Drydocks take on world

The freshly branded Drydocks World has leapt onto the international scene with a swoop for Singapore's Pan United Marine.
Drydocks take on world
By Administrator
Tue 02 Oct 2007 04:00 AM

Like much of the ship builders and repair yards worldwide, Drydocks World has been riding the crest of a wave throughout 2007, and bulging order books mean the future is bright indeed for the Dubai headquartered firm.

"It's certainly been a good year, in fact it's shaping up to be the best year the company has ever had," enthuses Geoff Taylor, CEO Drydocks World.

We’re always mindful that we don’t lose sight of our core area of expertise, which is ship repair.

Various factors have prompted the excellent period for ship repair, conversion and building firms. A persistently high oil price, and new gas train's coming on-line have generated considerable liquidity in the regional market, but strong demand for merchant vessels has been seen worldwide.

"The market has been particularly buoyant for more than three years now. As a group policy we've concentrated on diversification of the business which has been key to tapping into that success," says Taylor.

The company has been repairing vessels from the Dubai yard since 1983 and have completed repairs on over 5500 ships of all shapes and sizes. The group began construction of newbuildings in the mid 1990s and is currently working on its 55th hull. "Most of what we've built historically has been relatively small offshore vessels, pilot boats, and tugs, but we didn't really get into it seriously until quite recently, and the scale of the vessels we're currently producing is much bigger than vessels we've built in the past."

The two major areas of the business that the company have focussed on growing recently have been shipbuilding and the offshore conversion business, mainly floating production and storage and offloading (FPSO) vessels. "However, we're always mindful that we don't want to lose sight of our core area of expertise, which remains ship repair. There are companies that have eroded away at their core business in the pursuit of other work - that is something we absolutely have not done."

The target that the company have set themselves is to generate the same level of turnover from the three parts of the company - repair, building, and conversions. Each sector generates different profitability for yards, and whilst FPSOs and shipbuilding create a very good base level of work, in the grand scheme of things it's not as profitable as ship repair. "In terms of profit generation it's the repair work that is most significant. If you look at ship building 65% of the cost of the vessel would be exactly the same wherever it is built - because the materials and equipment are universal unit costs," explains Taylor.

Among the most notable successes the yard has had recently is the construction and delivery of the world's largest semi-submersible drilling rig for Norweigian clients Aker Kvaerner. The 16,300 tonne drilling rig was built in separate units and assembled at the Dubai yard, spanning a massive 120 metres in length and reaching over 37 metres in height.

"We eased ourselves into the rig market by building the biggest rig in the world first," laughs Taylor. The company also has a contract with Navig8 Group for a series of 50,000 tonne product carriers and have recently signed a letter of intent for two seismic vessels. "We have a great many other enquiries running at the moment, but - as is the case all over the world, capacity is the limiting factor at the moment."

With the Dubai yard booked up for newbuildings into the first quarter of 2009, and work committed to 2011, news that the company was expanding operations into the Asian market was an obvious choice to grow the company. In July of this year Drydocks World announced the acquisition of Pan United Marine (PUM), a Singapore headquartered company with yards in Singapore and Batam, Indonesia. The company specialises in repair, building and conversion and number container, tanker and bulk work at its core.
"Drydocks World Singapore (formerly PUM) is strongly aligned with our key business sectors in Dubai, and because vessel proximity is crucial when an owner is selecting a yard for repair work, it will enable us to tap directly into the expanding Asian shipping business," explains Taylor.

The global ambition of the firm is clear, and Taylor stresses that the Singapore acquisition was just the beginning for Drydocks World. "We're very much looking to grow the company on the international stage and we've already signed a contract with the Batam Industrial Development Authority for a plot in excess of 200 hectares for a maritime centre."

Looking five to ten years ahead it’s a question of judging just how much bigger we’d want to be.

The group is also currently in negotiations with yards and greenfield sites in the Mediterranean, India and China. "Asia is definitely the area we're targeting as the main region for growth because that's where you can optimise the economies of scale with regard to labour costs," explains Taylor.

Overseas expansion aside the group will have a crucial role to play in the hugely ambitious Dubai Maritime City. In April of this year Dubai Drydocks, Al Jadaf Shipyard, Platinum Yachts FZ and Platinum Yacht Management all came under the consolidated umbrella of Drydocks World Dubai.

