Gulf Coast Marine Industry In Buoyant Mood
here is an undisguised buoyancy in the outlooks of shipyard executives across the Gulf Coast, due in part to the $1.2 billion worth of new vessel construction contracts from U.S. and foreign owners currently in the Maritime Administration's (MarAd's) Title XI pipeline, earmarked for Gulf Coast yards. Many yards are building or buying extra capacity in anticipation of expanding markets, both domestically and worldwide.
Alabama Shipyard in Mobile, Ala., is well into a $20 million capital spending program to expand and upgrade facilities. Another $20 million may be pumped into the yard during the next 24-30 months, according to William Skinner, president.
"We have added a 500 x 90-ft. (152.4 x 27.4- m) panel line building, two 150-ton gantry granes, a 1,100-ton-capacity transporter, a new pipe shop and sub-assembly area, among other improvements," said Mr. Skinner. "We're awaiting MarAd Title XI approval for two 16,000-dwt chemical tankers for a Danish operator and have a letter of intent for two smaller tankers of 11,500 dwt for a Swedish owner. This is a market segment we expect to expand." Mr. Skinner added that Alabama Shipyard also has a letter of intent for a drill ship conversion for Sonat Offshore and orders for components for several semi-submersible drilling rigs, a reflection of the growing demand for offshore drilling equipment which has pushed utilization of the existing, aging fleet to near capacity.
Avondale Shipyards of New Orleans has completed a new under-roof steel fabrication building covering 575,000 sq. ft., as a major part of a $20 million infrastructure improvement. "Title XI is pending for up to seven Primorsk class product tankers for a Russian owner," said Ron J. McAlear, vice president of advanced programs and marketing. "In addition, we have orders for four American Heavy Lift 37,000-dwt vessel conversions, also pending Title XI approval, and the 50-barge contract for Ingram Barge Line with an option for 50 more, filling out our commercial orderbook." Avondale also has an impressive backlog of government work. Three Sealift vessels with an option for three more represent $1.2 billion of work, supplemented by a U.S. Coast Guard icebreaker, T-AGO oilers and amphibious craft. More than a year ago, Avondale set a goal of decreasing dependence on government work for itself by achieving a 50-50 work mix with commercial vessels by the year 2000. The yard is getting help in that direction from Spain's Astilleros Espanoles in shifting gears from high-tech navy work to competitive building of less complex commercial ships. "At the moment, we have a full workload through 1998," said Mr. McAlear.
Trinity Marine Group of Pascagoula, Miss., has acquired its 20th shipyard, the 80-acre Pascagoula yard of Chicago Bridge & Iron, valuable to Trinity for its deep-water access and repair capability. Trinity Senior Vice President Harvey Walpert reported that business has taken an upturn over the last several months. "A number of Title XI contracts are pending. We're building a large ferry for Alaska, berthing barges for the U.S. Navy and pushboats and barges for commercial operators," he said.
Bollinger Machine Shop & Shipyard of Lockport, La., has acquired repair facilities from McDermott Shipyard, bringing Bollinger's drydock inventory to 20. Bollinger will operate the new facilities at McDermott's Morgan City, La., location. President Donald Bollinger is upbeat about the market. "It's very strong. We recently delivered a super liftboat with four 250-ft. (76.2-m) legs to Halliburton for work in the Irish Sea (see MR I EN cover story, November 1995). We're working on our second dredge for Dutra in California, two 127-ft. (38.7-m) tugs for Otto Candies and a couple of 145-ft. (44.2-m) supply boats. Global Industries has ordered a 229-ft. (69.8-m) liftboat which is awaiting MarAd approval," said Mr. Bollinger. He added that he does not expect to see a major upsurge in offshore vessel construction for about two years, although the company has built a "new generation" 225-ft. (68.6-m) supply boat for Edison Chouest. Other major beneficiaries of pending Title XI loan guarantee approvals are Bender Shipbuilding of Mobile, Ala., for a $25 million anchor handling/tug-supply vessel; Leevac Shipyards of Jennings, La., for $13 million worth of barges; and Barnett Shipyard of Lafitte, La., for 44 deck barges costing $12 million, plus $5 million for shipyard modernization.
In all, MarAd has more than $4 billion in shipbuilding loan guaranties under study, though the figure is skewed by a single application for more than $1 billion for a proposed 6,200-passenger cruise ship.
Title XI is already fueling a current surge of barge-building contracts, such as Avondale's with Ingram Barge Line. Some, possibly most, of the flow would have occurred regardless of the loan guarantee program, according to Joe Tyson, general manager of operations and technical services for Canal Barge Co. of Belle Chasse, La., which has added 21 new doublehulled tank barges to its fleet over the past five years and plans to add another 10 in 1996. The company has also added 18 new deck barges since 1990, and will take delivery of another one in 1996.
