Offshore-Rig Builders Thrive in New Era

Just two years after offshore drilling was brought to a near-standstill in many parts of the world following BP BP.LN -0.07% PLC's 2010 Gulf of Mexico Macondo well blowout, the offshore-rig-construction sector is growing strongly, with oil majors moving to deeper depths and new frontiers while also having to meet tighter safety requirements.  

Sustained high oil prices have made exploration and production in areas such as offshore Brazil and West and East Africa more viable, even though companies working in these frontier areas are having to ensure they aren't laying themselves open to huge penalties for leaks, fires and equipment failures. With more than 50% of the total offshore world rig fleet over 25 years old and given tougher rules governing the sector, there has been an acceleration in the dismantling of older offshore facilities, triggering a wave of new orders. 

"The oil spill has actually helped [boost orders for new rigs]. Safety features on the rig were never taken into notice so much as they are now," said Wong Kok-Seng, the managing director of Keppel FELS Ltd., a unit of Keppel Corp. Ltd., BN4.SG +0.18% the world's leading offshore-rig builder. "Safety is a game changer for the market." Rig operators are requesting additional blowout preventers, which failed in the 2010 disaster in the Gulf of Mexico, and improved well-control systems. As a result, all the major drilling contractors have started constructing new-generation rigs to replace their older fleets. 

This month alone, the world's two biggest rig builders—Singapore's Keppel and Sembcorp Marine Ltd. S51.SG +1.20% —announced orders for new offshore rigs valued at close to $9 billion. The rigs will all be chartered by Brazil's Petróleo Brasileiro SA, PBR -0.32% or Petrobras, for offshore drilling at presalt fields in the Santos Basin. 

"Companies are now demanding new-generation rigs with better safety features," said Manav Kumar, director at Dynamic Offshore Drilling, a unit of Deepwater Drilling & Services, an emerging Indian offshore-drilling contractor. Problems in offshore operations can have a major impact when things go wrong. For example, U.S. oil major Chevron Corp. CVX +0.55% is appealing a Brazilian court order earlier this month banning it and drilling-rig operator Transocean Ltd. RIG +0.29% from operating in the country for their alleged roles in an offshore oil spill last year. They firms have denied any wrongdoing. The two were given 30 days to halt operations or face hefty fines. 

The surge in orders for a range of offshore rigs and platforms comes despite uncertain global economic conditions, which have left the related global shipbuilding industry bleeding. One of China's largest shipbuilders, Yangzijiang Shipbuilding Holdings Ltd., BS6.SG -0.50% this month predicted more trouble ahead for the industry, warning that half of all shipyards world-wide could be acquired or forced to stop operations next year due to lack of orders. Meanwhile, the world's top five rig builders—Keppel and SembCorp and South Korea's Hyundai Heavy Industries Co., 009540.SE -1.65% Samsung Heavy Industries Co. 010140.SE +0.13% and Daewoo Shipbuilding & Marine Engineering Co. 042660.SE -0.97% —have all experienced a surge in new rig contracts, with order books filled until 2014 or 2015 and some orders reaching well into the second half of this decade. The world's total drill-rig fleet counts 825 units, up from 809 a year ago, according to data from the IHS industry consultancy. 

Construction yards around the world saw order books increase by a net of 15 rigs in 2012, or nearly 13% compared with 2011 building on growth that continued despite the Macondo disaster. In June this year, 143 rigs were under construction globally compared with 127 rigs in June 2011, according to South Korea's STX Offshore & Shipbuilding, 067250.SE -1.20% the world's fourth-biggest shipbuilder. With Brent crude-oil futures mostly trading above $100 a barrel during the past 18 months, oil producers have plenty of incentives to drill in frontier areas, which mostly means in deeper waters and harsher conditions. 