Historically the Al Jadaf company has been responsible for operating the lifting of vessels into berth, at which point owners would be able to choose the contractor to work on the vessel. "Although Drydocks World will operate the shiplifts and manage the industrial precinct estate at DMC, we don't intend to frustrate that arrangement," clarifies Taylor. There is a fear in the market that tenants will not get sufficient access to the lifts, but in actual fact there will be more berths and the lift has a 3000 tonne capacity, so if anything there will be more opportunity for work." The DMC facility will boast a 6000 tonne shiplift which Taylor asserts will mostly handle Drydocks World Dubai vessels.

The geographical location is of course a major bonus for a shipyard. At the heart of the principal global oil distribution centre - and now gas distribution is also coming on-stream there is a great potential to tap into the vessel traffic from the region. "The weather is a big advantage too," says Taylor.

"We maintain a good level of efficiency all through the year, and it's a place where people want to work. Other shipyards around the world are in pretty isolated places and can be quite miserable locations for superintendents to be. Dubai is a lot more hospitable in that regard."

Despite the location and world leading facilities, the company has found significant challenges have accompanied the recent success. "No business in Dubai enjoys the same cost advantages seen four or five years ago. We have a very large expatriate workforce who require housing, and living costs have risen."

"With 9500 employees just in Dubai, one of our biggest challenges in that respect is accommodating such a large labour force." When the drydocks are at full capacity the company can add around 1500 contractors who would also be working in the yard. To combat these challenges Drydocks World Dubai is currently constructing two accommodation blocks to provide 4000 bed spaces for the workforce.

"It's also very difficult to source labour on that scale now," adds Taylor. To overcome the recruitment challenge the company has set up systems globally to recruit at short notice. In order to have the right manpower on tap the company tries to project how much work will be going on five months ahead of schedule and sources that labour through agents and contractors.
Added to this, the shipbuilding and conversion work has seen an increase in iron and steel prices worldwide, as demand for such commodities is at an all time high. Huge construction projects being undertaken in China, the Middle East and Asia have combined with a boom in demand for shipbuilding. The exception to this is that some iron ore and steel producing countries can pass on artificially low prices to shipyards for steel, as has been the case in China.

"It is costing us more to run the business, but because we are attracting more work than ever before we have been able to grow profitability in spite of those challenges."

With 9500 employees just in Dubai, one of our biggest challenges is accommodating such a large labour force.

As the company's operations have expanded it has become increasingly important for Taylor and his team to reduce the environmental impact the operations at the Dubai yard generates. Located just minutes away from popular beaches, hotels and the city centre the pressure for clean operations is higher than that faced by many yards worldwide. "We are systematically improving how we operate, and are currently in the final stages of completing indoor blasting sheds. Not only will we be completely enclosing the blasting operations, but we'll also be recycling the medium, so really getting the most from the abrasive."

The firm has also installed a wastewater management plant that cleans oily and toxic pollutants before it is released back into the sea.

Despite the rapid expansion of the company on a global scale, Taylor is keen to point out restraint in the region. With three graving docks and two floating docks (one resides permanently at Jebel Ali supporting the yacht building and conversion operations) plus the two new DMC lifts the facilities, the company is hugely dominant in the local market.

"To a certain extent we've probably reached the physical limitations of expansion in Dubai - looking ahead it's a question of judging how much bigger we'd want to be. It is a consideration that there are yards under construction that will have an impact on business."

Taylor suggests that predicted vessel traffic in the Gulf may not yield a suitable return. "That might sound negative but we are still expanding." The company have recently put in 650 metres of quay wall to service VLCCs undergoing conversion. "We had the opportunity to put in another 600 metres of quay, but based on our projections we decided this wouldn't be suitable," explains Taylor.

Current throughput has the company repairing 360 to 400 ships annually, and at capacity up to 28 vessels can be docked simultaneously. Whether the regional dominance displayed can be recreated on the international stage, and if that expansion came at a prudent time for the future market will remain to be seen.

What seems certain, however, is that shipping firms and shipyards from Western Europe to the Far East will be following the Drydocks World global adventure very keenly indeed.

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