A BIG LEAP FORWARD.
Duqm, about six hours drive from Muscat, is being developed as a maritime gateway that will also serve as an industrial and commercial hub. The master plan comprises strategic infrastructure including a port, a dry dock, an airport, a refinery, a petrochemical complex, power and desalination infrastructure, an industrial area and a free trade zone as well as tourism and residential projects. Today Duqm is still work in progress. The airport is to be ready by 2014, the port by 2012-13 and the first hotel there, Crowne Plaza, by the last quarter of 2012. But there is one section that is bustling with activity the drydock. Oman Drydock Company (ODC) is set to officially launch the drydock at Duqm in early 2012, but since its soft opening in April this year, it has already repaired 35 ships.
With investments of over RO800mn, the aim has always been to create one of the largest drydocks in the Middle East at Duqm, says Sheik Khalil al Salmi, deputy CEO, ODC. "Oman has seen development of industries around the container ports in Salalah and Sohar and the benefits associated with attracting clients and developing industrial clusters. Duqm will develop along similar lines. The upcoming port at Duqm will house a complete set of services docking, warehousing and ship repair facilities acting as a one-stop shop for ships works passing through the region."
With 30 per cent of oil in the world coming from the region, al Salmi says one can imagine the number of oil carriers passing by. "There is a huge demand for ship repair services in the region and we feel that this is an area we can tap into. Having a shipping yard with state-of-the-art facilities and leveraging on our maritime heritage will help in economic diversification. It also has a huge potential for generating employment for the younger generation of Omanis," says al Salmi.
ODC faces stiff competition from older and established shipyards in Bahrain and Dubai, but executives believe that they have an edge over regional peers thanks to the new facilities and state-of-the-art equipment that can optimise efficiency. Also another advantage is the weather conditions in Duqm it is more conducive for jobs like ship paintwork compared to that at the other drydocks in the region.
M J Park, CEO, ODC, says the drydock is the first project completed in Duqm. ODC had to complete the project in 40 months it was obvious that investors looking to enter Duqm will base their decisions on the successful outcome of the first mega project there. Al Salmi admits that as the first major project in Duqm, the pressure to surpass expectations and stay ahead of the game is constant. What has helped achieve this task, according to Park and al Salmi, is the operations and management partnership with Korea's Daewoo Shipbuilding and Marine Engineering (DSME), one of the largest shipbuilders in the world.
The facility has two docks and can currently repair up to six very-large crude carriers (VLCCs) at a time, but from the next year, ODC aims to increase this number to ten. Plans are also in place to develop a floating dock which is essential to complete the range of offerings at the ship repair yard, says al Salmi. The floating dock will cater to smaller vessels. Construction will begin in early 2012 once the study phase is completed.
Due to the state-of-the-art fabrication facilities at the yard, Park says there is potential to develop steel industrial business in the area. "Companies in Iran and Abu Dhabi are looking at large-scale steel fabrication works for onshore plants such as power plant, chemical plant, and steel bridge, etc. So steel industrial clusters can develop around the area." ODC is also looking at offshore projects like oil drilling and gas drilling due to the demand for these services from potential clients in Iran, India, the UAE and Qatar and this project too is in the study phase. They cannot depend on ship repair operations alone to achieve the target revenue in 2020, says Park.
The immediate focus is to get the floating dock ready in 36 months. Both executives hail the establishment of the Duqm Authority in October as a step in the right direction as they point out that any constraint on the infrastructure front can now be addressed promptly. When it comes to subcontractors for the drydock, Park says, "We are discussing with the authorities to provide some tax concessions for subcontractors, as people need incentives to work in a remote area."
While market reports predict a strong demand for ship repair services going forward, the next step is to take the ODC brand to international markets beyond the Middle East. Officials are relying on DSME's strong network to gain an edge in the market place. "Right now we want to see how successful the repair operations part of the business pan out," says Park.
Leveraging on partnerships
The government, realising the potential for ship repair services and docking facilities in the region, had initiated the 1,156,000sqm Duqm drydock project. These efforts were in tandem with the initiatives to develop the Al Wusta region by building a city in Duqm from scratch.
The project for the drydock took shape in 2006 when an agreement was signed between DSME and government port authorities in Oman for a period of ten years. Construction began in 2008.
Today, apart from local clients such as Oman Shipping, Raysut Cement and National Ferries, ODC caters to international clients from Belgium and Germany. For operations and swift maintenance, the expertise of DSME is sought. For special machinery and electrical work, subcontractors from Bahrain and Dubai are brought in.
