Oil rigs the wave of the future for shipbuilders

With many Chinese shipyards' earning capability being squeezed by low technical content, appreciation of the renminbi and blind expansion, Chinese shipbuilders are looking to stay afloat by building more maritime engineering products.

A recovery is still far off, said Wang Jinlian, secretary general of the China Association of the National Shipbuilding industry, although China's new ship orders reached 46.44 million deadweight tons between January and October, about 46 percent of the global market share.

Cargo ships are being built at a shipyard on the bank of the Yangtze River in Yichang, Central Chinas Hubei province, Nov 14, 2013. [Photo / icpress.cn]

The Beijing-based association previously represented more than 730 large and medium-sized Chinese shipyards before 2011, but the figure has dropped by half after only two years.

"Looking long-term, maritime engineering vessels and equipment will be key to Chinese shipyards' finding a way out and competing with South Korean and Japanese shipbuilders," Wang said.

As opposed to producing bulk ships, offshore engineering vessels and oil-drilling platforms are costlier and harder to build. But growing global demand for energy resources is expected to keep orders flowing, and demand for offshore energy products has rapidly risen in recent years.

COSCO (Nantong) Shipyards Co Ltd, a unit of China Ocean Shipping (Group) Co (COSCO), already has shifted its focus from shipbuilding and ship maintenance to maritime engineering products.

"The expertise and technology gained from building and maintaining ships offer a favorable condition for us to move into maritime engineering," said Ni Tao, COSCO (Nantong)'s managing director.

Maritime engineering products are essentially functional vessels and oil-drilling platforms that can float in deep water. Offshore gas and oil companies use these vessels to process the natural gas and crude that is pumped from the ocean floor. They also can be used in the extraction process.

Ni said shipbuilding and maintenance now account for just 10 percent of annual sales at COSCO (Nantong). Last year, the shipyard delivered five offshore drilling platforms to buyers in the United States, the Netherlands and Norway.

With two orders for drilling platforms and six offshore engineering vessels already in hand this year, the company received another two orders for semi-submersible drilling platforms from a Norwegian company in November. They will be built at COSCO (Nantong)'s Qidong base in Jiangsu province.

The total contract value of the two platforms is $450 million.

Chinese companies received about $12.8 billion worth of new maritime engineering equipment orders in the first 10 months of this year, accounting for 26 percent of the world's total. The country had held only 13 percent of the global market share in 2012, said China's Ministry of Industry and Information Technology.