LNG Shipping News SHIPPING NEWS AGENDA. MHI New Building Orders in 2012 in billions of yen (accumulated amount) Source: MHI

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1 LNG Shipping News An LNG JOURNAL PUBLICATION 2 May 2013 Shipping firms report winning streaks The results are still rolling in from shipping firms at the end of the fiscal year, but the following firms figures are looking up. Our news editor Some operators, like BG group, plan on ordering even more new buildings as they line up to tackle new LNG carrier demand, annual results reveal. LNG shipping profits are for some offsetting problems such as rising bunker costs, US recession and less steady performance in non-lng shipping segments. Bunker costs The Japanese shipping firm NYK Line called its 2012 LNG tanker business generally strong and said the LNG tanker business remained robust on the back of solid demand. It saw increased revenues for the 2012 fiscal year for the bulk shipping segment that contains its LNG tanker division, up 8.9%, to $8.13bn. In yen revenues were 795.5bn up from 730.8bn. The bulk shipping segment was its best performing segment and showed the highest operating income and profits. NYK Line said widening supply-demand imbalance caused by massive delivery of new built tonnage had hurt some vessel segments, such as its dry bulk carrier division. High bunker oil prices caused the company to implement company-wide slow steaming of vessels and on-board broadband services that allow better route analysis. Bunker oil prices were soaring, reaching highs of $700 per US ton and averaging $ per US ton. Tariffs LNG transportation sales increased by 11% for the Russian gas major Gazprom, growing to about MHI New Building Orders in 2012 in billions of yen (accumulated amount) Source: MHI $4,034m (RUB 125,386m) in the year ended December 31, It said the increase was due to larger volumes of gas transportation services rendered to independent gas suppliers and also an increase on tariffs for such services. Japan British gas major BG Group s LNG shipping segment did well, and was up 13% from $2,282m in It attributed a strong performance to demand in Asia. The vast majority of BG Group s LNG cargoes, around 70%, were destined for Asia, and this proportion increased from last year, especially the Japanese market, which increased its uptake from 40 to 67 deliveries. It noted the US made up a decreasing share of deliveries. LNG volumes in this passing financial year were lower than the prior year due fewer third-party spot purchases, it said. BG Group purchased LNG carriers from owners in 2012, it signed an agreement with Chinese major CNOOC to build two LNG carriers in China, and this year it plans to order even more modern and fuel-efficient ships to cope with new volume. Shipbuilding SHIPPING NEWS AGENDA LEGISLATION EU plans next attack on dirty ship scrapping BUSINESS Exmar reports steady income from LNG carrier fleet amid project developments 3 TECHNOLOGY Mitsubishi Heavy Industries (MHI) shipbuilding segment saw high earnings despite decreased sales, due in part to its increased sales focus on high-value LNG carriers. The shipbuilder counted orders for five LNG carriers amid orders for 29 vessels, with 24 vessels booked in the fourth quarter of PRODUCTS MHI s backlog of ship orders stands at 10 LNG carriers out of 45 total vessels. High LNG carrier demand stems from an increase in the use of natural gas. It forecasted even more new orders for STX Heavy Industries installs duel fuel engine for Sovcomflot 4 GE helps develop ship engineering in China 2 5

2 2 NEWS LNG Shipping News 2 May 2013 EU plans next attack on dirty ship scrapping Finding a solution to appease both activists and worldwide shipowning associations, EU bodies plan on using an incentive-based system to press EU-flag vessel operators to clean ships before scrapping. Our legislation editor Currently vessels are dismantled in countries like Bangladesh without removal of dangerous substances, for example as asbestos, heavy metals, and explosive gas through a process known as gas freeing. Substances left in old ships cause explosions that kill numbers of welders disassembling ships each year. The EU Commission s deadline to propose an incentive system is the end of Levy scrapped While the EU Parliament endorsed the spirit of the plan, it rejected a proposal to tax operators and owners with ships using EU ports after it caused outcry from industry. The European Community Shipowners Associations (ECSA) condemned the tax, calling it unfair to industry and unilaterally decided. It said it was a tax on merchant ships of all flags calling at EU ports that would finance EU recycling facilities. The tax would