What $600-million capital investment pays for itself in less than five years?
Answer: an offshore drill rig earning between $350,000 and $600,000 a day. Such math is enticing for banks and export development agencies in Asia, Canada, Germany and Norway offering loans, grants, export credits and billions in bond arrangements for owners of rigs and ships.
The credit storm that blew through global industries in the past two years has all but faded into the horizon of the world’s shipping behemoths, many of which have collateral dating back 200 years: a history of making fortunes during global downturns. In shipping, pedigree means opportunity.
World No. 1 crude oil transporter Teekay of Vancouver is named for the initials of its Danish founder, Jens Torben Karlshoej. After the Suez Crisis oil market collapse of the early 1970’s, he moved his ship-operating business from the oil trading capital New York to California before settling on Vancouver in 1991 to take advantage of B.C.’s favourable tax laws. He ran up enormous debt -- $900-million 1990’s U.S. dollars -- before dying of a heart attack and passing the company into the care of seasoned seafarer Jim Hood. Today, Teekay is run by Danish-rooted Bjorn Moller, a veteran of Far Eastern shipping with family links to the business. Teekay is on course to be debtless this year after growing tenfold under Mr. Moller’s 25 years of tutelage.
The Moller name may sound familiar: A.P. Moller Maersk, Denmark’s largest corporate earner and conglomerate with more than 1,000 companies and 300 vessels, including drill-rigs. Peter Maersk Moller founded the company in the mid-19th century and his descendants overcame a ruinous glut of shipping by allying with his own neutral government in the First World War and then meeting enormous demand for shipping in the Second World War. They also shipped U.S. forces during the first U.S.-led Gulf War.
Similarly, Leif Hoegh, the Norwegian founder of a modern liquefied natural gas carrier used the depression of the 1930’s to greatly expand his fleet. Certain coastal communities of tight-knit Norwegian families — which today share risk to finance new designs — have give us the shipping names Ulstein, Ugland and Bergesen.
John Fredriksen, the Norwegian shipping magnate turned rig magnate, is a recent example of the tough seafarer shipping banks love. A former welder, the majority owner of offshore drilling contractor Seadrill has grown his company exponentially by acquisition and bank finance.
In early 2009, as lending evaporated and worldwide vessel-building cancellations reached about 30 per cent, Seadrill and its banks guaranteed the rig-building project of fellow driller Scorpion Offshore at Singapore shipyard Keppel FELS.
After the credit-crunch lull, ship and rig operators are back at it, buying the assets of rivals, ordering new units and consolidating. The final week of 2010 saw no fewer than 18 large new ship orders for China; a billion-dollar Indian drilling order and $2 billion in Russian port readiness. So far in 2011, a new No. 2 offshore drilling contractor has been created: U.K.-based Ensco plc bought U.S. outfit Pride International to form a $16-billion company with $10-billion in deepwater drilling backlog on the books. The owners of these fleets — rigs, tankers, floating production vessels and offshore service ships — are gearing up to serve surging economies in Brazil, China, India and Russia.
At his cigar-rich Christmas party at year-end, Mr. Fredriksen declared that he would move half his fortune -- some $5-billion -- back into shipping, his first love, from (presumably) rigs and the Canadian fish farms he dominates.
Europe’s debt doldrums don’t scare these seafarers.
