Dubai: Ship shape

Working to strengthen its reputation as a shipbuilding and maritime centre, Dubai is looking to leverage its location astride one of the busiest shipping lanes in the world and the growing need for local and regional maritime support to develop a major shipbuilding and maintenance industry.

The flagship of Dubai’s maritime services industry is Drydocks World (DDW), part of the Dubai World group. Established in 1983, DDW initially focused on repairs and service work. Following a period of expansion, its remit has broadened to include construction and conversion, as well as offshore platform building.

In recent years, however, DDW has been carrying an extensive debt load, which threatened to swamp it as creditors sought repayment. Like many shipyards, DDW saw business volume fall in the wake of the global economic downturn, as worldwide trade eased on the back of falling demand. To further compound its difficulties, orders for new vessels also experienced a sharp decline. The crisis coincided with a period of aggressive expansion for DDW, which saw it acquire strategic assets in Asia, including shipyards in Singapore and Indonesia.

There are signs of improvement, however. At the end of August, DDW won the backing of a Dubai tribunal to restructure some $2.2bn worth of debt. With almost 98% of the firm’s creditors agreeing to reschedule repayments, which will see the principal repaid in full over a five-year term, DDW management will now focus on core activities. According to Khamis Juma Buamim, the chairman of DDW, a strategy was recently developed that will see the company repair, refurbish, and build offshore vessels for the oil, gas and energy sectors, with particular focus on the oil and gas industry.

“We had to think seriously about what would happen in the next 15-25 years, so we decided to plot it out. The data indicated that as per current forecasts, the oil and gas industry has a growth cycle up to 2030,” Buamim told OBG. This shift in strategy is expected to produce 3-4% annual growth for the company, he added.

While DDW may be the highest-profile yard in Dubai, it is by no means the only one, with many smaller concerns active in the maritime construction and service sector. One such company is Grandweld Shipyards, which produces mid-sized vessels that are mainly used in the oil industry to ferry personnel between offshore platforms and bases on the mainland.

In late August, Grandweld announced a deal with local firm Global Marine to design and build two aluminium crew boats that will have the capacity to carry 83 passengers and crew, as well as 90 tonnes of cargo. Based in Dubai Marine City (DMC) – a purpose-built maritime construction, repair and conversion cluster next to Port Rashid and the DDW yards – Grandweld has 20 vessels of various sizes already on its slips and recently delivered two tugboats to Abu Dhabi.

Grandweld will soon be joined at the DMC by Dubai Ship Building and Engineering (DSBE), which signed a 25-year lease earlier this year. The DSBE’s new facility will be developed on a block of land comprising 11,196 sq metres, allowing the company to expand its operations and to benefit from improved economies of scale, as it will now be closer to suppliers and clients.

With careful management, the emirate’s maritime services sector should be able to carve out a significant and profitable niche in the industry, one that caters to the needs of the region and many of those who trade with it.