Vietnam Offshore Maritime sector 18th June 2012 Tran Hai Anh (MSc., MBA) – Senior Market Adviser

Content 1. Cluster Conditions 2. Demand conditions 3. Industry Rivalry 4. Factor conditions 5. SWOT 6. Conclusion and recommendation

2

3

Cluster conditions

Main players

4

SHIPBUILDERS:

• Vinashin • PetroVietnam • Navy shipyards • Foreign shipyards

DOMESTRIC SHIPOWNERS:

• PetroVietnam • Vietsovpetro • Vinalines • Petrolimex • Au Lac • Ministry of National Defense

FOREIGN SHIPOWNERS:

• DOF • Farstad shipping • Densa • Norden • Geden • HMM • DSL Kumpula • Ezra Holding • German Briese

Shipbuilding Clusters

• Northern cluster: bulkers, containers, tankers, multi-purpose vessels, etc. up to 100,000 DWT.

• Center cluster: tankers, bulkers, multi-purpose vessels, navy vessels, etc. up to 300,000 DWT.

• South cluster: bulkers, offshore vessels, containers, etc. up to 50,000 DWT.

• Vung Tau offshore shipbuilding sub-cluster: offshore vessels and rigs.

5

Northern shipbuilding cluster

6

The Northern shipbuilding cluster has no existing offshore shipyard

The Centre shipbuilding cluster

7

• Dung Quat shipyard is going to build rig and submersible • Huyndai-Vinshin shipyard is the most busy shipyard in Vietnam

DUNG QUAT SHIPYARD 400,000 DWT TANKER

SONG THU SHIPYARD FOR LIGHT VESSEL

HYUNDAI VINASHIN

CAM RANH SHIPYARD 30,000 DWT VESSEL

The South shipbuilding cluster (excl. Vung Tau)

8

• PTSC shipyard is going to build offshore vessels for PTSC • Saigon Shipyard (Triyard) builds offshore vessels for Ezra Holding

CA MAU SHIPYARD FOR HANDYSIZE

76 SHIPYARD FOR HANDYSIZE

SHIPMARINE SHIPYARD FOR HANDYSIZE

SAI GON SHIPYARD FOR HANDYSIZE

PTSC SHIPYARD FOR HANDYSIZE

SOAI RAP SHIPYARD FOR HANDYSIZE

CAN THO SHIPYARD FOR HANDYSIZE

HAU GIANG SHIPYARD FOR HANDYMAX

Vung Tau offshore shipbuilding cluster

9

Offshore shipbuilding:

STXovs, Strategic marine,Sofel, PV

shipyards, Vinalines shipyard.

Oil and Gas industry:

VietsoPetro, PVN, Farstad,

DOV, PVD

Subcontractors:

Goltens, Rolls Royce,

PTSC

Suppliers: PTSC, Brodrene Dahl, Maritime

Interior

Finance, banking service:

BIDV, HSBC, VCB.

Ship classification

services: DNV, Loyd,

NYK Logistics: Palnalpina,

DHL, AGILTY, Shanker,

Brokers: PVFC,

Wihemsen. Safety

service: Mermaid safety.

Insurance: PVI, Loyd,

Dloite.

Education & training: PV

training centre, Maritime

university, DNV, BV, URS.

Offshore Ship&rig owners:

Vietsopetro, PVD, Petronas,

KNOC, BP, Chervon

HR service: IZ, Navigos,

Net Viet, Erns Young, KPMG,

DNV.

Ship management:

SBM, Modec

Ports: Cai Mep-Thi Vai,

Ben Dinh- Sao Mai, My Xuan, Go Dau, PTSC,

Vietsopetro

Source: Tran Hai Anh - Do Anh Tuan, Innovation Norway Hanoi

10

Demand conditions

Vietnam Order Book up to Mar. 2011

11

Unit: No of vessel

Source: Tran Hai Anh - Innovation Norway Hanoi

Status by kind of vessel (up to Mar. 2011)

12

Unit: No of vessel

Source: Tran Hai Anh - Innovation Norway Hanoi

None of offshore service vessels was cancelled or on hold 43% of bulker and 67% of tanker were cancelled or on hold

13

PTSC’s AHTS Development Plan

14

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

• 2012-2025: build/purchase 30 AHTS

• 7,000 HP – 10,000 HP;

• Prefer to build these AHTS at PTSC shipyards;

• Seeks for foreign investor(s) to develop PTSC shipyard.

