Exclusive Interview: Drydocks World chairman

In amongst these were the global ports and freezones business DP World and the ship build repair business Drydocks World, encompassing the giant flagship Dubai yard, three Indonesian subsidiaries and a Singapore yard. The Asian facilities were all acquisitions dating back to 2007.

Such a fire sale never materialised, and both companies have emerged from the crisis with sound finances and a growth trajectory which is expected to accelerate further in 2011.

The Emirate’s Drydocks World company, spearheaded by its prolific yard in Dubai, has undergone a period of reflection, and after years of rapid expansion is consolidating its outlook and gearing its business to the greater pursuit of lucrative maritime oil and gas engineering projects.

Standing at the helm of the Drydocks World operations since May 2010 is chairman Khamis Juma Buamim.

Having assumed the role last year Buamim has been integral in fostering a clearer image of the company’s obligations, and its plans and strategy going forward.

With approximately $2.2 billion worth of debt expected to be rescheduled this quarter, the chairman spells out the Drydocks World position, and its plans for growth in a difficult environment.

“The debt we have outstanding relates to acquisition deals in Singapore and Indonesia,” states Buamim. He firmly denies recent media reports that the company is looking to offload those assets. “Drydocks World Group will not give up any of its assets, and there is no reason to do so.”

Buamim says that when he took on the role he had a specific remit in mind. Restructuring and refocusing was his mantra, and delivery in a short time frame his goal.

“I decided the company needed a fresh strategy in order to achieve certain goals in a short period of time. We had to function immediately on the achievements of the last few years and build on the elements of the business that have served us well. That meant a greater concentration on our oil and gas segments right from the start,” he explains.

Since last year the company has been busy realigning its business strategy from rapid global expansion to one of focused sustainability. “We have been reinvesting our own cash in the business. Rather than going to banks for investment we have been reinjecting our income to boost the strength and financial position of the company as a whole. The company ethos has changed.”

Outside of Dubai, Drydocks World has yards operating in Singapore and the Graha, Pertama and Nanindah yards in Indonesia. The company houses four of Asia’s premier shipyards in one of the world’s busiest seaways, specialising in rig building and shipbuilding, as well as repair and conversions, supported by full engineering and design capabilities.

In addition, the company operates a fleet of 160 vessels including tankers, bulk vessels, tugs, anchor-handling tugs and barges. All Asian assets were bought through acquisition.

“From the moment I arrived, going to debt markets to fund growth or any kind of leveraged take-overs has been off the table completely. The climate we are operating in today doesn’t warrant that kind of aggressive growth.

Of course opportunities remain. But for the past year, and even right now, it remains the wrong time to be growing in that way,” he says.

Whilst around the world fierce competition from Chinese and Korean yards has squeezed margins on the building of merchant and container ships, combined with a double whammy of a general decline in global newbuild activity, niche providers capable of delivering the most complex oil and gas-related vessels have been somewhat shielded from the worst of the recession.

“The oil price has provided stability and offshore energy related and support vessels remains a sector delivering growth. As such, we are focusing on the offshore energy sector. That’s a fundamental strategic change in our thought process,” says Buamim.

The chairman says the company has already demonstrated its capability to build the top-tier vessels and has proven time and again its competence at delivering even the most technically challenging engineering solutions, right across the whole spectrum of the offshore market.

“Serving the oil and gas business is a highly technical and specialised area of the marine market. We have a very strong pedigree in this area and are well poised to take advantage of demand growth for more complex engineering projects.”

“We make no secret of the fact we have a very strong collective desire to emerge as a global leader in conducting these projects,” he says.

Prime Targets
Drydocks World has identified specific market sectors within the offshore newbuild remit to focus its programme, those poised to boom when upstream spending bounces back.

Recently the company has built a fleet of seismic research vessels; an area Buamim says is likely to see a rapid resurgence in demand.

“We have identified three areas where the exploration vessels, such as those owned by Polarcus, will be in magnificent demand. North Sea and Arctic is one – these ships are built to cope with ice conditions.

Then there is the East Coast of Africa, where one vessel is already working. And another is South America. The next generation of oil exploration will potentially boom in these locations.”

In 2010 Drydocks World was the largest single stake holder in Polarcus, with a holding of 9.15%. Polarcus has launched an ultra-modern fleet of advanced seismic vessels designed by Norway’s Ulstein Design incorporating the innovative Ulstein X-Bow hull. The vessels have been built in Drydocks World’s Dubai yard and are ice-class, highly efficient seismic acquisition vessels.

“We currently own an important stake in Polarcus, and we have no immediate plans to divest that. However, vessel ownership it is not our core business.

We have to rationalise how that can become part of our long-term strategy. However, I would add that it is our intention to explore with the management of Polarcus additional vessels. It’s a healthy area of the business and we obviously want to grow that at this time,” says Buamim.

In addition to the promising seismic research outlook, Buamim says the company’s expertise in building submersible support vessels is well-timed to coincide with an offshore facility construction boom.

In December 2010 Drydocks World held the keel laying ceremony for a state-of-the-art compact semi-submersible (CSS) vessel.

The Derwent is being built for integrated energy services provider Hallin Marine Subsea International, at Drydocks World’s Nanindah shipyard at Batam in Indonesia. The contract for the distinctive project has been valued at US$110 million.

“The CSS is an exceptional vessel and is capable of working in any water depth. We have prior experience in this field and this new project represents confidence in our ability to produce innovative vessels. Drydocks World has established a track record of building specialised niche vessels and we remain committed to providing seamless, efficient and cost-effective services to our customers worldwide,” said Buamim.

