Sea billions: how the Norwegian earned $9 billion on ships, oil and fish

Like a fish in oil

“When a five-kilogram cost of salmon in January [2016] higher than the cost of a barrel of oil, none of the oil companies that were not happy, — journalists wrote Bloomberg in his study at the end of February. — John Fredriksen, who made a fortune in tankers and offshore oil, it was at least some consolation. Because for the last year and a half his wealth declined by 40%, while the value of its investments in the fisheries sector has grown by half.”

Last summer, estimated the publication, the seafood producer Marine Harvest for the first time became the most expensive asset in the portfolio of Norwegian Fredriksen. Before that for many years the most valuable investment of Fredriksen had a stake in rig company Seadrill, the founder and Chairman of the Board of Directors is a businessman. Through a chain of holdings in the Fredriksen has approximately equal shares in Seadrill and Marine Harvest — 23 and 26%, respectively. The value of these assets is different now, almost nine times: $193 million vs. $1.7 billion.

All the Fredriksen owned by five investment funds that manage shares in 16 companies: apart from fishing and drilling offshore they are involved in shipping, logistics, oil production and other oilfield services. A special case is the oil trader Arcadia Petroleum, belonging to the Fredriksen personally. Since the core business of the leading businessman in the oil industry, with falling raw material prices in the summer of 2014 the size of his fortune has fallen by almost half. In July 2014, Bloomberg estimated it at $17.1 billion

Over the counter “real-time” Forbes magazine the state of Fredriksen at the end of February is $8.7 billion Bloomberg generously: on February 25 the Agency has estimated his fortune at $10.4 billion, More than half of that amount ($5.7 billion) is in cash reserves, $4 billion are portfolio investments and about $1 billion personal property.

Cinched waist

Thursday, February 25, the day after the publication Bloomberg, Seadrill has published its financial results for the year of 2015. Despite the crisis, the company managed to tighten their belts, reduce their spending by $832 million (against the budgeted $600 million) and significantly exceeded the forecast net income: $285 million vs. the expected $238 million (growth by 2014, 82%). On this news, shares of Seadrill on the Oslo stock exchange soared 8% to 15.2 crowns per share (about $1,75). However, over the last two years quotes Seadrill fell by 93%.

Oslo — New York — Singapore

John Fredriksen was born in may 1944 in German-occupied Norway. His father, Gunnar Fredriksen, worked as a professional welder in the state concern “Norwegian Railways”, and his mother, Johanna Eerbeek, ran the snack bar. Childhood and youth, the future businessman was held in the town Etterstad, a suburb of Oslo. In 1946 it became part of Oslo and since then is one of the residential areas in the Norwegian capital.

During the war the German army at full capacity used of the transport infrastructure of Norway — Soviet historians estimate that by the end of 1943 in the country were deployed 380 thousand soldiers. In Berlin developed plans for construction near the Norwegian Trondheim the “Northern capital” of the Reich, of the metropolis, which would become an important transportation hub. Railroad boom allowed the working family Fredriksen make ends meet. John Fredriksen in his youth decided to follow in the footsteps of his father in the transport industry, but he chose not Railways, and the sea — though his house was not far from the main freight station of Oslo, for her there was a port.

In 16 years, John was hired as a courier at a local steamship company Tenvig og Blehr, which provided brokerage services on freight vessels carrying fish. In parallel Fredriksen tried to study at night school, but dropped it, deciding to educate himself, at the same time accumulating business experience. Soon he was offered the position of broker.

Four years later, Fredriksen left his native Norway: he received an offer of employment from a canadian branch of the Norwegian Fjell Navigation company as an Intern and moved to Montreal. In Canada he stayed only for six months, after which, dissatisfied with the working conditions, asked to be moved to the office of the Corporation in new York. The new head of Jonah, Torsten Voss, gave him as a novice broker complete freedom of action — in particular, the right to receive a Commission from transactions.

Such an approach by his immediate superiors unties the hands of the young businessman, but Fredriksen was immersed in the business practically without support and was looking for another job. “Ticket home” for him was the proposal Manager OLE schröder from the Norwegian shipping company A. O. Andersen — after a year in new York, Fredriksen got home.

In Norway, however, he stuck around for a while — two years later he went to Singapore at the scene of the Deputy head of the regional branch of the international shipping Corporation Wallem & Co. The company was founded in 1903 in Shanghai and has worked exclusively in Southeast Asia: Hong Kong (later moved here the headquarters of the company), Thailand, Philippines. The Singapore office was opened in 1958, but by the end of 1960-ies, the work was attractive — island state has gained fame as one of the most promising markets, thanks to which began shortly before anti-corruption reforms is Lee Kuan yew

A few months Fredriksen settled on this totally unfamiliar market and for 25 years has been head of the Singapore branch of Wallem & Co. But a year later he resigned from the company, which by that time was bought by the British. If earlier Fredriksen is mainly engaged in the transportation of fish, from Singapore he returned home an experienced young specialist in the chartering of tankers.

Norwegian oil

Time start business career of John Fredriksen and her meteoric rise coincided with the oil boom in his native Norway. Oil and gas deposits were discovered by the Kingdom, offshore in the North sea in the early 1960-ies. The impetus for this was the discovery of large gas fields off the coast of the Netherlands in 1959. Several years private transnational corporations, having received from the government a license, conducted reconnaissance, and then in 1966 began the drilling of the first wells.