• Seeks for foreign expertise to build AHTS;

• Further information: www.ptsc.com.vn

Source: Nguyen Hoang Hai Minh, Deputy Director, PTSC shipyard

PV Shipyard Projects

15

Source: www.pvshipyard.com.vn

• Assist tender barge for PVD, (250 meters water depth).

• 400ft Jack-up for VietsoPetro

• 90 meter jack-up rig for VietsoPetro.

• 60 meter drilling jack-up rig project for PetroVietnam.

• Semi-submersible for Vietsopetro (?)

Vietsopetro Project

16

• Re-tender for the construction of a semi-submersible drilling unit.

• Seeking to buy or build heavy lift construction vessels of up to 3,000 tonne.

• The 60-metre Warstilla-designed DSV under construction at a shipyard in Batam is due for delivery

• Investing in more rigs to replace the drilling units it has on charter from third-party contractors

• Teamed up with Bumi Armada to develop and operate a floating production, storage and offloading vessel

Triyard projects

17

• H0705 self propelled jack-up rig

• H0706A self propelled jack-up rig

• H0706B self propelled jack-up rig

• H09026000 T oil tankers

• H1002 178 m sub-sea pipe laying vessel DP3

• H1007 29m ASD Tug boat

• H1008 29 m ASD Tug boat

Source: www.triyards.com

STX Projects • Six Aker DOF AHTSs were handed over • Three Farstad ships, Platform Supply under construction • Coming project?

18

19

20

Vietnam Shipbuilding Rivalry

Existing Shipbuilders Hyundai –Vinasin shipyard: Procurement done in Korea Damen:

Partnership with Song Thu shipyard to outsource new-building works plus total solution package.

Partnership with Song Cam shipyard (under Vinashin) to outsource new-building tub-boat plus total solution package.

Provide total solution package for PTSC on building tugboat

Use Helmers for interior package

21

Existing Shipbuilders (cont. 1) Triyards:

Built ships for its mother company (Ezra Holding) and start to look for external order;

Quality and price-driven procurement; Marc-Plan is used for supplying interior package.

STX OV Quality and price-driven procurement; STX Accommodation Vietnam is used for interior

package. Oshima’s shipyard is under construction in Khanh Hoa

province.

22

Existing Shipbuilders (cont. 2) PTSC shipyard

Under construction; Ambition of building ship for its mother company; Price-driven procurement (under law of

tendering). PVshipyard

Build rigs/platform for its mother company: PetroVietnam/Vietsopetro;

Price-driven procurement (under law of tendering).

Dung Quat shipyard: Price-driven procurement (under law of tendering).

23

Existing Shipbuilders (cont. 3)

Navy shipyards: trust, quality and price-driven procurement.

Vinashin shipyards:

price-driven procurement (under law of tendering).

24

NME’s group at STX OV, Vung Tau – Photo: Eivind Petershagen, Innovation Norway Oslo

Offshore Ship Owners • PVD: Price-driven procurement (under law of tendering). • Vietsopetro: Price-driven procurement (under law of

tendering). • PTSC: Price-driven procurement (under law of tendering). • Foreign operators: Trust, quality and price –driven

procurement.

25 Cat Lai Port – Photo: Innovation Norway Hanoi

Tanker Shipowners Petrolimex: Price-driven procurement (under law of

tendering). PVTrans: Price-driven procurement (under law of

tendering). PV oil shipping: Price-driven procurement (under law of

tendering). Au Lac: private ship-owner, price and quality-driven

procurement. Gas shipping: Price-driven procurement (under law of

tendering).

26

Other Shipowners Vinalines: Price-driven procurement (under law of

tendering). Navy ship-owners: trust, quality and price-driven

procurement.

27

STX OV Opening Ceremony – Photo: Kjell Arne, Innovation Norway Hanoi

Market analysis

28

Market has low entry barrier and low exit barrier Customer holds the power High customer’s possibility of switching from placing new order

inside Vietnam by shopping ready-made/under construction products in the global market

Set up long term partnership with ship-owner(s)? Set up long term partnership with shipyard(s)? Set up local production facility? Use agent(s) in Vietnam? Use agent(s) in Singapore to cover Vietnam market? Partnership with PetroVietnam’s subsidiaries to provide

services in Vietnam and in the region? Outsourcing for local constructors? M&A?

