High demand in region to boost market for construction vessels

Growing demand for construction vessels in the region and around the world is set to bolster the sector's expansion, especially in regions undergoing major marine infrastructure development, said industry observers.

The world's offshore construction vessel fleet continues to grow amid a trend towards deeper water capabilities and increased heavy lift capacities.

Of the newbuild contracts announced over the past six months a significant number of vessels are designed to operate in more than 1,500m of water, and a growing number will be fitted with heavy lift capacity of more than 3,000 tonnes.

Offshore construction contractors are hoping to cash in on the industry-wide move to deeper water development and demand for vessels able to handle the construction of larger and more complicated offshore structures.

The Middle East is increasingly becoming a major lure to owners and operators of construction vessels due to the increasing number of marine projects such as the Palm and the World and Dubai Waterfront.

"There is a clear indication that the future of construction vessels is bright in this region, especially in view of the various marine projects," said Ismail Sairi, General Manager of Penguin Marine Boat Services and Director of Penguin Marine Offshore Services (PMOS).

"More companies in this sector are looking at the region as a favourite destination for business."

PMOS, a wholly-owned subsidiary of Singapore's Penguin International, recently obtained a $200 million (Dh736m) five-year logistics management contract from developer Nakheel to support the development of the World project and the company is in the process of moving some of its specialised boats to Dubai to commence the job.

The GCC is investing heavily in a number of offshore oil and gas exploration projects to a tune of $60 billion in the next three to four years and a further $20bn is being invested in offshore infrastructure schemes.

This investment in more offshore projects is causing an unprecedented demand for all types of workboats and the regional supply is currently constrained.

Captain Gary Dockerty, Business Development Manager for Lamnlaco Group, said: "Previously, this was not a major market for permanently stationed construction vessels – it was more of a spot market. But as new offshore infrastructural developments take shape, we are seeing civil construction and dredging companies willing to build and supply their vessels within the region. I believe this is what we will see happening in future."

The Middle East currently forms between 15 and 20 per cent of the global workboats market, with most of the vessels operating in the oil and gas sector. However, the region is believed to have the highest demand for workboats in the world for both infrastructure development and exploration activities.

The rush to cash in on the market upswing in the oil and gas sector continues to support the growth of the global rig and construction vessel fleet. Construction boat supply companies anticipated this situation more than three years ago and began making orders for the construction of new vessels to boost their fleets.

Lamnalco Group, for example, has over the past seven years ordered new vessels at a cost of $400m.

Last year it took delivery of 11 vessels and it will receive 11 more by the end of 2008. It hopes the number of deliveries will be 20 per cent higher next year.

"We see this ordering process continuing for the next three to four years since we don't anticipate a drop in demand," said Dockerty.

"Companies that were formerly involved in only vessel repair are now doing building as well to meet the rising demand. Older vessels are getting displaced."

ESNAAD, the supply arm of the Abu Dhabi National Oil Company, has 10 new vessels on order for delivery at the end of 2008 in addition to the 36 vessels it already manages.

Companies such as Sharjah's Maritime Industrial Services (MIS) are now capitalising on the high demand to become key players.

MIS recently announced it had received orders worth $520m to repair and build rigs at its Sharjah yard.

It is estimated that annually more than 2,000 workboats, from tugs to dive boats to dredgers, are docked or repaired in the Middle East. There are 13 ship repair yards in the region sustaining five dry docks, eight floating docks and 17 slipways.

However, observers said the rise in demand for shipyard space threatens to cause a hike in the cost of labour and materials in the shipbuilding sector.

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