"We know what kind of work is going on in the Bahrain and Dubai drydocks. We would like to establish a similar system here. It does not make sense to have companies permanently stationed here for repair work as the market is inconsistent. Sometimes we will be able to bring in ten ships to repair at one time but sometimes we may have only 3-4. So having subcontractors on a temporary basis works best for us," says Park.
Despite the high demand for ship repair services in the region, the element of competition is quite pronounced for ODC, with drydocks around the corner in Dubai and Bahrain and a new one coming up in Qatar. "We are committed to attracting the big companies and the ship owners from around the world," says al Salmi, "We have a brand new complete facilities offering serves as a one-stop shop for clients and we have DSME as our partner. Now it is all about how successfully we market ourselves."
Substantial legwork is required by ODC to market the drydock efficiently at this point. The company collaborates regularly with Oman Shipping to track the crude carriers passing through the region and approaches them with their services. While this strategy has helped procure orders for repairing 35 ships so far, Park admits ODC needs to make its name known in the international market.
International marketing campaigns have begun, but showcasing a product like the drydock requires a different approach. With plans to increase ODC's presence in the international markets, the marketing team needs to be aggressive and Salmi admits that participating in international exhibitions helps meet new clients and gaining knowledge. "We want to take part in at least four exhibitions a year," says al Salmi. ODC has so far participated in exhibitions in India, Korea, Singapore and Norway. Partner agents in these regions have scouted for potential clients during and after the exhibitions and helped ODC get in touch with them. ODC has so far participated in exhibitions in India, Korea, Singapore and Norway. Partner agents in these regions have scouted for potential clients during and after the exhibitions and helped ODC get in touch with them. The DSME association is a huge advantage for ODC. "DSME is known for its marketing expertise and its network of clients that it has built over 30 years. It has lent its expertise to clients in Korea and across Europe," says Park. Hence customers are confident about approaching ODC when they know about DSME.
Determining the future value
Procuring the right manpower and transportation of materials remains a challenge as the cost of manpower has gone up and Duqm is still a remote area from the country's capital. But company executives point out that the infrastructure development for Duqm is top priority for the Omani government right now and it is just a matter of time before the roads, airport and even hotels are ready.
Going forward, the outcome of the ship repair operations will determine whether or not ODC can move forward to ship building. But this requires billions of dollars of investment, admits Park, adding that ODC needs to consolidate its position in the region before it can move on to this phase.
The potential remains vast in the ship building business and this is an area that Park is seriously looking at for ODC for the future. At the end of DSME's ship repair contract in 2016, if both parties choose to renew it for the next ten years then ship building can be looked at with DSME supplying Oman with the designs.
For some, this might seem too ambitious for a project that is so young. But planning big under all the intense scrutiny has panned out well for ODC in the past, so this strategy may perhaps continue to charter the course to its success into the future as well.
Veronica, Oman's first floating hoteL
In October 2010, DSME bought Mona Lisa, a cruise ship built in 1966, from Bahamas shipping firm Leonardo Shipping Inc, with the intention of converting it into a luxurious floating hotel, to be stationed at the Duqm drydock. With investments of over US$30mn the ship was renamed as Veronica after refurbishments and is set for its soft launch soon. The floating hotel has 208 rooms subdivided into luxury, deluxe, standard, serviced residences and crew rooms. Facilities onboard include restaurants and bars, a spa, swimming pool and sauna, a fully equipped gym/health club, a karaoke bar, a clinic and pharmacy, retail shops, offices and conference rooms. DSME started with the project to compensate for the lack of hotels in Duqm for visiting senior management of ODC and DSME. While Veronica will be for the officials during its soft launch phase, having identified the potential for development of tourism, there are
plans to open it to public towards the end of 2012.
SERVICES PROVIDED BY ODC
Repair of ULCCs, VLCCs, offshore rigs, derrick barge and pipe-laying barge.
Repair & Conversion of various dredgers such as TSHD, CSD, Grab Dredger, etc.
Fabrication & renovation of offshore structures
Fabrication of steel structures for long-span steel bridge and high-rise buildings
Repair & Conversion of various vessels include
FPSO (Floating, production, storage and off take), FSO Upgrades
VLCC / FSO/FPSO Conversions
Double Hull Conversions
Cargo-Handling System Installation
Pipe Lay Barge Refurbishments
Self-Unloading Bulk Carriers
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