IEM-029: Development of the Shipbuilding and Ship Repair industry in Trinidad and Tobago
DEVELOPMENT OF SHIPBUILDING AND SHIP REPAIR INDUSTRY IN TRINIDAD AND TOBAGO Wilfred de Gannes 1 and Andre Persad 2 Shipbuilding and Repair Company of Trinidad and Tobago Limited, Trinidad and Tobago, West Indies 1 E-mail: degstt@hotmail.com 2 E-mail: persad.andre@gmail.com
Abstract: Trinidad and Tobago (T&T) has been primarily an oil and gas-based economy with downstream industries such as Methanol, Urea, Ammonia and Ferrous Steel. It is the largest exporter of Methanol and Ammonia to the world and the second largest exporter of Liquefied Natural Gas (LNG) to the United States of America (USA). An international firm, based in Houston, Texas, USA which evaluates oil and gas properties and independently certifies petroleum reserves quantities recently submitted its commissioned report indicating that the level of proven reserves of natural gas in T&T has fallen to detrimental levels. The Government of Trinidad and Tobago has decided that for future economic sustainability and social stability, it is paramount that the gas-based economy be diversified to allow for alternative avenues of foreign investment, thereby facilitating increased trade and continued industrial growth. One such key area that has been proposed is the further development and expansion of the Shipbuilding and Ship Repair Industry. Trinidad has been engaged in the commercial repair of small vessels such as Tugs, Barges and Offshore Supply Vessels for over 100 years, primarily in Chaguaramas, North-western Trinidad. One of the proposed sites that have been identified for further advancing this development is the new LABIDCO port extension and Union Industrial Estate both located in La Brea, South-western Trinidad an area which was formerly proposed for the establishment of an Aluminium Smelter Complex. This area is ideal because of its existing deepwater port infrastructure, sheltered Gulf of Paria waterfront, available land acreage and local competencies in welding and steel fabrication. Key words: Shipbuilding, Ship Repair, Diversification, La Brea, Trinidad
1. Introduction At the present time, Trinidad and Tobago has minimal capacity for the repair and conversion of ships or the construction of high value commercial vessels. Almost all of Trinidad and Tobago’s needs in these sectors were catered for by foreign shipyards which amounted to TT$3,743 billion for the acquisition of some twenty-eight (28) vessels in the last three years. The loss of business to local industry is significant, and major opportunities to further develop and diversify the country’s industrial base are not being exploited. The ideal marine conditions in the Gulf of Paria make it virtually perfect for the maritime industry to operate a safe vessel anchorage and sheltered base for the establishment of a vibrant ship repair and shipbuilding industry. Trinidad and Tobago’s strategic location in relation to North America, Europe, Africa and the Panama Canal, provides a captive market for ship repairs. Trinidad is home to many world-scale industrial plants that export bulk commodities of various types using a wide range of shipping to transport these cargoes. Commodities include Trinidad Lake Asphalt (TLA), Ammonia, Urea, Methanol, Steel billets, Wire rods, as well as Liquefied Natural Gas (LNG) throughout the western hemisphere and Europe. North-South Trade along the West Atlantic shipping lanes also generates approximately 31,000 voyages per annum of vessels passing within 10 nautical miles of Trinidad & Tobago, or 30 nautical miles from Port-of-Spain. The type and deadweight size of vessels identified by the Trinidad and Tobago Shipbuilding and Repair Cluster, as the target market for ship repairs, includes Terminal Tugs, Ferries, Barges, Platform Supply Vessels (PSV’s) and Anchor Handler Tow Supply (AHTS) ships (i.e., less than 5,000 dwt) which also comprise the third largest number of vessels that make up the world merchant fleet. Figure 1 show a PSV undergoing scheduled zinc anode replacement. These vessels are also very prevalent in our territorial waters, as they play a significant role in the port, ship lightering, offshore oil and gas exploration, and inter-isle passenger transport. Existing ship repair facilities in Trinidad are fully booked with scheduled dry-docking of these vessels. Unsatisfactory waiting periods range from 3 to 6 months for an available shipyard slot.
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IEM-029: Development of the Shipbuilding and Ship Repair industry in Trinidad and Tobago
Figure 1. PSV Undergoing Scheduled Zinc Anode Replacement.
