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Ministry of Land, Infrastructure, Transport and Tourism
Cooperation between Brazil
and Japan in Offshore and
Shipbuilding business
Shinichiro Otsubo, Ph.D. Director of Shipbuilding and Ship Machinery Division
Maritime Bureau
Ministry of Land, Infrastructure, Transport and Tourism
(MLIT)
August 13, 2014
Historical Review of shipbuilding industry
1
0
1.000
2.000
3.000
4.000
5.000
6.000
7.000
8.000
9.000
10.000
11.000
1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010
'0000GT (Completion, Dismantling), 'million GT (World Seaborne Trade)
A Calendar Year
World Seaborne Trade Completion (Japan) Completion (Korea) Completion (China) Completion (Europe) Completion (Others)
（note）1. Data Source : Lloyd's Resister, United Nations, The Japanese Shipowners' Association
2. Ship Size Coverage : 100 Gross Tonnage and over.
1940s
The WWII
>Mass production
of standardized
vessels
1960s- 1970s
Increase of
seaborne trade
> Enlargement of
vessels
1980s
Oil crisis
>Energy efficient
vessels
1990s
MARPOL Double
hull tanker, and
specialized
vessels, such as
container vessels,
PCC, RORO, Ore
bulk carrier
1969年 OECD輸出信用船舶セクター了解
1972年 造船行の正常な競争条件の～一般取極
1976年 造船政策に関する一般指導原則
1982年 一般取極、一般指導原則の改訂
1994年 OECD造船協定採択
1995年、EC、諾、韓が批准
1996年、日本が批准
米国が批准を断念し、未発行
2003-2005年、新造船協定交渉の再開
2010-2011年、新造船協定交渉の再開
1950s
Increase of oil
transport, and the
1956 Suez crisis
> Enlargement of
vessels
2000s
LNG, eco-friendly
vessels
Neworders by builder country
2
0
2.000
4.000
6.000
8.000
10.000
12.000
14.000
16.000
18.000
1970 1975 1980 1985 1990 1995 2000 2005 2010
Japan Korea China
Europe Others
'0000GT (Order) 受注量推移
（note）1. Data Source : Lloyd's Resister, United Nations, The Japanese Shipowners' Association
2. Ship Size Coverage : 100 Gross Tonnage and over.
A calendar year
energy-saving ships
Container Ship Oil Tanker
Bulk Carrier
Any types
of ships
Competitive
advantage in
a wide range
of products
Pure Car Carrier
Traditional Line-up
ＬＮＧ carrier
ＦLNG
LNG
Shuttle tanker
Japanese Shipbuilding
3
Offshore
segments
Wind turbines
Towards
new and
growing
markets
Offshore wind energy Installation and maintenance
Logistics hub
Present and future situation of Japanese shipbuilding
4
FPSO, Offshore support vessel, LNG Tank Marine research vessels and AUVs
Large Floating Offshore Structure
(Mega Float)
Green ship (energy saving
technologies) Marine equipment
High Speed Vessel
Japan’s maritime technologies cover wide areas, however…
Challenges – 1: Stagnating ship prices
5
0
20
40
60
80
100
120
140
160
180
($ M
M)
タンカー ＶＬＣＣ
タンカー スエズマックス
タンカー アフラマックス
タンカー ハンディ
バルクキャリア ケープサイズ
バルクキャリア パナマックス
ハンディマックス
ハンディサイズ
Clarkson Research Studies
"Shipping Intelligence Weekly"
Tankers – VLCC
Tankers – Suezmax
Tankers – Aframax
Tankers – Handysize
Bulk carriers – Capesize
Bulk carriers – Panamax
Bulk carriers – Handymax
Bulk carriers – Handysize
6
800
900
1.000
1.100
1.200
1.300
1.400
1.500
1.600
70
80
90
100
110
120
130
140
150
00 01 02 03 04 05 06 07 08 09 10 11 12 13 14
Yen/Dollar Won/Dollar
Calendar year
Yen / Dollar
Won / Dollar
101 Yen/Dollar
(2014.5)
1,027 Won/Dollar
(2014.5)
Japanese yen has been weakening against US dollar since the end of 2013.