Possible Entry modes

29

30

Factor conditions

Country at glance

31

Source: www.adb.org

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

1/1/

2009

2/1/

2009

3/1/

2009

4/1/

2009

5/1/

2009

6/1/

2009

7/1/

2009

8/1/

2009

9/1/

2009

10/1

/200

9

11/1

/200

9

12/1

/200

9

1/1/

2010

2/1/

2010

3/1/

2010

4/1/

2010

5/1/

2010

6/1/

2010

7/1/

2010

8/1/

2010

9/1/

2010

10/1

/201

0

11/1

/201

0

12/1

/201

0

1/1/

2011

2/1/

2011

3/1/

2011

Base rate Refinancing rate Discount rate

Economy Outlook

32 Source: www.adb.org

Interest rate (%)

Investment Related Costs Hanoi Da Nang Hochiminh City Wage (manufacturing) Full time worker (basic montly salary) 104 $ 87 $ 100 $

Full time engineer (basic montly salary) 287 $ 180 $ 293 $

Full time manager (basic montly salary) 822 $ 221 $ 670 $ Legal minimum wage 95 $ 95 $ 95 $

Social security burden Employer burden rate - Social insurance 16% 16% 16% - Health insurance 3% 3% 3% - Unemployment insurance 1% 1% 1% - Trade union fee 1% 1% 1% Employee burden rate - Social insurance 6% 6% 6% - Health insurance 1.50% 1.50% 1.50% - Unemployement insurance 1% 1% 1%

Energy cost - 95 Petrol 1.1 $/L 1.1 $/L 1.1 $/L - Diesel 1.009 $/L 1.009 $/L 1.009 $/L - Electricity price (average) Uscent 9.5 Uscent 9.6 Uscent 9.7

A Graded Office rent 30-35 $/m2/month 17-19 $/m2/month 25-30 $/m2/month

33 Source: Tran Hai Anh, Innovation Norway Hanoi

34

35

Unit: $ billion

Source: Vietnam economic times

36

Strong government ownership o Vinashin is 100% owned by the government o PetroVietnam is 100% owned by the government o Vinalines is 100% owned by the government o 51% of Vietsopetro is owned by PetroVietnam o Ministry of National Defence owns navy shipyards

37

Government shows its strong commitment and provides significant support to Vietnam maritime sector

Strong Development of Oil & Gas activities

38

Unit: 103 barrels

Source: BP Statistical Review 2011

Third ranked in Asia – Pacific by Oil reserves Third ranked in SEA region by production of oil and liquid

DISCOVERED

YET TO FIND

Oil & Gas – E&P situation

39

Major oil productions from Cuu Long basin Major gas production from Nam Con Son basin Offshore water depth: 30m-150m

40

41

Vietnam Business Culture

42

Vietnam Business Culture

43

44

45

46

47

?

48

SWOT -Norwegian Maritime Companies and Vietnam Offshore Shipbuilding

Norwegian Maritime Companies - Strengths

Strengths • Unique technology • Unique combination (owns the whole

value chain?) • Unique competence? • High accessibility to R&D

achievements • High accessibility to financial sources • Good reputation (good quality and

good attitude)

49

Norwegian Maritime Companies Weakness

50

Weaknesses • High cost? • More focus on technology than

business? • Sufficient resources to cover Vietnam

market? • Sales/marketing efforts? • Flexibility?

Opportunities

51

Opportunities • Political stability • Member of international organizations (WTO,

ASEAN, IMO, COSPAS-SARSAT, etc.) • EFTA Trade Agreement is under negotiation • Existing domestic demand as the result of

strong oil & gas industry development • Young population with competitive labor cost • Favorable geographical location • Tax incentives for export products • Presents of Norwegian players

Threats

52

Threats • Economic depression • High bureaucracy • Raw materials needs to be imported • High competition from neighbor countries

(China, Singapore, Malaysia, Korean)

53

Conclusion and Recommendation

Conclusions Vietnam offshore shipbuilding is driven by both domestic

demands and external demands.

Strong presents of international players, including Norwegian players, in Vietnam offshore maritime sector.

Norwegian offshore-maritime expertise and technologies are needed.

Coming together make you shaper and stronger

Now is right time to come and see?

54

Recommendations

55

We are here for help!

56