As long as global crude-oil prices average between $70-$80 a barrel or above, producers will keep investing in offshore exploration and production—and in new oil rigs, said industry executives. And as oil majors mostly have strong balance sheets while at the same time are struggling to achieve production targets and build reserves, the increase in exploration and production is expected to continue. "Oil companies now have a belief that the average oil price will stay at a high level, which makes it economically viable to explore," said Alf Thorkildsen, chief executive of SeaDrill Ltd., SDRL -0.68% one of the world's biggest offshore-drilling companies. 

In July, the Norwegian company received a commitment from a major oil company to charter three new drillships valued at as much as $4 billion. The company currently has 18 drilling units under construction to be delivered by 2015 at a total cost of $6.9 billion. New technological advances have made drilling possible at water depths of about 12,000 feet. Coupled with high oil prices, deep-water drilling activity has risen fast, with governments world-wide promoting the industry in hopes of achieving energy self-reliance. The hot spot for deep-water offshore drilling remains Brazil along with West and East Africa and the U.S. Gulf. 

 Other busy drilling areas include Mexico, the North Sea, the Middle East, India, China, Indonesia and Australia.Rigs for deep-water drilling are in tight supply, with day rates touching $700,000 for sixth-generation deep-water drilling vessels, up from about $450,000 three years ago. Demand for jack up rigs—used in shallower waters to about 400 feet—is also strong, with day rates up to $230,000. source: online.wsj.com

Offshore wind supply chain to exceed demand for the next decade

January 14, 2012 - LONDON In relation to the renewable energy industry is news that the utility giant RWE has announced its plans to invest €5bn in both the UK and Poland. There is also to be an additional €1bn investment in offshore wind developments in the German North Sea.

The news confirms Germany’s commitment to switch off all 17 nuclear reactors in the next 10 years as a reaction to the Fukushima disaster from 2011 proving once again that the renewable energy sector and more specifically the offshore wind industry is rapidly turning into a profitable business.Many companies are already hoping to get their share of the significant investment RWE is planning to make in the renewables sector by winning key long term contracts with the company in 2012 and beyond. Given the shutdown of the German Nuclear industry, many manufacturers in the country who now supply parts or services to nuclear plant developers and operators will soon be short of business, and looking for new opportunities such as that which the RWE investment represents.

Furthermore, other industries such as the oil and gas or aviation industry are also looking to enter the offshore wind market and according to the EWEA ‘’the supply of offshore wind turbines will meet and exceed demand for the next decade, leading to healthy levels of competition within Europe with the potential for export to emerging North American markets’’.

With new players constantly entering the offshore wind market, the competition for the procurement managers’ attention will become increasingly harder to achieve leaving the least adapted companies out of business. With more businesses offering supply chain products and services in 2012, knowing exactly what procurement managers are looking for will be a critical factor for companies’ survival in the market.

To address these issues, the 2nd Annual Offshore Wind Supply Chain Conference taking place in London this February 28-29 is bringing leading contract and procurement managers from Europe’s main utilities to discuss their selection criteria for choosing supply chain partners for the next round offshore wind projects. RWE is presented by Mr. Bjoern Przygodda, Head of Procurement, Offshore and Mr. Thierry Aelens, Head of Projects & Operations, Offshore who will be giving some vital insight about the RWE offshore experience and the main factors they will be looking for in their current and future business partners across Europe.

With more than 150 C level executives attending the event last year and even more expected to join this year, the 2nd annual offshore supply chain conference is the largest, most important business to business gathering entirely dedicated to offshore wind supply chain industry matters in UK and Europe. source: www.renewableenergyworld.com

Moving Jobs Offshore Becoming 'Harder to Justify'

Economic conditions, natural resources and technological innovation are making it harder for manufacturers to "justify moving jobs offshore," according to a new report by Reynders, McVeigh Capital Management.

Three drivers are responsible for "breathing life back into manufacturing," according to "Workforce Rising: Why U.S. Manufacturing is Poised for a Comeback," authored by Charlton Reynders and Patrick McVeigh.Offshoring to Homeshoring
Companies are turning from offshoring to homeshoring as the cost advantages of moving production to China and other locations become less significant. The wage gap between China and the U.S is shrinking, the report notes. Wages in China are rising at a predicted 15% to 20% annually while U.S. wage rates are growing at only 2%.

