The rig builder of Sharjah

What is a Dubai-based company with operations in Sharjah doing on the Norwegian Stock Exchange? Tamara Walid went to find out.

Times have never been better for the region's oil rig builders. The surging price of crude has encouraged big oil companies to reinvest profits in exploration, keeping order books brimming in fabrication yards around the Middle East.

One of the biggest beneficiaries of that trend has been the publicly traded UAE-based rig builder known as Maritime Industrial Services (MIS). But you won't find the company's stock trading in the UAE. Instead it chose to list in Norway.

"There were a few reasons we chose Norway," says Peter Convery, president and CEO of MIS. "One was that it's a very energy-sector oriented country and stock exchange. Also, when we were getting into the new-build business back in 2006, a lot of the companies interested in that type of business originated in Norway. Our first client was Norwegian."

One year after listing its shares in Oslo, MIS has just sealed new rig-building contracts worth $335m for two offshore jack-up drilling rigs for Mosvold Middle East Jackup. The deal took the company's mid-2008 confirmed order backlog to $480m, up $110m from the corresponding period last year.

The oil price and a capacity crunch are fuelling orders for rigs around the region.

"We're in an area that produces 61% of the world's oil reserves and production demands are going up all the time," says Convery. The surge in orders has led MIS to hire an extra 1500 workers over the last year.

"The increasing price of oil is driving demand for more drilling, more production," he explains.

MIS has its corporate office based in Jebel Ali Free Zone in Dubai and operates fabrication yards in Sharjah, Jebel Ali in Dubai, as well as in the Kingdom of Saudi Arabia and Kuwait.

Founded in 1979, the company has become one of the leading contractors in the Middle East, offering services to the oil and gas industry spanning the hydrocarbons delivery chain, from exploration drilling through to delivery to downstream customers. While the Gulf is at the very centre of the world's oil and gas business, the jack-up rig building business is surprisingly young.

MIS launched its first offshore jack-up drilling rig to be built in the region last year, the SeaWolf Oritsetimeyin. A second rig followed, SeaWolf Onome, in 2008.

Both rigs are being built at MIS's Sharjah shipyard under a $254m contract for SeaWolf Oilfield Services Limited, a Nigerian drilling company. The rigs are scheduled to be handed over in August and December of 2008. The recently-announced orders will be supplied by MIS on a turnkey basis.

"A lot of what we build here goes throughout the region and beyond it. We send products anywhere from Algeria to Pakistan to Greece. We actually manufactured something that's going to Brazil and West Africa," Convery says.

MIS is now benefiting from the shortage in capacity in the traditional international shipyards in locations such as Singapore, China and the US Gulf Coast. It currently operates a 200,000 sq m shipyard in Sharjah. However, Convery is keen to expand the existing space to meet increasing demand.

"I'd love to have twice the space and particularly key site space," he says, adding: "You can get land but to get land on a waterfront is really difficult to find. It's all taken which is really a challenge."

Convery says the company has plans to raise debt to finance its expansion ambitions, but declines to give further details.

The boom in offshore rig construction has helped MIS raise revenues from $178m in 2006 to $308m last year - its best ever financial performance. Convery explains this was largely driven by the new business line of new-build rigs which was added to existing business lines. He says there has been an increase in operations throughout all business lines in the past year, and sees "continued potential for growth this year".

While its first rig orders to be completed in the UAE are destined for Nigeria, Convery sees MIS's regional base as an advantage as more oil company profits are invested in exploration throughout the Middle East.

"If a rig is going to be used in this region, mobilisation costs post-building are much less than if you're going to construct it in the US or Singapore, which are probably the other two big regions of building, " says Convery.

The comparatively low cost of labour is also seen as a big plus for companies operating in the region, especially when compared to the relative cost of locations in the US and Europe.

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