Source: Marine Preservation Limited (Trinidad Shipyard)
2. Diversification Trinidad and Tobago has become known for its well-established, energy based economy, and the country derives most of its revenue from this sector. However, the new Government has recognized that energy resources are finite and in order to achieve long-term, sustainable growth and development, the country must aggressively diversify its economy. The maritime industry has been identified as “one of the targeted sectors in the Government’s thrust to diversify the economy of Trinidad and Tobago” from the energy sector, much in the same way as other gas and petroleum exporting countries have already done, such as Brazil, Qatar, Oman and Norway.
2.1 Governments macro-economic objectives The Government of the Republic of Trinidad and Tobago proposes a development agenda to transform the country and to create new employment opportunities for nationals. The objective behind these developments is to bring prosperity and a higher quality of life to every individual family and community across the country.
2.2 Use of energy revenue surplus Diversification efforts are proposed to utilize the windfall energy revenues to create a more diversified structure of production with a view of reducing the dependency on the energy sector and developing a viable non-energy sector able to compete in the global marketplace. This development will take some time and efforts must be made to ensure the proper utilization of revenues from the energy sector.
2.3 Attracting Foreign Direct Investment Over the past five years Trinidad and Tobago’s Foreign Direct Investment (FDI) has averaged US$600 million (net) per annum. Foreign investment primarily fuels the energy and downstream manufacturing sectors in Trinidad and Tobago with large investors inclusive of Cantrex and Arcelor Mittal. A recent visit to Trinidad and Tobago by a delegation from International Enterprises (IE) Singapore, a lead agency under the Singapore Ministry of Trade and Industry which spearheads the development of Singapore's
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IEM-029: Development of the Shipbuilding and Ship Repair industry in Trinidad and Tobago
external economic wing, commented on the need to make Trinidad and Tobago more attractive to foreign investment.
2.4 Further educating the labour force The University of Trinidad and Tobago (UTT) Campus for Maritime Studies in Chaguaramas was officially inaugurated in September 2007. Maritime degree courses presently offered include BSc. Nautical Studies and MSc. Maritime Management. Ship Engineer and Deckhand courses are also available. Maritime courses are also being offered by North West Maritime Limited also located in Chaguaramas which was formed to provide world class, relevant training for the maritime sector. Partnering with Northeast Maritime Institute Inc. (USA) they are able to bring the Commonwealth of Dominica Maritime Administration approved and STCW compliant courses to those who previously were unable to afford the training. Additional government assistance programmes comprising the following are being offered to assist those in financial need, ensuring high quality maritime training is available to eligible students. These are 1) Government Assistance for Tuition Expense programmes (GATE), and 2) Higher Education Loan and Scholarship programmes.
3. International Maritime Developments 3.1 Increased Economic Growth impacting positively on shipping The world economy is projected to grow by 4.2% in 2010, against -0.6% in 2009. Commercial trade volumes have been increasing according to the International Monetary Fund (IMF). There is no doubt that the world economy is on the mend and the rapid growth of developing countries will continue to contribute to increased demand for marine transport and shipbuilding. According to Mr. Joep Gorgels, head of European Transportation at Fortis Bank Nederland, “We have to find €500 billion needed for ship financing between 2011 and 2012” Approximately 7,000 million tonnes of cargo, equal to approximately 80% of the world’s commodities, is transported by sea. Approximately, 90 % of the sea borne transport comprises agricultural products, raw material (i.e. steel) and energy products such as oil, oil products and coal. Without shipping the import and export of goods on the scale necessary for the modern world would not be possible. Seaborne trade continues to expand, bringing benefits for consumers across the world through competitive freight costs, in today’s world of high energy prices. Thanks to the growing efficiency of shipping as a mode of transport and increased economic liberalization, the prospects for the industry's further growth continue to be strong. At present, there are around 71,929 ships trading internationally, transporting every kind of cargo. The world fleet is registered in over 150 nations and manned by over a million seafarers of virtually every nationality.
3.2 Increases in Shipyard Orders Nearly 5,400 ships are on order worldwide, including tankers, container ships, bulk carriers and gas transporters. The hulls on order in the shipyards are equivalent to 28 per cent of the world's current merchant shipping fleet. As mentioned previously, this growth is being driven by a sharp upsurge in world trade, a result of globalization. The explosive increase in worldwide shipyard orders is also significant to several countries relatively new to large-scale shipbuilding namely the Philippines, Taiwan, Vietnam, India and Brazil.
