U.S. shipyards are enjoying another year of good health — as in healthy orderbooks.
In WorkBoat’s annual Construction survey released in March, respondents reported 735 new vessels under contract, under construction, or recently delivered during the previous 12-month period. The year before, the number was 745. And that doesn’t take into account all the repair business.
“I think the industry is in a good position,” said Richard McCreary, vice president, commercial business development, BAE Systems ShipRepair, Mobile, Ala. “We’re now seeing a resurgence of equipment in what I call the traditional Jones Act trade — more the tankers, containerships, the bulkers, the articulated tug/barge units.
“The state of the industry is strong,” agreed Matt Paxton, president, Shipbuilders Council of America. “We are witnessing an uptick in several markets including inland tug and barge.”
The driving force behind much of the shipbuilding boom has been the U.S. oil and gas industry. Between the production coming out of the Gulf of Mexico and out of the ground through hydraulic fracturing, the future looks bright. The U.S. is expected to be the largest producer of oil and gas by 2020.
Construction of inland tank barges has been booming. It set a record in 2013 with 336 deliveries, easily eclipsing the previous record of 261. Trinity Marine Products, Madisonville, La.,and Jeffboat, Jeffersonville, Ind., built the lion’s share of the new tank barges, most of them of the 30,000-bbl. variety. Last year’s record won’t stand for long, though, because experts expect it to be topped this year.
“We’re in a very sharp upward demand curve,” Brent Dibner, president, Dibner Maritime Associates, told WorkBoat. “These millions of barrels of oil are going to have to be spread out like icing on a cake. You can’t have too much of a buildup anywhere.”
Frank Foti, president and CEO, Vigor Industrial, Seattle, said he’d like to expand his shipyard business and moving into the Gulf to take advantage of energy sector growth is definitely a possibility.
“Sure, yes, if they’ll have me,” Foti said. “It is difficult to know how we will continue to serve the refining capacity in the Gulf.”
MORE RIGS, MORE OSVs
Meanwhile, as many as 10 new rigs are expected to enter the Gulf by the end of the year, and shipyards are deep into multivessel contracts for offshore service vessel operators.
“We’re probably likely to see 20 to 25 vessels delivered this year,” Richard Sanchez, senior marine specialist, IHS Petrodata/Marine Base, said at the WorkBoat OSV Design Summit held in Houston in April.
Those multivessel contracts from operators such as HornbeckOffshore Services, Harvey Gulf International Marine, Edison ChouestOffshore and others will keep shipyards such as Eastern ShipbuildingGroup, VT Halter Marine, Leevac Shipyards, North American Shipbuilding and Gulf Coast Shipyard Group busy over the next 20 months or so.
New multivessel offshore service vessel contracts have mostly run their course for now, and Gulf shipyards are seeing companies adding specialized OSVs to their fleets. “We’ve had a great run the last several years in the energy sector, but that sector is starting to slow down quite a bit because of all the orders that have been made there,” said McCreary.
One of those specialized vessels is the 353'×72', DP-2 subsea support vessel being built at BAE in Mobile for Oceaneering International. The vessel will be powered by GE Tier-4i-emission compliant engines and feature a 250-ton, active heave-compensated crane capable of reaching depths of 13,000'.
Many of the new OSVs, such as the four 252'×60'×25'3" platform supply vessels BAE is building at its Jacksonville, Fla., yard for Jackson Offshore Operators, have become increasingly complex, shifting some roles for shipyards. The GPA 675J PSV design from Guido Perla & Associates, Seattle, features diesel-electric power plants. The PSVs include an integrated Rolls-Royce ship systems package, inclusive of a low-voltage, active front-end diesel electric system and a complete Rolls-Royce propulsion package. The package includes Azipull thrusters, which Rolls-Royce says are designed to offer efficient propulsion and maneuvering on higher speed vessels.
These new sophisticated systems are so complex that technicians from the manufacturer are needed to install the systems. “The shipyard use to be the system integrator,” said McCreary. “As systems become more technologically advanced, we’re actually hiring someone like a Rolls-Royce or a Siemens or someone like that to be the systems integrator for the ship because their systems have become so advanced, so complicated that only the vendors really understand the interactions with the other components.
“We’ve become an erection yard, an installation yard. We pull the cable, but we really don’t even connect the cables. That falls to the integrator,” said McCreary. “I don’t know that it’s a bad thing. If a design is developed using a Rolls-Royce design, then you’re going to see Rolls-Royce as the integrator. Years ago they really didn’t want to do that.”
Asked if he saw the same trend in the northwest, Foti said, “The volume here is fundamentally lower. Vertical integration would make more sense here than it would, say, in some places like the Gulf.”
The erection yard trend may be confined, for now, to larger yards with multiple contracts.
Gary P. Stansbury, director of commercial programs, Swiftships, Morgan City, La., said that subcontractors at its yard are normally a part of a boat’s construction team, but they are the main builder and systems installer.
“We subout some of the systems, some of the electrical and some of the painting,” said Stansbury. “I still don’t see them doing the installations the shipyards do.”
“One of the things I know in our case, and I don’t think we’re unique, said McCreary, “we look to subcontract more and more work, partly because of labor issues and partly because we don’t have some of the same competencies to install these systems.”
PERSONNEL AGENDA
For U.S. yards, finding new skilled people is always a challenge, one that is exacerbated when boatbuilders are at their busiest.
“I think the personnel problem is numbers one, two and three on a list of the five biggest problems we face,” said Dan Gaiennie, vice president business development and engineering, at Jennings, La.-based Leevac.
Shipyard officials have been proactive in the past few years about bringing younger people into the industry. The results have been somewhat positive, but the industry has a mixed reputation that it is having a hard time overcoming, particularly in the Gulf.
The oil and gas industry runs in cycles. Workers have job security when times are good, but lose it when the industry slows down.
“The industry has lost a lot of people over several down times,” said Lynn Falgout, operations manager for Leevac’s Houma, La., yard. “Many of them never came back. One of the biggest drivers is market condition. We all have the same issue.”
“Everyone’s in competition for the same bodies,” said Stansbury.
Another common problem throughout the shipyard industry is the aging of the current workforce.
McCreary said that the average age of a welder across all sectors of the construction industry is 55. “That just amazed me,” he said. “The labor issues are going to become even more significant as those people start to retire. It’s my single biggest concern. We have to find a way to grow our own.”
Despite the personnel concerns and the winding down of multivessel OSV contracts, there are reasons to be optimistic and some yards are positioning themselves for what lies ahead.
Leevac acquired Quality Shipyards from Tidewater about a year ago in an effort to beef up its repair capabilities. “Customers wanted us to get into the repair business,” said Gaiennie, so it could both construct and repair vessels for companies like Hornbeck, Tidewater and Aries Marine.
“One of the things we did was add a second shift,” said Falgout. “Some customers, we wouldn’t be able to bid on a job without a second shift.”
He said the Houma yard has been cleaned up, the machine shop moved, the panel shop updated and new technology incorporated throughout the facility. “Our goal here has been to improve the infrastructure,” he said. “We had to ask ourselves what can we handle here, and what is our market going to be.”
Foti said that a recent Marad study indicates that there is a shift toward more commercial building and fewer military contracts. “So it should make our industry on the commercial side more robust,” he said, “but I can’t say for how long.”
McCreary said he anticipates more contracts for the construction and repair of Jones Act vessels.
There has been “billions and billions of dollars in investments into the Jones Act trade in the last 20 years,” he said, “so consequently, I think there is a very significant constituency that is very defensive of the Jones Act and the value it brings to the country as far as capability. Shipyards are a part of that.”
