Overseas Houston (top) was the first new product carrier delivered by Aker Philadelphia Shipyard for charter by Overseas Shipholding Group. By summer, work on Overseas Los Angeles, the third tanker in the series, was well under way. (Courtesy of Overseas Shipholding Group and Walter Garschagen)
For commercial shipyards, this is the year the U.S. tanker fleet finally got serious about replacing its remaining single hulls.
Three multi-vessel contracts for double-hulled product carriers in the 45,000-dwt range are under construction or on the drawing board as owners and charterers rush to meet the deadline for replacing Jones Act tonnage with vessels that meet the safety rules enacted after the Exxon Valdez oil spill almost 20 years ago.
The tanker newbuilds, matched by a surge in large barge construction, highlight a year that has also seen strong demand for boats for the offshore oil industry (see stories, Supply Boats and Crew Boats). Yards that specialize in new crewboats and supply vessels are full, and companies that want quick deliveries are turning to nontraditional yards to avoid a wait.
“There’s been significant new construction begun or signed over the past year,” said Allen Walker, president of the Shipbuilders Council of America. “Some shipyards — not all, but some — have a two- or three-year backlog at this point. There continues to be significant construction in the offshore supply boat market, and that’s probably a big market looking forward.”
One consequence has been a labor shortage, particularly in the Gulf, where yards are competing with the construction industry for skilled labor. In Pascagoula, Miss., Butch King, CEO of VT Halter Marine, told the local newspaper’s business roundtable in July he would need 200 more people by March. “I think the Gulf Coast is becoming a mecca for skilled artisans,” he said.
Shipyards are taking innovative approaches to the labor problem. VT Halter’s neighbor, rig builder Signal International, even imported guest workers from India as welders and fitters.
Bollinger Shipyards of Lockport, La., completed the conversions of three dive support vessels for EPIC Divers & Marine. (Courtesy of Bollinger Shipyards Inc.)
Military shipbuilding, including Coast Guard construction, suffered a run of bad press over the last year and a declaration of “tough love” from the secretary of the Navy. Cynthia Brown, president of the American Shipbuilding Association, said the nation’s biggest yards need to restore the Navy’s confidence. “The major issue for the shipbuilding industry is to perform and to perform well,” she said.
A tale of three tankers
By the end of this year, Aker Philadelphia Shipyard will have delivered three new 46,000-dwt double-hulled product carriers to Overseas Shipholding Group, the first of 16 vessels if all options are exercised. The second vessel, Overseas Long Beach, profiled on Page 12, is American Ship Review’s Ship of the Year.
In San Diego, General Dynamics Nassco began construction in August on Golden State, the first of a similar series of up to nine 49,000-dwt product carriers for U.S. Shipping. Golden State will go under charter to BP; delivery is scheduled for spring 2009.
In the Gulf, Atlantic Marine — acquired last year by J.F. Lehman & Co., headed by the former Navy secretary — has a contract to assemble three 42,400-dwt product carriers for AHL Shipping as part of a modular process in which various partners are responsible for different facets of construction.
The AHL tankers, due for delivery in 2009-2010, will be time-chartered by Shell. The propulsion system is twin-screw diesel electric. They will be the first Jones Act newbuilds to comply with the 2006 International Association of Classification Societies Combined Structural Rules for Tankers.
AHL’s design was developed from scratch by Aker Yards Marine and Al Nierenberg of Ship Construction Strategies. Nassco and Aker Philadelphia, however, licensed existing designs from South Korean shipbuilders, a tactic that minimizes engineering costs and spreads design and licensing fees over a number of hulls.
In that respect, said Karl Johnson, Nassco’s director of communications, the order from U.S. Shipping is like Nassco’s contract for up to 14 T-AKE underway replenishment vessels for the Navy, which has a value to date of $3 billion.
“That’s the attractive nature of these ships,” said Johnson. “There isn’t much reengineering work that goes into it, and you’re asking your work force to basically produce the same ship over time.”
Among yards with contracts for large barges are VT Halter, Bay Shipbuilding in Sturgeon Bay, Wis., and Tampa Bay Shipbuilding. Halter, for example, is in the middle of an order for 10 tug-barge units for Crowley Maritime Corp. Each barge has a capacity of 185,000 barrels.
For the nation’s commercial yards, one prize on the horizon is replacing the nation’s dry cargo fleet. “That’s well past when it should have begun,” said the Shipbuilders Council’s Walker. Short-sea transport is also attracting interest. In today’s economy, it remains to be seen whether tight credit will affect lenders’ willingness to bankroll shipbuilding.
A flurry of contracts
At medium-size yards, order books have filled up nicely. VT Halter Marine reported one new project after another last fall, including a $199 million missile range instrumentation vessel for the Navy, a $15 million SWATH coastal mapping vessel for NOAA (which is winding up an order for four fisheries research vessels from the yard) and the resumption of preliminary work on small, fast missile craft for the Egyptian Navy. In March, Halter announced a $23.5 million contract for a 285-foot deepwater platform supply vessel due in late 2008.