3.3 Ship Owners facing dry-dock shortage Several large shipping corporations are joining forces with new and existing dry dock facilities to head off a potential dry-docking capacity crunch as owners take delivery of mega post-Panamax containerships and similar sized cruise ship vessels. Owners face future problems finding available facilities both large enough and in the right geographic location. Carnival Cruise Lines, CMA CGM, Holland America Line, A.P. Møller Maersk Line, Mediterranean Shipping Company (MSC) and Royal Caribbean International are some of the names behind orders for these mega ships.
4. Local Maritime Developments
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IEM-029: Development of the Shipbuilding and Ship Repair industry in Trinidad and Tobago
4.1 Increased vessel ownership by the Government This is concerned with the acquisition of twenty-eight (28) vessels less than 1,000 DWT at a shipyard price of TT$3,743 billion. Many vessels have already been delivered and/ordered ordered at foreign shipyards on behalf of the Government of Trinidad and Tobago (GORTT) within the last three (3) years (see Table 1). These vessels include: Table 1. Vessels delivered and/or ordered at foreign shipyards
Source: Based on De Gannes (2010)
4.2 Increased vessel ownership by local maritime companies. This is concerned with the acquisition of twelve (12) vessels less than 1,000 DWT at a shipyard price of TT$105 Million Vessels already delivered/ordered at foreign shipyards by companies registered in Trinidad and Tobago within the last two (2) years, include tugboats, offshore supply vessels and barges to be used primarily to support the offshore energy sector.
5. The Domestic Maritime Environment The Domestic Maritime Environment comprises vessels owned by locally registered companies, both private and government-owned involved in various commercial maritime related industries. Figure 4 below, indicates that vessels owned and registered in Trinidad and Tobago are primarily less than 5,000 DWT. These include Lift Barges, Water Carriers, Passenger Ferries, Terminal Tugs, Barges (Transport and Construction), Offshore Support Vessels and Fishing Vessels. This line-up falls within the target market for ship repairs and new shipbuilding, identified by industry stakeholders and consultants (De Gannes, 2009, p.4). Increasing the local shipyard capacity and capabilities to adequately service these vessels within the country will save the ship owners from having to go abroad for expensive repairs, thereby reducing turnaround time and saving valuable foreign exchange.
5.1 Key success factors for the development of ship repair and shipbuilding A number of key success factors contribute to the development of ship repair and shipbuilding. These are: 1) GORTT: goal to diversify the economy and expand the domestic maritime sector. 2) GORTT: goal to increase involvement in the local ship ownership sector. 3) Willingness of stakeholders/nationals of Trinidad and Tobago to be involved at all levels in the domestic ship repair and shipbuilding Industry, as seen by enormous interest in the Maritime Stakeholders Forum (March 2008), Annual Maritime Mentorship Youth Programme (2008-2009) and recent site visit organized by the Shipbuilding and Repair Development Company of Trinidad and Tobago Limited and the La Brea Concerned Citizens United to shipyards and related facilities in Northern Trinidad (September 2010). 4) Availability of locally produced, competitively priced ship repair and shipbuilding materials. 5) Availability of locally trained / certified maritime professionals: UTT Maritime Campus and Northwest
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IEM-029: Development of the Shipbuilding and Ship Repair industry in Trinidad and Tobago
Maritime Limited.
5.2 The fundamental advantages Several fundamental advantages include: 1) Existing ship repair business. 2) Existing links with relevant maritime authorities and regulatory bodies. 3) Below active hurricane belt. 4) Long history in weld fabrication, including offshore platform construction. 5) The Gulf of Paria being one of the world’s largest natural sheltered harbours.
5.3 Fundamentals for maintaining competitive advantage According to Avierinos (2007), this fundamental includes: 1) Use of standardized ship designs for the construction of new vessels. 2) Use of the latest technologies in ship repair and in the shipbuilding process. 3) On-going human resource training and development for all industry stakeholders. 4) Continuous marketing efforts.
6. Programme Expenditure The Proposed budget over the initial development period (FY2011-2012) is estimated to be TT$69,734,000. This funding is necessary to achieve organizational goals outlined over this period of development (De Gannes, 2009, p.25-27). Expenditure consists of the establishment of S&R Headquarters and Training Centre, Operating Expenditures, Public Relations and Educational activities (e.g., maritime tradeshows, seminars and publications), S&R Cluster Development (e.g., financial grants / non-financial incentives) to increase domestic shipyard capacity, including the development of an Advance Shipyard Park for the repair and construction of ships less than 5,000 DWT.
