Changing Trend of

LNG Shipping Business

Nobuo Ishihara,
Mitsui O.S.K. Lines
September 25, 2013
 Outline

1. MOL Business Profile

2. LNG Market in 2012
3. LNG Market Forecast to 2025(World)
4. LNG Market Forecast to 2025(Asia Pacific)
5. LNG Shipping -How Many LNG Ships Needed?
6. LNG Shipping -Challenges to Overcome the Bottlenecks
7. FSRU, FSO, LNG as Fuel

2
 Outline

1. MOL Business Profile

2. LNG Market in 2012
3. LNG Market Forecast to 2025(World)
4. LNG Market Forecast to 2025(Asia Pacific)
5. LNG Shipping -How Many LNG Ships Needed?
6. LNG Shipping -Challenges to Overcome the Bottlenecks
7. FSRU, FSO, LNG as Fuel

3
1. MOL Business Profile
MOL Corporate Data & Financial Highlights

Corporate Data Financial

Highlights *(Unit: Billion \)

• Established: 1884 • For the Year Ended March 2013

• Head Office: Tokyo, Japan  Revenue： 1,509
• Number of • At the End of March 2013
Group Employees: 9,465  Total Assets： 2,164
• Credit Rating: Moody’s –  Shareholders’ Equity： 619
Baa3
• Public Company with
120,874 Shareholders
4
4
1. MOL Business Profile
Fleet Composition

LNG CARRIERS
OTHERS BULK CARRIERS

CONTAINERSHIPS
69 49
115 404
127
194
CAR CARRIERS TANKERS
(PCC) *As of March 201３ / Consolidated

5
5
 1. MOL Business Profile
World Major Carriers’ Fleets (All Vessel Types)

67
MOL (Japan) 958
NYK (Japan)

COSCO (China)

AP Moller-Maersk (Denmark)

K Line (Japan)

China Shipping Group (China)

Oldendorff (Germany)

Zodiac (UK)
DWT
Teekay Shipping (Canada) Number of Vessels

Swiss Marine (Switzerland)

(Number of Vessels) 0 200 400 600 800 1,000

6
6
*Source: MOL Internal calculation based on each company’s published data and other information (As of March 2012)
1. MOL Business Profile
Market Position in LNG Shipping Sector (1)

Moss 47 Vessels Membrane 38 vessels

MOL
LNG
Vessels
(incl. On-Order Vessels)

MOL’s Interest
in LNG Carriers in the World Delivered On-Order Total
MOL Group
participating
69 16 85
Managed by MOL
Group
42 16 58
Worldwide Total 362 105 467
*As of May, 2013
7
7
1. MOL Business Profile
Market Position in LNG Shipping Sector (2)

Number of LNG vessels

L N G 20 40 60

NYK

K Line

8
8
 Outline

1. MOL Business Profile

2. LNG Market in 2012
3. LNG Market Forecast to 2025(World)
4. LNG Market Forecast to 2025(Asia Pacific)
5. LNG Shipping -How Many LNG Ships Needed?
6. LNG Shipping -Challenges to Overcome the Bottlenecks
7. FSRU, FSO, LNG as Fuel

9
 2. LNG Market in 2012
LNG Supply 2005-2012
Eg yp t Oth e rs
2% 10%
U .A.E.
Bru n e i Qa ta r
2%
3% 32%
Om a n
4%
R u ssi a
4% Ot hers
Tri n i d a d &
300.0 To b a g o Egy pt
5%
Al g e ri a
U . A. E.
250.0 5%
Ma l a ysi a
N i g e ri a 9% Brunei
8% In d o n e si a Au stra l i a Om an
200.0 8% 8%
R us s ia
mmtpa

150.0 T rinidad & T obago

Algeria
100.0
N igeria
In d o n e s i a
50.0
Aus t ralia

- M alay s ia

2005 2006 2007 2008 2009 2010 2011 2012 Q a t a r

10

Source: Wood Mackenzie

 2. LNG Market in 2012
LNG Import 2005-2012
Ot hers
U. S. 11%
It aly 1%
2%
Turk ey
2% J apan
Franc e
38%
3% U. K.
5%
Taiwan Oth e rs
5%
300.0 U .S.
India
250.0 6% Ita l y
China Tu rke y
200.0 6% Spain Korea
Fra n ce
mmtpa