Now is a good opportunity to buy Japanese high-quality eco-ships and
energy-saving products!
Challenges – 2: Exchange rate
7
Strategies – 1:
Eco-ships for all range of products
Environment surrounding Eco ships and Energy saving products
Tightening of regulations on
CO2 emission from ships Rising fuel price
0
20
40
60
80
100
120
1990 1995 2000 2005 2010
Crude Oil Prices
Crude oil prices will rise due to increasing
demand in developing countries and other
reasons.
EE
DI (g
-CO
2/t
on
ne
-mile
)
Phase 0 2013～14
Phase 1 2015～19
Phase 2 2020～24
Phase 3 2025～
10 %
20 % 30 %
DWT
Baseline
New ships shall meet the EEDI* requirement
which will become stringent in phases until
2025. (*) Energy Efficiency Design Index
New IMO regulations adopted in 2011
Growing demand for eco-ships and energy-saving products:
NOTE: Eco means both ecological and economical.
US dollar / barrel
Calendar year
Source : BP, Statistical Review of World Energy 2013
8
Japan’s Business and Government Initiative
To meet the EEDI requirements in advance, Japanese industries
have endeavored and been successful to develop new energy-saving
technologies.
Such technologies cover a variety of factors to generate considerable
effects collectively.
Reduction of Friction
Resistance
New Type Propulsion
New Conventional
type Air bubbles along hull High efficiency propeller
Next-generation Operational System Waste Heat Recovery System
Waste heat recovery system Weather routing system
Engine Operation
Hull Propulsion
Examples of Japanese industries’ research and development
9
Japanese Advanced Eco-Ships IBIS WIND
(Sanoyas Holdings Corporation)
Clipper Excalibur (Mitsui Engineering & Shipbuilding Co., Ltd.)
- The vessel has improved fuel consumption by 10%
compared to the existing SANOYAS PANAMAX bulk
carrier, keeping a loading capacity of 83,000mt which is
the biggest in this category.
- This vessel’s fuel oil consumption is less than that of a
conventional Supramax bulk carrier despite its
enlargement.
- This unprecedented “wide beam shallow draft vessel”
called “neo 66BC” was delivered in November 2013 for
the first time.
“SAYAENDO”
a series of new type LNG vessels (Mitsubishi Heavy Industries CO., LTD.)
10
Japanese energy-saving products
Engine
UEC Eco-Engine (Mitsubishi Heavy Industries marine machinery & engine CO., LTD.)
Dual fuel engine DE28DF / MD36DF (DAIHATSU DIESEL MFG.CO., LTD.)
Dual fuel engine 6EY26DF (YANMAR CO., LTD.)
Paints
SEAFLO NEO SLZ (CHUGOKU MAEINE PAINRS, LTD)
A-LF-Sea -Ultra low Friction Underwater Coating System-
(NIPPON PAINT MARINE COATINGS., LTD.)
Realization of ultra low friction.
Others
GPX PROPELLER (NAKASHIMA PROPELLER CO., LTD.)
VTI Turbochargers (Mitsubishi Heavy Industries
Marine machinery & engine CO., LTD.)
Realization of
energy saving
11
Japan is back: Recovery in Japanese shipbuilding
12
40
50
60
70
80
90
100
110
0
100
200
300
400
500
600
700
800
1-3
7-9
1-3
7-9
1-3
7-9
1-3
7-9
1-3
7-9
1-3
7-9
1-3
2008 2009 2010 2011 2012 2013 2014
10,000GT yen/dollar
“Lehman Shock” effect
Yen depreciation
Yen appreciation
Recovery
JPY/USD exchange rate and
export contracts received by Japanese shipyards
“Abenomics” effect
1.000
1.500
2.000
2.500
3.000
3.500
4.000
2011 2012 2013 2014
World shipbuilding completions
CHINA
KOREA
JAPAN
10,000GT
Source：Clarkson Research Service
Decreasing production
Increasing
37%
36%
33% 36%
23% 21%
Source：Japan Ship Exporters’ Association, “Statistics for New Export Ship Orders”
13
Strategies 2: Re-entry into
offshore segments
Being aware that we are behind,
what to do?
