Major marine players keen to diversify

Marine services providers won’t be knocked off course by the waves of change in the oil and gas industry.

Diversification is front-of-mind for many in the state’s marine logistics sector, which has been beavily reliant on oil and gas-related work.

Whether through new business lines, interstate operations or fighting for export markets, increasingly price-conscious clients are prompting them to seek new opportunities.

Public-listed and recently rebranded MMA Offshore had a strong finish to 2014, more than doubling its EBITDA on the same period in 2013, up to $132 million.

But in the company’s report, chairman Tony Howarth flagged a warning for the market.

“The recent plunge in the oil price has had a dramatic impact on the sector globally, with oil and gas majors reacting by curbing capital expenditure and seeking to reduce their operating costs,” Mr Howarth said.

“The Australian construction market is less impacted in that most of the current offshore support work relates to the construction of large LNG projects, which have already been sanctioned and are well into the construction phase.

“The international market is expected to be challenging in the current environment with pressure on rates and utilisation across all vessel segments.”

Nonetheless, MMA has five vessels under construction, with two being used in bids for long-term inspection, maintenance and repair contracts as the company gears up for its clients to transition to LNG production.

A further two of the vessels, to be delivered in 2016-17, will be used on a production support contract of up to 10 years with Inpex.

MMA, which last year bought Singapore-based provider Jaya Holdings, has targeted the international market for work outside of oil and gas, including a 12-month, $105 million management contract for a Baltic leisure cruiser, secured last September.

KT Maritime Services has also achieved a long-term work pipeline, with a contract to operate three support vessels out of Broome for Shell’s Prelude project.

Bhagwan Marine, which became the nation’s largest vessel hire business after its July 2014 acquisition of Brisbane’s MDT Maritime, has been on the diversification path for some time, according to managing director Loui Kannikoski.

“From Bhagwan’s perspective, we were always conscious that the construction period on the major Western Australian projects would not last forever, so we tried to be as ready as we could be to transition into the production phase,” Mr Kannikoski told Business News.

“Part of this strategy has been to diversify and grow our business into other regions such as the Northern Territory, Queensland and the UK.

“Focusing on growth in some of these key areas has meant we have been able to deploy some of our assets and crews that were working in WA to other areas.”

In 2013, Bhagwan bought Workboats Northern Australia, which is based in Darwin, which increased its fleet by around 30 vessels.

Most recently, the company has opted to go below the surface, opening a new subsea division, to be managed from Belmont.

“We basically saw an opportunity to offer the market something that is currently unique in the Australian oil and gas and resources industries,” Mr Kannikoski said.

He said the company was now positioned to offer end-to-end integrated subsea inspection, maintenance, repair and construction services.

“Launching this division at a time like this was a huge decision for us, but one we believe will set us apart from our competitors and provide huge benefits to our clients in the form of operational efficiencies and cost savings.”

TAMS Group, which had seven vessels operating on the Wheatstone project during construction, is also relying on diversification and increased efficiency.

“We’re quite heavily focused in Port Hedland,” group financial controller Lee Bartlett said.

The company has engaged in maintenance and dredging contracts, among others, with BHP, which has expanded its port operations.

Mr Bartlett said the company benefited from being a diverse business, which minimised the number of contractors an operator would need to deal with.

Both TAMS Group and Bhagwan will continue to pursue opportunities, with work available at Gorgon as production steps up and LNG vessels take gas off, for example.

“We’ve had to be a lot more competitive,” Mr Bartlett said, with the company reducing its margins and focusing on increased efficiency. That included investing in a shore base in Gingin so the company can lower transport costs.

But cost reduction will be difficult for providers across the sector, with its labour supply tightly controlled by one of the nation’s most militant trade unions.

The Maritime Union of Australia has scored a range of headlines in the past year, on the back of various bids to up pay and conditions and threats to block up the state’s northern ports.

International player Teekay Shipping was one that came under pressure, when 56 of its tug boat workers threatened a four-hour strike in November last year.

The Canadian company eventually agreed to provide employees with a further four weeks of paid annual leave, in exchange for the removal of some allowances.

Earlier this month, however, it was reported that the Port Hedland workers might need to back track on the deal, with Teekay looking less likely to achieve renewal of its BHP Billiton contract.

MMA, which has been contracted to Chevron’s Gorgon, endured similar waterfront issues, with three strikes announced in three months at its Dampier supply base.