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Nam Cheong: Why OSV negativity is misplaced

Singapore: The negative comments circulating around the OSV sector are not 100% justified, argues Leong Seng Keat, executive director of the Malaysian offshore builder Nam Cheong.

The president and ceo of Malaysian energy giant Petronas recently joined the throng of people pouring cold water on rates for the local offshore support vessel (OSV) sector. Shamsul Azhar Abbas said earlier this month domestic OSV rates were falling and would continue to do so amid a rampant build up in capacity of OSVs and rigs in Malaysia. His comments come amid plenty of analyst speculation that the sector is facing tough times, but Nam Cheong’s Leong is not too worried.

“There’s lots of talk about oversupply of OSVs, and rates falling, and E&P being lower than before,” Leong says, before adding: “We don’t see this.”

He points to shallow water E&P which is “still strong” and notes that while there is oversupply all Nam Cheong’s newbuilds are being taken before completion. Client utilisation is still doing very well, he insists. Some of the negativity, he reckons, is coming from owners with older tonnage.

There are also 110 jack-ups still on order, Leong points out, so demand will still be there.

Having delivered a record 24 vessels last year and celebrated record results, Singapore-listed Nam Cheong is looking to hand over 30 ships this year and 35 next year.

“owners are taking positions earlier than last year, which is a good indication that orders will be strong this year,” Leong maintains. Another sign that owners are still bullish, he says, is that they are building to order more – speculative orders are down.

With a history that stretches back to 1968 Malaysia’s number one shipbuilder with a 12 ha yard in Miri has been outsourcing the bulk of its ship orders to a number of Chinese yards since 2006 as business ramped up.  [20/03/14]

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