Colombo Dockyard shipbuilding biz fuels export earnings
Sri Lanka’s shipbuilding business has generated a sizeable cash infusion into the export earnings in the first half of this year; but sluggish oil prices adversely impacting on future orders for offshore vessels has resulted in the Colombo Dockyard PLC (CDPLC) looking for business in the cruise vessel segment.
The Central Bank releasing export data for June stated that earnings from industrial exports were up by 9.8 per cent compared to last year at US$750 million in June mainly due to the higher exports from the sale of two ships that had increased earnings by nearly sevenfold to $54 million compared to the corresponding month in 2016.
The two ships sold were offshore support vessels costing between $21 – 23 million each delivered in January and April to their Singapore based ship owners. One more offshore vessel is to be handed over in March 2018.
As of now CDPLC has delivered 12 such vessels to this client alone since 2010 but future orders for these high complex ships for the oil and gas exploration and production industry have been adversely impacted with the global drop in crude oil prices. In addition to this challenge the company is also faced with growing competition from China that is increasing its focus on shipbuilding with its relatively low labour cost while India has received state support for shipbuilding with the expansion of its shipyards, officials said.
These are the highly sophisticated DP2 vessels with the capability of dynamic positioning (ability to position itself in the exact location and remain in the same position when the right co-ordinates are given); and able to maneuver in rough seas and assist in the supply services from rig to shore.
Built at the Colombo Dockyard these Platform Supply Vessels (PSV) and Anchor Handling Tug Supply Vessels have been the focus of the company for which they had also received orders for the delivery of seven vessels since 2004 from an Indian client also based in Singapore – Greatship Global.
Due to the global downturn in the offshore petroleum industry, the CDPLCL is facing a challenging operating environment resulting in the company posting a revenue of Rs.9.9 billion during 2016 contracting from the previous Rs.14.4 billion in 2015.
Even in the 2015 financial year owing to adverse offshore vessel market conditions, contract cancellations and the further impact of contract re-negotiations resulted in a negative financial performance for the Colombo Dockyard during the year ended December 31, 2016, the company stated in its 2016 Annual Report.
Shipbuilding revenue generated from shipbuilding operations reduced drastically from Rs. 10 billion to Rs. 5.3 billion during the period in review, largely as a result of subdued activity in the offshore petroleum development industry.
The major revenue contributor for the group has become shipbuilding with 50.1 per cent compared to 65 per cent recorded in 2015.
Due to the drop in demand for these sophisticated vessels, CDPLC is now focusing on attracting the prospects for growth in the construction of support vessels for cable laying and offshore wind turbines, the company stated.
Moreover, CDPLC is also working to attract new inquiries for high spec vessels, river vessels and passenger boats for the tourism and leisure sector. Currently there is a significant increase in the number of passenger cruise vessels calling at the Colombo Port and the industry is generating increased travelers to the country.