Despite the attractive gains to be made by aligning the business with sectors primed to take off, the company is by no means scaling back its core, perennially stable product lines. Drydocks World has long been a maintenance and conversion player for the largest vessels, and a yard full of giant vessels suggests this remains the case.

“Our floating production, storage and offloading (FPSO) and FSO conversion business is still very healthy,” says Buamim. “We currently have four major FPSO and conversion projects in hand, primarily for European clients. Deepwater development projections reinforce the fact that vessels with production and storage capability have a very strong future, and that this will always remain an important part of our business.”

Buamim also adds that work on merchant shipping vessels has not been scaled back, but in terms of working to the best of the company’s capabilities, more complex engineering and challenging projects are the part of the business he wants to see grow.

The Year Ahead
2011, by all accounts is a watershed year for the company under Buamim’s direction. It is expected that a debt restructuring will go well, and the company can position itself back in the driving seat for growth.Many of the projects already underway signal a healthy year of returns for the company, and Buamim is upbeat about the coming months.

“Our numbers this year suggest we are working at 140% capacity in Dubai, we are flat out on the repair and conversion work. Traditionally we would be aim to be working at around 90% of capacity, but we have seen a tremendous uptick in demand, and I think we will maintain that for quite some time to come,” he says.

The chairman conservatively expects a proportion of around 40% of the company’s revenues to stem directly from upstream energy and support related work.

“The lower end of what we have forecasted for oil and gas-related revenue comes to around $140 million,” he reveals. 

The view from the chairman’s office, indeed from anywhere within a mile of the facility, such is its stature on the shoreline, confirms the buoyancy of current business, and vessels ready to be moved into drydock suggest the order book is brimming.

Casting his eye over the yard, Buamim says there are a number of very exciting, major projects underway.

“The whole spectrum of what we do is being tackled as we speak,” he enthuses. We have a vessel here from Germany which we will cut into two halves, extend it, and essentially rebuild it as an FSO. We are also undertaking several projects which will be giving a whole new lease of life to existing vessels.

In addition we have a number of jack-ups in the yard right now. This business has remained fairly stable. We have two drilling vessels coming in from Europe and America and it is significant that we have won those contracts from the international market, and aren’t reliant only on regional rig counts,” he says.

One of the facilities out of sight, but at the forefront of the minds of smaller local maritime players, is the Jadaf yard, nestled on a discreet curve on the Dubai Creek.

For all of Dubai’s history, service and repair work on smaller vessels (tugs and supply vessels, as well as dhows), has taken place at the Jadaf yard site.

However, following the huge Maritime City development, which sits cheek by jowl with the existing Drydocks HQ, it was widely reported that the historic yard would have to move wholesale to the industrial zone of Maritime City. It should be added that this was at a time when prime creekside real estate values were stratospheric.

“Drydocks World and Dubai Maritime City are separate entities. There are of course synergies to be had between the existing drydocks and the industrial zones located next door.

However, in my view Jadaf serves an important part of our economy. Personally speaking, I feel very strongly that Jadaf should remain where it is permanently. For dhows and small vessel operations it is ideal, not to mention expensive and disruptive to relocate it. Our stance on Jadaf is clear: we will not be moving it.”

As part of the re-jigged strategy, Buamim asserts that the business has to operate as one, using its vast global network as an unrivalled asset.

“If a tender or project becomes available we will look at this from a global perspective and see how we can best tailor our solution to the client’s needs. That may involve using some of our Far Eastern resources in conjunction with the yard here in Dubai,” he explains.

One thing which is certain is that the chairman’s vision to return to a solid bedrock of business and consolidate the company’s strengths is unshakable.

“Oil and gas engineering will become an ever-larger part of our business. This we are focused on. In addition, we are building a totally integrated company with one management structure and accountability and transparency. We will not be making the same mistakes we have in the past,” he concludes.

DDW’s new line: Compact Semi-Submersibles
Drydocks World and Maritime World Chairman Khamis Juma Buamim stated that while subsea production systems ranged in complexity they were highly reliable and specialised vessels that had to be commercially viable and efficient.

He explained that one of the most outstanding aspects of the CSS being built at the Drydocks yard were its low costs coupled with its excellent project load capacity.

Designed by STX Canada Marine Inc the CSS vessel has a semi-submersible style hull making it a cost effective alternative to large Diving Support Vessels (DSV) and traditional semi-submersibles in providing subsea services as well as light well interventions.

The primary focus of the vessel, which will be classified by the American Bureau of Shipping, will be light well intervention to provide repair and maintenance services to an existing offshore well and sub-sea oil production systems support.

The CSS is equipped with four fixed-pitch Azimuth thruster units and full DP-3 capacity, which enables automatic as well as manual dynamic positioning/heading control in harsh environmental conditions, and has a multiple inherent fail-safe capability.

The 84-metre, 8200dwt vessel has an active offshore crane, a single line lifting of 150 tonnes SWL (Safe Working Load), a complete active heave-compensated, electro-hydraulic Deep Water Lowering System, a five tonnes provision crane and two deepwater Remotely Operated Vehicles. The CSS can accommodate up to 152 sub-sea team members.

Fast Facts:
20 000 staff DDW Shipyards and shipping operations employ over 20,000 dedicated and skilled employees in Singapore and Indonesia alone.

2000 The Drydocks World shipyards in Indonesia and Singapore have built and repaired more than 2 000 vessels of various types and sizes. Customers include major owners and management companies worldwide.

6600 vessels conceived as an ambitious project under the guidance of H.H. Sheikh Rashid Bin Saeed Al Maktoum, the late Ruler of Dubai, the flagship shipyard has repaired more than 6600 vessels so far, and celebrated 25 years of operation in 2008. Several of the world’s largest dredgers and jack-up rigs are serviced every year and the yard has specialised LNG handling capabilities.