ship repair opportunities in indian offshore industry

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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



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?



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



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 ?



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



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



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?



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



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



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.



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

ship repair opportunities in indian offshore industry

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