Norwegian shipbuilders adapt but capacity glut looms

On the country’s west coast, the pain is particularly hard felt – the Sunmøre cluster is home to a tight-knit community of designers, builders and operators of some of the world’s most sophisticated offshore vessels. Their demands also support a wide range of high-tech equipment suppliers.

However, as energy companies slashed capex budgets and OSV operators stopped spending, offshore building work in progress has crashed. The dramatic change in fortunes has forced a strategic re-think. Key to new business models are revenue streams generated by non-traditional vessel types including high-tech fishing vessels, offshore wind farm support vessels, cable layers, regional ferries and expedition cruise ships.

The focus on fishing is a natural move because the forbears of many west coast owners ran fishing fleets operating in some of the world’s most hostile waters. Today’s vessels include live fish carriers and new deep-water support vessels for fish-farms located further from shore.

But relatively standard PSV construction has traditionally been the “bread-and butter” business of the region’s yards, with super-sophisticated high-end vessels providing the icing on the cake. Today, however, about 100 OSVs are laid up in Norway, around 30 in the Sunmøre region alone.

Even when activity picks up, absorbing that volume of tonnage will prove a major challenge. In the meantime, contracting volumes in other sectors cannot make up the shortfall in offshore building contracts.

VARD’s Holger Dilling, vp of investor relations and business development Asia at the nine-shipyard group, recently revealed how the 55.6% Fincantieri-owned firm, also listed in Singapore, has changed course over recent months and is now targeting a variety of other ship types. To do this, the company has strengthened its design team, hiring more naval architects and support staff in a 30% increase in headcount.

The initiative is proving successful. Five new contracts have been signed since June – two expedition cruise ships taking the total to six, and three offshore module carriers to add to the 15 ordered by Topaz Energy and Marine in a $300m contract earlier this year.

Meanwhile family-owned Kleven Shipyard is successfully demonstrating that diversification can work. Traditionally, the builder specialised in PSV construction and high-end offshore vessels including IMR ships and subsea construction vessels.

As well as several more of a six-ship series of anchor handlers for Maersk Offshore, the yard is building four high-end stern trawlers for owners in Germany, France and Spain, a cable-layer for ABB, two live-fish carriers for local owners and a second mega-yacht for a New Zealand businessman. A deep-sea mining vessel has recently been completed for De Beers. Overseas owners are likely to have been attracted by Norway’s appealing export credit terms available through the Government institution GIEK.

Meanwhile, against stiff local and international competition, Kleven recently won a prestigious contract for two, option two, coastal ferries for Hurtigruten. The Rolls-Royce design ice-class vessels are to be built both for operation by Hurtigruten on the Norwegian coast as well as for expedition cruises in northern waters.

The switch out of offshore has proved more challenging for others, however. Havyard, listed on the Oslo Stock Exchange in 2013, ran up significant losses until recently. However, workforce cuts and corporate reorganisation appear to be working and the shipyard announced positive figures for the last quarter.

Over the last 18 months, deliveries have included three offshore wind support vessels, two icebreakers, a live salmon carrier and a stern trawler. Yet only three ships remain to be delivered – two more icebreakers and another live fish carrier. The yard is now assessing opportunities in the repair and conversion sector and recently signed a contract to install hybrid engines on two ferries. Shipyard executives remain hopeful that new orders will be announced by the year-end.

Work is also running low at Ulstein. However, the shipyard’s innovative design team is working on potentially new applications for existing designs, notably the highly successful PX121 platform supply vessel. Its naval architects are also working on other vessel designs including casino and family cruise ships for the Chinese market, expedition cruise ships, specialised workboats and various conversion possibilities.