Norway's I.M. Skaugen to Establish Joint Venture to Ship LNG and Petrochemicals from Middle East to Asia

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Researched by Industrial Info Resources (Sugar Land, Texas)--Leading Scandinavian shipping company I.M. Skaugen SE (OSL:IMSK) (Oslo, Norway) will establish a joint venture company, Skaugen Gulf Petrochem, in Bahrain to transport liquefied natural gas (LNG) and petrochemical products from Middle Eastern suppliers to China and countries in Southeast Asia. The company will be established by I.M. Skaugen in association with Bahrain's National Oil and Gas Authority (NOGA) (Manama, Bahrain) and Capital Management House B.S.C. (CHM) (Manama, Bahrain). As per the agreement, NOGA and I.M. Skaugen will each hold a 35% stake in the venture, while CHM will hold the remaining 30%. CHM is an Islamic investment bank that is controlled and licensed by the Central Bank of Bahrain (Manama). Skaugen Gulf Petrochem will procure and rent ships that will be utilized for transportation.

I.M. Skaugen is engaged in providing marine logistics and transportation services to customers in the petrochemicals, LNG, liquefied petroleum gas (LPG) and chemicals sectors. The group's innovative "small-scale LNG" solution is also gaining popularity worldwide. The concept aims to provide easy and low-cost LNG supply connectivity to industrial establishments and energy projects that do not have direct access to natural gas pipelines. The gas is transported from LNG tankers, production facilities and export terminals. The group provides marine transportation services and gas transport services under the brand names Skaugen PetroTrans Incorporated (Houston, Texas) and Norgas Carriers AS (Oslo, Norway), respectively. The group, which is also involved in shipbuilding, presently operates a fleet of 42 carriers and vessels. I.M. Skaugen's employees are based in China, the U.K., the U.S., Bahrain and Norway, and the company serves customers worldwide. I.M. Skaugen also operates two state-of-the-art training centers in China and Russia.

Confirming the announcement, Dr. Abdul Hussain Mirza, Bahrain's Oil and Gas Minister and the chairman of NOGA, said that the proposed joint venture is part of NOGA's strategy to increase investments and diversify revenue streams. Mirza expressed confidence that the strategy, which will also include deals with international oil and shipping companies, will increase return on investment. NOGA's proposed initiatives are also expected to provide impetus to the plan submitted by the Bahrain Economic Development Board (Manama, Bahrain) to boost the country's logistics and transportation sector.

NOGA, which is also focusing on developing new oil and gas projects, is scouting for international participation in these projects. According to Shaikh Mohammed Bin Khalifa Al-Khalifa, the general manager of NOGA, over the next five years Bahrain is proposing to develop eight new gas wells at a combined cost of $200 million. In a related development, NOGA has selected Occidental Petroleum Corporation (NYSE:OXY) (Los Angeles, California) to undertake deep gas-drilling activities. The drilling procedures, which will be carried out at depths of 20,000 feet over a seven-year period, are estimated to cost $100 million to $200 million. Occidental Petroleum will bear the cost of drilling and exploration.

Bahrain's focus on new oil and gas projects comes at a time when a recent report by the Arab Petroleum Investment Corporation (Dammam, Saudi Arabia) reveals that, although natural gas reserves in the Middle East and North Africa (MENA) region exceeded 84 trillion cubic meters in early 2010, producers will continue to face acute gas shortages. The shortage has been attributed to a lack of investments and receding reservoirs. Experts have observed that energy companies could increase domestic gas prices to create funds for new projects. The report also indicates that several countries, including Bahrain, Algeria, Oman and Tunisia, have not been able to keep up with growing natural gas demand. Gas production replacement has become critical and a delay could lead to a supply crunch, especially in Bahrain and Algeria.

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