Focus: Inside Saudi Arabia’s IMI shipyard plans

A look at Saudi Arabia’s ambitious new shipyard plans, and why it matters in a region already beset with an overcapacity of maritime maintenance and repair facilities
Saudi arabia, IMI, Shipyard, Saudi aramco, Lamprell, Bahri

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Saudi Aramco and its partners Lamprell, the National Shipping Company of Saudi Arabia (Bahri) and Hyundai Heavy Industries have launched a shipyard focused on the offshore sector at Ras Al-Khair Industrial City in Saudi Arabia.

Partners in the joint venture are all leaders in their field: Saudi Aramco (51.1%) is the world’s largest energy company. Bahri, with 19.9% controls the largest VLCC fleet. Lamprell (20%) is the region’s leading rig builder and Hyundai Heavy Industries (10%) builds more ships than any other shipyard group. The newly established International Marine Industries (IMI) will operate the shipyard complex.

When fully operational in 2022, International Maritime Industries (IMI) will be one of the largest full-service maritime facilities in the region. Saudi Aramco sees the venture as localizing essential links for its supply chain related to offshore drilling and shipping activities.

The nearly 12 million square-meter facility will build offshore oil and gas rigs, offshore support vessels and commercial vessels, including Very Large Crude Carriers (VLCCs). The yard has an annual capacity to manufacture four offshore rigs, over 40 vessels including three VLCCs, and service over 260 maritime products.

According to Tony Wright, deputy chief financial officer, Lamprell, Saudi Aramco, with an order of more than 20 rigs, and Bahri, with an order of 52 ships over the next decade, will make up at least half of the shipyard’s planned capacity.

“This yard will be transformational because it will give us the ability to compete with other major shipyards in the region for rig build work,” he says. “Saudi Aramco and Bahri will be major clients of the shipyard, but IMI has been designed to be competitive on the world stage and so it will be taking global orders as well.”

Asked whether there was any risk of the new shipyard taking business away from Lamprell in the UAE, he said the risk was negligible. “The way we see is it that the amount of money that Saudi Aramco will spend on new rigs and refitting existing rigs will create huge demand. They’re saying they’re going to spend US $414-billion in the next ten years,” he says.

“This is a transformational project,” he adds. “Yes, it carries risk, as does any major investment, but the risk of not being involved far outweighs them.”

For Abdullah I. Al-Saadan, chairman of IMI’s board of managers and Saudi Aramco’s senior vice president of finance, strategy & development, the new shipyard is a key step in the oil company’s plans to better integrate its supply chain and operations.

“By meeting Saudi Aramco’s offshore production and transport needs, International Maritime Industries will serve our strategic intent to become the world’s foremost integrated energy and chemicals company,” he says.

“Its combination of technology, supply chain efficiencies and lifecycle partnership will create a world-class company that offers customers a keen competitive advantage,” Al-Saadan added.

Fathi K. Al-Saleem has been appointed CEO of IMI. Al-Saleem has more than 23 years’ experience at Saudi Aramco and led the feasibility and commercial development stages of IMI. According to Wright, the contracts for the initial offtake agreements were being drawn up at the time of writing.

“The business is fully registered and construction contracts will start to be awarded very soon. Dredging up in Ras Al-Khair is also underway,” he says.

“Building a new yard from scratch isn’t easy. It’s taken Lamrepll 40 years to get to where we are here in the UAE, but when you look at it and start to understand some of the subsidies involved, you see how the Saudi Arabian government is going to make this work,” he adds.

The overall cost of the yard is US 5.2-billion, US $3.5-billion is coming from Saudi Aramco and according to Wright, himself a member of IMI board, that will be much of the ‘house work’, the dredging, the building of quay walls, the development of dry docks.

“Saudi Aramco will recover that from IMI over the course of 100 years with an annualised lease payment of US $38.5-million. The remaining US $1.7-billion is what the IMI itself has to find, and of that US $700-million will come from the shareholders and the remaining US $1-billion will come through heavily discounted loans from the state,” he says.

Initial production and service operations are expected to commence in 2019, with the facility reaching its full operational capacity by 2022.

Tony Wright, deputy chief financial officer, Lamprell

At a second location nearby, Saudi Aramco will develop a casting and forging facility over an area of 300,000 square meters. The new facility will serve the maritime industry and the manufacturing of equipment related to the oil and gas supply chain.

Automation and digitalisation are a key focus and since there is currently no steel building facility in Saudi Arabia, a new mill is to be built adjacent to the complex.

The shipyard facility will create a total of 80,000 jobs directly and indirectly by 2030 and is likely to make a $17bn impact on the economy.

A major recruitment drive is underway in which young Saudis – men and women – are high priorities. This reflects a major societal shift which lies at the heart of Crown Prince Mohammed bin Salman’s plans for the country as set out in his Vision 2030 programme.

The developments are part of Saudi Aramco's ongoing commitment to establishing a world-class supply chain and services ecosystem in Saudi Arabia. The strategy is part of the In-Kingdom Total Value Add (IKTVA) Program, launched by Saudi Aramco two years ago to double local content by 2021.

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