SMM India Conference, Mumbai, April 8th, 2011
Ship repair opportunities in the Indian Offshore Oil & Gas sector
Anand V Sharma Mantrana Maritime Advisory
Indian Ship Repair Industry - Overview
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
Projection
Characteristics of Indian Shipping Industry
Source: Mantrana Maritime Advisory Pvt Ltd
In addition, there exists potential to service ships calling to Indian ports www.mantrana.in
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Estimated Annual Repair Market Tugs & Offshore
33,638 26,934 21,345
AG R
15%
Factors Considered in Projection (2015) New Scheduled delivery Repair cost escalation due to ageing Marginal Cost escalation 3%
r 8y
R AG C
% 19
5y rC
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Floating Marine Assets in Indian Offshore
At any given point of time there are more than 900 marine assets operating in Indian offshore Share of Foreign Flagged Vessels
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
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Prominent Ship Repair Infrastructure Offshore Segment
1. 2. 3. 4. 5.
Drydocks of Mumbai Port FDD of Great Offshore FDD Seagul Marine Western India Shipyard, Mormugoa Cochin Shipyard, Cochin
6. 7. 8.
Drydocks of Kolkata Port Pardip Port Hindustan Shipyard, Vizag (earlier)
6 1 2 3 4 5
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
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Opportunities for Service Providers - India
Afghanistan Pakistan
Bahrain (1363) Dubai (1105)
India
Paradip (324)
Duqm (847)
Prominent Offshore Supply Bases in India
1.Bhavnagar 2.Nhava Seva Prominent 3.Mumbai 4.Murmagoa 5.Kakinada Prominent 6.Vizag 7.Pardip
Goa (218)
Discovery of ONGC, Reliance, GSPC
Singapore (1595)
Cochin (575) Colombo (877)
Cochin (793) Colombo (1,087)
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
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 90s 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 www.mantrana.in
Ship Repair (Mumbai Port Trust) A Case Study
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 www.mantrana.in
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Ship Repair (Mumbai Port Trust) A Case Study
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. www.mantrana.in
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Conclusion
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 www.mantrana.in
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Thank you for your Attention
Mantrana Maritime Advisory Pvt. Ltd.
A-207, Sai Chambers, Plot No. 44 Sector -11 CBD Bealpur Navi Mumbai - 400 614. Maharashtra, India
Landmark : Near CBD Station, Opp IDBI Bank Bldg.
Tel Fax Email Web : +91-22-6609 8010 : +91-22-6609 8013 :
[email protected] : www.mantrana.in
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