China Shipbuilding Industry s Offshore Business & Views on Shipbuilding VS. Offshore

China Shipbuilding Industry s Offshore Business & Views on Shipbuilding VS. Offshore - from a Shipbuilder s View - ZHANG Yonghui China Institute of Marine Technology and Economy OECD Council Working Party on Shipbuilding (WP6) Workshop on shipbuilding and the offshore industry, Monday 24 November 2014

About Us China Institute of Marine Technology and Economy is a research institute of CSSC. shipbuilding market research shipbuilding economy research shipbuilding industry policy research shipbuilding technology research shipbuilding standard research shipbuilding industry IPR research OECD Council Working Party on Shipbuilding (WP6) Workshop on shipbuilding and the offshore industry, Monday 24 November 2014 2

Content 1 China Shipbuilding Industry s Offshore Business 2 Views on Shipbuilding VS. Offshore OECD Council Working Party on Shipbuilding (WP6) Workshop on shipbuilding and the offshore industry, Monday 24 November 2014 3

1 China Shipbuilding Industry s Offshore Business 1.1 The history In 1966, the first offshore production well of China was drilled in Bohai Bay. In 1971, China s first jack-up rig BOHAI 1 was delivered by Dalian Shipyard. In 1973, China s first catamaran drillship KANTAN 1 was delivered by Hudong Shipyard. In 1984, China s first semi-submersible rig KANTAN 3 was delivered by Shanghai Shipyard. In 1989, China s first FPSO BOHAI FRIENDSHIP was delivered by Hudong Shipyard. China Institute of Marine Technology and Economy 4

1 China Shipbuilding Industry s Offshore Business 1.2 The performance By the end of 2013, China shipbuilding industry has delivered 31 jack-up rigs 16 semi-submersible rigs 2 drillships 23 FPSO (including FPSO conversion projects) Hundreds of offshore service vessels China Institute of Marine Technology and Economy 5

1 China Shipbuilding Industry s Offshore Business 1.3 What we can do now Products Basic Design Detail Design Shop Design Construction Jacket Platform FPSO/FSO Hull Living Quarter Topside Modules?? Jack-up Rig Semi-sub Rig Drillship Seismic Ship Construction Vessel PSV & AHTS China Institute of Marine Technology and Economy 6

1 China Shipbuilding Industry s Offshore Business 1.4 The major player Major Player Main Shipyards Offshore Products CSSC CSIC COSCO Shipyards shanghai waigaoqiao shipyard shanghai shipyard huangpu shipyard, CSSC guangzhou dockyard dalian shipyard shanhaiguan shipyard wuchang shipyard qingdao beihai shipyard COSOC dalian shipyard COSOC nantong shipyard COSOC guangzhoushipyard FPSO, jackup rig, semi sub rig, drillship, construction vessel, other OSVs, offshore unit repairing and conversion FPSO, jackup rig, semi sub rig, drillship, construction vessel, other OSVs,, offshore unit repairing and conversion jackup rig, semi sub rig, construction vessel, other OSVs CIMC Raffles CIMC yantai shipyard jackup rig, semi sub rig, OSVs CMHI CMHI shenzhen shipyard CMHI nantong shipyard jackup rig, offshore unit repairing and conversion China Institute of Marine Technology and Economy 7

1 China Shipbuilding Industry s Offshore Business 1.5 The orderbook by the end of 3Q of 2014 Drilling Rigs FPSOs OSVs Type No. Total Jack up Rigs 65 Semi sub Rigs 9 80 Drillships 6 FPSO Newbuilding 3 FPSO Conversion 2 5 PSV 185 AHTS 125 409 Others 99 China Institute of Marine Technology and Economy 8

Content 1 China Shipbuilding Industry s Offshore Business 2 Views on Shipbuilding VS. Offshore OECD Council Working Party on Shipbuilding (WP6) Workshop on shipbuilding and the offshore industry, Monday 24 November 2014 9

2 Views on Shipbuilding VS. Offshore 2.1 Market driving factors Shipping freight and shipbuilding contracts Oil price and offshore contracts 300 M. DWT USD/DAY 35000 100 Billion USD offshore contracts value USD/Barrel 120 250 200 150 100 50 30000 25000 20000 15000 10000 5000 50 Brent oil price 90 60 30 0 0 0 0 2014.1 9 2013 2012 2011 2010 2009 2008 2007 2006 2005 2014.1 9 2013 2012 2011 2010 2009 2008 2007 2006 2005 world economy, sea trade, shipping market, freight level, etc. world economy, energy demand, oil price, offshore E&P investment, etc. China Institute of Marine Technology and Economy 10

2 Views on Shipbuilding VS. Offshore 2.2 Business characters Shipbuilding Construction Contract(T&C is determined by specification) Series design, series and batch orders Standard Design Customers are less involved in the newbuilding process Built according to the approved drawing, rarely change design Standard raw materials and equipment supply mode Result Control global sourcing Offshore Service Contract(T&C is determined by tender document) Single design, single order, discontinuous orders Project Design Customers, contractors and subcontractors are integrated and frequently interact in the process of project execution Engineering, construction and installation interact in the process of project execution, often change design Suppliers are part of the project group, and everything is traceability Process Control (HSE, QE, Subcontractors/Suppliers, Duration, Cost, Document) local content requirement China Institute of Marine Technology and Economy 11

2 Views on Shipbuilding VS. Offshore High-tech & high value-added Customization & complicated China Institute of Marine Technology and Economy 12

2 Views on Shipbuilding VS. Offshore 2.4 Challenge for the shipyards Higher technical requirements, higher engineering and integration abilities Capability of manage large and complicated projects Good supply chain control to ensure delivery cycle Higher requirements for HSE and QC Customers special and sometimes severe requirements Capability of financing a large and complicated project Higher risk tolerance China Institute of Marine Technology and Economy 13

Conclusion Remarks: Shipbuilding and offshore have lots of similarity, such as supply chain of raw materials and equipment, rules, regulations, standards, construction technology, assembly process and so on. As above said, they are so different in the many aspects. It is necessary for the shipyard to be quickly familiar with and adapt to these characteristics, when they enter into the offshore business. China shipbuilding industry has a long history of offshore business. Recent offshore achievement of China is based on the long-term accumulation, and also on the improvement of shipbuilding technology and project management. However, there is still a gap for China shipbuilding industry, especially in the aspects of engineering, R&D and localization of equipment supply. To strengthen communication and cooperation is the way to realize win-win. China shipbuilding industry hopes to develop offshore market with counterparts of other countries in the future.

Thanks for your attention. ZHANG Yonghui Email: yhzhangchina@sina.com China Institute of Marine Technology and Economy OECD Council Working Party on Shipbuilding (WP6) Workshop on shipbuilding and the offshore industry, Monday 24 November 2014