Asian Offshore, Marine Firms Reinvent to Survive Downturn

Several Asian offshore and marine (O&M) firms, battered and bruised by an industry slowdown, are responding to the changed market environment by reinventing their businesses. They've tapped into existing competencies to expand service offerings, venturing into new areas such as downstream petroleum, offshore windfarms, cruise ships, fishing vessels and even solar energy.

Diversification has become a buzzword for these relatively small, but nimble Asian companies in their quest for business survival. Some have been nudged into seeking alternative revenue streams as profits fall, while others acted out of necessity to stem growing losses.

“It’s very important for [firms] to diversify, given that most industry players are expecting lower-for-longer oil prices,” Joel Ng, an analyst at Singapore’s KGI Fraser Securities Pte Ltd. said in a Reuters report.

C-Mar Sees Opportunities

Still, some O&M firms are not contemplating business diversification just yet as they prefer to leverage on existing service offerings, albeit in areas that continue to generate growth. One of these is C-Mar Group, a marine offshore and dynamic positioning (DP) services provider.

While profitability for C-Mar was impacted by the industry downturn, the firm remains optimistic about market opportunities in its existing business – which focuses on vessel and crew management, subsea engineering and DP training and consultancy – in places such as Iran and Southeast Asia. 

Chris Hawdon
Chris Hawdon, Group CEO, C-Mar
Group CEO, C–Mar

“Iran is going to provide quite a lot of work because they have been cut off by sanctions for many years. There is a lot of maintenance work and new developments,” C-Mar Group Chairman Chris Hawdon told Rigzone in Kuala Lumpur, Malaysia during the Offshore Technology (OTC) Asia 2016 Conference in March.

C-Mar is also looking to expand its training services in Southeast Asia, where development of the local workforce and the transfer of technology are assuming greater importance. The firm, which has DP centers in London, Rio de Janeiro, Houston, Shanghai, Mumbai and Singapore, said it trained 45 percent of global DP students in 2013.

“We are now looking at offering a wider range of courses in those centers. We see technology transfer and local upskilling as the big issues particularly as the Western workforce ages,” Hawdon said.

TRIYARDS Breaks New Ground

Meanwhile, TRIYARDS Holdings Ltd., a Singapore-headquartered integrated engineering, fabrication and ship construction solutions provider for the O&M sector, is an example of an Asian shipyard that established a diversified clientele in the current market.

In its latest contract, awarded April 10, TRIYARDS will have to build two liquefied natural gas- (LNG) powered aluminium catamarans for the Netherlands-based ferry operator Rederij Doeksen for $50.1 million (EUR 44 million).

The firm, which operates yards in Singapore, Vietnam and the United States, also ventured into the renewable energy segment. It secured a $17.8 million contract in early April to construct three wind farm support vessels as well as building a luxury river cruise vessel.

“These contracts are the result of our conscientious efforts to diversify our client base and product offering. In addition, the wind farm vessel orders attest to our growing standing in the renewable energy market. We will continue to establish a greater foothold in this sector as well as seek opportunities in addition to those in the traditional market,” TRIYARDS CEO Chan Eng Yew said in an April 7 press release.

Last December, TRIYARDS secured a $21.8 million (NTD 716 million) contract from Taiwan’s state-owned CPC Corp. to build two oil barges, which will supply bunker fuel to vessels in the country’s harbor and coastal areas upon delivery in 2018. Chan attributed the contract success to the company’s “flexibility in engineering and fabrication solutions … [which ensures that] TRIYARDS is well positioned to address opportunities beyond the oil and gas sector.”

The company’s diversification beyond the offshore oil and gas sector began yielding results after the third quarter of 2015, just over a year after oil prices slipped from the psychological $100 per barrel mark. TRIYARDS won $100 million contracts in October 2015 for industrial fabrication and construction of three chemical tankers and two high speed craft.

TRIYARDS’ other contracts included a $12.8 million deal to build four escort tugs, a $26.4 million construction order for a scientific research vessel from Taiwan Ocean Research Institute, and a $19.1 million contract to build two wind farm crew transfer vessels and a passenger ferry.

