Marine Engineering Workshop

A Ship Repair perspective on challenges

and Industry growth

South Africa is positioned strategically along

the international shipping routes

Recent oil & gas exploration in and around

South Africa could drive growth

Source: Infield Systems Ltd. 2013

Market segmentation

TRADITIONAL EMERGING/GROWTH

•Cargo / Tanker / Container

•Construction / Dredgers

•Crew / Supply

•Fishing

•Casualties

•Naval

•TNPA Vessels

•Diverted Vessels

•Oil & Gas Rigs / OSV’s

Reasons for calling a specific port

• Reasons: – Collection and delivery of goods

– Resupply

– Construction contracts / port development

– Repair

• The decision to repair is based on a combination of: – Locality of the port

– Necessity of the repair

– Cost of the potential diversion

– Cost of the repair work

– Duration of the repair work

Key Notes Vessel Category

Cargo / Tanker /

Container

-Largest market

-Smaller vessels in this category are being replaced by larger vessels, but fewer

large vessel are required to move larger quantities of goods

- Preference to repair in Asia due to cheaper rates

-Vessels unlikely to repair outside of charter route, except in emergencies

Construction / Dredgers -Limited activity due to lack of port developments

Crew / Supply -Limited activity

Fishing - Limited activity

O&G Rigs / OSV’s - Highest growth area due to exploration activity

Casualties - Infrequent activity

Naval - Limited activity

TNPA Vessels - Consistent activity

Diverted Vessels - Limited activity as diversions are dependent of availability of other docks

Growth Forecast by Category Forecasted

Ave. % Growth for period

Vessel Category Next 3 Years Year 4 & 5 Year 6 Comments

Cargo / Tanker /Container 2% 2% 2%

The cargo/tanker/container market is forecast to grow very

slowly over the next number of years

Excessive growth at the top end would depend on an

increase in port capacity which would require significant

investment

Construction / Dredgers 1% 1% 1% Growth in this segment would require extensive port

developments on the East Coast of Africa which would only

materialise with significant foreign investment

Crew / Supply 2% 2% 2% Slow and steady growth predicted

Fishing 1% 1% 1% This market may remain static

O&G Rigs / OSV’s 10% 16% 15% The further exploration and the proximity of drill ships/

floating rigs would have a direct impact on the growth in

this market

Other 6% 6% 6% Growth in the remaining could be steady

To give you an idea...

East African Oil & Gas Exploration and

Market Development

Development Plan Mozambique

Source: Cove-Energy.com

Anadarko have announced that they

have sold ⅔ of the potential

production to client in Asia

Demand for OSV’s will be driven by the need for

Drillships / Rigs / Subsea Structures

http://oilpro.com/post/1614/west-africa-needs-10-15-more-deepwater-rigs

Where is the demand?

Golden Triangle will still drive the lion's share of ultra-deepwater rig

demand growth over the next couple years. This rig demand

forecast slide from Pareto lays out their view of how ultra-deepwater

demand will progress through 2015.

http://oilpro.com/post/1614/west-africa-needs-10-15-more-deepwater-rigs

5 6

Current Rig Activity

East Africa

Rig Client Area Duration of Contract

Belford Dolphin Anadarko Rovuma - Mozambique N/A

Saipem 10000 ENI Rovuma – Mozambique En Route – 19 Feb

ENSCO 5001 Petro SA South Africa N/A

Discoverer Americas Statoil Tanzania N/A

Deepsea Metro I BG / Odfjell Kenya N/A

This activity is on par with the peak of activity during

2013/2014 and does not indicate any significant

increase in exploration activity

Emerging/ Growth Market

Oil & Gas

Key Areas of Focus

Mozambique Most developed / promising fields

South Africa Locality

Tanzania Focused drive to compete with

Mozambique

Madagascar Increased activity / appetite for

export

Kenya Mixed exploration success

1

2

3

4

5

Key Drivers

Exploration Field Development

Continued / increased exploration of

existing concessions

Exploration of new concessions in

Mozambique, South Africa, Tanzania,

Kenya, Madagascar

Field establishment to enable

onshore production

Higher demand for subsea structures

once field is developed and stable

Types of vessels: Seismic vessels,

Drillships, OSV, Crew Vessels,

Security Vessels, etc.