Era of a
booming ocean
development
Dominated by
Korea, China and
Singapore
14
2003 Iraqi war Oil crisis
Oil prices: statistical review of world energy 2013 workbook
Trend of offshore drilling structures and oil prices
0
20
40
60
80
100
120
0
20
40
60
80
100
120
195
0
195
5
196
0
196
5
197
0
197
5
198
0
198
5
199
0
199
5
200
0
200
5
201
0
Crude oil prices
（US$／barrel）
No.
Number of offshore drilling structures completed and oil prices
（Total of drill ship, semi-submersible, jack-up rig)
USA
Japan
South Korea
Singapore
China
Brazil
その他
Crude oil prices（US$／バレル） Barrel
SWOT analysis for Japan’s shipbuilding industry
15
Internal
factors Strength
- Trustworthy quality and
performance, accumulated
know-how
- Superior production
management
- Strong maritime clusters: all of
shipping, shipbuilding and ship
machinery industries are
prominent players
Weakness - Insufficient number of
engineers
- Decentralized production
facilities with limited economy
of scale
- Late behind in cross-border
company alliance
- Wariness for risk-taking
business decisions
External
factors Opportunity - Market expansion of offshore oil
and gas exploitation and
production
- Strong financial institutions
seeking new investment targets
- More emphasis on HSE (health,
safety and environment)
Threat - Non-existence of oil and gas
fields nearby: no training and
trial opportunities
- Emerging resource
protectionism
- Weakening economic power
of Japan in relative term
SWOT analysis for Japan’s shipbuilding industry
16
Internal
factors Strength
- Trustworthy quality and
performance, accumulated
know-how
- Superior production
management
- Strong maritime clusters: all of
shipping, shipbuilding and ship
machinery industries are
prominent players
Weakness - Insufficient number of
engineers
- Decentralized production
facilities with limited economy
of scale
- Late behind in cross-border
company alliance
- Wariness for risk-taking
business decisions
External
factors Opportunity - Market expansion of offshore oil
and gas exploitation and
production
- Strong financial institutions
seeking new investment targets
- More emphasis on HSE (health,
safety and environment)
Threat - Non-existence of oil and gas
fields nearby: no training and
trial opportunities
- Emerging resource
protectionism
- Weakening economic power
of Japan in relative term
SWOT analysis for Japan’s shipbuilding industry
17
Internal
factors Strength
- Trustworthy quality and
performance, accumulated
know-how
- Superior production
management
- Strong maritime clusters: all of
shipping, shipbuilding and ship
machinery industries are
prominent players
Weakness - Insufficient number of
engineers
- Decentralized production
facilities with limited economy
of scale
- Late behind in cross-border
company alliance
- Wariness for risk-taking
business decisions
External
factors Opportunity - Market expansion of offshore oil
and gas exploitation and
production
- Strong financial institutions
seeking new investment targets
- More emphasis on HSE (health,
safety and environment)
Threat - Non-existence of oil and gas
fields nearby: no training and
trial opportunities
- Emerging resource
protectionism
- Weakening economic power
of Japan in relative term
18
Why Brazil?
