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Discovery Reports

Teekay fuels growth in emerging markets

Discovery Reports

PUBLISHED : Wednesday, 03 October, 2012, 4:01pm
UPDATED : Wednesday, 03 October, 2012, 4:03pm

Sustaining the continued industrialisation on the mainland depends on the steady supply of oil and gas from regional and international players. The International Energy Agency forecasts that the mainland will account for 65 per cent of the world's oil demand growth and about 30 per cent of natural gas demand growth over the next 25 years.

With its diversified marine midstream business platforms, New York Stock Exchange-listed Teekay Corporation is in a prime position to respond to the increasing oil and gas demand from the mainland and other emerging markets.

Teekay is one of the world's largest marine energy transport, storage and production companies. It transports approximately 10 per cent of the world's seaborne oil. Teekay is the fourth-largest operator of leased floating production storage and offloading (FPSO) units in the world.

The company also provides floating storage and offloading solutions as ancillary external storage for FPSO units.

Teekay leverages sophisticated project management expertise to bring energy to markets all over the world with the Teekay Spirit - safety and sustainability, passion, integrity, reliability, innovation and teamwork.

Demonstrating its ability to adapt to changing market landscapes, Teekay has grown its assets tenfold in the last 15 years.

To date, Teekay manages and operates US$11 billion worth of consolidated assets, comprising approximately 152 liquefied gas, offshore and conventional vessels.

"At a time when many of our competitors struggled, Teekay has emerged from the recession with a solidified position as a global leader in its sectors," says Peter Evensen, president and CEO of Teekay.

Aside from its own fleet, Teekay works with ship owners to fulfil charters. By partnering with Teekay, ship owners gain access to worldwide marketing, chartering and operational services. Teekay helps ship owners maximise the earnings of their fleets, minimise market fluctuation impact and manage operational risks.

Teekay has global chartering teams in London, Singapore, Houston, Tokyo, Vancouver, Connecticut and Stavanger. An agile organisation, Teekay is composed of 6,400 professionals around the globe. Rooted in a culture of safety and operational excellence, Teekay's workforce is committed to delivering top-notch services to its customers.

"From start to finish, our focus is to deliver on time consistently. We understand teamwork, superior planning and technical due diligence are essential to successful project execution," says William Hung, Teekay vice-president for strategic development.

Aside from 24/7 chartering, commercial operations, finance and accounting, and technical management support, Teekay also develops solutions that add value to customers.

"We continue to grow through innovation. Teekay initiated an innovation and technology team to drive the investigation and development of value-added, differentiated business opportunities last year," Evensen says. "Simultaneously, our business development team works co-operatively with customers and partners to develop these new technologies, shortening time to market and minimising risk."

Teekay is a company with a strong balance sheet and ample liquidity. Its forward fixed rate revenues amount to US$16 billion. The company also posted US$203.5 million total cash flow from vessel operations for the first quarter of the year, up by 37 per cent from the previous year.

"Our industry is facing a scarcity of capital. Fortunately, through our solid reputation in the financial community, Teekay has access to multiple capital markets for funding future growth," Evensen says.

There are three publicly-traded subsidiaries under the Teekay umbrella: Teekay LNG Partners, Teekay Offshore Partners and Teekay Tankers. Through these companies, Teekay built a significant presence in the liquefied natural gas (LNG) shipping sector and offshore oil production, storage and transport sector.

"Over the past few years, Teekay's daughter company structure has been an important part of positioning the company for profitable growth. We have dedicated financial entities to raise capital and pursue opportunities in each of our core segments," Evensen says.

Teekay LNG Partners

Through Teekay LNG Partners, Teekay conducts extensive operations in the LNG, liquefied petroleum gas (LPG) and crude oil shipping sectors. Teekay owns the world's third-largest independently owned LNG fleet.

Teekay LNG provides marine transport services under long-term, fixed-rate time charter contracts to energy and utility companies. Some of Teekay LNG's blue chip customers are RasGas, BP, Chevron and Repsol.

In a joint-venture project with Marubeni Corporation completed in February, Teekay LNG acquired ownership interests in six LNG carriers from A.P. Moller-Maersk. The acquisition increases Teekay LNG's presence in the growing LNG shipping market. Teekay LNG has 27 LNG carriers, five LPG carriers and 11 conventional tankers.

Driving the growth of the LNG sector is Japan. The nuclear disaster last year prompted an increase in Japan's LNG imports by 12 per cent to 78.5 million tonnes. Teekay LNG sees that Japan will continue to be a strong force in the LNG sector until the nuclear reactors are back online. With 30 per cent growth of its LNG imports to 12 million tonnes, the mainland is also crucial in the growth of the industry.