Types of vessels: Dredgers, Pipe

layers, Drillships, OSV, Well

Intervention Vessels, Rigs, Crew

Vessels, Security Vessels, etc.

Growth Milestones

Exploration Field Development

Further exploration in Rovuma basin

– only 2 areas out of 6 have been

actively explored

Opening of bidding for the second

round of concessions in Mozambique

Increased Exploration of African East

Coast

Significant reserves off South Africa

coast

Establishment of the Palma Plant

Export of gas from the Palma plant

Expansion of the Palma plant

Introduction of subsea structures

Introduction of well intervention

vessels

Establishment of operations offices by

fleet management companies in

Mozambique

Signification foreign investment (port

developments etc.)

Summary & Conclusion

The traditional market should see very little growth over the

next 3 to 5 years.

The development of the African East Coast Oil & Gas field

is growing steadily, but without a significant step change,

activity levels will remain the same as in 2013 and 2014.

Only once the construction of the onshore facility in Palma

begins in earnest will there be significant, but short term,

growth.

Gearing up for the future

The current position Number of individual vessels calling East African ports

Seg

men

t

Car

go /

Tanke

r / C

onta

iner

Con

stru

ction

/ Dre

dger

s

Cre

w /

Sup

ply

Fishing

O&G D

rillships

/ OSV's

Oth

er

Est 2014 Vessels 3441 20 14 74 133 119 3800

% Growth 5.00% 1.00% 2.00% 1.00% 9.00% 6.00%

Vessels 3613 20 14 75 145 126 3992

% Growth 5.00% 1.00% 1.00% 1.00% 9.00% 6.00%

Vessels 3794 20 14 76 158 133 4195

% Growth 5.00% 1.00% 2.00% 1.00% 16.00% 6.00%

Vessels 3983 20 14 76 183 141 4419

Fo

rec

as

ted

To

tal

Ma

rke

t -

Ea

st

Afr

ica

2015

2016

2017

In 2013...

* Figures based on EBH South Africa records, TNPA dock line-up for 2013 and assumed figure for SA Shipyards

2013

TNPA Graving Dock Actual Number of Vessels Docked 27

% Double Dockings 60%

* Double dockings were restricted from July 2014 due to caisson failure

Docking Occurances 17

EBH ELDOCK Actual Number of Vessels Docked 43

* Docking of 8 fishing vessels will be counted as one double docking going forward

% Double Dockings 30%

Actual (In 2013, 9 dockings out of 27 occurances were double)

Docking Occurances 27

OTHER Estimated number of vessels docked with SA Shipyards 8-10

TOTAL VESSELS DOCKED IN DURBAN 2013 80

Forecasted Docking Potential Total Market

Seg

men

t

Car

go /

Tanke

r / C

onta

iner

Con

stru

ction

/ Dre

dger

s

Cre

w /

Sup

ply

Fishing

O&G R

igs / O

SV's

Oth

er

Est 2014 Dockings 16 0 0 18 25 15 74

% Growth 2.00% 1.00% 2.00% 1.00% 9.00% 6.00%

Dockings 16 0 0 18 27 16 78

% Growth 2.00% 1.00% 2.00% 1.00% 9.00% 6.00%

Dockings 17 0 0 18 30 17 82

% Growth 2.00% 1.00% 2.00% 1.00% 9.00% 6.00%

Dockings 17 0 0 19 32 18 86Po

ten

tial D

ockin

gs

2015

2016

2017

Assumptions

Assumptions

No of days in a year 365

Average duration of docking 10

Maximum number of docking occurances 36

TNPA Graving Dock Capacity Estimated % Utilisation 80%

Estimated % Double Dockings 85%

Maximum capacity (36 occurances x 80%)* 185% 55

EBH ELDOCK Estimated % Utilisation 75%

Estimated % Double Dockings 30%

Maximum capacity (36 occurances x 75%)* 130% 35

Potential Facility Capacity

Facility

Gra

ving

Doc

k (T

NPA)

Float

ing

Doc

k (T

NPA

)

Float

ing

Doc

k (D

orm

ac)

Float

ing

Doc

k (E

BH)

Float

ing

Doc

k (S

AS)

Gra

ving

Doc

k (E

BH -

EL)

Yard Durban Durban Durban Durban Durban ELSY

Est 2014 30 0 0 35 10 25 100

% Operational 100.00% 100.00% 0.00% 100.00% 100.00% 100.00%

Total 55 25 0 35 10 25 150

% Operational 100.00% 100.00% 30.00% 100.00% 100.00% 100.00%

Total 55 25 10 35 10 25 160

% Operational 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%

Total 55 25 35 35 10 25 1852017F

ac

ilit

y C

ap

ac

ity

2015

2016

What must the TNPA do to enable the

growth of the ship repair industry?