have not have sat well with Japanese and Singaporean operators, it warned, and the ship recycling facilites in China and India. These governments would have lobbied the EU. It said EU regulation would have prevented the ratification of the UN International Marine Organisation s Convention for Safe and Environmentally Sound Recycling of Ships which was created in Convention? The 2009 IMO convention would have been similar to the EU proposal, except that it will remain ineffective until 15 countries ratify it, and right now there are no ratifying countries. The IMO convention has some things in common with the EU law. Ships must be designed and operated in ways that pose less explosive risks for recycling facilities, it says. It requires that ships carry an inventory of hazardous material aboard ships sent for recycling. The more stringent EU law specifies such a list for any s hip calling at an EU port, with penalties to clinch enforcement. It also would penalize ships sent for recycling to a facility not on an EU list. The IMO convention is due to enter into force 24 months after the date on which 15 States, or 40 per cent of world merchant shipping by gross tonnage, ratifies it. Such a system relies on not only flag states but also recycling states, for example China and India, for ratification and enforcement. At this rate, the EU may beat them to it. With two publications, ABS shores up labour compliance The American Bureau of Shipping (ABS) last week released its publication, Guidance Notes on Safety Analysis (JSA) for the Marine and Offshore Industries. The guidance notes explain the JSA risk assessment process aimed at minimising personnel injuries. Certain tasks should only be done after managers conduct a verbal or written JSA. These include asbestos abatement, moving equipment around the deck at sea, recovering equipment in the sea and travelling in convoys in war zones. Other tasks to be assessed include crane operations, pressure testing, electrical work, work at height and work over the vessel s side. The guidance is intended either to establish a safety management programme or to update existing programme. The newly-updated regulatory matrix, also released this week, identifies compliance dates for IMO regulations coming into effect in the next seven years. Upcoming regulations coming into effect in July of 2013 include MARPOL and SOLAS laws. Labour requirements coming into effect in 2014 and 2015 include SOLAS laws protecting marine labour, giving a new noise code, and outlining fire safety and person recovery equipment requirements. LNG Shipping News 2nd floor, 8 Baltic Street East London, EC1Y 0UP United Kingdom Tel: +44 (0) Publisher Stuart Fryer Editor Cristina Brooks +44 (0) general@lngjournal.com Advertising Anneli Kallman +44 (0) anneli@lngjournal.com Events Natasha Wedlock Tel: +44 (0) natasha@lngjournal.com Subscriptions Stephan M. Venter Tel: +44 (0) venter@gastopowerjournal.com Subscription included with LNG Journal Production Vivian Chee Tel: +44 (0) chee@btconnect.com No part of this publication may be reproduced or stored in any form by any mechanical, electronic, photocopying, recording or any other means without the prior written consent of the publisher. Whilst the information and articles in LNG Shipping News are published in good faith and every effort is made to check accuracy, readers should verify facts and statements direct with official sources before acting on them as the publisher can accept no responsibility in this respect. Any opinions expressed in this publication should not be construed as those of the publisher.

3 2 May 2013 LNG Shipping News NEWS 3 Exmar reports steady income from LNG carrier fleet amid project developments Exmar, the Belgian LNG carrier owner and project player, said its fleet contributed $8.1 million to company earnings in the first quarter. Our business editor The Antwerp-based company controlled by Nicolas Saverys,said all the conventional LNG vessels and regasification units in which Exmar has an ownership stake are in service and have fully contributed time charter revenue during the first three months. The carrier "Excel" continued employment under a short-term charter with redelivery in the early part of the third quarter. Discussions are on-going for future employment of the vessel, Exmar said. During the course of the first quarter, the Belgian company signed an agreement with French company EDF Trading for the supply of a liquefaction barge of up to 1 million ton per annum producing capacity to the US Gulf coast. Discussions on the finalization of the contract are on-going, Exmar said. The deal also involves EDF Trading and Exmar pursuing smallscale export opportunities