Higher oil prices have pushed transportation costs dramatically higher, the report notes. "By reallocating resources to the U.S., companies can reduce the distance to the point of sale and eventually benefit from more accessible, cheaper fuel in domestic natural gas," the report states.

Industries are adopting a more holistic view of production, according to the study, by using Total Cost of Ownership (TCO). TCO includes in cost evaluation "the burden of controlling quality and delivery, transportation, oil consumption, inspection of labor, inventory carrying, and freight and packaging." Companies that use TCO "find it is cheaper and more predictable to keep manufacturing close to home," the report states.

Resources Spur Momentum
Water stress is a global issue and the U.S. is well-positioned to address it. The report notes that the U.S. has the largest reserves of water on the planet. Moreover, there is "significant growth in domestic companies focused on conservation and desalination technology - both of which will be critical to augmenting the fresh water supply."

Natural gas, much of it coming from shale formations, could generate domestic supplies for 120 years. The report states this would not only help with transportation costs but also may give "U.S. manufacturing a competitive refooting, which will in turn stoke industrial demand." The report cites an estimate by PricewaterhousCoopers that natural gas investments could create 1 million U.S. manufacturing jobs in the coming 15 years.

Technology & Innovation
3D printing, also known as additive manufacturing, could "transform entire industries," the report notes. It may streamline manufacturing and make it more efficient by "vastly" reducing production liens and wasted material. The report argues that 3D printing could unleash a wave of innovation, with "millions of innovators in millions of garages - each with a 3D printer on hand."

While the report does not foresee a "quick fix" for U.S. manufacturing, it argues that manufacturing will return as "China struggles with growing infrastructure and the emergence of its middle class; as industries built around U.S.-based resources solidify; and as innovation brings production to new levels of efficiency."source: www.industryweek.com

Plans for Maine’s first offshore wind turbine moving quickly

Dec. 09, 2011 - SOUTH PORTLAND, Maine — A deep water wind farm off Maine’s coast moved closer to reality Thursday as state and federal officials got a more detailed look at a Norwegian energy company’s proposal.

Statoil North America Inc., a division of the Norwegian company Statoil ASA, submitted an application in October for a commercial lease to the federal Bureau of Ocean Energy Management for an area of ocean that’s about 22 square miles for full assessment of environmental impacts, sea bed conditions and wind speeds. The lease area is about 12 nautical miles offshore of the Boothbay area.

The eventual size of the “Hywind Maine” project would be narrowed down to an area of between 2.32 and 3.86 square miles.Ned Farquhar, deputy assistant secretary at the Department of the Interior, talked Thursday about the Obama administration’s goals to reduce dependence on foreign energy sources.

“Opportunities like Atlantic wind, where there is significant potential, don’t come along every generation,” said Farquhar. “This is a huge opportunity to develop clean energy sources responsibly.”

The official interest by a major industry player in offshore wind immediately accelerates the potential development of the sector in Maine. The state, largely through the efforts of private industry and the University of Maine, has been developing prototypes, studying environmental and commercial issues off the coast and setting up the process for approving such projects.

“The proposal galvanizes the commercial deep-water development in Maine and the United States,” said Habib Dagher, the UMaine professor who has been at the forefront of offshore wind research in the state. “It’s currently an international race to deep water, and Maine is in the middle of that race.”

Farquhar confirmed Dagher’s assessment: “Deep water has not been implemented very much around the world. It’s got tremendous potential and Maine is at the vanguard.”

Sen. Susan Collins, R-Maine, has been involved with the offshore wind effort in Maine for years, sending members of her staff with former Gov. John Baldacci to Norway in 2009. She noted in a statement Thursday that Interior Secretary Ken Salazar toured the new deep-water offshore wind laboratory at UMaine during the summer at her invitation to learn more about the work being done in the state.

