Nam Cheong sees record OSV deliveries in 2014-15

Singapore

NAM Cheong Ltd, Malaysia's biggest builder of offshore support vessels (OSVs), expects record deliveries this year and next as the company's focus on shallow-water oil search products helps it withstand a drop in crude-oil prices.

Nam Cheong expects to hand over 30 vessels that provide support to offshore exploration and production facilities this year and 35 in 2015, chief executive officer Leong Seng Keat said in an interview. The company delivered 20 vessels last year.

The builder intends to retain its focus on shallow-water search products as a decline in global crude-oil prices slows oil companies' appetite for exploring deeper oceans. Crude-oil prices dropped to US$88.85 a barrel on Oct 7, the lowest close since April 22 last year, on the New York Mercantile Exchange.

"Next five years, we are not looking at deep water," Mr Leong said. "Most of the oil majors are not looking to deeper waters because of the oil price." Shares of Nam Cheong have gained 42 per cent this year.

Oil companies are expected to spend about 6 to 8 per cent more on shallow-water projects next year, helping increase demand for vessels used in this area, Mr Leong said. Oil at below US$90 a barrel could prompt companies to squeeze more reserves from existing wells near the coast, he said. About 80 per cent of global oil production is from shallow waters, Mr Leong said.

Nam Cheong also expects replacement of older ships to drive demand, Mr Leong said. BLOOMBERG