Maybe the only gateway to
offshore market for Japan
Matching between Brazil and Japan
Rich human & natural
resources
State-of-the-art technology
in the offshore sector, in
particular, sub-sea
Establishment and
promotion of domestic
maritime industries
Coping with strong and
growing demand for the
exploitation of offshore oil &
gas fields
NEEDS
STRENGTH
Catching up from “blank”
period of Japanese industry
in the offshore market
NEEDS
A variety of leading
companies that can offer
“total solution” including the
logistics
Long-time experiences in
overseas investment and
cooperation, including the
enhancement of local
employment
Reliable and energy-efficient
maritime technologies
Competitive financial options
STRENGTH
Brazil Japan
WIN-
WIN
19
Actions in Government level
Aug. 2011 The 1st Technical Roundtable Meeting between Brazil and Japan
MOU was signed between SINAVAL and Japan Maritime Equipment
Association (JSMEA)
Feb. 2012 Dispatch of an MLIT official to Japanese Consulate in Rio de Janeiro
Mar. 2012 Seminar on Brazil Offshore Oil and Gas Exploitation in Japan
May 2012 Signing of Memorandum on Cooperation on Maritime
Technology and Industry between MDIC and MLIT
July 2012 The 2nd Roundtable
Nov. 2012 Dispatch of an MLIT official to JETRO in São Paulo
Feb. 2013 Approval for establishment of J-DeEP
May. 2013 Meeting of Ministers (MDIC and MME with METI, Japan)
Aug. 2013 The 3rd Roundtable
Aug. 2014 Release of top-level Joint Statement on
Cooperation in Shipbuilding for Facilitating
Offshore Resource Development
Aug. 2014 The 4th Roundtable 20
Japan’s business and government initiatives
Direct investment in the
shipyards in Brazil
Development of human resources in
shipbuilding sector
In June 2013, JICA project on technical
cooperation in the shipbuilding human
resource development was adopted.
JICA：Japan International Cooperation Agency
Promotion of marine
machinery and equipment
industry
Government support to the Japan’s
machinery and equipment industry to
overcome their technological challenge
in the offshore market.
Specific projects in
Brazil’s offshore development
Japanese maritime industries may contribute
to the offshore development in Brazil through
technology-based projects such as Logistics
Hub.
Coping with the local
content issues
In December 2012, Nippon Kaiji
Kyokai do Brasil LTDA (ClassNK in
Brazil) was authorized by ANP as
a certifying organization of the
local content.
Continuous private-public discussions
between Brazil and Japan
Facilitate the Japanese machinery and
equipment industry to be active in
Brazilian market.
Offshore
development
in Brazil
Public and private sectors work together to facilitate Brazilian offshore development.
The project will start within 2014.
Roundtable meetings
Japanese shipbuilders have recently
invested in Brazilian shipyards and are
working on ship building in Brazil.
21
Enseada Indústria Naval (Bahia)
May 2012: KHI (Kawasaki Heavy Industries)
invested in Enseada Indústria Naval
Estaleiro Atlantico Sul (EAS) (Pernambuco)
June 2012: JMU (Japan Marine United) started
technical cooperation with EAS
June 2013: IHI, JMU and JGC invested in EAS
Estaleiro Rio Grande (ERG2) (Rio Grande do Sul)
October 2013: MHI (Mitsubishi Heavy Industries), Imabari, Namura, Oshima and
Mitsubishi Corporation invested in ECOVIX - ENGEVIX.
Recent progress
Brazil
Brazil Estaleiro Enseada do Paraguacu (EEP) (Bahia)
May 2012: KHI (Kawasaki Heavy Industries) invested
on EEP
Estaleiro Atlantico Sul (EAS) (Pernambuco)
June 2012: JMU (Japan Marine United) started
technical cooperation with EAS
June 2013: IHI, JMU and JGC invested on EAS
Estaleiro Rio Grande (ERG2) (Rio Grande do Sul)
October 2013: MHI (Mitsubishi Heavy Industries),
Imabari, Namura, Oshima, and Mitsubishi
Corporation invested on ECOVIX
Conceptional drawing of
the new shipyard (EEP)
Source: KHI
Source: IHI
Direct investment in Brazilian shipyards
22
Recent progress
1) Meeting with President Dilma Rousseff Prime Minister Abe explained the offshore logistics hub systems,
and President Rousseff took note of his manifestation.
2) Release of Joint Statement “Joint Statement on Cooperation in Shipbuilding for Facilitating
Offshore Resource Development”
Prime Minister Shinzo Abe’s visit to Brazil (August 2014)
Key points of Joint Statement
- Strengthening foundation of Brazilian shipbuilding industry
- Financial and human support from Japan: Direct investment in Brazilian shipyards,
JICA technical cooperation project
- Memorandum on Cooperation on Maritime Technology and Industry between MDIC and MLIT
- Annual roundtable attended from both public and private sectors
- Deepwater, distant offshore oil E&P: Logistics Hub Systems
- Further strengthened friendship
- Enhancement and expansion of bilateral cooperation
- Develop technologies and products for offshore development through private,
academic and administrative cooperation
23
・The biggest shipyard in the southern hemisphere, and the only VLCC construction shipyard in Brazil.
