Three years ago, Nakilat signed a joint-venture deal with Singapore’s Keppel Offshore & Marine (Keppel O&M) to manage the design, construction and operation of the first two phases of a ship-repair yard on reclaimed land at the Port of Ras Laffan, Qatar.
The Nakilat-Keppel O&M (N-Kom) partnership is the cornerstone of a five-phase joint initiative by Qatar Petroleum (QP) and Nakilat to develop shipbuilding and repairs on the 1.1 square kilometre site, a plan intended to make Ras Laffan a global hub for ship services.
Repair and maintenance
Keppel O&M is one of the oldest names in global shipping. It has expanded from its Singapore base into major maritime markets, such as the Netherlands, and into emerging markets, such as Brazil, the Philippines, where it has three shipyards, and the UAE, where it manages Arab Heavy Industries shipyard in Ajman.
N-Kom is an 80:20 partnership between Nakilat and Keppel O&M. Nakilat is managing the design and construction of the shipyard infrastructure at Ras Laffan, which will be completed this spring. Keppel O&M will start operations in the autumn. These will include repairs to large and medium-sized ships, ship conversions and fabrication and maintenance of fixed and floating platforms.
It is estimated that Qatar will invest $785m in the civil works and construction for the first two phases of the shipyard, although Nakilat has declined to confirm the figure. Standard maintenance procedures oblige Nakilat to pull its carriers from service every five years for essential checks and repairs. The Ras Laffan shipyard will give Qatar priority access to repair and maintenance services close to home, so it will no longer need to wait for a repair dock to become available in Singapore, the UAE, South Korea or China.
“Even in a recession, vessels need to be serviced, and specialist companies are needed to do this work”
Yong Chee Min, chief executive officer, N-Kom
Additional capacity is being built into the Ras Laffan shipyard from the outset. Nakilat has a fleet of 54 liquefied natural gas (LNG) carriers, whose repair and maintenance requirements will take up just a quarter of the yard’s capacity at any time, leaving 75 per cent free for other vessels – not necessarily specialist oil and gas tankers, but also container, general cargo and other product carriers.
The N-Kom yard will compete for this third-party business against regional rivals such as Arab Shipbuilding and Repair Yard Company (ASRY) in Bahrain and Drydocks World-Dubai in the UAE.
Both these established shipyards are planning to invest in new facilities. Oman is also planning to open its own yard at Duqm for repairs and conversions of oil and gas tankers before the end of this year. It will have two 410-metre dry docks to handle ultra-large crude carrier vessels, expanding by 2014 with a floating dock and offshore fabrication.
The Ras Laffan shipyard’s potential, says Yong Chee Min, chief executive officer at N-Kom, lies in Qatar’s location, which is well situated to target general cargo and container vessels sailing from Europe to Asia, as well as the repair and maintenance needs of Qatar’s home fleet.
“Qatar is important because of its concentration of oil and gas vessels,” Yong says. “But having a yard in Qatar will allow us to take care of eastbound tonnage too. We want to serve traffic from Europe, as well as the Middle East markets. There is always a lack of facilities to accommodate the biggest vessels. Even in a recession, vessels need to be serviced, and specialist companies are needed to do this.”
N-Kom plans to build market share through a combination of competitive pricing and efficiency. In the short term, this might prove difficult. Until autumn 2008, shipyards across Asia were struggling to cope with demand for new ships. But now, following the global recession, shipping lines have stopped ordering and are cancelling or trying to renegotiate their existing orders, so the market for new ships has swung from a supplier’s to a buyer’s market.
But demand for maintenance and repairs has proved more resilient. The world’s newest and ever-larger vessels demand increasingly specialist servicing, while older tonnage requires regular maintenance and repairs.
Several planned ship repair yards have been put on hold in China as a result of the global downturn in international trade. But Yong maintains that recovery will come to the shipping industry, which has always been heavily cyclical, and that the worst of the downturn could already be over.
Furthermore, the N-Kom yard has fixed core business in the shape of the Nakilat fleet, whose 25-year contracts offer stability of workload to offset the downturn in shipping.
When the shipyard opens, Yong expects N-Kom’s Ras Laffan workforce to increase from 200 to as many as 600 people. N-Kom will import most of its skilled workers, engineers and managers into Qatar from other Keppel O&M yards. But the workforce could more than double over five years to reach 3,000 people, if demand lives up to Yong’s expectations. The company hopes to train Qatari nationals to fill managerial posts.
But N-Kom represents just the start of Nakilat and QP’s plans for the Ras Laffan site. Phase three of the five-phase masterplan will focus on fabrication and maintenance of offshore structures and components for onshore petrochemical plants. Phase four comprises a shipyard that will build high-value smaller craft, such as tugboats, coastguard patrol vessels and support vessels for the Qatari Navy. This project is being undertaken as a joint venture with the Netherlands’ Damen Shipyards Group. Damen and Nakilat signed a memorandum of understanding in March 2009, under which Nakilat will be responsible for construction of the shipyard and Damen will market its services and manage vessel construction. The partnership could even bring construction of luxury yachts to Qatar for the first time.
Gorinchem-headquartered Damen has a growing Middle East and Indian Ocean customer base, with recent orders including four tugboats for the Egyptian Navy, two coastal patrol boats for the Yemeni coastguard and three prefabricated boat kits sold to Pakistan’s Karachi Shipyard & Engineering Works.
Nakilat expects Damen to produce around 20 vessels a year in Ras Laffan to meet local and regional demand for specialist, high-value small craft.
“We chose Damen as our partner because it is particularly big in defence,” says Nakilat managing director Muhammad Ghannam. “Damen is a reliable manufacturer of small naval and coastguard vessels such as patrol boats. And in the late 1990s, it acquired a business building luxury superyachts. We look set to start the first construction of small vessels in Qatar this year.”
Phase five focuses on repairing small ships of less than 20,000 tonnes. Nakilat says it has won government approval for the project and has drawn up a shortlist of prospective partners. Ghannam hopes to sign an initial agreement for the project later this year, with operations starting in 2012.
Only phase three is on hold for now, with progress unlikely before mid 2011. “We will continue to monitor demand to decide the best time to move this part of the project forward,” Ghannam says. “The site is ready to go; it is just a question of deciding when to allocate the additional resources.”
Nakilat’s project taskforce completed market assessments and feasibility studies for the whole five-phase development in 2008. Even though world shipyard orders have slumped due to the recession, Ghannam remains confident. “We are absolutely thinking about the long term and about the needs of our own fleet,” he says.
“Having such a large fleet, we wanted to be able to guarantee for ourselves the quality and reliability of shipyard services, and that’s how – initially – we justified the viability of the project. But a year and a half ago we carried out feasibility studies and saw how tight the -market was – so tight that some of our future regional competitors were charging premiums for dry-docking.
“With the shipping industry expected to recover by 2012-13, we believe there is certainly enough demand to commercially justify our decision to proceed,” says Ghannam. “We are very optimistic – not least because of the strong relationships we have built with ship-owners worldwide.”
Central to Ghannam’s thinking is the prospect of the growing numbers of ships that will come to Qatar in future, drawn to service the country’s increased exports of gas, oil, condensates and related products. With the right infrastructure in place, he argues, the shipyard can target a captive market.
“Having Keppel O&M as our partner is a major advantage,” Ghannam says. “It is the world’s number one when it comes to ship repair and conversions, and Qatar will operate as an extension of the Keppel O&M facilities in Singapore. Ras Laffan will be the crown jewel in Keppel O&M’s facilities worldwide.”