6% 15%
150.0 U .K.
Ta i w a n
100.0
In d i a
50.0 China
- Sp a i n

2005 2006 2007 2008 2009 2010 2011 2012 Ko re a

Ja p a n
11

Source: Wood Mackenzie

 Outline

1. MOL Business Profile

2. LNG Market in 2012
3. LNG Market Forecast to 2025(World)
4. LNG Market Forecast to 2025(Asia Pacific)
5. LNG Shipping -How Many LNG Ships Needed?
6. LNG Shipping -Challenges to Overcome the Bottlenecks
7. FSRU, FSO, LNG as Fuel

12
 3. LNG Market Forecast to 2025 (World)
Liquefaction Capacity Under Construction

Liquefaction Capacity Under Construction July 2013

Country Project Operator No. of Trains Capacity in mtpa Start-up
Algeria Arzew 3 Sonatrach 1 4.7 1Q14
Australia Queensland Curtis LNG BG 2 8.5 4Q14
Papua New Guinea PNG LNG ExxonMobil 2 6.9 4Q14
Indonesia Donggi-Senoro Mitsubishi 1 2 4Q14
Australia Gorgon Chevron 3 15.6 1Q15
Australia Gladstone LNG Santos 2 7.8 2Q15
Australia Australia Pacific LNG ConocoPhillips 2 9 3Q15
USA Sabine Pass Cheniere 4 18 4Q15
Malaysia Floating LNG Unit Petronas 1 1.2 4Q15
Malaysia Bintulu Train 9 Petronas 1 3.6 1Q16
Australia Wheatstone Chevron 2 8.9 4Q16
Australia Ichthys Inpex 2 8.4 4Q16
Australia Prelude Shell 1 3.6 1Q17

Total 98.2
13

Source: Andy Flower, MOL

 3. LNG Market Forecast to 2025 (World)
Forecast of Planned Project Capacity in 2025

Forecast of Planned Project Capacity in 2025

Capacity in mtpa

Country/Region Planned Base Case Low Case High Case

USA 203 43 39 61

Canada 119 23 17 39

East Africa 70 40 30 45
Australia 51 15 11 20

Russia 76 29 10 44

West Africa 21 4 - 4
Rest of Pacific Basin 12 12 12 12

Eastern Mediterranean 17 - - -
Middle East 12 12 12 20

Total 581 178 131 245

14

Source: Andy Flower, MOL

 3. LNG Market Forecast to 2025 (World)
Global LNG Supply to 2025

Global LNG Supply to 2025

500 Average Annual Growth Rates
1980-2012 7.9%pa
2012-2017 5.5%pa
400 2017-2025 5.9%pa

300
in mtpa

200

100
12

13

14

15

16

17

18

19

20

21

22

23

24

25
20

20

20

20

20

20

20

20

20

20

20

20

20

20
In Operation in July 2013 Under Construction in July 2013 Planned
15

Source: Andy Flower, MOL

 Outline

1. MOL Business Profile

2. LNG Market in 2012
3. LNG Market Forecast to 2025(World)
4. LNG Market Forecast to 2025(Asia Pacific)
5. LNG Shipping -How Many LNG Ships Needed?
6. LNG Shipping -Challenges to Overcome the Bottlenecks
7. FSRU, FSO, LNG as Fuel

16
 4. LNG Market Forecast to 2025 (Asia Pacific)
Asian LNG Imports 2000 to 2012

Asian LNG Imports 2000 to 2012

Asia’s % Share of Global Production

200 100%

160 80%
in mtpa

120 60%

80 40%

40 20%

0 0%
00

01

02

03

04

05

06

07

08

09

10

11

12
20

20

20

20

20

20

20

20

20

20

20

20

20
Japan Korea Taiwan
India China South East Asia
Share of Global Production 17

Source: Andy Flower, MOL

 4. LNG Market Forecast to 2025 (Asia Pacific)
Asian LNG Imports 2000, 2012, 2020, 2025

Asian LNG Imports 2000, 2012, 2020, 2025

300

250
New
200 Markets
in mtpa

150

100
Established
Markets
50

0
2000 2012 2020 2025

Japan Korea Taiwan India China S. E Asia 18

Source: Andy Flower, MOL

 Outline

1. MOL Business Profile

2. LNG Market in 2012
3. LNG Market Forecast to 2025(World)
4. LNG Market Forecast to 2025(Asia Pacific)
5. LNG Shipping -How Many LNG Ships Needed?
6. LNG Shipping -Challenges to Overcome the Bottlenecks
7. FSRU, FSO, LNG as Fuel

