CEO's Review
This has been very much a year of reaping benefit from some of our new initiatives. Our first “self-designed and built” gas tankers were delivered from our shipyard in China to Skaugen Marine Construction (SMC), vindicating our decision to move into China over a dozen years ago - as well as our approach to renewing the fleet by using our own know-how and talented team of professionals. Two gas vessels were completed during 2007 and two will be completed in the first half of 2008 – at considerably below prevailing market rates – and we see no reason why SMC, the programme manager, should not continue this success as we complete up to 12 further vessels.
Our SMC initiatives were a reason - though by no means the only ones – why we performed particularly well during 2007. Norgas was also a good performer. It is true that we are fortunate to be riding the wave of a particularly strong petrochemical market at present, but it is due to the hard-fought efforts of previous years that we have been able to retain and extend our customer base and to focus on cost and service leadership in the industry. As the golfer Gary Player famously remarked: “The harder I work, the luckier I seem to get!”
SPT has once again had difficult conditions to contend with in 2007, in no small part due to having to hire-in vessels at high market rates to cover contracted business. This situation should have eased towards the end of the year as this business, too, took on newly-built vessels, but some unfortunate events took their toll with sudden very weak spot markets for tankers. It has been four years since the six new ships, with the special features designed by our own teams, were ordered and the commencement of deliveries has been a welcome relief to everyone involved with the company. They are without doubt excellent performers with enhanced service and productivity features that should change the way business is done.
But 2007 has also been about building even more of our future. Nordic LNG, the natural gas business we are developing in conjunction with our partner, Lyse Gass, is gaining momentum. Lyse and their partners have begun construction of the 300,000 tons liquefaction plant in Stavanger, we have a long-term contract with Shell for the supply of gas and our Multigas vessels that can be used for the transportation of LNG are well into the build phase. Our first customers have been signed up and we are on target for a fully operational service in early 2010.
A longer-term activity – that of CO2 transportation – is also moving from the conceptual stage towards a bona fide business proposition. Though carbon capture and storage (CCS) is still in its infancy, it can undoubtedly be part of the solution when it comes to reducing CO2 emissions – particularly by power generators. Our involvement, as a transportation partner, in a study in conjunction with one of Europe’s leading power companies is just a first step, but it shows our determination to be at the forefront of the industry as and when this business takes off.
The global village
I would like to take his opportunity to touch on a broader issue that I believe is not just important to I.M. Skaugen, or Norway, but to every business operating, wherever they may be in the world.
To compete in a global marketplace, we - as many Norwegian based companies need to – must attract the best talent from around the world. When I began working at the company, we were solely Norwegian and operating from Norway. Today we are global in our presence and have a multicultural approach to our business. We aim to hire the most talented people with the highest enthusiasm and wherever we can find them in the world to make up our industryleading team.
China has been a great source of talent for us. The country already produces more university graduates than all of Europe; India is not far behind, and as the number of graduates from emerging economies soars over the next 20 years, it will become increasingly important for Norwegian companies to draw on the widest possible pool of talent. For example, Saudi Arabia has now more than 22 universities and if you look at the history of the region you see their commercial and inventive acumen stretches back far longer than in Europe. The same goes for China.
In a different sphere, take a look at football. The team that my young son Alex supports, Arsenal, was once uniformly English. Now, it is a multinational team full of talent. You may think that individuals from so many different countries, speaking so many different languages, and each with their own individual style of play, could not gel as a team. But actually it works. As Arsenal’s French manager, Arsène Wenger, explains: “Each person brings from his own culture a positive side, which comes together in the service of efficiency. That is the beauty. It is almost magical.” In less than a decade Arsenal has won several Premiership titles, four FA cups, and come within minutes of winning the Champions League.
Unity in Diversity
But, diversity is not only good in itself. It also acts as a magnet for talent. Talented people are drawn to cities like New York, London - and now Shanghai - because they are exciting, cosmopolitan places - and that in turn boosts economic growth. But the biggest economic benefit of immigration is the stimulation of innovation. Many exceptional individuals with brilliant new ideas are often immigrants. Instead of following conventional wisdom, immigrants tend to see things differently, and as outsiders are more determined to succeed. 21 of Britain’s Nobel-prize winners arrived in the country as refugees.
Most innovation nowadays comes from groups of talented people sparking off each other – and foreigners with different ideas, perspectives and experiences add something to the mix. People from different backgrounds thinking differently, bouncing ideas off each other and can solve problems better and faster, as a growing volume of research shows. Just look at Silicon Valley. Google, Yahoo! and eBay were all co-founded by immigrants arriving not as university graduates, but as children. In fact, nearly half of America’s venture-capital-backed start-ups have immigrant co-founders.
Diversity is not only vital in high-tech, it’s crucial to the economy as a whole, because an ever-increasing share of our prosperity comes from companies that solve problems - be they developing new medicines, computer games or environmentally friendly technologies, designing innovative products and policies, or providing original management advice.
The bottom line is this: since diversity boosts innovation and innovation is the source of most economic growth, critics who claim that immigration has few or no economic benefits are profoundly mistaken. For one, we are determined to show that our method of employing the best people, wherever they may be, will help to drive our own innovative, forward-thinking ways.
Finally, I would like to thank each and every one of our stakeholders who has contributed to a successful year for the company. Your efforts are much appreciated. I truly hope that you will all continue to be a part of the I.M. Skaugen family in 2008 as we look to continue our winning ways.
Morits Skaugen, CEO
5 February 2008
Ibsen statue donated by Skaugen to Shanghai Theatre.