"With the global demand for LNG expected to increase by more than 50 per cent by 2030, our role in providing marine solutions to the gas industry continues to grow. Our business development team is exploring more value-added LNG projects, including floating storage and regasification unit solutions," Evensen says.

Teekay Offshore Partners

Teekay Offshore Partners - the marine transport, oil production and storage services arm of Teekay - is the world's largest owner and operator of shuttle tankers. It caters to the offshore oil industry, with focus on the fast-growing, deep water offshore oil regions of the North Sea and Brazil.

Teekay Offshore's experience in weathering challenging conditions in the North Sea gives it an advantage in capitalising on new discoveries in the area. Offshore oil represents approximately 30 per cent of total world production, with a record number of new discoveries and projects initiated in the past several years. Teekay Offshore is in an ideal position to capitalise on these new projects.

The fleet of Teekay Offshore comprises three FPSOs, five floating storage and offtake, 40 shuttle tankers and 10 Aframax vessels. Teekay Corporation adds more FPSOs to its fleet with the acquisition of three vessels from Norwegian company Sevan Marine. The acquisition brings Teekay closer to achieving its goal of becoming the leader in FPSO operations, even in harsh environments.

Aside from the FPSO acquisition, Teekay Offshore also acquired an equity interest in Sevan. Additionally, Teekay will enter into a co-operation agreement to acquire future FPSO projects that Sevan will develop.

"Our ownership in Sevan provides Teekay with a pipeline of on-the-water FPSO growth opportunities. Coupled with Teekay's operational capabilities and financial strength, Sevan's technical capabilities represent a powerful FPSO combination," Evensen says.

Cash flow from Teekay Offshore's vessel operations increased to US$102.1 million in the first quarter of this year, from US$92 million in the same period last year. This increase was primarily due to a full quarter contribution from the Sevan acquisition of the Piranema FPSO.

Teekay Tankers

At the heart of Teekay's success is its conventional tanker business. Teekay Tankers handles the oil tanker business of Teekay. It manages a fleet of

10 Aframaxes, six Suezmaxes and one very large crude carrier (VLCC). Teekay Tankers agreed to acquire a fleet of

13 double-hull conventional oil product tankers and related time-charter contracts from Teekay in April this year.

The addition of 13 modern vessels nearly doubles Teekay's fleet size and provides a broader platform for Teekay Tankers in the mid-size crude oil tanker segment. The transaction also introduces product tankers into Teekay's fleet mix.

Growth on the mainland

Teekay founder Torben Karlshoej built Teekay's Aframax business around the Far East trade. Serving the region for more than 35 years, Teekay sees immense growth potential on the mainland as it is the second-largest importer of crude oil and has increasing LNG imports.

"Our experience commercially managing both conventional and LNG carriers can add value to Chinese charters and ship owners. Teekay sees itself building long-term relationships with suppliers, shipbuilders, ship owners and charters," Hung says.

Teekay opened a representative office in Shanghai last year to better position itself in addressing new business opportunities and to provide quick response times to clients. The representative office fortifies Teekay's long-term commitment to the mainland.

For the past five years, the mainland has been a key location for Teekay's new buildings: four Suezmaxes at Bohai Shipyard, three small LPG ships at Taizhou Wuzhou Shipyard, two multigas ships on order at Dingheng Jiangsu Shipbuilding and VLCC new building on order at Shanghai Waigaoqiao Shipbuilding Company, not to mention the Sevan units constructed by Cosco Group. These new buildings are partly financed through China EXIM Bank.

Aside from shipyards, Teekay also works with Chinese companies for vessel charters. Teekay seeks increased co-operation with Chinese companies to develop vessels of the future.

Teekay made headlines last month with its partnership with Hong-Kong based Anglo-Eastern Ship Management. The union between the two companies is one of the world's largest pacts between an independent ship management company and a ship owner. The strategic partnership between Teekay and

Anglo-Eastern encourages knowledge exchange that will serve as a foundation for creating a joint ship management firm to oversee part of Teekay's fleet.

As environmental legislations continue to affect the way shipping companies operate, Teekay believes that its expertise can help usher in new technologies that will address the needs of the changing times. The company sees that close partnerships with clients and suppliers are the best way to innovate and prepare for the future. Teekay has partnered with suppliers and customers to develop the next generation of tankers with a new eco-design.

"We could offer local Chinese partners our breadth and scope of international operations from a commercial and technical perspective.

At the same time, local partners have solid foundations on the mainland and the Far East, which would fit with Teekay's growth ambitions in this region," Hung says.