with Finn Wollesen Petersen , Managing Director, Knud E. Hansen
While the shipping industry is going through rough times, the offshore market is growing quickly: according to a late 2010 study by Germanischer Lloyd, the number of OSVs worldwide is projected to increase beyond 2,500 through 2020 with demand not only in the oil and gas markets but the offshore wind industry as well. How do these developments reflect on Knud E. Hansen?
Our history is strongly connected to passenger ships. Although we are very proud of our history, it creates a challenge today because possible clients think that our expertise and interest solely is in cruise ships and ferries.
Today, about 30 percent of our turnover comes from offshore, with a main focus on offshore wind. Our track record starts with the design of the first dedicated installation vessel for offshore wind turbines delivered in 2003.
From there we moved more and more into operation support, and today we work closely with installation companies from small and mid-size to the biggest players like Dong Energy
Recently we reached another milestone in the development of our offshore capabilities, when we signed a contract with Swire Blue Ocean for the design of two new vessels, the Pacific Orca and Pacific Osprey. These are today the largest dedicated windmill installation vessels in the world.
We have also done a number of full project support jobs. That involves the project planning of the operations of the entire project from lifting to full project documentation and complete information spreads including all the engineering calculations behind those. We did this recently on the Anholt offshore wind farm for instance. We managed the entire marine transport scope and offshore drilling for that project.
How challenging has it been to establish Knud E. Hansen within this segment and take on established competitors?
Our engineers are used to design to marine codes but can easily design to an offshore code as well, so the transfer has been relatively easy. Furthermore, a lot of the key developments in offshore today are ship-related and there are many cross-over projects.
For instance, back in 2006 we designed a drilling vessel for an American client, Frontier Drilling for usage in Sakhalin, Russia. It was a ship but at the same time had drilling equipment for Arctic deployment.
Today we are designing vessels that are going into Antarctica. Ice is not something unknown to us as a Danish company. From a ship design point of view, the difference between designing a ship that has to sail in Antarctica or Greenland or a drill rig is not very large.
Marine and offshore are like twin sisters. Drilling equipment is like a black box to us. We have to put it on the ship and the rest is to an offshore code, but it is still a ship. Jack-ups are of course somehow related to offshore as well; it is still a mobile offshore structure. We use the same engineers, the same disciplines.
One key difference is that historically there has been more money in offshore. It is not as competitive as marine. You put more money into your equipment, more money into processes; there are consultancies checking the consultancy. If you do not know how to price that, you might face an unpleasant surprise. In that regard offshore wind is a step in between offshore oil & gas and shipping.
Is it fair to say that wind farm operators need compact but versatile vessels, and the offshore sector needs vessels that are less expensive to operate but equally capable?
Yes it is. In offshore wind we have to improve the business. Simply copying oil & gas practices would be reliable but it would also make the Kilowatt coming out of the wind turbine far too expensive.
A smart design has to be worked out to solve the puzzle not just of installation but also of maintenance in the long run. That design has to focus on improving processes.
In a lot of ways offshore wind and offshore oil & gas show similarities, but there are also major differences. The water depths that we are working in for offshore wind are like the early days for oil & gas. Another, and more crucial, difference, and one that most clients do not realize until we get deeper into the project, is that in offshore oil & gas we do far fewer operations with much higher value assets. In offshore wind you will pick up a lot of extremely heavy things many times.
Installing one offshore wind turbine means the vessel picks up six or seven pieces that all weigh in excess of 400 tons. In offshore oil & gas a vessel on the other hand, a vessel might pick up one or two things that weigh a few hundred tons, maybe a thousand.
In wind things need to be designed extremely efficiently and extremely safely. In wind you are not worried about things exploding; you are worried about people standing in the wrong place, about procedures that have not been designed correctly and the vessel not doing the procedure correctly.
The jacking system on a drilling platform is maybe jacked up ten times in its lifetime, whereas the ship we designed for Swire jacks up two or three times per day, 300 days per year. This means that the jacking system has to be much more optimized.
What is the image that you want the industry to have of the company?
We have proven experience: we are the oldest independent naval architect in the world. Also, we are very project oriented through an architecture company approach that we like to call innovative customized design.
When a client comes to us with an idea, we have guys who can take this to the next stage. But sometimes, a company like ours should tell a client that his idea is not feasible and he should not waste his money on it.
Although Knud E. Hansen is relatively small on an international scale, I run a very international company. Not only do we have offices in a range of locations abroad: London, Athens, Fort Lauderdale, Australia, the Faroe Islands; we furthermore have a highly international staff. Among our 65 employees are 16 different nationalities – Italians, Spaniards, Greeks, Brits, Australians, you name it!
Why does Knud E. Hansen not yet have offices in offshore hotspots such as Brazil and the African West Coast?
You will see that one day. The reason we are not in Brazil yet is that the country is very protectionist. For us it would only be possible to enter as a sub supplier to a larger company like Maersk, Semco Maritime or Total. If we would go in on our own it would take too much of our resources.
In Latin America, Columbia is a more interesting market to us as it is not nearly that protectionist. Furthermore Mexico is a viable option.
You do not see us in Russia for reasons similar to the ones I gave for Brazil. On top of that Russia of course provides the challenge of dealing with rampant corruption.
In the biggest of the BRICS countries, China, we are successful though. We have had two large contracts there: one with a shipyard called Hudong for the world’s largest con-ro vessel, and one cruise ferry that we design for the Chinese government.
Speaking to our overall internationalization strategy, we have done things slightly different from the competition. Many of our main competitors moved their offices to low-cost countries where they could hire low-cost engineers. We moved to where our clients are located, and that is still overwhelmingly in high-cost countries. We do not want to open an office in China with 200 cheap engineers; we want to do the opposite and ensure that we ensure our company culture and continue to work in the way we have done since our foundation.
How come you dared entering the Chinese market but are hesitating to enter Brazil?
Once you have the relation things can flow quite easily in China. It takes time to learn how to operate together, but they are actually nice to work with. We do not see any corruption either.
The opportunity for us to successfully establish ourselves in China was created by European ship owners. They basically told Houdong Shipyard that they would like to build their shipyard, but would like to secure that the design is done by a western European company up to class approval drawings.
The shipyard then received a quotation from us and accepted. For Chinese shipyards that want to move into more complicated vessels it is also an insurance: a company like ours does the high-level engineering, and then they take over.
We delivered the design in good cooperation and to the satisfaction of all parties involved, and we already have the second assignment.
Where would you like to the company to be five years from now?
While we are working hard to keep our offshore business growing, we do not necessarily need it to grow beyond 30 percent. The company should grow from its current 65 employees to 75+ employees organically in the coming two years. In five years we aim to employ over 100 people, and this will happen organically like it has in the past ten years.
In offshore wind we already are considered among the top companies in the world. In this segment one of our key focus areas is to expand further into full installation projects, management engineering and documentation.
One of the key challenges that offshore oil & gas and shipping face today is developing the footprint in Arctic areas. This is where Knud E. Hansen will move. Offshore support vessels are nice, but there are very strong Norwegian competitors in that area.
If we want to be number one, we have to look further ahead than our competitors and early on play into the next development. Drilling in the Arctic is slowly taking off and we shall further develop our business in this direction.