Sri Lanka Dockyard warns oil price slide could hit orders

COLOMBO (EconomyNext) – Sri Lanka’s Colombo Dockyard has warned that lower oil prices which slows down investment in drilling could temporarily reduce orders for offshore support vessels of the type it has specialised in during recent years.

Ship building now accounts for about two-thirds of total sales with the yard’s profitable ship repair business having slumped to 24 percent owing to the downturn in shipping which prompted owners to delay repairs, its new chairman Toru Takehara said.

Colombo Dockyard, a unit of Onomichi Dockyard Co. Ltd. of Japan, is looking to diversify its business and build new types of vessels to reduce reliance on oil industry support ships.

"Globally, the prevailing low oil prices can be expected to have negative impacts on revenues of the Colombo Dockyard, as we are mainly manufacturing offshore support vessels for the oil drilling industry," he told shareholders in the firm’s annual report.

"With oil prices on a declining trend, investment interest in oil drilling is also slowing down, which may have a knock-on effect on our future orders for offshore support vessels."

In recent years the yard has won repeat orders for Offshore Support Vessels (OSVs), delivering more than 17 and eight more OSVs on order.

In the financial year to December 2014 the yard delivered three vessels and signed new contracts for the construction of four more vessels for a Singaporean Owner.

The report said the new orders further strengthens the yard’s track record for building Offshore Support Vessels, a niche it has been focusing on since 2006.

Vessels built by the yard have been able to secure charters as soon as they are delivered to the owners.

They have been chartered to oil majors such as Petrobras of Brazil, Petronas of Malaysia and  Shell of the Netherlands.