CIMC Raffles Offshore Ltd conducts trial of a newly completed $550 million deepwater semisubmersible drilling rig named North Dragon at its Yantai production base in East China's Shandong province. [Photo/Provided To China Daily]

Firm thinks focus on maritime engineering vessels and equipment is key to Chinese shipyards' turnaround

With the global shipbuilding industry adrift in choppy waters amid waning demand, Yantai-based CIMC Raffles Offshore Ltd is looking to not only stay afloat but maintain robust growth by exporting more offshore oil rigs and engineering vessels.

CIMC Raffles is an equipment manufacturing subsidiary of China International Marine Containers (Group) Ltd, the country's transportation equipment producer.

Earlier this month, it completed development of a $550 million deepwater semi-submersible drilling rig named North Dragon at its Yantai production base in East China's Shandong province.

The rig was built for North Sea Rigs Holding AS of Norway, one of the largest offshore oil producers in Europe. It is the first China-made semi-submersible drilling rig capable of operating in the Arctic area with temperatures of minus 20 degrees Centigrade and withstanding storms in the North Sea and Barents Sea.

The platform will be able to operate in seawater depths of up to 1,200 meters and drill to a depth of 8,000 meters.

According to a survey by the United States Geological Survey, the North Sea has 13 percent of undeveloped petroleum and 30 percent of undeveloped natural gas.

Yu Ya, president of CIMC Raffles, said many Chinese shipyards' earning capability is being squeezed by low technical content, appreciation of renminbi and blind expansion.

So, developing maritime engineering vessels and equipment will be key to Chinese shipyards' turnaround. Competition with South Korean and Japanese shipbuilders could also help.

In the first half of this year, Chinese shipyards received orders for new vessels with a collective capacity of 11.19 million deadweight tons, accounting for 27.6 percent of the global market share, while South Korea's shipbuilding industry, a powerful rival of China's, secured 44.6 percent of the world's market share, data from the Beijing-based China Association of the National Shipbuilding Industry show.

Offshore engineering products are essentially functional vessels and oil drilling platforms that can float in deep water.

Offshore gas and oil companies use these vessels to process the natural gas and crude pumped up from the ocean floor. In some cases, they are also used in the extraction process.

Since 2009, CIMC Raffles has delivered 10 semi-submersible drilling rigs and another five are under construction, two of which will be able to work in the North Sea in 2016 and 2017.

The company's sales of offshore engineering products totaled $1.8 billion across global markets in 2014. Energy companies from Brazil, Norway, Mexico, Malaysia, Russia and Italy are its main clients.

"Even though offshore engineering products and vessels are more costly and complex to build, the burgeoning global demand for energy resources is expected to keep orders flowing. While the global shipping industry is unlikely to see a notable upturn anytime soon, demand for offshore energy vessels has steadily increased in recent years," said Yu.

Supported by more than 13,000 employees, including 800 engineers and researchers, CIMC Raffles already has the technology to make products that have a longer life cycle, perform better under extreme weather conditions and the methods to use more advanced materials in building oil rigs or vessels.

Eager to enhance the company's export abilities, its parent CIMC acquired Bassoe Technology AB, the well-known Swedish provider of design services and equipment for offshore drilling rigs in 2013.

With a comprehensive concept and creative design capabilities of Bassoe Technology, CIMC Raffles has initiated a China-European researching methodology.

"This acquisition gives us an opportunity to build new offshore engineering equipment and related ships with more complex technical edges," said He Changhai, director of CIMC Raffles' research and development center.

He said the main reasons why the company is betting big on offshore engineering products are high international energy demand and the insatiable global appetite for natural resources.

Established in 1977 as a shipyard to build bulk carriers, the company now operates three offshore engineering product manufacturing bases in Yantai, Haiyang and Longkou. Eager to diversify its business categories, its research and development center also focuses on wind power systems, high-end shipbuilding, seawater desalination, rotating machinery, condition assessment and equipment life extension programs.

"If you look at the global market for ships, you can see signs of decline everywhere," He said.

"We want to shift our core business to more high-end offshore engineering as apart from higher profits, there is less competition as not too many shipyards are capable of making either offshore engineering equipment or vessels."

Guo Dacheng, president of the CANSI, said offshore engineering is unlikely to see a slowdown in the near future. Deepwater fields are expected to be the main sources of conventional energy yet to be discovered and developed.