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Andrew Coccoli, General Manager, Farstad Shipping, Singapore

22.07.2014 / Energyboardroom

“Farstad Shipping has always hedged the risk of greater competition by continually moving up the value chain, where the technical capability of our vessels offers some protection from the wider market. Our vessels are better suited to more complex and difficult arenas characterized by deepwater exploration. This is a specialized market where the barriers to entry are high and where we are well positioned to play a leading role.”


In 2005, you moved to Singapore to help establish an office in Singapore for Farstad Shipping.  Today Farstad Shipping has built a significant presence in the Indian Ocean and the Pacific. From the launchpad of Singapore, how has your footprint evolved in the region?

In Singapore, we started off with a marketing manager, who effectively acted as a one-man band. A couple of years later, I came to Singapore to help build and augment the business. Farstad’s strategy was to transfer ownership of some of its assets out of Norway to the newly established business in Singapore and leverage against the Approved International Shipping Enterprise (AIS) tax scheme, and through the city-state, the company sought to penetrate Asia’s vast offshore market.

Incrementally, we have expanded our internal infrastructure and built up our capabilities. We initially started off with four ships in ownership, and we now have eight. Moreover, we started to do a number of administrative functions for our Aberdeen office and additionally catalyzed our ship-repair and maintenance service arm.

We are still trying to penetrate further into the regional markets. It comes down to what we do best and that is large, high horse power vessels. After Maersk, we are the second biggest owner of high horse power, anchor handlers rated above 12,000bhp in the industry. Asia’s offshore market remains predominately shallow water driven; but as the market inevitably evolves to the deepwater arena, we will be well positioned to service and support this transition and sector.

One of Farstad’s competitive advantages is the sophisticated tonnage. We pride ourselves on being highly innovative. Driven by our Norwegian center of excellence, we plan to bring world class and cutting edge offshore technology to Asia.

How do you enter and build enduring partnerships in a region as large and diverse as Southeast Asia?

Southeast Asia is a complex market. Indonesia and Malaysia have implemented a cabotage regime and there are risks to foreign owners associated with such policy that have to be managed. To mitigate the risk factors, it is crucial to find trustworthy partners and build enduring relationships to establish local representation and a solid management structure. Through this, one should have the confidence to transfer ownership of ones assets to the bespoke country and once that is achieved, you can sail under the local flag and compete on a more level playing field. If you are operating as a foreign ship owner under a foreign flag, you face a myriad of uphill battles, namely not being able to qualify or participate in a lot of activity.

Ultimately, we are positive because as the market shifts to deepwater – which is a far more technical environment – international expertise will be required and consequently we expect these markets will have to be more open when considering foreign flags. Naturally, we pursue opportunities that have minimal risk exposure but to be part of the game in South East Asia you must accept some minimum level of local content. It is only fair and entirely reasonable when working in another’s backyard. To work in Australia there are no requirements for reflagging making it an attractive destination for our tonnage and a reason why we are working with a number of projects based there. Nonetheless, there are some massive projects occurring in Indonesia and Malaysia and to execute these projects the oil companies will need the right kind of vessels & rigs. I see international operators struggling to comply with the local cabotage regime and being unwilling to reflag their very expensive assets to meet local needs and demands. These countries are desperate for energy sources and a business friendly offshore ecosystem is paramount. To maximize the full potential of these vast offshore markets, the governments of the oil provinces based in Southeast Asia need to attract foreign capital.

Of course international companies have to contribute and strive to adapt to local customs and requirements. For example, we are very well equipped to provide local manning on all our vessels and have a strong pool of local market seafarers that we can tap into. Aligned with the company’s values, we do not use manning agencies; rather we employ our own sea staff directly and nurture their development. The high standard of training we provide and levels of competency our employees achieve is a core value that underpins our business.

Arguably the offshore supply industry is vulnerable to oversupply, with so many conventional shipping companies from emerging market pivoting towards offshore supply industry. How do you assess the competition & state of the offshore supply vessel market in Southeast Asia?

