Info Malaysia International Shipping Corporation (MISC)

With over 4000 safe and timely deliveries of more than 200 million tonnes of LNG over the last 25 years, MISC Berhad needs no introduction in the world of LNG Transportation. MISC has grown from a humble player with a micro fleet of five to what is now the largest single owner operator of LNG tankers in the world with 21 LNG tankers and 8 newbuilds expected to be delivered in 2008.

In terms of cubic capacity, MISC has approximately 10 per cent of the market share in the LNG segment.

MISC began its foray into the LNG transportation in 1983 with the delivery for Malaysian national energy group PETRONAS of its first LNG cargo to Tokyo Gas terminal in Sodegaura, Chiba.

From the 1980's up to 2002, MISC's sole client has been PETRONAS, whose evolution into a major gas producer and supplier has helped set in motion MISC's own ventures into energy transportation.

The connection with PETRONAS has placed MISC from early on, in a strategic position to develop its LNG transportation business, with the availability of a steady supply of cargoes.

In 1997, PETRONAS acquired a majority stake in MISC and this has helped in the consolidating of marketing strategy and management expertise from the parent company and MISC.

With a secure base volume support from PETRONAS, the next logical step in sealing its position in the LNG transportation business is to broaden its base of business beyond the parent company into third party contracts.

Global player

The result was that in 2002, MISC secured its first third-party contract with Gaz de France for the three pus one-year time charter of the LNG tanker, "Tenaga Satu". Securing this contract was an affirmation of its aim to become a global player.

Two years later, MISC was awarded a 20-month contract to transport LNG for a Swiss unit of US-based Cheniere Energy, J&S Cheniere, which was successfully completed in August, 2005. Both medium-term contracts utilised LNG tankers that were refurbished after their respective contracts ended.

To complete its entry into the global market, MISC in 2005 signed two long-term charter party agreements for the provision of two 157,000 cubic metres LNG carriers with Yemen LNG Company (YLNG), beginning in 2009.

The Yemen contract signifies an important milestone in MISC's LNG business development as it is the first long-term contract with a third-party client.

In 2005, MISC also build new partnerships with major international corporations � BG Group of the UK and Pertamina of Indonesia.

The BG contract will run for the duration of three years with the commencement of employment by BG of "Tenaga Empat". The Pertamina deal, using "Tenaga Tiga", is MISC's first third-party contract within the Asia Pacific region.

While MISC is keen to grow its third party business in LNG, the tie with PETRONAS remains the core of its business strategy.

Leveraging on PETRONAS

In 2003, MISC signed five long-term charter party agreements for the provision of LNG carriers to Malaysia LNG (MLNG) and Malaysia LNG Tiga (MLNG Tiga).

The signing of the five agreements, as well as an earlier agreement signed in June 2002 with MLNG Tiga for the provision of one LNG carrier means that MISC has successfully completed the fixtures of all six LNG carriers ordered from Japanese companies, Mitsui Engineering and Shipbuilding and Mitsubishi Heavy Industries in Japan.

In 2006, MLNG Tiga secured a 20-year sale and purchase agreement covering 520,000 tonnes a year with Japanese company, Toho Gas. MISC will provide the shipping for the contract, which will begin in 2007.

MISC will also benefit from the recent signing between MLNG and Osaka Gas Co. Ltd (Osaka Gas) to supply up to 920,000 metric tons per annum of liquefied natural gas (LNG) for 15 years beginning April 2009, with an option to extend for a maximum of five years.

MISC said it was enthusiastic about spreading its wings further and this means making its mark in the Mediterranean and Atlantic markets.

PETRONAS' foray into the production of LNG in Egypt and the distribution of LNG in the UK will enable MISC to reinforce its presence in the same markets, primarily in the Atlantic Basin.

To handle all the businesses West of Suez, Europe, Africa and the Atlantic, MISC established its Europe Operation office in London in 2004.

With the continuous growth of PETRONAS and its subsidiaries on the global LNG front, MISC embarked on an aggressive expansion of its LNG fleet.

A formidable fleet

While being the largest owner is not the ultimate aim of MISC, as long as the company has the capacity both financially and operationally and while trading provides the necessary margins, then growing the fleet size is a part of MISC's strategy.

MISC recently took delivery of its 21st LNG carrier, the "Seri Amanah" in March 2006 from Samsung Heavy Industries and has eight more newbuildings from various shipyards to follow by the end of 2008, bringing its LNG fleet to 29 in total.

These newbuildings are part of MISC's long term fleet expansion programme to cater to the transportation needs of not only its sister companies of the MLNG Group in Bintulu, Sarawak but also for other PETRONAS joint venture projects overseas.

These additional vessels will also enable MISC to offer operational capability and flexibility to its third-party customers and to take advantage of the vast market potential of global LNG.

Increased competition

LNG's resurgence has brought about increased competition, with the entry of players such as Teekay, OSG, a Japanese consortium dubbed J5 and some big Greek shipowners.

That said, what distinguishes MISC from the rest of the pack is its impeccable credentials. The critical factor for success in the LNG business is integrity of service and this is what MISC has achieved to date.

MISC has built up a large pool of skilled resources to support the shipping needs and the strong management know-how that goes with it.

Clients recognise this fact and it's something that the competition cannot take away from MISC. For example, by providing innovative freight solutions MISC was successful in securing a beachhead in Europe and the US - the two areas where LNG growth is moving forward. The company's action plans will see MISC grow its market share in the Europe-US market.

While other companies can build tankers, not many have the advantage of having a parent company involved in the whole LNG supply chain. MISC's advantage is that it is able to leverage on PETRONAS assets. As such, MISC said it was able to offer a better deal than most other LNG transporters.

Strategic intent

Due to the nature of the LNG business, where long-term shipping requirements are covered during the project development phase, current mega project ventures into regions such as West Africa, Australia, Qatar and Iran have presented new potential business opportunities.

MISC also said it realised it had to keep pace with technological developments.

Skilled Manpower

With the expansion that is taking place in the LNG shipping business over the next few years, one issue which stands out is the shortage of qualified officer level seafarers.

While this is a problem many have only woken up to it recently, although MISC has long had comprehensive training plans in place.

MISC has its own world-class recognised training academy, Malaysian Maritime Academy (ALAM) that is dedicated to providing highly-qualified graduates in the maritime industry.

Strategic steps and investments have been made been to position the academy as a premier petroleum and LNG training hub.

The LNG Value Chain

MISC has also moved into the LNG repair business through its shipyard subsidiary, Malaysia Marine and Heavy Engineering (MMHE). The yard carries out repairs and drydocking for both MISC LNG ships and other shipowners.

MMHE is keen to develop itself as a hub for the provision of LNG Carrier maintenance, repair, refurbishment and other services in Asia and a recent joint venture with Samsung Heavy Industries (SHI) to this end will enable MMHE to leverage SHI's technical know-how in the design and maintenance of LNG tankers.

Growth through Partnerships

MISC's focus is on creating lasting partnerships with its various stakeholders and its tagline "Growth through Partnerships" summarizes the 38 years that MISC has spent cultivating a policy of focusing on long-term relationships with its customers.

Recognising that LNG transportation is a long-term business that requires time, effort, investment, integrity and reliability, much of MISC's success to date has been and will continue to be based on mutually advantageous partnerships and collaboration, the company said.

The pursuit of strategic and energetic partnerships in all of MISC's business and the fostering of longer term relationships will continue to remain a major focus in the company's move forward.

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