7. Conclusion and Recommendation The current situation with respect to further development of the Ship Repair and Shipbuilding industry is serious and deserves consideration by the government. First, the domestic Ship Repair industry contributes more than TT$100 million to our economy each year and generates more than 350 direct jobs and provides a “multiplier effect” for other local industries in the supply chain. Marine industries have an Economic Generation Factor of 5:1, fuelling local economies by the creation of expanded job opportunities and driving international trade meaning that, for every dollar spent, a further five dollars of economic benefits are created. Therefore a TT$5 billion project like the Trinidad Dry Dock project to be established in 2013 at Sea Lots would add a further TT$25 billion benefit to the Trinidad and Tobago economy. Second, maritime traffic in ports is presently predicted to grow by as much as 12-15% per year for the next decade. And third, local shipyards earn as much as 85% of their revenues in direct foreign exchange. Though it has fallen on some challenging times over the past 25 years, Trinidad and Tobago’s maritime industry must be considered a vital strategic asset. The industry with the establishment of new shipyards would employ more than 4,000 highly skilled workers and would create some of the highest paying jobs in the manufacturing industry. These facts are often overlooked because ship repair and shipbuilding activities must, by their very nature, occur in some of the rural communities (e.g., Chaguaramas, La Brea and Point Fortin, with Port of Spain the only notable exception). While their present contribution to the economy of Trinidad and Tobago is small – either directly or indirectly – shipyards are a major influence on the overall economic situation, domestically and globally. The situation now faced by the government should be looked upon as an opportunity – an opportunity “To develop a world-class shipbuilding and repair sector”, an opportunity to diversify the economy from the energy sector. The Shipbuilding and Repair Development Company of Trinidad and Tobago Limited strongly urges the government to consider all aspects of this important sector and trusts that it will adequately support and assist in the implementation of plans, as outlined.
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IEM-029: Development of the Shipbuilding and Ship Repair industry in Trinidad and Tobago
References: De Gannes, W. (2010), Strategic Plan for Trinidad and Tobago’s Ship repair and Shipbuilding industry for the period 2011-2012, Shipbuilding & Repair Development Company of Trinidad and Tobago Limited, June, Available at: http://issuu.com/shipbuildingandrepairdocuments De Gannes, W. (2008), T&T Shipbuilding and Repair Cluster ‘VISION’ booklet, Shipbuilding & Repair Development Company of Trinidad and Tobago Limited, April, Available at: http://issuu.com/shipbuildingandrepairdocuments Issuu (2010), ‘New La Brea Vision’, T&T Shipbuilding and Repair, July, Available at: http://issuu.com/newlabreavision Avierinos, F. (2007), “Consultancy services for the domestic maritime industry in the development of business plans for key maritime clusters”, Global Insight/MLTC, December, Available at: www.ihsglobalinsight.com/: http://www.mltc.fr
Authors’ Biographical Notes: Wilfred de Gannes is currently the Chairman and CEO of the Shipbuilding and Repair Company of Trinidad and Tobago Limited. He is a graduate of the University Primary School, Hillview College and has undertaken management studies at the University of the West Indies. He is an industrialist having established the first Precision Investment Casting (PIC) foundry in the region, together with his family (www.degannes.com). Wilfred has also undertaken non-ferrous foundry training in both the United States of America and the People’s Republic of China and is presently the Chairman and CEO of the Shipbuilding and Repair Development Company of Trinidad and Tobago Limited, an initiative of the Ministry of Trade and Industry, intended to diversify the economy from the energy sector. Andre Persad is presently a Director of the Shipbuilding and Repair Company of Trinidad and Tobago Limited. He has spent approximately 10 years in the maritime industry in technical, commercial, HSEQ and leadership roles. He was most recently employed as the Safety and Technical Manager for Svitzer Marine, a subsidiary of A.P. Moller (Maersk), a Tug owning entity primarily supporting Terminal Towage activity at Atlantic LNG. He was primarily responsible for the Safety Management System of the company and overall Technical Management of it fleet of Tugboats. He is an avid supporter of sustainability of local content in organisations and promotes efficiency, effectiveness and teamwork while building leadership in organizations. He holds a BSc in Mechanical Engineering and an MSc in Project Management both from the University of the West Indies.
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