KUCHING: Sibu-based shipbuilder TAS Offshore Bhd has shifted its focus to constructing tugboats, which are in strong demand following the company’s decision to suspend the construction of its offshore supply vessels (OSVs) for the oil and gas (O&G) industry.
The company said demand for OSVs has remained weak after oil prices tumbled and sales prices were depressed due to the glut in the market.
TAS also sold more tugboats to Indonesia, which reported increase in coal mining activities, spurred by the rapid rise in coal prices since the second half of 2016.
According to chairman Datuk Mohammed Sepuan Anu, the group secured shipbuilding contracts for tugboats and ferry totalling about RM72.6mil in the 12 months to May 2019 (FY19).
“This is indeed encouraging as the contracts secured was a three-fold increase from RM24.1mil in FY18.
“Of the contracts for 12 tugboats and one ferry the group secured in FY19, the group has built and delivered three of the tugboats to clients.
“The contracts in hand will contribute positively to the group in FY20 and FY21, ” he said in the company’s 2019 annual report.
He said the tugboat market is perceived as bullish, which drives the new tug construction orders as health, safety and environmental concerns begin to boost global order book.
Analysts from Technavio, a global market research company, had pointed out that the tugboat market will register a compounded annual growth rate of close to 17% by 2022.
“The tugboat market will remain attractive. Shipyards will also benefit from tugboat contracts as the industry enters a golden period of tug construction, driven by regulation and environmental concerns.
“Fifty-six towage vessels were added to the global order book in the first six months of 2019 in what is perceived as a bullish industry.
“These new shipbuilding contracts boosts the global order book for tugs of more than 20 meters in length to 297 vessels, keeping some shipyards busy into 2020 and a few to 2022. These development augurs well for the group, ” said TAS in its management discussion and analysis.
On the weak demand for OSVs, Mohammed said the situation is expected to change with the anticipated implementation of mega O&G projects in the Middle East over the next five years.
“Investments in these mega projects are projected to reach US$130bil. These projects will require the fabrication, transportation and installation of larger offshore structures in deeper water, thereby creating a robust demand for OSVs, ” he said.
Given analysts’ forecast that oil demand might rebound in second half of 2019, TAS is expected to benefit from the positive outlook in both the OSV and tugboat markets.
The current weak demand and a glut of OSVs in the market has led to stiff competitions among the shipbuilders, which have suppressed their selling prices.
Several years ago when the oil prices fetched over US$100 per barrel, TAS had engaged shipyards in China to construct OSVs besides building others at its own shipyard in Sibu.
The downturn of the O&G industry had affected TAS, which in turn resulted in the group’s inventories to go up by 7.1% to RM450.2mil in FY19.
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