Initially the returns from these enterprises was modest, and only in August 1969 the oilers opened the first large Deposit of oil / gas — bearing Ekofisk area in the South-Western parts of the Norwegian shelf. Its development involved an American firm Phillips Petroleum, now part of ConocoPhillips Corporation. By the early 1980s, the level of production at the Ekofisk exceeded 400 thousand barrels. every day, now the figure has dropped to approximately 130 thousand barrels.

Over the past decades, oil and gas became the basis of energy of Norway. By 2014, according to the International energy Agency (IEA), 44% produced by country energy (tons of oil equivalent) was from oil, 15% gas.

The beginning of the oil crisis hit Norway much damage. During these one and a half years of the Norwegian Krone in the third, weakened against the US dollar (and for the first time in many years fell below SEK). The devaluation of the crown is not saved by a collapse in oil revenues even in the national currency. In 2015, the value of oil exports amounted to 450 billion against 551 billion kronor a year earlier. At the current exchange rate is about $52 billion and $63.6 billion, respectively. The share of oil in export revenues has fallen from 45.2 to 38.7%.

Dangerous attachments

In Singapore Fredriksen met with risky business decisions, which hardly came into his head, he stay in Norway. For example, he rented the old cargo ships, freight, which were much cheaper. The first such project was a failure: loaded the cement ship were forced to idle in the Nigerian port of Lagos, while the rent was eaten up the reserves of Fredriksen.

To sea transport of oil Fredriksen returned a few years later — thanks to geopolitics. In the early 1970s, he worked in Beirut, organizing through his new company Northern Shipping supplies of Arab oil through Lebanon to Europe. With the beginning of the “Yom Kippur war” of OPEC announced an embargo on selling oil to countries that supported Israel. With the fall of the proposals in the global price of oil soared, and suppliers became unprofitable to use large-capacity tankers. Many carriers went bankrupt, their ships were left to rust in the docks.

In contrast, Fredriksen saw in the unfolding energy crisis new opportunities. Using his knowledge of the industry, communication in the Arab world and the accumulated funds, he took unused tankers for long term rent, subsequently redeeming them. For a while oil prices have stabilized, which allowed Fredriksen to assemble your own fleet in a relatively peaceful environment. In 1979, the collapse of production in Iran (and then Saudi Arabia) has led to another surge in prices. The businessman, according to Bloomberg, earned $40 million.

A few years later, the businessman took advantage of the Iran-Iraq war. Direct delivery of oil via the pipeline from Iran to Syria (a key ally of Tehran) was not possible, and the company Fredriksen offered the Islamic Republic the services in transportation of oil by tankers. Since then, the businessman prefers to work in a politically volatile environment: the higher the rate, the higher the profit.

Rotation on its axis

Risk, Fredriksen is not always won. So, in 1986 he was arrested on charges of fraud and spent four months in prison. Norwegian prosecutors charged Fredriksen and several executives of his company that to their knowledge the crew actually stole them with the oil, using it as fuel for their ships. He was charged with fraud, and endangering the lives of crew members — because instead of bunker fuel used is crude oil. The businessman still categorically rejects the charges, though he had 30 years ago to settle.

Hostility to the Norwegian authorities, complicated legislation and high taxes eventually led to the fact that Fredriksen in 2006 he refused from the Norwegian passport, receiving the Cypriot citizenship. Through this step he became the richest inhabitant of the country and headed in 2015 “index of Robin hood” Bloomberg — section from its status Cypriots would benefit more than any other peoples.

Another annoyance that befell Fredriksen, is it an accident of the tanker Sea Empress off the coast of Britain in February 1996. The ship was off course, and threw him on to rocks in the sea were about 73 tonnes of North sea oil. The ship was owned by another company, Oriental Ocean Shipping, and went under the flag of Liberia, but Fredriksen acknowledged themselves to be the ultimate owner of the tanker and even thought about what to finish career of the shipowner. By this time, he for two years was interested in other business — oil production from offshore developments, but these investments in the extractive sector he came only ten years later. Never left the shipping business in 2005, Fredriksen founded Seadrill. Through mergers and acquisitions he created her from one of the industry’s largest companies with an annual turnover of over $5 billion and Now the market itself Fredriksen returns to where it started half a century ago, to rabotorgovtsev.

Fredriksen and Russia

In may 2014 Rosneft, NADL and the company Fredriksen of Seadrill, which owns 70% of NADL, agreed on the acquisition of Russian company, 30% of NADL in exchange for the assets and investments. The amount of the transaction was expected to be about $1 billion from this amount, Rosneft will contribute to the Charter capital of NADL 100% “RN-Drilling”, another $300 million, the company will provide cash. The second part of the deal involved the bringing to realization of projects of Rosneft on the shelf of six offshore drilling rigs NADL. The value of this transaction as it was reported in July 2014, amounted to $4.25 billion

It was expected that the deal between Rosneft and NADL will be closed until the end of 2014, but was postponed to may 2015. In the fall of 2014, Bloomberg noted that offshore contracts with Rosneft may increase orders NADL 65%.

In early January 2015, “Rosneft” has decided to postpone its offshore project in the Arctic — the company moved the drilling in the Kara sea in 2016. Reuters noted that the company expects to choose a contractor until April—may 2015. Among the options called buying rigs from NADL and freight oil platforms in China or Korea. In April 2015, Rosneft and NADL moved the deal to exchange assets with may 2015 for the period until 31 may 2017.