Interview with Hoegh LNG President and CEO, Sveinung Stohle/30% share globally/design innovations minimize the risks
Hoegh LNG is on the offensive with an eye on growth in the FRSU (floating LNG〈liquefied natural gas〉 storage and regasification unit) market following the full-scale export of LNG from the US and Australia. During his recent visit to Japan for the Gastech 2017 international gas conference and exhibition, we asked the President and CEO (Chief Executive Officer) Sveinung Stohle about his company’s strengths and future plans.
The Japan Maritime Dairy (JMD): You ordered two FRSU this past January. Can you provide an overview of your business?
Stohle: We have a total of 10 FRSU, 6 in operation and 4 on order. Of the units on order, charters have been arranged for 3 units. In addition, we have an agreement with the shipyard regarding an option for an additional order.
We are one of the three companies that pioneered the creation of the FSRU market. FRSU did not exist until 6-7 years ago, but today, there are 20 operating around the world. Of these, our company has about a 30% share.
■Realizing “short lead times”
JMD: What are your company’s strengths?
Stohle: We have three competitive advantages. The first is the fact that we operate new units. Among our competitors, some modify existing LNG carriers, but new units have superior efficiency and reliability.
The second is design. Our new FRSU are mainly built at a major South Korean shipyard, but the design is developed on our own by our in-house design company.
The third is the fact that we place orders before finalizing the charter and shoulder a risk equivalent to $300 million. The reason for this is because in the FRSU market, “time” is an important factor.
Even if the end user wants to start importing LNG quickly, FRSU require 2.5-3 years from order to delivery. By taking the risk and placing orders in advance, we can commence the service based on a short lead time in line with the customer’s request.
■“Versatility” is a selling point
JMD: There is significant risk in placing advance orders given the investment reaches $300 million. How do you manage the risk?
Stohle: We aim to minimize the risk through design innovations. The FRSU we order can be used for 90% of the projects, and this versatility is a selling point. In addition to a detailed understanding of the customers’ needs, our advanced engineering capability enables us to create flexible designs.
Despite this, there is no denying that an advance investment of $300 million is a large risk. Even though we have not concluded a definite charter contract, we review the potential demand and identify 5-6 charter candidates before placing an order.
JMD: What is the outlook for the FRSU market?
Stohle: There are about 20 FRSU operating around the world. Deals for 6 projects were concluded in 2016, of which we acquired 2. Going forward, we expect 10 projects to take shape in the next 1-2 years. According the forecast by the research company Wood Mackenzie, although it seems to be a little optimistic, the market is forecast to expand to 60 projects in 2025.
■16 FRSU in 2020
JMD: What is your future business strategy?
Stohle: We will aim to expand our business in line with the market growth. We are considering expanding our fleet to 12 FRSU in 2019 and at least 14, if not 16, in 2020.
Without stopping just at owning and operating FRSU, we will provide ancillary services such as obtaining permissions and approvals, regulatory compliance and building the infrastructure, and we will provide comprehensive solutions.
JMD: Are there any opportunities for partnerships with Japanese companies?
Stohle: We jointly own the first FRSU we built with a Japanese shipping company. Also, we will partner with Mitsubishi Corporation in the Pakistan project set to start from 2018.
Through a consortium joint venture with Mitsubishi Corporation, ExxonMobil, Total and Qatar Petroleum, while Mitsubishi Corporation and others will supply the LNG, we will handle the FRSU service. Going forward, I intend to value the relationships with our Japanese partners.
Sveinung Stohle: He has more than 25 years of experience from the LNG industry with both shipping and oil & gas companies. Prior to his employment with Hoegh LNG he held positions as President of Total LNG USA, executive vice president and chief operating officer of Golar LNG, and various positions with Elf Aquitaine. He has a master of business administration from the University of San Francisco and a bachelor of science in finance from California State University. He is a norwegian citizen.
This article published in Japanese on 21st April 2017.