Keppel grows footprint in Azerbaijan with new shipyard

President of Azerbaijan, H.E. Ilham Aliyev, graces the official opening of new Baku Shipyard

A new shipbuilding yard that is jointly developed by Keppel Offshore & Marine Ltd (Keppel O&M), State Oil Company of Azerbaijan Republic (SOCAR) and Azerbaijan Investment Company (AIC) was officially opened this morning by President of Azerbaijan, H.E. Ilham Aliyev. Singapore's Senior Minister of State for Trade and Industry, Mr Lee Yi Shyan, also attended the inauguration ceremony of the new yard.

Named Baku Shipyard LLC (Baku Shipyard), the new 62-ha yard in Baku, Azerbaijan, is designed to undertake the construction of a wide range of specialised vessels and merchant ships including subsea vessels, anchor handling tug/supply vessels and multi-purpose offshore support vessels such as platform supply vessels, as well as tankers and cargo vessels. The yard also has ship repair and conversion capabilities.

Baku Shipyard adds to Keppel's existing footprint in Azerbaijan where it has been operating the Caspian Shipyard Company (CSC), also a joint venture between Keppel O&M and SOCAR, since 1997.

Keppel O&M currently has 10% share in the new yard, while SOCAR and AIC own the remaining 65% and 25% respectively. Keppel O&M will be responsible for the management and operation of the yard.

Phase 1 of the yard was built at an estimated cost of US$470 million. When operating at full capacity, it is able to undertake up to 100 repairs and conversions per annum and is estimated to achieve an average annual steel output of 25,000 tons. Plans for Phase 2 include the construction of a graving dock with added facilities for offshore projects.

The yard is already in discussions on several potential new projects ahead of its opening, and has received two contracts worth about US$50 million in total - to construct one unit of 50-tonne bollard pull azimuth stern drive tug and one set of pontoons for a semisubmersible in conjunction with CSC.

Mr Tong Chong Heong, CEO of Keppel O&M, said, "The inauguration of Baku Shipyard signals the opening of a new and additional chapter in the long-standing partnership between SOCAR and Keppel O&M. Our participation in the yard demonstrates our commitment to be a long-term solutions provider for Azerbaijan.

"From our years of cooperation with SOCAR in CSC, we have accumulated a rich reservoir of technical know-how as well as meaningful market insights and networks to operate a first-class shipyard. SOCAR and Keppel O&M will continue to leverage our collective strengths to achieve new successes through our partnership in the Baku Shipyard.

"In this regard, Baku Shipyard will also build upon CSC's experiences, and at the same time support CSC in its construction activities. The new yard reinforces Keppel O&M's Near Market, Near Customer strategy and enables us to unlock synergy in our Caspian operations. We are hence confident that our enhanced presence in Azerbaijan will place us in good position to capture more growth opportunities and contribute significantly to the region's energy sector."

Mr Rovnag Abdullayev, President of SOCAR, said, "We are very happy that our partnership with Keppel O&M has once again borne fruit with the successful opening of Baku Shipyard. With the strong growth potential in Azerbaijan's oil and gas sector, we believe that Baku Shipyard is well placed to support this growth and contribute to the country's economic development.

"As a leading global offshore and marine group, Keppel O&M will bring its invaluable experience to Baku Shipyard, and we are confident that our combined strength will propel the facility into an internationally recognised centre of excellence in shipbuilding, repair and conversion."

Following the inauguration of the Baku Shipyard, President of Azerbaijan, H.E. Ilham Aliyev named a new floating drydock at the yard. He also officiated at a strike steel ceremony for the semisubmersible drilling rig that is being built by CSC for a subsidiary of SOCAR, Caspian Drilling Company Ltd. Built to Keppel's proprietary design, DSS^TM38M, the rig is expected to be completed in 4Q 2016.

The above mentioned joint venture and contracts are not expected to have any material impact on the net tangible assets and earnings per share of Keppel Corporation Limited for the current financial year.