Chinese offshore engineering industry facing extraordinary test

Looking back on the marine engineering industry in 2016, the industry was full of tears and sorrow. According to the statistics from the Economic and Market Research Center of CSSC, there are deals of a total 81 various types of marine engineering equipment worth 5.23b dollars, down by 56% and 53% respectively. Xu Xiaoli, the researcher of the Economic Research Center of CSIC said that, Singapore, South Korea and China, which were once the top three in terms of global marine engineering equipment manufacturing, have now become “sufferers”. Many products cannot be delivered, resulting in inventory pressure and big financing problem. At present, most of the orders with Chinese marine equipment enterprises haven’t been delivered, and this is especially serious for jack up drilling platform, floating production and storage equipment, offshore support vessels.

Our reporter has learned that these offshore engineering companies are now willing to sell the products in their hands even though at a loss of money. Take the jack up drilling platform of 400 feet as an example, the price in peak time is in the range of $200 million to $220 million, but now it is only about $140 million. For ship owners, it is not a big thing to lose money, since this can save the maintenance cost as the oil price recovery will not happen in the foreseeable future.

Oil companies which are aware of the plight of marine engineering enterprises are very anxious. Because there is a consensus in the oil industry that the development of China’s marine engineering industry is closely related to them. However, due to the impact of the oil prices, the rate of use of Chinese oil companies’ platform is very low, some even at around 50%. In this case, if they take over the orders from the marine engineering enterprises, it would be unable to digest the inventory fundamentally. Faced with such distressful situation, China's marine engineering industry must find ways of breakthrough as soon as possible.

Xin Guobin, the Vice Minister of China’s Ministry of Industry and Information Technology, stressed that the division of international industrial specialization is reshaping, China’s marine engineering equipment manufacturing industry is facing great challenges and opportunities. It will be able to cope with the current crisis only if the synergy of the whole industry chain is activated to forge ahead together.

On December 28, 2016, the 7 marine engineering enterprises approved by MIIT to be listed in the “white list of offshore engineering” which represent the backbone of Chinese offshore engineering manufacture established the China deep sea ocean engineering equipment industry alliance. Liang Yanfeng, the first chairman of the alliance, general manager of COSCO Shipping Heavy Industry Co. Ltd. proposed that Chinese deep sea marine engineering equipment industry alliance should build up China image and Chinese brand of deep-sea marine engineering equipment with the guidance of the national industry development strategy and objectives.

Jin Peng, the Secretary General of China Shipbuilding Industry Association suggested that China is building up its powers in the maritime industry, so we can set up a maritime fund to link the relevant parties. Now the urgent task is to solve the backlog of products in the hands of Chinese marine engineering enterprises and the financial difficulties. He believes that we can use the fund to buy these platforms, which is better than a single enterprise selling platform. Although the oil price is relatively low, judging from long-term view, there will be demand in offshore oil development in a long period of time. He further explained that, the fund can combine enterprises upstream and downstream. For example, marine engineering enterprises can invest 10m ～ 20 m in each platform, and financial institutions, enterprises and other stakeholders can also provide certain support. Besides, the oil company has special platform brokers, who are more professional in marketing than shipyards.

There are some related insiders who also suggest that China should plan and establish a demonstration zone in the South China Sea oil field, where we carry out our own equipment R&D and production, and all equipment used should be China-made products. In this way, we can solve the backlog of offshore equipment orders. At present, foreign shipowners do not recognize the marine equipment produced in China, even some domestic oil companies are not willing to use domestic equipment. But in this way, we can solve the problem of low rate of use of marine equipment.

Chinese offshore engineering industry facing extraordinary test

Reporter Xing Dan