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Energy

Mitsui expands LNG processing fleet with eye on Southeast Asia

Floating units offer cheaper alternative to onshore facilities

A floating storage regasification unit, left, processes LNG directly from the carrier.

TOKYO -- Mitsui O.S.K. Lines will more than double its fleet of LNG regasification ships, a low-cost alternative to onshore import terminals, to tap into a construction boom for gas-fired power stations in such developing regions as Southeast Asia.

The Japanese maritime shipper will add six floating storage regasification units (FSRUs), bringing its total to 10 by 2025. This is part of plans to expand its LNG-related fleet to 110 vessels by the same year from about 90 at present. The company is expected to invest upward of 100 billion yen ($940 million) for these efforts, including vessels for joint ownership.

Southeast Asia, where demand for electricity is surging, is a hot market for power stations reliant on LNG. There are "10 to 20 known projects" in countries such as Thailand and the Philippines that might be accompanied by the floating units, said Mitsui O.S.K. President and CEO Junichiro Ikeda.

After liquefied natural gas is shipped by sea, the energy source is returned to a gaseous state at onshore receiving terminals or, increasingly, at FSRUs, before being transported to a gas-fired power station by pipeline.

One advantage of the floating units is their lower construction costs. They typically require only about a third of the investment needed to build onshore terminals because no land needs to be acquired and no foundation work is necessary.

The vessels also take just one to three years to build -- two to three years less than conventional terminals. This means countries receiving LNG can bring a power station online sooner.

Part of the addition to Mitsui's fleet will be a floating unit the company is building for a gas-fired power station to come online in Indonesia's West Java Province in 2021. The project, run by a consortium that includes Japanese trading houses Marubeni and Sojitz, calls for developing the plant along with the special vessel, which will sit offshore about 21 km from the power facility. The concurrent development project is the first of its kind in Asia, according to the companies.

Mitsui commands more than half the LNG transport market in Indonesia, where no local players have the same expertise. The Tokyo-based company aims to win more shipping contracts there.

As the world's top LNG transporter, Mitsui boasts a capacity of about 5.2 million cu. meters. A job to operate an FSRU would mean a long-term contract for receiving, storing and heating LNG back to gaseous form. The company hopes to generate a stable income by combining these services with LNG shipping.

Mitsui, which has spun off the container business that had generated upward of 40% of its revenue, is setting its sights on the growing field of transporting energy, including LNG. LNG-related operations accounted for about 7% of revenue for the year ended in March. The company aims to lift the figure to about 20%.

Global demand for natural gas is projected to balloon to 4.4 billion tons by 2040 from 3 billion tons in 2017, according to the International Energy Agency.

European and American peers own 80% of the world's roughly 30 FSRUs. While they face the higher risk of damage from accidents than container vessels and onshore terminals, the global fleet is expected to increase to about 60 by 2020, according to one estimate, as demand for LNG rises.

Sojitz and other trading companies are also active in the FSRU field in Japan, the world's biggest LNG importer, while likely entrants include shipping group Nippon Yusen.

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