Friday, 25 September 2015

Nam Cheong, Pacific Radiance, POSH, Swissco, Triyards, EMAS Spoke in Conference

Asian Offshore Support Journal (AOSJ) Conference

About two weeks ago, I attended a two-day conference in Singapore - Asian Offshore Support Journal (AOSJ). This is an event where industry people gather. To explain simply, the Offshore Support industry consists of companies that own, build or in one way or another related to the Offshore Support Vessels (OSV) supply chain.

source: Asian Offshore Support Journal 

Familiar names of OSV companies listed in the SGX are – Nam Cheong, Pacific Radiance, POSH, Swissco, EMAS and Triyards (subsidiaries of Ezra Holdings), Falcon Energy, Vallianz etc.

Speakers included in this event are: 
  • EMAS - Jon Dunstan, CEO (replaced as CEO on 25 Sep)
  • Nam Cheong - Leong Seng Keat, CEO
  • Pacific Radiance - James Pang, MD  Commercial & Business Devt
  • POSH - Lee Keng Lin, COO
  • Swissco - Sam Kwai Hoong, Hd OSV
  • Triyards - Chan Eng Yew, CEO

The conference brief as follows. Source: Asia OSJ conference

Day 1 -  8 Sep 2015

Today’s oil price only partially explains present market difficulties in the offshore support vessel sector, DVB Bank’s head of shipping and offshore research told delegates at Riviera’s third annual Asia OSJ conference in Singapore on Tuesday. The sharp decrease in the oil price partly explains the present recession in the OSV sector, Henriette Brent-Petersen told an audience of more than 200 industry professionals, including representatives from some of the industry’s leading charterers, owner/operators and suppliers. Cost inflation, a reduction in the barriers to entry for offshore shipbuilding and the fact so many companies are highly leveraged also play a significant part.

Drawing parallels with the bulk carrier market, Ms Brent-Petersen warned that shipyard overcapacity and the fact newbuilding production cycles are so fast, means that the sector risks "killing any rebound in the market before it even starts".

“Don’t blame oil prices,” said Ms Brent-Petersen. “It’s time to focus on core competencies, reorganise and reduce leverage.”

Setting the tone for the day’s discussions with a candid but positive presentation, Rolls-Royce commercial marine’s senior vice president Richard Bowcutt acknowledged that the industry was "in the middle of a perfect storm". He said: “We need to look beyond a difficult one-to-two-year horizon and work on the things that we can do.” These included preparing for tighter regulations, fuel diversity – ‘there will be a place for LNG’ – and a continued geographical shift of the industry as it moves into deeper, more remote and dangerous waters, including the Arctic. “The way we support, service and finance assets will change,” he said. The future will be defined by greater integration and better use of industry intelligence, even if the industry’s commitment to big data was presently big talk.

The idea that stakeholders should focus on the things they can control carried over into the ‘View from the top’ panel discussion, with POSH chief operating officer Lee Keng Lin joking that every phone call was from an oil major looking to cut costs.

Pacific Radiance’s James Pang said the key was "right-sizing" an organisation by ensuring that it is optimised to meet the jobs it has. His company pursues a policy of entering cabotage markets as their complex and demanding operating environments serve as a barrier to entry for others.

Other participants in the session included Miclyn Express Offshore’s Diederik de Boer and Swissco Holdings’ Sam Kwai Hoong.

An entire session was devoted to current market opportunities. Triyards chief executive officer Chan Eng Yew said liftboats represented ‘a new OSV class’ and reported significant contract success here. He also said that Vietnam – where the group has two facilities – was the new China. He believed that the yards were capable of at least matching Chinese production and could offer more competitive prices.

EMAS Offshore’s chief executive officer Jon Dunstan said demand for maintenance, modification and operations services was encouraging and benefited from being a feature of owner/operator capital expenditure rather than operational expenditure. He also spoke favourably of the market for offshore accommodation vessels, pointing out that they would always be needed on oil field developments. This view was endorsed in a very complete paper presented by PT Bayu Maritime Berkah president Adi Agung Tirtamarta.