in North America using bargemounted liquefaction plants. The aim would be to bring mobile, self-contained liquefaction units to LNG import terminals in the US using existing pipeline, tank and jetty infrastructure to enable LNG exports. EDF Trading and Exmar have secured the support of the Chinabased Wison shipbuilding and energy project construction group for the provision of turn-key engineering, procurement and Excelsior, Exmar s 138,060 cubic metre LNG carrier built in construction services for the LNG production plants. These liquefaction plants will make use of the PRICO single mixed refrigerant liquefaction technology of Kansas-based Black & Veatch. Meanwhile, the construction of the world's first liquefaction barge for Canadian-listed company, Pacific Rubiales Energy, is progressing on schedule and on budget, Exmar said. First gas operations for this project offshore Colombia in Latin America are expected in the first The Exmar, Wison and Black&Veatch combination is also working on the Colombia liquefaction project. Financing of the Colombia barge with the International Finance Corp. of the World Bank and China Export-Import Bank should be in place before the end of the year, Exmar said. Exmar said its consolidated results after taxes, and including all operations such as its liquefied petroleum gas tanker fleet, amounted to $65.8M compared with $27.9M in the same three quarter of months a year ago. Japanese shipping group MOL takes $1.8Bln earnings hit but LNG is bright spot Mitsui Osk Lines, the Japanese shipping group and LNG carrier fleet operator, posted a record net loss of billion yen ($1.8Bln). The losses were $1.5Bln higher than for the previous fiscal year, a sevenfold increase in red ink. They came from recorded revenue of 1,509Bln yen and "reflect such factors as the recording of the cost of business restructuring and reforms in the quarter ended March 31, 2013." The huge hit suffered by MOL came as it confirmed its participation in a joint venture with Chinese partners for the construction of six new carriers at a Chinese yard. MOL said that the LNG carrier segment where it controls 70 v essels held up well. There was additional demand for electric power generation from gas-fired power plants in Japan, but this was offset by a fall in LNG activity in Europe, partly caused by the economic downturn. Nevertheless, MOL's global LNG cargo volumes were firm and hire rates in the short-term to mediumterm charter markets remained high. Ordinary LNG income was about level with the previous fiscal year, reflecting stable revenue secured from long-term shipping contracts for deliveries to Japan. MOL is currently involved in more than 20 percent of the world's LNG transport in terms of ownership, management, and operation of LNG carriers. "Looking at the overall maritime shipping market conditions, the deterioration in the gap between vessel supply and demand took its toll on the market across the board, becoming a significant factor in market stagnation," MOL said. "In the dry bulker market, conditions for all vessel types stagnated because the number of new vessel deliveries was consistently high from the start of 2012, preventing further improvements in the gap between supply and demand," MOL said. MOL's restructing to cope with the tough market conditions have included transforming its sales activities by embracing a new model of centralizing headquarter functions in shipping centres such as Hong Kong and Singapore. MOL has also culled more than 70 vessels from its fleet, but despite the cutbacks the Japanese company still has substantial shipping assets, including some 400 dry cargo vessels, 200 tankers, 70 LNG carriers, 130 car carriers and over 110 containerships. However, the Japanese shipping group continues to widen its activities in the LNG carrier market. It has just confirmed its participation in both the ownership of six new LNG ships to be built in China by Hudong-Zhonghua Shipbuilding, and in associated ship-management agreements through a joint venture formed in Hong Kong. MOL said its participating stake was for 20 percent of each venture. The remaining 80 percent stake is held by its Chinese partners, China Shipping Co. and China Petroleum and Chemical Corp., known as Sinopec. "All of the six new LNG ships are earmarked by way of longterm charters for Sinopec's FOB (free-on-board) sale and purchase agreement with Australia Pacific LNG. They will be delivered to the owning joint ventures from early 2016 to late 2017," MOL said. Total cost for the construction of the six LNG carriers will be $1.5Bln. Long-term limited financing of $1.2bln was secured for the six ships with a syndicate of banks in China and Japan.