“I am very pleased to see the department take this next step in convening the BOEM Maine Renewable Energy Task Force today, and I thank Secretary Salazar for his commitment to work with other federal agencies in pursuing the most efficient path forward to establish deep-water, offshore wind as a viable energy source,” Collins said.

The federal agency has reviewed and approved the legal aspects of the application. It still has to review the technical and financial merits of the program.

The project would be in water from 460 to 520 feet deep. Because of the depth, the wind turbines would be floating, tethered to anchors on the sea floor — not embedded in the ocean bed.

Aditi Mirani, the bureau’s project manager for Maine, said the initial project Statoil has proposed is a pilot plan. It would include four 3-megawatt turbines, she said. The company is proposing a similar deep-sea pilot program off the coast of Scotland.

“What they’re proposing here is a test facility, a small-scale project. They just want to demonstrate the commercial potential of that floating turbine technology,” said Marini.

Ken Fletcher, head of Gov. Paul LePage’s Office of Energy Independence, noted the development of offshore wind in Maine was still in the very early stages.

The administration is keeping an open mind regarding the different energy opportunities that exist, he said, and ocean energy is “one of those great potentials.”

“The real test will be how well we can implement and achieve that potential with minimal impact,” said Fletcher.

Marini said Statoil plans to submit construction plans and operations plans by the end of next year, with the bureau making a decision on the lease request and approval of those plans by 2014. The plan is to start installation of the turbines in summer 2016, she said.

Statoil has responded to a request for proposals from the Maine Public Utilities Commission for companies that wanted to produce offshore energy, and the company also has applied to the New England electric grid to connect at the Boothbay substation.

Sen. Christopher Rector, R-Thomaston, head of the Legislature’s Labor, Commerce, Research and Economic Development Committee, said he saw great potential for Maine companies like Bath Iron Works, Cianbro Corp., Reed & Reed Construction and others.

“We’ve been focused on jobs for as long as I’ve been in the Legislature. What’s exciting about this is the opportunity for jobs in areas where we have some levels of native skill,” Rector said. “Saltwater runs in our veins.”

Rector said he was thinking of not only jobs making the turbine towers and parts, but also the installation and continuing maintenance of the wind farm.

Paul Williamson, director of the Maine Wind Energy Initiative, said his group has been working with Statoil to determine what parts of the supply chain exist here in Maine and where there are gaps.

The company’s interest in Maine waters takes his group’s efforts to a different level, he noted.

“This is beyond tire-kicking,” he said.

Statoil developed the first deep-water floating turbine off the coast of Norway in 2009. Former Gov. John Baldacci, University of Maine researchers and others visited the site that year, signing an agreement to cooperate in exploring the technology’s potential.

The company has operations in 34 countries and is valued at $85 billion. Company officials visited Maine after the gubernatorial mission to Norway and said at the time they were exploring numerous deep-water sites around the globe for their first commercial wind farm.

About 100 state and federal officials, as well as members of the public and interested parties, gathered Thursday for the meeting in South Portland.

Expected to last for much of the day, the session included numerous comments from agencies including the Coast Guard, Department of Defense and National Marine Fisheries Service on how they plan to study the proposal and what problems may exist.

Several officials gave initial assessments while describing the additional studies and tests they would undertake concerning the feasibility of the Maine Hywind project.

“Statoil picked a fairly decent location as far as traffic goes,” said George Detweiller, a marine transportation specialist with the Coast Guard.

Coast Guard data show relatively light traffic in that area, he said, though they don’t necessarily track smaller fishing vessels or recreation craft.

Representatives from the DOD said they would need more studies to determine possible impact on radar, and noted the area was in the general vicinity of pathways used by BIW and the Navy to test new destroyers, as well as submarine routes for vessels being serviced by Portsmouth Naval Shipyard.

A fisheries officials said they would study impacts on habitat, marine mammals, fish stocks and others.

