YRS Updates on First and Future Constructions

Yantai Raffles Shipyard Ltd. (YRS) believes that the investments it has made in its yard and facilities will result in establishing YRS as one of the world-class facilities for construction of large and complex offshore vessels.

WilPioneer, the first DP3 semi-submersible drilling rig to be built in YRS, has presented many challenges, but these are being overcome with the full cooperation of Awilco Offshore ASA. Delivery of this vessel is targeted for fourth quarter 2008. Construction is being done on this rig by building the deck box on the ground and building a revolutionary crane, called Taisun, to mate the deck box to the columns and pontoons. This process will reduce the required manhours by up to 40%. The mating will take place in the dry dock, away from all weather, when the efficiencies from fully outfitting the deck box on the ground can be realized, as opposed to mating sooner and having to continue outfitting work at height.

Taisun has undergone all Governmental tests and each beam has been successfully tested to 12,600 mts.

YRS' private placement exercise in November 2007, when it raised net proceeds of $124 million equivalent, was undertaken primarily to ensure YRS can execute its strategic capital expenditure plans over the next 12-18 months without undue reliance on the equity markets being receptive over that period.

Importantly, these plans include, but are not limited to, participating in two new joint ventures with Chinese partners to construct two new block fabrication facilities that will both enhance YRS' production capacity and secure its supply chain. Subject to approvals, these facilities are expected to provide a committed and secure supply of fabricated and outfitted blocks of up to 60,000T per year, commencing late 2008, over and above the existing arrangements with YRS' longterm outsourcing partners, DOPCO and Gaya.

As intended, YRS is also now dredging its quayside and harbor to an 18 meter water-depth to facilitate the installation and pre-testing of thrusters in the yard. This will clearly introduce significant efficiencies in terms of time, cost and safety.

"We want to make it very clear that we are absolutely committed to continuously improving our processes to the level of world’s best practice," Cho Yong Jin, YRS’ CEO said. "With our yard facilities, we are positioned to achieve our mission to be the Yard of Choice, and with continuing hard work, and focus and commitment to investment in our people, we are confident we will get there for the ultimate benefit of our customers and our shareholders."