19
 5. LNG Shipping – How Many LNG Ships Needed?
LNG Ships Delivered and On Order by August 2013

LNG Ships Delivered and On Order by August 2013

LNG Tanker FSRU

Vessel Size Delivered On Order Delivered On Order Total

<125k 28 28

125-147k 198 1 6 205

147-160k 66 45 111

160-200k 25 59 9 93

200k- 45 45

Total 362 105 6 9 482

20

Source: MOL
 5. LNG Shipping – How Many LNG Ships Needed?
Transition of Completed Vessels 1969-2017

Transition of Completed Vessels 1969-2017

60

50
# of vessels

40

On Order
30
Delivered

20

10

0
1969 1976 1980 1985 1992 1996 2000 2004 2008 2012 2016
LNG
Tanker 21

Source: MOL
 5. LNG Shipping – How Many LNG Ships Needed?
Orders for New LNG Ships 2002 to 2013

Orders for New LNG Ships 2002 to July 2013

70

60

50 Speculative
# of orders

40

30 FSRUs

20

10

0
02

03

04

05

06

07

08

09

10

11

12

13
20

20

20

20

20

20

20

20

20

20

20

20
22

Source: MOL
 5. LNG Shipping – How Many LNG Ships Needed?
Vessel Supply-Demand Balance
Vessel Supply-Demand Balance 2013 to 2020
(No.)
600
Trading Vessels
550
500 Required Fleet

450
400
350
300
2013 2014 2015 2016 2017 2018 2019 2020
2013 2014 2015 2016 2017 2018 2019 2020
Surplus Fleet -1 19 17 6 -14 -51 -106 -160

Trading Vessels: existing vessels + vessels in the current orderbook

23

Source: Andy Flower, MOL

 Outline

1. MOL Business Profile

2. LNG Market in 2012
3. LNG Market Forecast to 2025(World)
4. LNG Market Forecast to 2025(Asia Pacific)
5. LNG Shipping -How Many LNG Ships Needed?
6. LNG Shipping -Challenges to Overcome the Bottlenecks
7. FSRU, FSO, LNG as Fuel

24
6. LNG Shipping - Challenges to Overcome the Bottlenecks
Where is the real bottleneck in LNG Shipping Sector?

Shipbuilding Capacity? ⇒ NO
 If we take all the shipyards in Korea, Japan, and China into
consideration, there is sufficient capacity to build all LNG Ships
needed.

Finance? ⇒ maybe NO
 New orders for other type of vessels are temporarily lagging.
 Many banks are seeking opportunities to place new loans under the
quantitative easing monetary policy by Central Banks.
 Positive support from government banks in Korea, Japan, and
China.

Human Resources? ⇒ YES

 Securing and training of LNG experienced seafarers and ship-
management shore staff cannot be achieved without long-term
strategy and commitment.
25
 6. LNG Shipping - Challenges to Overcome the Bottlenecks
Crew Supply (1)
How to secure qualified seafarers is the key

450 650
600
400
550
350 500
300 450
400
250 350
200 300
250
150
200
100 150
06

07

08

09

10

11

12

13

14

15

16

17

18

19

20
20

20

20

20

20

20

20

20

20

20

20

20

20

20

20
26

Source : MOL
 6. LNG Shipping - Challenges to Overcome the Bottlenecks
Crew Supply (2)
Crew Matrix
Years
Sea Combined LNG
Rank Certificate Steam
Service Sea Time Experience
Experience
Master Class 1 4 years
4 years 2 years rank
Chief Officer Class 2 2 years
1st Officer Class 2 1 years
2nd Officer Class 3 0.5 years
3rd Officer
Chief Engineer Class 1 4 years 1 year
4 years 2 years rank
1st Engineer Class 2 2 years 1 year

Jr.1st / Gas Engineer Class 3 1 year 1 year 0.5 year

2nd Engineer Class 3 0.5 years

3rd Engineer
Remark: Matrix requirement by each oil major should be followed regardless of the above.
Required number of qualified crew members
= 50crew per vessel 27

Officer 11x 2(spare) + Rating 16 x 1.75(spare)

6. LNG Shipping - Challenges to Overcome the Bottlenecks
MOL’s Challenges
<Industry Challenges>
Recruiting, selection and training from long-term view point is essential
to secure high standard quality and quantity.