4 4 NEWS LNG Unlimited 2 May 2013 STX Heavy Industries installs duel fuel engine for Sovcomflot Licensee STX introduces MAN hybrid dual-fuel engine for both land and marine use, calling it a first for the domestic market. Our technology editor Korean shipbuilder STX will install a MAN 51/60DF engine in one of two 170,000 cubic metre LNG vessels for Russian tanker operator Sovcomflot. Sovcomflot signed a 15 year time charter for the two carriers with Gazprom Global LNG, which it intends to use for the long-term security of its transport and to complement its discussions with LNG suppliers and customers worldwide. The two ice-class carriers, due in the fourth quarter of 2013 and the second quarter of 2014, feature sophisticated winterisation. The Russian JSC United Shipbuilding Corporation is involved in design for the vessels, and Russian suppliers will provide materials, machinery and equipment. Sovcomflot last year selected dual-fuel MAN 51/60DF engines for two confirmed LNG new buildings with an option for two more Graphical rendering of one of the Sovcomflot new building LNG carriers STX Heavy Industries held a dual-fuel engine launch ceremony. vessels. STX has had a licence agreement with MAN for this engine since Licence agreement MAN has an over-30-year working relationship with STX. The partnership originated in a license agreement for the production of four-stroke Diesel engines. In 1984, STX added a smaller, two-stroke Diesel engine range to the license. In 2007 the companies agreed a license for a dual fuel engine: the large-bore, type 51/60DF, medium-speed engine, after STX had increased its engine-building facilities in Changwon. That year saw MAN s first order of the engines for LNG Carrier Castillo de Santisteban owned by Spanish Empresa Naviera Elcano. MAN has said there are opportunities for dual-fuel growth in STX s home market of Korea. Lloyds Register helps stakeholders handle LNG bunkering risk Lloyd s Register s latest Gas Technology Report recommends using its risk evaluation services for LNG bunkering. As opposed to ship-to-shore LNG cargo transfer, bunkering of LNG fuelled bunker vessels requires more frequent operations close to commercial and population centres, it said. Services As such the report addresses key hazards relevant to LNG shipping firms: vapour management and bunkering. A basic six step recommendation for ship-to-shore bunkering included in the document recommends reviewing regulations and codes for LNG ship-to-ship (STS) cargo and fuel equipment, applying them to bunkering operations, developing a comprehensive manual for all phases of operations, and including emergency response systems and safety checklists. It also recommends a critical review of technology on all applicable equipment, ensuring it meets class compliance requirements. For landside safety, the operator must identify port exclusion zones, connection, and review overall operation of the STS LNG bunkering system. Lloyd s Register offers services to facilitate assessment of STS technologies and processes. Other vessels Beyond just LNG shipping and bunkering, the report profiles companies doing LPG shipping, and also LNG offshore production, and looks at issues of bunkering on cargo carrier ships, for example, tank size and placement. The latest examples of widening applications for LNG bunkering include Shell s inland tanker launched this month and the Baltic Sea passenger vessel, Viking Grace.

5 2 May 2013 LNG Unlimited NEWS 5 Sesam Genie 6.4 design software updated to cut costs Vessel design engineers can now use DNV s comprehensive software suite for combined ship design, modification and life extension analysis. Our products editor DNV said that the software now has expanded ability to import data from other programs. spent on separate systems, cutting cost on unnecessary licences and on training. Life extension For life extension analysis, this means it can either produce or import the required data from other systems, saving time for life for customers who use different programs. It also has a feature, requested by customers, which allows tension and compression analysis from inside Sesam Genie. This helps reduce the extra money Calculations The software also facilitates the parts of the design process that have to do with disconnecting beams and plates. DNV has improved the calculations made by the software to increase efficiency and quality of designs. One of the key features of Sesam Genie is the ability to work inside a consistent user interface. An image of a tension-compression-model in Sesam Genie 6.4. DNV Software Managing Director Are Føllesdal Tjønn said, Sesam Genie has seen an exceptional growth in sales across the globe. This enables us to invest even more in development, and shore engineering solution has unique capabilities in an integrated environment for structural modelling, environmental load calculations, structural response analysis and engineering evaluation we see the results now. Our off- and redesign, he says. GE helps develop ship engineering in China Students and engineers interested in ship design in China will get a leg up thanks to a memorandum of understanding GE signed with the Shanghai Maritime University (SMU). The engineering company s marine propulsion segment announced a research and training programme to start at SMU. It plans to work with the university on research programs covering power and propulsion systems, vessel control and automation systems as well as dynamic positioning. Cooperation will extend into other areas of study including oil and gas, metallurgy, port management, automation, and six sigma management. Research Part and parcel with this, the two organisations will be setting up laboratory facilities. Chinese students may benefit from marine propulsion internships and work opportunities. SMU s teaching staff are offered a chance to visit and learn at GE facilities around the world, such as those located in the UK and France. Joe Mastrangelo, CEO of GE s Power Conversion business said, The shipbuilding industry in China is capturing a large share of international attention, and environmental demands are changing ship design and propulsion technology. This agreement will help China develop and deliver competitive vessels that must meet exacting international sustainability standards. SMU is a multidisciplinary university with courses in engineering, management, economics, law, liberal arts and science, with a special emphasis on shipping technology, economics and management. It lists 60,000 graduates. 3rd Annual LNG Shipping Forum 2013 Thursday 6th June 2013 Thon Hotel Arena, Lillestrøm, Norway Event Partners Sponsor LNG Unlimited A memorandum of understanding has established a propulsion and automatic control research facility in Shanghai. For enquiries or to register contact Anneli Kallman anneli@lngjournal.com Tel: +44 (0)