Shipbuilder seeks growth in Houston

It has been about two years since the office of the China State Shipbuilding Corporation Offshore (CSSC) was opened in Houston, and its primary goal still holds: trying to get a foothold in the global offshore market by positioning itself in the energy-centric city of Houston.

In its office, the glass-encased model of China's first and only deep-water rig designed and built in China by CSSC - Hai Yang Shi You 981 - represents the capability of CSSC and the mission of this relatively new division. "However, we are looking to get into any sector of the market now," said Chen Weimin, business development director of CSSC Offshore in Houston.

CSSC, established on July 1, 1999, is a humongous conglomerate and state-authorized investment institution directly administered by China's central government. It promotes itself as being the mainstay of the shipbuilding industry in China.

Under its wing, there are 60 sole proprietorship enterprises and shareholding institutions, including a batch of leading shipbuilding and ship repair yards, research and design institutes, marine-related equipment manufacturers and trading firms in China. It ranks as one of the world's top shipbuilding groups.

In 2014, CSSC revenue reached a record high of $22.29 billion and its profit doubled over 2013 through management reform, asset relocation, institution restructure, technology renovation and the development of new products.

CSSC's main business is shipbuilding, however it has expanded into 20-plus fields and sectors such as aerospace, construction, power generation, petrochemicals, hydraulic engineering, environmental protection, metallurgy, railway and light industry.

Since 2000, CSSC has made great progress in its offshore sector and has become a renowned offshore products and service supplier in China over the last decade. The spectrum of CSSC's offshore products are expanding from survey, drilling, construction, production and transportation to logistics and support. CSSC can provide a full range of offshore facilities to oil companies and offshore contractors.

CSSC Offshore was created about two years ago in Houston to further expand into this market globally. However, Chen said the company didn't have enough time to catch the peak in oil prices, which lasted less than a year since the office was set up.

It takes time to gain entry to this market, with a project often spanning five to 10 years.

The international crude oil price continues to hover at low points since its sharp decline beginning June 2014, and the trend will hold for some time and price recovery isn't yet in sight, according to industry projection. The offshore market is strongly related to the international crude oil price, and lower price means less demand for the global offshore market.

"A stronger US dollar, the large production capacity of shale gas in the United State, and the slowdown of economic growth in developing countries, including China, are the primary reasons of the crude oil price drop," said Chen.

Now the offshore market is depressed, and it doesn't look like a turnaround any time soon, but Chen still sees opportunities for Chinese companies.

"The lower oil price forces oil companies to pay more attention to the cost. Some oil companies, in an effort to lower its operation cost, want to acquire lower priced offshore equipment, and this is where the Chinese companies can come into play because China's offshore industry still holds the advantage of lower manufacturing cost," said Chen.

For example, Shanghai Waigaoqiao Shipbuilding Co, Ltd (SWS), a subsidiary of CSSC, sees increasing inquiries and orders from oversea oil companies for offshore equipment lately, said Chen.

SWS is CSSC's flagship company in offshore equipment design and manufacturing. Through its innovation-driven development, SWS has accumulated sufficient technology and manufacturing experience in offshore sector, starting to make a name for itself in the international offshore market.

Over the years, it has successfully produced FPSO (floating production, storage and offloading) ranging from 15-tonnage to 30-tonnage, self-rising offshore oil drilling platform, deep-water rig, and other high-end offshore equipment.

"SWS now has at hands more than 10 orders of JU2000E, CJ46, CJ 50 and other mainstream designed self-rising drilling platforms. That means non-stop manufacturing in the current climate, a very healthy prospect," said Chen.

Chen, with years of experience in the industry, is also aware of the risks associated with such opportunities.

"Due to the lower oil price, the profit-making ability of the oil companies and drilling contractors is severely diminished. So, there lies the risk of default. On the other hand, due to suppressed price of offshore orders, we have to carefully evaluate the risk associated with cost to avoid incurring big losses," said Chen.

The Houston office's focus is looking for opportunity in and beyond the United States.

mayzhou@chinadailyusa.com