Existing LNG experienced seafarers natural growth alone cannot meet

growing demand.

Then, how to secure LNG experience ?

<MOL’s action with commitment>

① Secure potential candidate and plan conversion
② Supply LNG seagoing experience for trainee

- MOL to secure seafarers after old tonnage retirement and also started
conversion from Tanker, LPG seafarers as trainee for LNG.
- MOL has interest in 69 existing LNG carriers including 42 MOL’s ship
management vessels as of today. MOL can provide newly joined 28
seafarers and staff members with real training opportunity.
 Outline

1. MOL Business Profile

2. LNG Market in 2012
3. LNG Market Forecast to 2025(World)
4. LNG Market Forecast to 2025(Asia Pacific)
5. LNG Shipping -How Many LNG Ships Needed?
6. LNG Shipping -Challenges to Overcome the Bottlenecks
7. FSRU, FSO, LNG as Fuel

29
7. FSRU, FSO, LNG as Fuel
New Movement and Innovation in LNG Carrier Industry

Expanding to Up/Downstream, offering better alternatives

30
7. FSRU, FSO, LNG as Fuel
What is FSRU?
FSRU=Floating Storage & Regasification Unit
A Package Alternative to Onshore LNG Import Terminals

31
7. FSRU, FSO, LNG as Fuel
FSRU Projects in the World
13 FSRU projects have been realized in the world.
More than 50 potential FSRU projects under consideration.

32
 7. FSRU, FSO, LNG as Fuel
Emission Requirement in Europe and North America
ECA Emissions Requirements for Existing Fleets
Requirement Compliance Option
2010: SOx＜1,0% HFO + scrubber
2015: Sox＜0,1% Distillate fuels
LNG ECA: Emission Control Area

33

Source: DNV
 7. FSRU, FSO, LNG as Fuel
Existing LNG Fuel Vessels as of August 2013
＜Delivered＞
No.
12
10
8
6
4
2
0
1991 2000 2003 2006 2007 2008 2009 2010 2011 2012 2013

＜Ship Type＞
Ferry Platform Supply General Cargo Chemical Tanker Total
22 12 1 1 36
34

Source: Clarkson
 7. FSRU, FSO, LNG as Fuel
On Order LNG Fuel Vessels as of August 2013
＜On order＞
No.
12
10
8
6
4
2
0
2013 2014 2015 2016
＜Ship Type＞
Platform Container General Ethylene/ Cruise
Ferry
Supply
Ro-Ro
Ship Cargo LPG Tanker Ship
Total

10 8 4 2 2 2 2 30
35

Source: Clarkson
7. FSRU, FSO, LNG as Fuel
World’s First LNG Fuelled Container Ship was
ordered in Dec 2012!

Owner： TOTE Maritime (USA)

Delivery： 2015 4Q / 2016
(with additional 3 option)
Size： 3,100TEU
Builder： NASSCO (USA）
Design: DSME (Korea)
Engine： MAN ME-GI
(LNG/FO dual fuel)
Trade： Florida-Puerto Rico

36
7. FSRU, FSO, LNG as Fuel
Required Terminal Facelities

LNG Fuel Supply Methods

1) LNG Satellite Terminal
1) LNG Satellite Terminal
→ Install the LNG satellite tank at terminal.
2) LNG Supply Vessel
2) LNG Supply Vessel
→ STS operation
3) LNG Tank Truck
→ Low supply rate ( 20~30 m3/hr) 3) LNG Tank Truck

4) LNG Tank Container

→Tank and piping are fixed to the vessel.
4) LNG Tank Container
37
 7. FSRU, FSO, LNG as Fuel
Challenges for LNG Fuel Vessels
Cost;
1) Increase of initial investment
→ DFD Engine, LNG tank installation
2) Increase of operation cost
→ High LNG price in far east
→ Crew Training
Incentives; DFD Engine

1) Enhancement of environmental
regulations LNG Tank System

2) Favored tax treatment

3) Subsidy for vessel construction
4) Prospect of the abolish of crude oil price
38

linked LNG pricing system in Asia