For oil and gas players around the Gulf, the name ASRY will be synonymous with ship repair and maintenance, and probably conjures the familiar image of VLCC super tankers in dry dock. This remains accurate, and the Bahrain yard remains one of a small number of elite yards capable of carrying out such work, but the chatter in the upstream sector has turned towards rigs, offshore service vessels and the growing presence of a new kid in town.
The working profile and portfolio of many yards across the Gulf has broadened considerably since 2006, and it’s increasingly rare that owners will seek maintenance and overhaul work from outside the region. Such are the costs of transportation, and the comparable quality of work, that Asian yards have seen a significant fall in the proportion of Gulf rigs requiring their services.
With big ambitions to take a slice of this gulf rig action is ASRY’s newest offering, a dedicated offshore services division. As Qatar and Saudi offshore activity spiked, the company took the decision to throw its resources further behind oil and gas related work. Chris Potter, ASRY CEO tells Oil & Gas Middle East that the company’s GCC cooperative owners are not only behind the idea, but are pushing for a rapidly independent business unit.
“The last few years have been exceptional, of that there’s no question. There’s been an extremely strong ship repair market in this region and we have the experience and facilities in place to be a first choice yard for major owners in the Gulf area,” explains Potter.
“The strength of the market has helped us develop, and helped us convince the board we should plough some of our profits back into the facility, which has been realised with the construction of the two new slipways,” he adds.
Potter says that the company recognised a huge growth in the smaller tonnage sector a few years ago, and as such put the slipways in place so as not to detract from it’s massive dry dock capacity during busy periods.
“The oil and gas fields are right on our doorstep and we wanted to build our capacity ahead of the curve. There’s been a notable drop in sales since the end of last year, but that investment is ongoing, with significant alongside berth additions about to start, so that when the pendulum swings back again we’re in a much stronger position.”
Upstream focus
Potter says that the yard has managed to attract around six to seven rigs per year, plus additional oilfield related work, but that is set to increase substantially. “We recognised a year to 18 months ago that there was a lot of development going on, particularly in the Qatar oilfields, and that seemed to us a very good opportunity. With the experience we’ve built up over the years repairing rigs, primarily for Aramco, we were
in a strong position to move into this business.”
The core skills and essential workshops for offshore work are common to the company’s traditional ship repair business, an obvious advantage that has expedited the progress of its offshore ambitions. However, despite the lure of the Offshore specialist tag, Potter is keen to stress the midstream tanker work will preserve its reputation.
“The facilities and shop floor skills that we’ve accrued over the decades is extremely well suited to the work needed on rigs. We will maintain our core business, which is mainly chemical and oil tankers, and there is a lot of work of this kind in this area – and maintaining those key relationships is one of the driving forces behind the desire to take ASRY Offshore Services independent.”
He adds the ASRY board is especially keen to separate that business entity away from ship repair because it doesn’t want that side of the business to start restricting the ship repair
capabilities.
Offshore skills
In Summer 2008 ASRY Offshore Services won its first major contract – the upgrading of Hercules Offshore’s jackup drilling rig, Hercules 170. The work included installing a new larger portside crane, additional generators, modifications to the lifeboats and an upgrade of the drilling systems.
“This was a hugely significant contract for the brand ASRY Offshore Services, and a great platform to build on the reputation of the work we carried out on the Hercules Rig which is certainly helping us in the market.”
Potter says in the next two years the company sees itself as the major rig repair centre in the Gulf, and he feels it can do this.
Although the work is specialised, Potter says that getting the right skills in place has been in execution for some time. Offshore focused engineering firms have taken up residency in the ASRY yard, which has boosted the yard’s capabilities, without incurring extra costs.
“It is not so much a case of making a revenue from renting land, more about building a relationship where they will put work with us in the future. Hydrolink and Goltens are specialist companies that we’ve introduced to the yard in order to strengthen the infrastructure of the yard because they are the best in their field,” he says. “This is a mutually beneficial arrangement which enables the best level of service provision whilst spreading the risk involved in infrastructure investment.
Targets
“We are tending to target certain areas at the moment, for the time being Qatar and Saudi in particular, but we expect to be getting enquiries from further afield too as our name and stature grows in that offshore upstream marketplace.”
These ambitions are being tempered by the economic realities of the first quarter of 2009. As exceptional as preceding years have been for growth and activity, so too is the current environment for the opposite reasons.
“Things began changing in December. There wasn’t really the feeling that it was as a direct result of the economic meltdown in the west, but it’s obvious now that it is exactly that,” says Potter.
“What we are finding with many of the repairs that come in, they have work that needs to be done to meet their certificates and class. But with restrictions on cash they are having great difficulty financing all of these projects, so we’re exploring favourable payment terms with them. Also, when projects come in they are looking to do the absolute minimum required, and there’s no question that this is beginning to have an impact on our level of sales,” he adds.
It’s not all doom and gloom though. Whilst there is stiff competition in the Gulf, owners that have cash available are getting a good deal for essential work. “Times are tight, but owners see this as a good time to catch up with their maintenance and spend some money to improve their vessels. What’s holding owners back at the moment is that they simply don’t have the cash, or ability to attract finance from banks.”
One ominous development clouding the horizon is companies attempting to squeeze their classification requirements.
“Owners are in discussions with their classifications societies in order to try and defer obligations, and I’ve even heard of owners changing classification society, which shows how
desperate people are to find a way around the problem.”
Future challenges
Potter says his biggest challenge last year was finding enough labour to cope with the quantity of work the yard had booked, whereas now that trend has reversed. However, the growing reputation of the offshore division may see that spare labour capability reallocated.
Shipowners are being very slow to place work across the globe, and the phenomenon is by no means limited to Gulf coastal waters. As the offshore offering – under the stewardship of Rob Bryant and Palitha Jagathpriya – emerges from its infancy, Potter is optimistic about that slack being filled by meeting the oil and gas industry’s needs.
“What we have to work on in the next six months is to turn the enquiries we’re getting right now into a strong portfolio of work, and then let that work talk for itself. If the customer goes away happy, that’s the best marketing we could possibly get. On the back of the Hercules job we’ve already attracted ENSCO on the strength of a recommendation,” he says.
Industry spend and project development across the Gulf is weaker than it has been for some years, however, the ASRY board is totally behind Potter’s offshore vision, and investment remains forthcoming.
“It’s very important for the company that we push ahead with that. Now is the time to do it because when the pendulum swings back again we’ll be in a much stronger position and can realise those goals,” he concludes.
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