"The nation's barge fleet is aging with virtually no replacements in over a decade, and OPA 90 regulations mandate environmentallyfriendly, double-hulled tank barges to mitigate against spills," said Mr. Tyson. "I think we'll see a similar spurt in towboat construction in about five years. The boats tend to outlive the barges by about that long." Notwithstanding the new business it is generating, even shipbuilders cannot agree whether Title XI, in its present form, is all that vital to the future of their marketplace. The big yards, including Avondale, have set their sights primarily on the world market for blue water vessels, and are fighting to keep the current 87 percent/25-year loan guarantee plan in place to help lure foreign buyers.
The smaller (or second-tier) yards, however, are vigorous in their support of the pending OECD shipbuilding agreement, the nominal ratification deadline for which has been setment shipbuilding subsidies around the world, although it would impose reductions on the percentage and terms of Title XI financing as well.
The smaller yards feel that they can compete more effectively in world markets if the field is leveled, giving added weight to their relatively low wage scales; year-round working environment, particularly on the Gulf Coast; and long experience building for the offshore energy industry.
The latter is especially problematic. The offshore industry triggered a massive boom in boat building, as well as in shipyards, in the 1970s and early 1980s. More than sheer numbers of vessels, offshore operators generated demand for multiple, "cookie cutter" vessels which were significantly more profitable for shipyards than the one or two-of-a-kind orders. Since the oil price collapse of the mid-1980s, however, offshore service vessel (OSV) construction in any multiple has been almost nonexistent.
The devil, to paraphrase, is in the day rates. OSV operators insist that they cannot economically start building replacements for their 20- year-old fleets until charter or day rates rise above $4,500. At that point, according to Richard M. Currence, executive vice president of Tidewater, Inc., operators might see a reasonable hope of getting $5,500, and above for new-generation, higher-capacity and performance workboats — the level required to build $5.5 million replacements.
Since day rates are not something OSV operators, let alone shipyards, have any real control over, one shipbuilder has decided on a different tack. Michael Clute, president of Service Marine Industries of Morgan City, La., said his company has invested in R&D to develop an innovative new design for OSVs — which have retained the same configuration since Tidewater launched the first purpose-built workboat in 1965.
"We have completely overhauled the design to produce a vessel with smaller-boat cost and bigboat performance," said Mr. Clute. He declined to elaborate on specifics of his company's design, with which he hopes to attract recalcitrant OSV operators to the table, much as Detroit has lured buyers with model changes over the years.
These conditions notwithstanding, it is certain that shipyards will have fewer buyers to target for OSV orders. In November, Hornbeck Offshore Services announced its intent to merge with Tidewater in a stock transaction valued at $225 million. Hornbeck is Tidewater's principal competitor in the Gulf of Mexico, though Tidewater is roughly six times larger in number of vessels worldwide. Tidewater made an even larger dent in the OSV marketplace three years ago when it acquired Sapata Gulf Fleet, doubling its fleet to the present size of approximately 600 vessels. With the addition of Hornbeck's 90 owned and operated vessels, it will become even more dominant, both as a vessel operator and a prospective buyer.
Currently, Tidewater, Hornbeck and other OSV operators are enjoying close to 100 percent vessel utilization, and rising day rates in the $3,600 to $3,800 range. Much of the work is being generated by new drilling in the Gulf of Mexico, spurred by the vastly improved 3-D seismic technology and the success of deep water ventures which are producing in excess of expectation. It helps that the underlying commodities (oil and gas) are commanding higher prices than they have all year.
With 263 out of a total of 277 OSVs in the Gulf of Mexico at work (November 1995), Tidewater's Mr. Currence, for one, is well pleased with the situation. "I would prefer to see prices, utilization and day rates continue to move gradually higher, rather than rapidly upward," he said. "This industry (OSV operation) hasn't demonstrated much ability to handle booms over the years."shipyards, none more so than Service Marine. The company has built 26 gaming vessels and casino barges and now has a contract for one of the largest, and possibly the last newbuild of this type for a while. It is a $36 million, 408 x L00-ft. (127.2 x 30.5-m) behemoth for Indian Gaming Co., a subsidary of Argosy Operating Company.
"Available gaming jurisdictions are about exhausted," said Mr. Clute. "The big ones, Texas and Florida, are out of play. Casino work in the future will probably consist mostly of conversions of smaller, first generation boats in the 250-ft. range, to larger vessels and some replacements for earlier ones." Mr. Clute added that there is still some life in the casino barge business, building the marine foundations for dockside casinos For the past several years, riverboat casinos have been a mainstay for many Gulf Coast back from January to October of 1996. It would, at least in theory, put a lid on govern