The Straits Times / The Business Times News on Cosco

New contracts worth US$92.4m for Cosco

Contracts reflect SembMarine's influence within Cosco group

COSCO Corp's Singapore subsidiary, Cosco Shipyard Group, has secured US$92.4 million in new contracts as it edges its way up the shipbuilding value chain, partly thanks to work farmed out by SembCorp Marine (SembMarine).

The contracts for semi-submersible oil rig components, single-to-double-hull and other specialised conversions reflect the growing importance of higher-value shipbuilding for Cosco Corp, which owns 51 per cent of Cosco Shipyard Group, as it expands away from its bulk shipping business.

Shipping, which accounted for 96 per cent of turnover in 2004, now constitutes only 17 per cent while ship repair and newbuilding account for over 80 per cent.

The contracts also reflect the influence of SembMarine, one of Singapore's leading rig builders, which has a 30 per cent stake in Cosco Shipyard Group.

Among the new orders is a US$31 million contract from SembMarine's Jurong Shipyard to construct the lower pontoons for two semi-submersible rigs, with construction to begin this month for delivery in April next year. Another Cosco Shipyard Group facility, Cosco Nantong Shipyard, located outside Shanghai, recently delivered the accommodation block of a jack-up rig to SembMarine subsidiary PPL Shipyard.

'The group will be in the position to build complete offshore rigs with experience accumulated from fabrication of these rig pontoons as well as rig accommodation,' Cosco Corp said in a statement.

'With the support of our partner, we are sure that the construction of lower pontoons for semi-submersible rigs and the repair of semi-submersible drilling rigs (Nanhai Kaituo) shows our ability in the offshore business,' said Cosco Corp vice-chairman and president, Ji Hai Sheng.

For its part, SembMarine said it had chosen Cosco Dalian Shipyard as its partner for its rig building programme, 'leveraging on the facilities and strengths of the two groups', according to SembMarine COO Wong Weng Sun.

Mr Wong added it will be a 'win-win situation' for all parties.

The Cosco Shipyard Group also picked up US$34.1 million in new contracts for the conversion of single-hull tankers into double-hulls.

The shipyard group has been benefiting from International Maritime Organisation regulations on the phasing out of most single-hull tankers by 2010 in favour of double-hulls.

Double-hull tankers have an extra layer of steel separating cargo tanks from the sea, making them less likely to cause oil spills in the event of a collision.

The shipyard group also won four specialised conversion contracts worth US$27.3 million with commencement dates from April and completion dates up to July this year.

'Conversion contracts secured in the year to date have already doubled those won in the whole of 2005,' Mr Ji said.

'We are confident of securing more complex and higher-value conversion jobs,' he added.