WTI Crude spt HenryHug NG spt 0 0 * US Henry Hub natural gas spot price Source: Bloomberg 7
Emerging economies Source: Pardos Marketing Industrialization, modernization and urbanization will increase demand for the products we transport China and India have low per capita consumption of plastics as of today What will happen with the total consumption if consumption per capita increases in these two countries to more like the US, Japan or WE? In2050, there will be 10 billion people on earth?! 8
Brent crude oil, Naphtha & Ethylene prices Historical Price Comparison 1 800 160 1 600 140 1 400 120 1 200 100 USD/ton USD/bbl 1 000 80 800 60 600 40 400 20 200 Ethylene JAP Naphtha JAP Brent crude oil 0 0 Source: Bloomberg
Market developments Cost of Production of Ethylene TC & TCE to Spot 2010/2011 (Leader Plants, Fourth Quarter 2010) 750 1400 700 1200 650 1000 US Dollars per Ton 600 800 600 550 400 500 200 450 0 400 USGC (E) USGC (N) W. M. East W. Europe Japan S. Korea SE Asia Canada jan. feb. mar. apr. mai. jun. jul. aug. sep. okt. nov. des. jan. feb. 10 10 10 10 10 10 10 10 10 10 10 10 11 11 Variable Cost Fixed Costs Freight to SE Asia Price (CFR SEA) Eth/C 8000 Cbm TC Eth/C 8000 Cbm TCE S/Ref 8000 Cbm TC S/Ref 6500 Cbm TCE S/Ref 20/22500 Cbm TC S/Ref 15000 Cbm TCE Source: BRS Feb11 Source: Nexant ChemSystems 4Q10 2010 was mainly driven by increased imports into Asia and inter Asian trade due to the quite buoyant demand for petrochemicals in this region. Positive market momentum starting in 3Q continued in Q4, with December closing rate reaching the highest index level since April 2009 Higher Ethylene export volumes from the Arabian Gulf increased nominations under COA Contracts. Total fleet utilization in Q4 at 94% with 50% utilization under COA The newly commissioned polyethylene plants in the Middle East Gulf will need regular supply of other petrochemical gases, thereby reducing ballast days and increasing our fleet utilization 10
Market outlook Ethylene world capacity and seabornetrade 170 9 160 8 150 Million Tons Year 140 7 Ethylene World Capacity 130 Ethylene World Production 5.64 6 5.49 120 5.24 Seaborne trade 3% 5.03 Seaborne trade 4% 110 119.1 125.7 131.0 137.1 141.0 5 4.47 4.36 4.19 4.04 Seaborne trade 5% 100 3.84 115.3 109.1 111.7 4 Seaborne trade 6% 109.7 90 80 3 2006 2007 2008 2009 2010 2011 2012 2013 2014 Source: Norgas While the Middle East will continue to play a significant role in changing global supply/demand dynamics, an equally important region is Asia. We expect the ethylene exports to reach 1.5 million tons/year in the ME during 2011 However, due to derivative capacity coming on stream as of 2012, ethylene exports could temporarily be lower • between 2012 and 2014 as we have seen partly in 2010 Above graph illustrates the sensitivity of 1% on the seaborne ethylene exported, which would represent an • additional 1.25 million tons of ethylene exports per year. In this case, it will require 20 ‐ 25 ships of > 8000 cbm able to carry average 50 ‐ 55000 tons per year for transporting the equal amount of ethylene exports. 11
Positive market trend China Ethylene Self Sufficiency Thousand Tons Sufficiency 40 000 60 % 35 000 50 % 30 000 40 % 25 000 20 000 30 % 15 000 20 % 10 000 10 % 5 000 0 0 % 04 05 06 07 08 09 10 11 12 13 14 Domestic Deriv. Ethylene Demand Net Equiv. Imports (Exports) Self ‐ Sufficiency Source: Drewry Source: Sinopec Ethylene prices remained strong on the back of bullish crude oil and naphtha prices The Chinese economy is expected to continue to grow and its appetite for petrochemical products is increasing Despite the fact that China is expanding its own capacity in order to gain on self ‐ sufficiency, the country is still relying on much of the import from especially low cost producers in the Middle East. 12
Small scale LNG IMS innovative regional distribution of tomorrows fue l “Small ‐ scale LNG is an effective solution for making natural gas available to energy users not currently connected to pipeline networks.” Norgas Innovation – I.M. Skaugens first LNG Multigas vessel 13
Need for more and cleaner energy Figure 14. Shares of world energy consumption in Figure 13. World marketed energy consumption: % of world total the United States, China, and India, 1990-2035 quadrillion Btu OECD and Non ‐ OECD,1990 ‐ 2035 30 500 History Projections United States China India History 25 400 20 300 OECD 15 200 10 Non ‐ OECD 100 5 0 0 1990 2000 2007 2015 2025 2035 1990 1995 2000 2007 2015 2020 2025 2030 2035 Source: EIA Source: EIA China and India alone are expected to account for about the same amount of energy that IEA members currently use, the rest of the world will require an equal amount. Strong economic growth in China and India over the projection period, with their combined energy use more than doubling and accounting for 30 percent of total world energy consumption in 2035 in the Reference case. Energy use in non ‐ OECD Asia (led by China and India) shows the most robust growth of all the non ‐ OECD regions, rising by 118 percent from 2007 to 2035 14
Promising Small ‐ scale LNG developments With an increasing crude oil price and decoupling with natural gas price, it will speed up the shift within power generation, heating and transportation from traditional diesel or heavy fuel to natural gas in the form of LNG. The environmental and economic benefit is significant and it will facilitate to ease the energy shortage many emerging countries are facing as the bottle ‐ neck of the overall economic growth Compared to large scale projects the Small ‐ scale LNG requires less CAPEX, provides fast track solution, a unique scalability and flexibility We see potentials within many of our core geographic focus areas such as South ‐ East Asia, alongside the Yangtze River in China, South East Asia, the Indian sub ‐ continent and the GCC region in the Middle East. Norgas Invention, the third Multigas vessel delivered in early January 2011
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