The delivery of Polar Enterprise, seen entering Valdez, Alaska, in February, took Northrop Grumman’s Avondale (La.) yard out of commercial work — for now. (Courtesy of ConocoPhillips)
Elsewhere in the Gulf, Bollinger Shipyards in Lockport, La., hopes to turn out one 190-foot platform supply vessel every other month throughout 2008 for Rigdon Marine. The first of 10 vessels was delivered in August (see story, Deja vu). Bollinger also delivered the first of two 245-foot lift boats to Edison Chouest Offshore and continues to build coastal patrol boats for the U.S. Coast Guard.
Meanwhile, Bollinger is being forced to move repair operations away from its yard on the Industrial Canal in New Orleans. “We have focused on repairing our damage from Katrina,” said Donald “Boysie” Bollinger, chairman and chief executive officer. “This will result in a number of new dry docks of increased capacity. We also are expanding our repair operations at most of our locations.”
In April, Bender Shipbuilding & Repair Co., the recipient of an earlier 10-boat order from Rigdon, won a contract for two more platform support vessels for Trico Marine Services. The designer is Guido Perla & Associates of Seattle. And in the Northwest, a consortium of yards won a long-delayed order for new ferries for Washington state (see story, Ferries).
In other yards, one project that has not gone smoothly is the conversion of two 370-foot sulfur tankers into multipurpose supply vessels by Cianbro of Pittsfield, Maine. Hornbeck Offshore Services originally forecast completion by the end of 2006 at a cost of $55 million to $65 million. In August it revised the delivery date to mid-2008 and increased the cost estimate, blaming “design enhancements” and “unplanned project complexities.”
Among military contracts completed in the last year was the delivery of ten 40-foot high-speed landing craft from Kvichak Marine Industries of Seattle. The boats replace the Navy’s LCM-8s in support of Marine amphibious assault missions. (Courtesy of Kvichak Marine Industries Inc.)
Smaller shipbuilders are busy, too. Unlike larger yards that are subject to disclosure requirements, some may have logged orders not yet announced.
“Tough love” from the Navy
When Navy Secretary Donald C. Winter told a Navy League symposium in April that the service was going to “reassert its control over the entire shipbuilding process,” he described the Navy’s new relationship with the industry as “tough love.” The effects were dramatic.
Within days, the Navy terminated construction on one of its new littoral combat ships (LCS) after the cost estimate for the first topped $350 million.
Because of the way the LCS contracts were awarded, work is going on simultaneously on two different versions. In Wisconsin, Marinette Marine is building a 377-foot semi-planing monohull, Freedom, that can top 40 knots, and the priority is to get to sea trials before ice season. The prime contractor for this design is Lockheed Martin; other partners include Bollinger. It was the Lockheed consortium whose follow-up vessel was terminated.
In Mobile, Ala., Austal USA is part of a General Dynamics consortium spearheaded by Bath Iron Works (BIW) that is building a very different prototype: Independence, a 417-foot trimaran with a sprint speed of 47 knots.
So far, the General Dynamics versions are cheaper than Lockheed Martin’s, but the Navy has fired a warning shot over GD’s bow about future costs. The LCS project also ran into criticism from Congress when appropriations measures came up for votes this summer. No one doubts the Navy wants the boats, but the next move is uncertain. The Navy has always reserved the option to pick one version over the other after the prototypes are built.
Both Marinette and Austal have significant non-Navy contracts. Marinette plans to open a new facility to handle its share of a contract with Kvichak Marine Industries of Seattle to build 45-foot response boats for the Coast Guard. Austal, which reached 1,000 employees in July and opened a new panel line shop the same month, is working on a second catamaran for Hawaii Superferry.
Up for grabs
For midsize yards, one future prize is the proposed Joint High Speed Vessel, or JHSV, a fast catamaran that would allow the Navy, Army and Marines to transport troops and equipment. Speeds could top 35 knots fully loaded, and the vessels might be required to operate in shallow water.
Alan Shepard joined the fleet in June as the latest underway replenishment vessel (T-AKE) built by General Dynamics Nassco. Plans call for building 14 ships, including three for the Maritime Prepositioning Force. (Courtesy of General Dynamics Nassco)
Austal USA and BIW are both interested in the project; so is Bollinger, which is teaming up with Incat, Gladding-Hearn and two yards from Washington state, Kvichak and Nichols Brothers, to submit a proposal. “I believe the JHSV will probably be built by midsize shipyards,” said Walker of the Shipbuilders Council.
Also up for grabs is the long-delayed fast-response cutter for the Coast Guard.