Linda Welch, a U.S. Fish and Wildlife biologist who works with the Maine Coastal Islands National Wildlife Refuge, raised a number of concerns regarding offshore turbines and their potential impact on birds and bats.

Both the roseate tern and the piping plover are endangered species and migrate from Nova Scotia to Maine using unknown routes. They could be affected by a wind farm, she noted.

Maine has about 4,600 coastal islands and 382 are nationally significant seabird nesting islands, she said.

For example, 96 percent of the Arctic terns in the lower 48 states breed on four islands in the Gulf of Maine. Ninety percent of Atlantic puffins breed on three of Maine’s islands, she said.

Bald eagles congregate on the coast in the winter, feasting on seabirds, traveling to islands up to 20 miles off the coast, Welch said.

She suggested that in-depth studies would be needed to address potential impacts.

Rep. Bruce MacDonald, D-Boothbay, a member of the task force, said he was a proponent of wind energy, but added that a lot more study and information was needed.

“We have to look at a complete picture — can you do it without hurting the fishermen?” he said.

After the presentations, the task force took comments and questions from members of the audience. Some, including Dagher and Beth Nagusky of Environment Northeast, urged an expedited process for approving the pilot project lease.

A number of others with questions represented Maine’s fishing community, including Chris Weiner, a senior fishery analyst with the American Bluefin Tuna Association.

Weiner said the area eyed by Statoil is a “hot spot” for tuna, as well as for groundfish, lobsters and whale watchers.

“There are much better places to put something like this,” said Weiner. “You’re never going to please everybody, but don’t pick a hot spot.”source: /bangordailynews.com

Retail jobs to fall sharply: Gerry Harvey

9 Dec 2011 - Consumer goods king Gerry Harvey says 20 per cent of retail jobs could be lost if tough trading conditions continue.

The Harvey Norman co-founder and chairman predicts that the sector, which employs 1.2 million people, could shrink to one million workers next year due to the parlous state of retailing.

"We employ 1.2 million people and next year we'll be employing one million - it's getting bad every day and just gets worse," Mr Harvey told AAP on Friday.Mr Harvey said traditional store-front retailers were increasingly losing out to online sales, with shopper dollars flying offshore.

"Now it's starting to bite because so many retailers are going out of business.

"And then you've got so many Harvey Norman shops that are in serious trouble.

"We're losing money in more shops than we've ever lost money and that's (the same for) every retailer right across the country."

Australians are keeping purse strings tight and hoarding savings as global economic woes weigh on sentiment, and retailers are feeling the pinch.

Losing sales to online stores is a double whammy.

PayPal Australia this week said online commerce in the nation had grown at 11 per cent over the past year and sales were expected to be $30 billion by the end of calendar 2011.

Harvey Norman last month launched an online shop, following its Harvey Norman Big Buys website that started in April, after feeling the effect of internet shopping on its traditional stores.

Harvey Norman reported a 3.8 per cent fall in global sales in the September quarter, compared to the prior period.

The franchise was doing it tough in the lead-up to the all-important Christmas season, and it was not alone, Mr Harvey said.

The retailer expected "a reasonable Christmas, but not great".

Mr Harvey also renewed his call for the introduction of the GST and duties on foreign goods bought online for less than $1,000.

Currently, imported goods must be valued at more than $1,000 to attract such levies.

Mr Harvey said the existing system didn't appear to be enforced because the retailer had tested it by buying a $1,500 item online and was not charged GST and duties.

"They put $1,500 on your credit card and send you an invoice for $990 so it goes through customs, and the credit card company doesn't say anything because it's good for them, too.

"This has been going on for ages."

A Productivity Commission report on Friday recognised that competition from overseas online sellers was a challenge to the retail sector.

However, the commission said the low value threshold for exemption from GST and duty on imports was only a "minor part" of the competitive disadvantage traditional retailers faced and it would cost more to lower it than retain it.

According to the commission, the retail sector is worth around $60 billion a year to the economy.source: www.businessspectator.com.au