ship repair opportunities in indian offshore industry
DESCRIPTION
This paper was presented at the SMM India Conference in Mumbai on April 8th, 2011, this paper demonstrated the factors ailing the Indian Ship Repair Industry, and how it has been missing out on the widespread opportunities due to a disorganized nature of the industry, insufficient infrastructure and the lack of policies to give a boost to the segment. The paper also touched upon some of the practices that the Ship Repair Industry could benefit from in the present scenario.TRANSCRIPT
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Ship repair opportunities in the Indian Offshore Oil& Gas sector
Anand V SharmaMantrana Maritime Advisory
SMM India Conference, Mumbai, April 8th, 2011
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Indian Ship Repair Industry - Overview
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• Unorganized Industry
Few Dedicated & Large Players
Large number of smaller workshops working on Make shift arrangement
• Old & Poor Infrastructure
Few drydocks added to cater to repair industry in last 2 decades
Fleet increased multiple times, infrastructure did not grow to cater to demand
• Great Potential for industry – Little has been done on Infrastructure
• India has high technical resources & manpower
They all work for ship repair yards based in Middle East & Singapore
What is the opportunity size for repair service providers, especially offshore?
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Estimates of Annual Repair Bill of Indian Flagged Ships
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In addition, there exists potential to service ships calling to Indian ports
Source: Mantrana Maritime Advisory Pvt Ltd
Projection
Characteristics of Indian Shipping Industry
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8 y r C
A G R 1
9 %
5 y r C A G R
1 5 %
Estimated Annual Repair Market – Tugs & Offshore
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Factors Considered in Projection (2015)
•New Scheduled delivery
•Repair cost escalation due to ageing
•Marginal Cost escalation 3%
33,638
26,934
21,345 ?
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Floating Marine Assets in Indian Offshore
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• At any given point of time there are more than 900
marine assets operating in Indian offshore
Offshore Drilling Rigs : - 45
Offshore Supply Vessels : - 250
Accommodation/ Construction/ Pipe laying Barges : 50
Others assets of low value, such as crew boats, tugs, etc
• Every year roughly 200 foreign flag offshore vessels
work on Indian coast on short term to long term
contract
Deployment period – few weeks to months
Most of them plan & undertake periodic dry
docking prior to mobilization to India, however
scope for a float repair remains
Share of Foreign Flagged Vessels
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Prominent Ship Repair Infrastructure – Offshore Segment
6
123
4
5
6
78
• One of docks of Mumbai port is closing
• Western India takes ships upto 60,000 DWT
• Cochin Shipyard is catering to Navy and ships upto 125,000 DWT
• Kolkata port docks face heavy siltation
• Hindustan shipyard has been taken over by Ministry of defence
6. Drydocks of Kolkata Port
7. Pardip Port
8. Hindustan Shipyard, Vizag (earlier)
1. Drydocks of Mumbai Port
2. FDD of Great Offshore3. FDD Seagul Marine
4. Western India Shipyard, Mormugoa
5. Cochin Shipyard, Cochin
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Opportunities for Service Providers - India
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Prominent Offshore
Supply Bases in India
1.Bhavnagar
2.Nhava Seva –Prominent
3.Mumbai
4.Murmagoa
5.Kakinada –Prominent
6.Vizag
7.Pardip
Discovery of ONGC,Reliance, GSPC
Bahrain(1363)
Duqm(847)
Dubai
(1105)
Colombo(877)
Goa
(218)
Cochin(575)
Paradip(324)
Singapore
(1595)
Cochin(793)
Colombo(1,087)
Pakistan
Afghanistan
India1
• Supply base of ONGC at Nhava Seva and Supply base at Kakinada on the East coast cater
to maximum number of Offshore vessels.
• Both the locations lack ship repair infrastructure essential for upkeep of vessels.
With So Much Opportunities, Why Infrastructure has not Come up?
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Industry Introspection – Ship repair
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Basic Facts
• Capital Intensive + Skill Intensive + Policy Driven
Indian Scenario PSU
• Dominance of Public Sector
• Existence of Semi- Dedicated repair yards (CSL&HSL)
• Makeshift Repair Yards/Workshops existed with all major ports
Private Sector contribution
• Two Shipyards Chokhani on East Coast & Western India on West Coast came in 90’s
• Chokhani closed down selling both the floating docks for scrap
• Western India survived with large losses
Every stake holder to the ship repair industry truly belived, ship repair is something India is not
Capable of
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Ship Repair (Mumbai Port Trust) – A Case Study
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Overview
• Has 2 Dry Docks (several decades Old)
One being closed down
• Has not undertaken major investment on docks in last few decades
• Total Turnover of Port more than INR 5 bn
Share of Ship repair to revenue less than 3%
No infrastructure other than dock & tower crane
Working Methodology
• Acts as landlord & leases drydocks to workshops
• Drydock charges by port is based on GRT of the ship, no market driven rates
• Ships are being treated on First come first basis (except emergency repairs or
for Naval Vessels)
• A barge with repair value less than INR 5 mn could get preference over Supply vessels of repair value more than INR 50 mn
Impact on port
• As shiprepair does not contribute to revenue, there is little
development on agenda
• Even the business plan of port does not mention it
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Ship Repair (Mumbai Port Trust) – A Case Study
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Impact on Working
• After every repair contract the lease owner of drydock changes
• As owner ship by private party is short lived, there is no incentive to develop or invest on infrastructure
• Private workshops operate as make shift as owner ship is not more than few weeks
• Most of the workshop have their own infrastructure about 5 kms away from drydock
• In the absence of full-fledged shops for repair of machinery, piping, etc. The ship repair activity merely reduces to Steel
renewal activity
• Rise in unproductive time and cost at the time of repair
• Cost of repair goes up
• Quality of repair comes down
What Should be Done?
Model adopted by Paradip Port is far better. Port develops basic drydock and gives it to a party (in this
case currently to Wartsila) on a long term lease of 5 years to be renwed at revised rates. The operator
invests in additional infrastructure, workshops, etc as it foresees recovery of investment and profits so
invests in it.
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Conclusion
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Demand Supply Gap
• Large local market however relatively small infrastructure to cater to them
• Lack of infrastructure limits availability of Technology, locally
Key Service Segments • Ship Repair Yards
• Dedicated Workshops for equipments & machinery
• Storage & supply of critical equipments
• Planning, Consultancy & Supervision
Key Geography for Service Providers (about 100 km radius)
• Mumbai – West Coast
• Kakinada – East Coast
• Cochin – South
Key Competitors
• Ship repair – Colombo, Fujairah, Singapore, etc
• Equipments, Machinery & critical services – Singapore
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Thank you for your Attention
Mantrana Maritime Advisory Pvt. Ltd.A-207, Sai Chambers, Plot No. 44Sector -11 CBD BealpurNavi Mumbai - 400 614.Maharashtra, India
Landmark : Near CBD Station, Opp IDBI Bank Bldg.
Tel : +91-22-6609 8010Fax : +91-22-6609 8013Email : [email protected] : www.mantrana.in