Shipping China Energy

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Chinese offshore yards - Introduction overview

• Shipping China Energy
• 29 April 2009

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Outline of Worldoffshoreyards.com

• Worldoffshoreyards (www.worldoffshoreyards.co
  m) is an outgrowth of a Worldyards. Both are
  web-based information and analytical systems
  containing all relevant commercial, technical and
  management information on global shipyards.
  Worldoffshoreyards covers global offshore EP and
  OSV yards.

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Core list with credentials in drilling rigs and
structures

• COOEC (Tanggu and Qingdao)
• Cosco Shipyard (Dalian, Nantong, Zhoushan,
  Qidong)
• China Merchants Heavy Yiulian (repair)
• Dalian Shipbuilding
• Yantai Raffles
• STX Dalian
• Shanghai Waigaoqiao
• Qingdao Beihai Heavy Industries
• - Jiangsu Hantong

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Public and private Chinese merchant builders
expanding into offshore business
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continuation
Examples of merchant builders (outside China)
expanding to offshore
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Timeline of China offshore (1)

• In June 2006, COOEC Qingdao started operations to
  supplement the Tanggu site and serve as one of
  the biggest fabrication yards in the world. A
  unit of CNOOC, this is the largest and most
  credentialed offshore shipyard in China.
• STX Group has 2 billion project started in 2007
  at Dalian with ambitions to get into offshore
  structures in addition to its orderbook of bulk
  carriers.
• In May 2007, Shanghai Waigaoqiao delivered the
  hull of the nation's biggest floating production,
  storage, and offloading (FPSO) vessel Hai Yang
  Shi You 117 to ConocoPhillips China.
• In September 2007, Qingdao Beihai delivered the
  country's first domestically developed jackup to
  a local user China National Petroleum Offshore
  Engineering Co Ltd (of CNPC).

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Timeline of China offshore (2)

• In November 2007, Yantai Raffles delivered a
  third round FPSO to Sevan Marine for completion
  at Keppel Verolme shipyard for topside hook-up
  and commissioning.
• In March 2008, Shanghai Shipyard started the
  basin construction for the first phase of the
  offshore engineering base in Chongming.
• In April 2008, Shanghai Waigaoqiao started the
  construction of Chinas first deepwater
  submersible, a 3,000 m semi-submersible
  deepwater drilling platform for CNOOC to be
  delivered in the end of 2010.
• In August 2008, Dalian Shipyard delivered Hai
  Yang Shi You 942, a cantilevered jack-up platform
  built on the ground as the first product Dalian
  Shipyard has completed in its Qianyan offshore
  manufacturing base.

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Timeline of China offshore (3)

• In October 2008, Dalian Shipbuilding is preparing
  to move its facilities to a new shipbuilding base
  due to be constructed on Changxing Island
  including an offshore base.
• The hull of the first Floating Drilling
  Production Storage and Offloading vessel (FDPSO)
  in the world, MPF01, was completed in COSCO
  Dalian Shipyard in December 2008.
• In January 2009, COSCO Shipyard Group signed
  agreement with Qidong (County of Nantong City) on
  the mutual cooperation of COSCO-Qidong Offshore
  Base Construction project.
• Yangfan Qingdao Shipbuilding Co Ltd in February
  2009 won a RMB620m loan to fund an investment of
  RMB2bn to focus on offshore vessels and
  administrative maritime work vessels.

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China offshore status (1)

• Compared with Korea and Singapore, China is
  basically at the lower end of capacity, the
  exceptions being projects entrusted to Chinese
  yards by such as CNOOC and COSL, ie, essentially
  in-house deals.
• Some yards constructing OSVs have upped their
  game, but are more or less reliant on single
  clients, which does not represent a true increase
  in competencies or diversification of the
  customer base.
• Those yards that have experience in hulls for
  rigs and FPSO or else LNG vessels would appear to
  be best positioned to enter the sophisticated
  offshore market.
•  
• Amongst the smaller, low-end yards, it is easy to
  see mass closures and bankruptcies, there are
  just too many of them, and they tend to be poorly
  financed and inefficient.

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China offshore status (2)

• The intent by China to undertake more offshore
  work with Chinese owned assets will undoubtedly
  provide Chinese yards with a cushion. COSL for
  instance have always until recently used older
  second hand tonnage. It is only recently that
  they have had new builds.
•  
• This effort now extends to Chinese built and
  owned rigs. The trend is likely to continue, and
  this should give certain yards the competencies
  to gain work from international owners.
• Offshore is not a tonnage game as has been played
  in the newbuilding sector. Technology and
  management skills are the keys to succeed in the
  offshore sector.
• While foreign designs have been dominant to date,
  there is now evidence that China is working to
  develop its own designs for the offshore arena.

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WY has good quantitative measure on commercial
building (over) capacity.
Worldwide Shipbuilding Output Potential Estimate
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• Arriving at a definition of CGT
• (Worldyards article published in Naval
  Architect)
• - One would quickly discover that the OECD
  segmentations are too broad or course to be
  operational, on micro level, for measurement of
  shipbuilding capacity and analysis of the
  orderbook.
• Through very detailed studies and extensive
  consultation with experts, Worldyards has
  developed the market-oriented segmentations. As a
  commercial concern and taking full responsibility
  of our interpretations, we compared our practical
  working segmentation to correspond with that of
  broad categories given by OECD whenever possible.
  
• Worldyards has examined at length the prospect
  for applying a CGT value to offshore projects.
  Our primary objective was to understanding how
  shipyard capacity might be switched from offshore
  into commercial shipbuilding or vice versa. Based
  on our research, we concluded that the offshore
  industry output is akin to snowflakes no two
  projects are alike enough for a standardised
  inclusion into aggregate measures for capacity or
  output calculations.

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• Conclusion
• There is huge overcapacity for commercial
  shipbuilding
• We can observe many commercial shipbuilders
  rushing into the offshore sector to compensate
  for the drought of orders in commercial sector.
• A unit of measure is crucial so we can compare
  commercial to offshore construction and to
  measure offshore output, to avoid the massive
  overcapacity that we have seen built up in the
  commercial sector.
• China is well on the road to offshore strength,
  but many others have stumbled on this rocky road.

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Thank you and good luck!