Marine industry looks to cruise ships, wind farms to weather oil slump

Triyards Holdings

12/04/2016 24:00

* Weak oil prices slash spending by big energy companies 
    * After relying on oil sector, Vard targets cruise ships 
    * Other companies looking at supporting offshore wind farms 
    * Singapore marine, offshore engineering output falls to 
$14.5 bln 
 
    By Aradhana Aravindan and Keith Wallis 
    SINGAPORE, April 12 (Reuters) - Marine and offshore 
engineering companies are turning to cruise ships, fishing 
vessels or even sea-based wind farms to keep their earnings 
afloat as weak oil prices slash new spending by big energy 
companies. 
    Many companies that have focused on building or chartering 
vessels to support offshore drilling and exploration have seen 
orders and charter rates tumble following a two-thirds drop in 
oil prices  LCOc1  since mid-2014, pushing them to diversify. 
    Singapore-listed Vard Holdings  VARD.SI  last month signed a 
letter of intent to build four luxury expedition cruise ships 
for French company Ponant. The vessels are designed to carry 
thrill seekers to the polar regions and remote ports that are 
inaccessible to most ships.  
    Vard has over the last few years mainly catered to the 
energy sector, but wants to grow its non-oil business that 
includes research and naval vessels. 
    "We need to - and we want to - reactivate that and make that 
a much bigger part of the business, now that the oil and gas 
market is down," said Holger Dilling, an executive vice 
president at Vard, which is majority-owned by Italian ship 
builder Fincantieri  FCT.MI . 
    Oil and gas made up 80 percent of the business over the past 
five years, but this could fall to 40 percent over the next two 
years, Dilling said. 
    Another problem for the industry is a glut of offshore 
supply vessels (OSVs) that serve oil rigs. 
    The number of such vessels rose 83 percent between January 
2008 and June 2015, whereas the number of drillships, jackups 
and semisubmersibles increased only 38 percent, IHS Energy data 
shows. 
    The global OSV fleet will rise by another 9-18 percent this 
year, on top of the 4,400 ships already operating, according to 
ship broker Banchero Costa.   
    Charter rates have dropped by two-thirds for some vessels in 
the last two years, from between $17,000-$20,000 a day in March 
2014 to around $6,000 now, according to shipping services firm 
Clarkson.  
    With so many vessels lying idle, three Australian companies, 
including shipbuilding project management firm Silverstar 
Marine, have partnered to convert some into luxury explorer 
vessels complete with a helideck in order to target well-heeled 
customers. 
                     
    CLEAN ENERGY    
    "It's very important for (firms) to diversify, given that 
most industry players are expecting lower-for-longer oil 
prices," said Joel Ng, an equity analyst at KGI Fraser 
Securities.  
    "It will not be enough to offset the losses from oil and 
gas, it will just cushion a bit." 
    The offshore renewables industry is also fast becoming a 
target market as countries such as China boost their clean 
energy capacities. 
    Singapore-based Ezion Holdings  EZHL.SI , which owns service 
rigs and liftboats used in offshore construction and maintenance 
projects, signed a joint venture in February with a Chinese 
state-owned enterprise to support offshore windfarms. 
 urn:newsml:reuters.com:*:nWNBS0230G 
    China plans to increase its installed offshore wind capacity 
to 30 gigawatts by 2020 from just 2.5 gigawatts at present, 
according to brokerage DBS Vickers Securities.  
    The broker said a liftboat could help install 200 megawatts 
of offshore wind capacity a year, meaning that up to 30 
liftboats could be required over the next five years. 
    Windfarm support vessels and a luxury river cruise vessel 
are among new contracts won by Triyards Holdings  TRIY.SI , 
which has branched out since its listing in 2012 when its order 
book was almost 100 percent from oil and gas clients.  
    "It has always been our strategy to have a diversified 
pipeline of new building projects," Triyards, majority-owned by  
oilfield service firm Ezra Holdings  EZRA.SI , said in an email. 
    It is one of many shipbuilding and offshore support firms 
that operate out of hub Singapore. Output from the marine and 
offshore engineering sector dropped 21 percent to S$19.6 billion 
($14.5 billion) in 2015, preliminary data from the Economic 
Development Board shows. 
    "Singapore firms face competition from other contract hungry 
shipyards and operators that already have orders to build and 
provide ships to wind farm projects," said Ralph Leszczynski, 
head of research at ship broker Banchero Costa in Singapore.    
 
 (Reporting by Aradhana Aravindan and Keith Wallis in SINGAPORE; 
Editing by Ed Davies and Richard Pullin) 
 ((aradhana.aravindan@thomsonreuters.com; +65 6403 5659; Reuters 
Messaging: aradhana.aravindan.thomsonreuters.com@reuters.net)) 
 
Keywords: OIL SERVICES/OPPORTUNITY