TRIYARDS’ business diversification appears to have had the desired effect as the company reported April 7 that the oil and gas sector accounted for only 61 percent of its $513 million net order book as of Feb. 29.

O&M Firms Keen on Renewable Energy Segment

Other Asian O&M firms have also taken a similar path to tap business in the renewable energy sector, including Singapore’s liftboats and service rig provider Ezion Holdings Ltd. and integrated oil and gas engineering and drilling solutions firm SBI Offshore Ltd.

Ezion signed an agreement with an unnamed Chinese state-owned enterprise (SOE) in December to support the latter’s offshore wind power installation projects along China’s coastal regions. The firm will deploy its service rigs for the loading, construction, transportation and installation aspects of the wind turbine development projects under the deal.

“The agreement marks a major step forward for the Group to participate and support the potentially high growth wind energy market of China. The Group believes that the versatility of its fleet of service rigs and the expertise in operating the units will allow the Group to enhance utilization for the energy markets,” Ezion said Dec. 14 in a press release.

SBI, like other O&M companies struggling financially in the current industry climate, revamped its business focus to stem losses. The company, which posted a net profit of $610,000 in 2014, recorded a $4.04 million loss in 2015. And in September, shareholders approved the company management’s strategy to branch into the renewable energy business.

SBI had earlier formed a 51:49 joint venture, Graess Energy Pte Ltd., with Germany’s Grass Group to build and operate solar photovoltaic energy plants and systems as well as to undertake independent power producer activities.

To strengthen its solar energy business, SBI appointed Chan Lai Thong as the new CEO in March. The search for alternative revenue streams impacted some of SBI’s core O&M business operations. SBI said in the Straits Times March 28 that the focus on solar business has “significantly reduced operating costs of the O&M business.”

NauticAWT Ltd., a Singapore-based oil and gas firm offering subsurface, subsea and surface facilities engineering services and contracting solutions, is another such outfit looking to the renewable energy sector to shore up its business. Its ultra-high performance cementitious NAXT products have recently received certification and approval for use in onshore wind turbine foundations by wind turbine manufacturer Vestas Wind Systems A/S.

John Gronbech, CEO of NauticAWT said in the April 7 press release that Vesta’s product endorsement will strengthen his firm’s “capability in this market which is considered a key driver for growth in the coming years.”

Ventures to Non-Traditional Business

Despite the interests of Asian O&M companies in the renewable energy or other energy-related sectors, some explored other business options. Singapore-listed Vard Holdings Ltd. (VARD), for instance, ventured into non-traditional areas such as construction of naval and fishing vessels, while marine and logistics services firm Sinwa Ltd. engaged in the provisioning business for cruise ships.

VARD’s building orders since August 2015 highlighted the firm’s new business focus. Among them were two contracts, worth $46.4 million (NOK 385 million), for a coastal fishing vessel for Norway’s Breivik AS and a trawler for a Canadian client. VARD will also build an Antarctic icebreaking vessel for the Chilean Navy for $4.5 million (EUR 4 million).

In March, VARD signed a letter of intent with France’s PONANT to build four luxury expedition cruise vessels for the latter. The company’s CEO and Executive Director Roy Reite said the “project is fully in line with our diversification strategy to enter the expedition cruise market.”

Meanwhile, Sinwa managed to stay profitable in 2015 despite the downturn in the oil and gas industry, due to diversified businesses that cover the general shipping and offshore marine sub-sectors. However, given uncertainty over the recovery in global oil prices, Sinwa is investing $8.1 million (SGD 11 million) to redevelop a local warehouse to expand its provisioning business catering to cruise ships that dock in Singapore.

“It will enable us to purchase in bulk directly from overseas, bringing down the costs and profitability of our operations,” Sinwa Chairman Mike Sim told Singapore Business Times March 5 in reference to the warehouse, which the company is funding from internal cash resources.



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