China offshore yards see dip in orders in 2014

Last year, China’s offshore rig and equipment builders won orders for 167 units of rigs, down 52% compared to 2013 and accounting for 40.1% of the global total, the data showed. The new orders were valued at $13.9bn, down 45.5% year-on-year and representing 40.9% of the total worldwide value.

Among the new orders, there were 78 jack-up rigs, 14 self-elevated drilling units, five semi-submersible drilling rigs, as well as a handful of drillships.

China’s offshore market had witnessed a rapid pace of growth in recent years due to the steady rise in crude oil prices, as well as by the recession in the conventional shipbuilding sector, prompting Chinese yards to diversify into offshore. The number of Chinese yards involved in offshore production have risen to more than 10 today from just four to five of them back in 2012.

However, the plunge in oil prices since late-October 2014 has sent the offshore market into a downturn, with buyers starting to default on contracts as oil majors slashed expenditure on oil and gas exploration and production activities.

The lack of the offshore market boom has now raised fears in the Chinese market due to the especially low downpayment of 1-5% for newbuilding rigs as Chinese yards sought to garner market share.

Investment bank Credit Suisse had earlier estimated that 42 jack-up rigs due to be delivered from Chinese yards this year are likely to get cancelled.

At present, the larger Chinese offshore yards include Yantai CIMC Raffles Offshore, China Merchants Heavy Industry, Dalian Shipbuilding Industry Corp (DSIC) and Shanghai Shipyard.