M3 Marine Group’s Mike Meade saw good long-term prospects in deep-water believing that over time prospects here will eclipse those offered by the shale revolution.

A final session looked at vessel production technology. Echoing Rolls-Royce Marine’s Richard Bowcott’s earlier comments, IHC Asia Pacific’s Francis Tang made the case for integrated offshore vessels. Nantong Rainbow Offshore & Engineering Equipment chief marketing officer Roy Yap presented a modular approach to increasing operational flexibility in an engaging talk which drew ready parallels with Lego. 

As a senior representative with a Chinese shipyard Mr Yap also fielded questions on the Chinese shipbuilding industry more widely. “There are some serious misconceptions around Chinese financing,” he told the gathering. The idea that yards would routinely require just a five or ten per cent deposit on newbuildings was misplaced. Such contract offers were one-off ‘silver bullets’ designed to propel a yard into a new segment.

Their appeal in today’s environment had also waned as yards have found that speculators who paid such minimal deposits could now walk away from their contractual commitments relatively easily. He refuted the idea that Chinese banks are mandated to lend irrespective of the prevailing economic climate.  

Chinese yards do not fear the competition provided by Vietnamese yards, he said, but they had been concerned earlier this year that favourable exchange rates and proximity to European owners would boost the fortunes of Turkish yards at their expense.

This fear has dissipated as the year has gone on. Mr Yap said that Nantong Rainbow was now looking to diversify into new markets with lift vessels and the renewables sector being looked at.

Day 2 -  9 Sep 2015

Delegates at Riviera’s Asian Offshore Support Journal Conference in Singapore heard that Malaysia is Southeast Asia’s star performer. Confidence was also expressed in offshore India, West Africa and in the Middle East.

However, offshore Brazil remains a frustrating market and the Mexican Gulf is falling short of the hype seen a year ago.

Effects on Keppel, Sembcorp or Ezion? 

Speaking in the regional round-up panel discussion on day two of the conference Yinson Holdings general manager Lim Choo Heang said his company was “offered up a contract twice a month in Malaysia” and cited the country’s offshore prospects as “the best in the Southeast Asia region.”
He acknowledged that when dealing with the authorities “contractually it was sometimes one-way traffic”, but when it came to practical operations he found the environment straight forward and conducive to doing business.

A later panel featuring Westshore do Brasil president Daniel Del Rio, Swire Pacific Offshore commercial director Duncan Telfer and MMA president offshore George Horsington, dissected the Brazilian Mexican, Middle Eastern and West African offshore markets.

In a characteristically open presentation, Mr Del Rio acknowledged that Brazil-flagged vessels were being favoured to the exclusion of internationally flagged ones. Asked to rank the regions in terms of ease of operation and rate of return on investment, Mr Telfer said Brazil came last in both categories. He added that operators were not helping themselves by “cutting each other’s throats by offering rock-bottom rates when tendering”.

Prospects in the Mexican Gulf are presently not matching the hype seen even a year ago, Mr Telfer added, although he foresaw a quicker turnaround in this region’s fortunes compared to equally hyped Iran. West Africa was talked of in largely favourable terms while Namibia was referred to as geologically – but not politically – similar to Brazil.

“Petrobras themselves have been looking at Namibia,” said Mr Telfer, although Mr Del Rio was quick to point out that a few years ago Brazil’s Petro Rio had looked at this prospect but decided not to follow through.

Mr Horsington cautioned smaller owner/operators against taking contracts “any time, anywhere”, even though the temptation in today’s challenging market is obvious. “Being niche, having presence and connections is what counts,” he said.

Other sessions on day two looked at the economic case for new technologies, the challenges of maintaining a long-term vision when facing short-term pressures, dealing with contract termination and regulation.

A poll of the conference delegates produced more than 40 different predictions for the biggest opportunity in 2016.

The most popular views were: IMR and subsea vessels; Iran; LNG; vessel scrapping; mergers and acquisitions; India; and an industry-wide efficiency drive.

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