Despite the pall cast by the LCS overruns, the Big Six have reported successes over the last year. Among General Dynamics yards, Electric Boat delivered the Virginia-class submarine Hawaii in December. In San Diego, Nassco continues to deliver its T-AKE underway replenishment ships: Alan Shepard was delivered in June, Richard E. Byrd is due in November, and Robert E. Peary next spring.
Support vessels attract less attention than combat vessels, but T-AKE has been a mainstay for Nassco. “Over the last three or four years the yard has gone from just under 4,000 employees to 4,600,” said Johnson, the company’s spokesman. Nassco has also picked up Navy repair work at a time when commercial repair work is hard to find.
Nassco is almost alone among the Big Six in maintaining active commercial work, although BIW is a subcontractor on the sulfur tanker conversions in Maine. As well as gearing up for its new product tankers, Nassco is marketing other designs based on its partnership with Daewoo Ship Engineering Co. of South Korea.
BIW is starting fabrication of its last Arleigh Burke-class guided missile destroyer and faces a potential gap before work starts on the new Zumwalt-class destroyers. Congress has cut the total order to seven; the lead ships will cost about $3 billion, and BIW is splitting production and design with Northrop Grumman in Pascagoula. BIW has been upgrading its facilities, installing a $3 million welding gantry and constructing a $40 million “ultra hall” to handle ship modules of up to 5,000 tons. It is also considering bidding on the fast-response cutter.
Among Northrop Grumman’s yards, Newport News has also made capital investments, finishing a 1,040-foot, multi-level pier and a covered module outfitting facility for aircraft carriers. Newport News launched its own new carrier, North Carolina, in May.
The storm after the hurricane
Northrop Grumman’s yards in the Gulf, in Pascagoula and Avondale, La., saw their last commercial construction sail away last year when Polar Enterprise joined its four sister ships in the Jones Act tanker trade. Since then, there has been a string of bad news.
Early this year, the Coast Guard took back control of its Deepwater modernization program, affecting the new National Security Cutters under construction in Pascagoula, which faced spiraling costs and questions about their useful service life. The Coast Guard was already reeling from the failure of its 123-foot patrol boat conversions. It wrote off all eight boats that had been stretched at Bollinger, starting with Matagorda.
In April the secretary of the Navy, Winter, sent Northrop Grumman a scathing letter about San Antonio, the lead ship of a new class of amphibious transports, built at Avondale. “Twenty-three months after commissioning … the Navy still does not have a mission-capable ship,” Winter wrote. The third ship in the class, Mesa Verde, was built in Pascagoula and went to builder’s trials in mid-August.
Pascagoula was also hit by a month-long strike and the continued effects of Katrina, a blow only partially offset when the Navy approved compensation of $98.6 million for damage to Northrop Grumman’s yards there and in Gulfport, Miss.
Asked about Winter’s “tough love” remark, the American Shipbuilding Association’s Brown replied, “I don’t think there’s disagreement between the secretary of the Navy and the industry on a lot of issues.” One area in which both sides have expressed interest is in reducing the number of new hull designs, which Brown called “very costly for the industry and for the taxpayer.”
Overall, said Brown, “The future is bright.” She said she was “heartened” by the Democratic takeover of the Congress, which put Reps. Gene Taylor, D-Miss., and John Murtha, D-Pa., in charge of key House subcommittees on defense and appropriations.
“They began this year saying they were going to address the persistent underfunding of naval shipbuilding, and both committees have not only said they’re going to act, they’ve done so,” she said. On the Senate side, $10 million in Title XI commercial shipbuilding loan guarantees even made it back into that chamber’s version of the appropriations bill.
North of the border
In December, Vancouver Shipyards laid the keel for a 328-foot, 600-passenger ferry for BC Ferries that is expected to enter service next summer. BC Ferries said two Canadian yards and one international yard had been shortlisted for the proposal; the company’s larger ferries are being built overseas. The contract is worth C$45.5 million to the yard.
In Halifax, Irving Shipbuilding, part of a diversified business with strong links to the offshore oil industry, disclosed in May that it had signed a contract to build a cruise ship in the 300-foot range for Pearl Seas Cruises of Guilford, Conn. Pearl Seas said it expected the vessel to enter service in August 2008 and held out hopes of a second order.
Yards in Halifax and British Columbia are considered the likeliest beneficiaries of a planned C$3.1 billion contract to build six to eight armed Arctic patrol ships with limited icebreaking ability. Announcing plans in July, Prime Minister Stephen Harper made a point of saying the vessels would be built in Canada. Press reports likened the vessels to the Norwegian Coast Guard’s 340-foot Arctic patrol vessel Svalbard.
And in a rare upbeat note for the Canadian industry, the Davie Québec yard in Lévis was rescued from bankruptcy by Norwegian investors and logged orders for two 427-foot offshore vessels worth $132.6 million each, with options for four more. Davie said it expected 600 workers to be back at work at peak production in July 2008.