The National Shipping Company of Saudi Arabia (NSCSA) has major growth plans. The five-year plan adopted by the board of directors in December aims to double the fleet. The current fleet consists of nine double-hull tankers, nine chemical tankers and four multi-purpose ro-ro vessels.
NSCSA’s five-year plan was approved by the board in December, focusing on growth and expansion in the VLCC and chemical-carrier sectors. “We are looking for double-hull newbuildings and pre-owned tonnage of not more than five years of age,” says Saleh M Al Shamekh, President of NSCSA Dubai, and NSCSA Corporate Vice President Oil & Gas.
“The oil majors are now indicating preference for double-hulled ships. We all have a responsibility to protect the environment by operating a high-standard modern fleet in cooperation with all the stakeholders. This includes the well-being of the seafarers,” says Saleh M Al Shamekh, who is also a director of Recso, the Regional Clean Sea Organisation, which was established by the oil majors.
Public company with ambitions
NSCSA is a public company registered in Saudi Arabia. The Saudi Arabian government owns 28 per cent of the company – while 72 per cent is owned by around 20,000 shareholders. “We’re a strong company in the stock market,” says Shamekh.
“Our shareholders and management are both proud and pleased that our 25th anniversary year of business, 2004, was our strongest performance and most profitable year since the company was established.”
NSCSA was established in 1979. The company started its diversification from solely operating in liner shipping business in 1985, initially into chemical-tanker operations which were further expanded in 1990 with the establishment of National Chemical Tankers (NCC) in a valued partnership with SABIC.
In 1993, the plan for further diversification to crude-oil tankers was finalised with the company’s first order for five VLCC tankers from Mitsubishi.
The commercial deployment for these five Mitsubishi VLCC tankers was arranged with a long-term time charter contract with Vela, the shipping subsidiary of Saudi Aramco. The chemical ships were employed with a combination of time charters with SABIC and through NCC as a pool member of Odfjell Tankers.
Own ship management – additional ships
An important strategic decision was made in 1996 to operate NSCSA’s own ship management with the establishment of Mideast Ship Management Ltd to provide the group companies with quality and cost-competitive ship management services. Dubai was chosen as the location for the operations company due to the benefits of its maritime services infrastructure and its convenient proximity for visiting the ships servicing the Arabian Gulf trade routes.
Additional ships were acquired by NCC in 1996, 2003 and 2004 and by the Crude Oil Tanker division in 2001 and 2004. The Liner Division divested several of its older ro-ro ships and container ships and is now a focused project-liner service.
The latest diversification into an LPG shipping company was completed in 2005 by the acquisition of a strategic 30.3 per cent share in Petredec, a company that owns and operates about 50 LPG ships varying in size from 5,000 to 80,000 cubic-metre capacity, in addition to its LPG cargo trading activities.
“NSCSA’s financial results in recent years are a direct result of our diverse shipping investments and of much hard work by my colleagues, management and board of directors together with the strong support of our shareholders and customers. The net income increased fivefold from 2002 to 2004,” says Saleh M Al Shamekh.
Increased commercial exposure
“Since 2002, we have increased our commercial exposure to customers and our expertise by trading a number of our VLCC fleet in the spot markets. As our fleet was expanded with an additional four VLCC tankers acquired in 2001, it was desirable to increase our customer base.
“At the year-end 2005, we had transported more than 100 cargoes or approximately 27 million tons or 200 million barrels of crude oil with our ships chartered on the spot market,” says Saleh M Al Shamekh.
The diversification of the customer base has been successful. More than 60 per cent of NSCSA’s spot voyages since 2002 have been performed for five oil company customers: Vela, Shell, BP, Chevron and Exxon. The long-term employment cover is still high at 67 per cent, with four ships in the VLCC fleet continuing to serve exports of Saudi crude under time charter agreements with Vela/Saudi Aramco.
Strengthening staff in Dubai
“As a result of our increased exposure to the day-to-day commercial activities, in August 2005 our board approved the reactivation of our NSCSA Dubai office from which to operate our oil and gas division and further develop experienced personnel to operate our commercial management operations, newbuilding construction and technical supervision,” says Saleh M Al Shamekh. “From this office, we liaise closely with our technical and operations manager Mideast and report financially and administratively to our Riyadh corporate headquarters. We intend to further strengthen our staff in Dubai with increased chartering and business analytical capabilities in 2006.
“In December 2005, our board approved our group Strategic Plan 2006– 2010, and this plan has incorporated the further expansion of our VLCC fleet.
“As previously mentioned, we will consider acquisitions of additional well-built modern double-hull VLCC tankers – both newbuildings and second-hand ships – and we further intend to review increased exposure of our fleet to spot market services, potentially reversing the current ratio to 60 per cent spot and 40 per cent long-term deployment as and when favourable market conditions should dictate.”
Many newbuildings
The company is expected to take delivery of eight new chemical carriers, each of 46,200 dwt, in 2006 and 2007.
In late 2004, NSCSA ordered two 318,000 dwt DNV-classed VLCCs from South Korea’s Hyundai Samho Heavy Industries. Both are scheduled to be delivered in 2007.
“There is a lot of growth in the crude transportation business as demand for oil has risen in China, India and the US,” concludes Saleh M Al Shamekh.