There are desperate ship-owners and shipbuilders who cannot find healthy returns in conventional shipping and are looking to enter more lucrative sectors, and the offshore market is one of those. Currently there is a stream of companies entering the offshore market into sub segments where the barriers to entry are lower such as the standard PSV. This market segment is sensitive to oversupply and becoming more commoditized which puts rates under pressure. Given such conditions, Farstad is actively assessing the best and most appropriate strategy for the future of our PSV assets.

Farstad Shipping has always hedged the risk of greater competition by continually moving up the value chain, where the technical capability of our vessels offers some protection from the wider market. Our vessels are better suited to more complex and difficult arenas characterized by deepwater exploration. This is a specialized market where the barriers to entry are high and where we are well positioned to play a leading role.

Having received a breadth of first-hand experience in Southeast Asia’s offshore markets, how has the industry’s attitude to health and safety improved?

As the industry has matured, attitudes are improving and that naturally has raised the regional health and safety standard. Furthermore, as international companies have pivoted towards Asia, the region has been exposed to a trickle-down effect which has been very positive. Today, the regional industry actively seeks to emulate the health and safety standards of the North Sea which is the benchmark. Effectively the standard has been set and if players in the upstream environment do not meet the required level, they can be disqualified from the tendering process. In the early days health and safety compliance was partly lip service and window dressing but now measures have been widely adopted by Asian operators and ship-owners. It is now taken deadly seriously and the long term opportunities for your business to grow and be profitable in Asia are severely limited without adopting a strong Safety focus.

Farstad Shipping’s above average attitudes and standards towards health and safety have engendered a true, durable competitive advantage – particularly in a maturing and safety conscious industry. Raising the industry bar has been woven into the very fabric and foundation of the company. A company can either observe safety, participate in it or lead it and we at Farstad Shipping certainly spearhead the latter. A good example of this is our US$15 million, state of the art simulation center in Perth.  All our Asian crew and many external offshore workers are sent there for training so that our own employees and industry participants can enhance their safety prowess. Ultimately, our approach to health and safety is one of the cornerstones behind our success.

With no oil and gas reserves, rising overheads and the emergence of Malaysia as a strong offshore hub, do you feel Singapore is the right location to capitalize on forecasted regional growth?

Currently Farstad utilizes Singapore as a ship repair hub with the majority of our drydocks and upgrade projects taking place here. We have considered Batam and elsewhere however we are more comfortable with the extensive engineering support and reliability of the shipyards in Singapore.

One of the most important cost variables for a ship owner is utilization. This is severely impacted by time spent in dock as you are offhire and without income. Although slightly more expensive than its neighbours, the superior planning and efficiency of the Singapore based shipyards gives the owner more certainty as to when you can redeploy your vessel back in the field and on hire. Supplementing this is an array of incentives offered by the government and its regulators to set up shop and stay in the country. The extra incentives – whether in technology, R&D, or fiscally, go a step further than the neighboring states. It is amazing how supportive agencies such as the Maritime Port Authority are to ship-owners and the marine community generally.

How important is Southeast Asia to facilitating the Farstad’s next phase of long-term growth?

It is hugely important and we just have to be patient to capitalize of the region’s nascent upstream potential. Other upstream markets in Brazil and Australia are facing profound challenges, in particular the increasing cost of labour, whereas Asia is on the cusp of substantial growth. The question is whether the Asian states can support their local shipping companies, without blocking out foreign expertise and investment. It is a delicate but critical balance. If orchestrated in the right manner, the results will be unanimously positive.

What are your ambitions for the company over the next three years?

I would like us to have a greater presence and footprint in the region’s growing subsea market. As we are seriously scaling up, we have to be careful as to how we transition into this segment. Asia Pacific is a good region for the company to deploy its future subsea assets, indeed it would be a pertinent place to deliver our two big, cutting-edge vessels that will come online next year. We have bold ambitions in this part of the world and we are poised to fulfill them.

To read more articles and interviews from Singapore, and to download EnergyBoardroom’s latest free report on the country, click here.



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