The Straits Times / The Business Times News on Cosco

Cosco S'pore in US$120m offshore contract

It will build the hull of the largest drill ship ever, expects to take 16 months

COSCO Corp (Singapore) yesterday announced a new US$120 million ship contract, the first of its kind for the shipyard and shipping group which is trying to muscle into the lucrative offshore market.

Cosco's 51-per-cent owned subsidiary, Cosco Shipyard Group, has secured a contract from MPF Corp to build the hull of a floating, drilling, processing, storage and offloading vessel (FDPSO). The vessel, which combines drilling, production and storage facilities, will be the largest and most versatile drill ship ever built, said Cosco. It is designed for multifunctional use in ultra-deep waters.

MPF said it chose Cosco to build the hull because of the flexibility provided by the facilities the group has developed for offshore construction. The vessel will be built at the group's Cosco Dalian Shipyard. The project - Cosco's first FDPSO contract - is expected to take about 16 months and delivery is scheduled for early 2008.

'We will deliver this vessel within the time and budget stipulated, without compromising international health, safety and environmental standards,' said Ji Hai Sheng, vice chairman and president of Cosco.

Cosco bagged US$250 million worth of contracts in the first half of this year.

The group has increasingly been transitioning from a near pure bulk shipping group to a strong focus on the shipyard business after acquiring a 51 per cent stake in the Cosco Shipyard Group (CSG) - China's largest shipyard group, with seven yards.

CSG has been winning a growing number of contracts for higher value work like semi-submersible oil rig components and single-to-double hull and other specialised conversions. This is largely due to the involvement of Singapore's SembCorp Marine, which holds a 30 per cent stake in CSG and which has partnered Cosco Dalian Shipyard for rig building.

Cosco saw net profit for second quarter 2006 rise 30 per cent to $51 million on the back of strong ship-repair demand and an increasing number of higher-value contracts, while revenue rose 26 per cent to $265.3 million. For the first-half of 2006, the group posted a 36 per cent rise in net profit to $88.6 million on a 42 per cent rise in revenue to $532.9 million. Cosco shares have gained 51 per cent this year, closing yesterday at $1.63.