European yards awarded for better quality, experience and ability

Mar. 6, 1998 In the past week, Spain's Astilleros Espanoles (AESA) and Belfast-based Harland and Wolff have unveiled contracts for three drillships in projects worth almost $ 1 bn.
Reading between the lines of AESA's statement on its latest contract success provided plenty of food for thought.
In announcing the prestigious Transocean Offshore order for two ultra-deepwater drillships, Spain's state-owned shipbuilding group was unusually forthright in its comments.
Transocean, AESA continued, had chosen its Astano subsidiary because it was "the most reliable yard for the construction of this type of unit, valuing the yard's better performances in terms of building quality, experience and ability, and cost-cutting efficiency".
Normally, any self-respecting journalist would dismiss these comments as a form of self-promotion not worthy of publication.
Moreover, the relationship between European and South Korean shipbuilders is particularly prickly right now because of concerns that the IMF's rescue package for South Korea may be used to support the country's yards.
But the sub-text of AESA's statement is worth examining. In a nutshell, the underlying message appears to be that a European yard was preferred to Far Eastern rivals even though the contract price was more expensive.
Interesting, perhaps, if not earth-shattering. But coming after Far Eastern yards' problems in the fulfilment of several sophisticated offshore contracts, it is tantamount to a victory cry.
If it was only European shipbuilders making these noises, Asian yards could dismiss them as the biased output of a propaganda machine. Crucially, though, some customers have also made their disaffection public.
After a bad experience in Japan, Statoil has said that, "as of today", it would not build another FPSO unit in the Far East. Emerging from the mouth of one of the world's leading oil companies, these are harsh words indeed, and cannot lightly be brushed aside.
Other oil companies and contractors, such as Saga Petroleum, Smedvig and Allseas, have also been disappointed with work in Asian yards.
Of course, even those with cause for complaint would not tar every Asian yard with the same brush. And Italy's Saipem, for example, has just shown faith in Samsung Heavy Industries by placing a prestigious order for an ultra-deepwater drillship with the South Korean yard.
But it is not an exaggeration to say that Asia is developing a dangerous reputation for failure in high-specification offshore work. A high profile example is Statoil's contract for the Aasgard A FPSO with Japan's Hitachi Zosen.
Production from the Aasgard offshore development is now expected to be several months late because of delayed delivery of the hull. As a result, completion of the unit by Aker Stord and its hook-up is now expected to require substantially more than twice the number of working hours originally budgeted.
Statoil commented: "The scope and complexity of outfitting work has been under-estimated, particularly with respect to ventilation, pipework, electrical installation and painting. Working methods at Hitachi Zosen have proved inapproriate for such a complicated ship."
A Statoil spokesman did volunteer that both the oil company and the shipyard "underestimated the complexity of the task". He stressed that the standard of Hitachi's work was not an issue. "We were satisfied with the quality of the work but the necessary speed was not reached."
Hitachi has also fallen behind schedule with construction of the dynamically-positioned semi-submersible rig West Future II.
Norwegian contractor Smedvig recently disclosed that the yard is three months behind schedule in engineering on the rig. Hitachi is by no means the only Asian yard to fail to meet the oil industry's expectations. Others, such as Singapore's Keppel FELS and Sembawang, have also encountered problems with major offshore contracts.
Earlier this year, Saga Petroleum disclosed that its Varg project was over-budget and behind schedule following problems atKeppel FELS. Saga's FPSO is running three months behind schedule. Keppel FELS is also in arbitration with Smedvig over alleged deficiencies found in the Balder FPSO.

Europeans see these failures as an indictment of Asian yards ability to handle sophisticated oil industry projects. Far Eastern yards' skills with conventional ships are not in question, but there is a growing view that they are simply not set up to handle complex, high specification offshore contracts. They stand accused of sloppy work, cost over-runs, and late delivery.
Part of the problem would appear to be their lack of flexibility while work is in progress. In contracts such as FPSOs, design and construction often run in parallel.
"Far East yards are very good at fabrication when the target is fixed and well known," said one European offshore industry source. "Handling changes is not that easy."
AESA's Astano, for example, prides itself on being ready to work in parallel and modify projects already under construction. But Astano has been targeting the offshore market since 1985, and the yard is much further up the learning curve than many Asian rivals.
When converting a yard from conventional shipbuilding to offshore there is a need for many changes, both physical and in working practices. It is not an easy transition to make.
Meanwhile, European yards are enjoying the relatively novel experience of feeling they have the upper hand over their Asian rivals.
Clearly, European yards will lose no time to boost their position in the market for sophisticated offshore contracts. It is said a vessel such as Statoil's Aasgard A FPSO is "three to five times more complex" than a VLCC.