Short term Specifically in the Port of Durban

• Complete the maintenance projects on an urgent basis

– Dock gate repairs (7 months)

– Crane repairs

– Floating dock repairs (5 years)

– General maintenance and upkeep

• Revise procurement process for outsourcing of these

repairs

– Current process is slow in the extreme and frustrates both the

TNPA personnel responsible for running the docks and the ship

repairers

Short term (Cont.) Specifically in the Port of Durban

• Revise how docking and undocking procedures are undertaken – Current docking/undocking is far to slow due to restrictions on overtime

hours etc.

– International procedures, if applied, would achieve up to 20% more dock capacity without capital expenditure

– The ship repair industry is more than willing to assist with implementing this change

• Port service, i.e. tugs and pilots, for docking and undocking of vessels needs to be given greater priority – This service is causing major problems for clients using the dock

• Review docking charges – South African docking charges are amongst the highest in the world and

deter many ship owners from docking in South African ports

– The charges are high due to a structural problem in respect of the docks / ship repair industry

Short term (Cont.)

Specifically in the Port of Durban

• Addressing the aforementioned issues can result in an

immediate increase in the capacity of the industry in

terms of available dock space

– i.e. Additional dockings in the TNPA Graving Dock could

increase by up to 12 dockings per annum

– i.e. TNPA Floating Dock (out of commission for approximately 5

years) could dock up to 25 vessels per annum. Instead over 100

potential dockings have been lost

• This increases the potential number of vessels that can

be docked by 35%

Long term

• TNPA has to define its role in the industry

– Does it want to be the major supplier of facilities for the industry?

– Does it want to open the options of ship repairers to invest in

those type of facilities? (This has been done in the past but on

an adhoc basis with no clear guidelines)

• Clarity on the above issues must be obtained if the

industry is to be able to expand to meet its potential

The current situation

• All land is under the control of the TNPA

• Generally permission to expand existing facilities or put in new facilities has not been forthcoming

• Where permission is granted amended lease periods are limited to 5 year and this precludes significant investment

• Most of the facilities needed to undertake ship repair are under the control of the TNPA which makes it difficult for ship repair companies to make significant investment in the industry – the key facilities needed for the business are not in their control

• Future developments in ports

What role must the industry play to

achieve growth and expansion?

Industry’s role

• Liaison between the TNPA and the ship repair industry needs to take place in respect of provision for space to be allocated for the industry in any new port developments

– i.e. In the proposed new dig out port there has been no provision for space for ship repair

• The ship repair industry needs to keep the TNPA informed of its view in respect of the market and the likely changes which will impact on the required facilities

• Timing is key as sometimes the market changes quickly and the window of opportunity to service the market is short and may disappear if appropriate and fast reaction is absent (i.e. Walvis Bay)

• Perhaps the most important is that the industry is given very clear parameters by the TNPA in respect of the role it will be playing in the future which will enable the industry to clearly make long term decisions to maximise its future potential and growth

Richards Bay

Creating an effective working model

Port of Walvis Bay in 2005

2005

Port of Walvis Bay in 2007

2007

Port of Walvis Bay in 2009

2009

Port of Walvis Bay today

Port of Walvis Bay today

Summary

• EBH Namibia was first aimed at meeting the demand of the fishing industry, but soon became a facility of choice for the West African Oil & Gas sector

• The Oil & Gas sector on the West African coast is roughly 10 times the size of the East African coast and developed over a period of 30 years

• In 2014 Walvis Bay will be docking approximately 90 vessel on the 3 floating docks

• The operation has created 1 000 direct jobs and countless more indirect jobs

Thank you