・JEI, established by IHI, JGC and JMU, acquired 33% share of the EAS by FEB 2014.
・3 oil tankers have been delivered, 20 Tanker ships and 7 Drill ships have been listed in order book.
Location: Pernambuco, Brazil
Area： 1,620,000㎡ (Building Area：167,000㎡)
Investor： Camargo Corrêa Group 33%
Queiroz Galvão Group 33%
JEI (IHI, JGC, JMU) 33%
Employee： Around 5,800
(Direct employment 4,560)
Cooperation
in Shipbuilding & Offshore industry
Estaleiro Atlântico Sul Shipyard
Copyright © 2013 IHI Corporation All Rights Reserved. 24
Improved accuracy in the production
25
Size error : 100mm
Size error : 40mm
Size error : 0mm
Connecting the hull blocks in the engine room part: Suezmax tanker C004–C006
2012
C004
2013
C005
2014
C006
Improved production efficiency
26
Introduce weaving
techniques Introduce automatic
welding machine
Welding time
reduced by 37.5%
2013 2014 2015
Progress in the welding work speed
Introduction of high-place work vehicle for welding
Before 2014 From January 2014
Hand and semi-
automatic welding with
scaffold
automatic welding with
high-place work vehicle
Welding time
reduced by 60.0%
Japan Side
・JICA ・Shipbuilders
Shipbuilding companies in 4 states (RJ,PE,BA and RS)
• JICA project on technical cooperation in shipbuilding human resource development was
adopted in June 2013, based on the request of MDIC (Ministry of Development, Industry and
Foreign Trade) of Brazil. The implementation period is 2014 – 2018 (4 years).
• R/D (Record of Discussion) was finalized on July 28, 2014. The project will start within this year.
• MLIT will dispatch an expert on shipbuilding policy to MDIC in September this year.
Brazil Side
・SENAI ・MDIC
Dispatch of Trainees (SENAI core instructors)
Dispatch of Experts
• Establishment of road map on policy and measures of shipbuilding industry
• Development of shipbuilding-specialized training program
• Training for SENAI instructors by core instructors
• Training of workers by instructors
• Policy coordination between MLIT and MDIC
• Training for 40 core instructors of SENAI (4 states: RJ, PE, BA, and RS)
• Training on shipbuilding policies for 5 officials of MDIC
• Introduction of Japanese practices on productivity (e.g., product management)
Development of shipbuilding and offshore industries
Development of human resources in shipbuilding sector
27
Core instructors trains SENAI instructors.
SENAI instructors trains engineers.
Effective and efficient human resource development
Promotion of marine machinery and equipment industry
In order to assist the Japanese industries to enhance their opportunities in the offshore
market, MLIT is providing financial assistance for their technological development.
(2013-2017) (Budget: 11.2 million USD in 2013-2014)
Cargo loading & offloading system
Storage
Control system
plumbing
Engine
Highly reliable LNG tank
Cargo loading & offloading system
between floating structures
high efficiency valve
for preventing
backward flow
High-capacity power
generation system
High-capacity motor
28
high-accuracy dynamic
positioning system
Mooring equipment
Logistics Hub Systems for offshore development
29
In cooperation with shipbuilding, shipping and
other related companies, MLIT is working on
“maturing” Logistics Hub Systems so that it can
be robust and efficient transport system.
(Budget: 13.8 million USD in 2012-2014)
Concept:
Logistics Hub system is a hub-and-spoke transportation system that can minimize
transportation cost of workers and supplies between land and offshore platforms.
Will be connected with the land by High Speed Vessels (HSV).
Will be connected with offshore platforms by helicopters.
Concept:
Logistics Hub system is a hub-and-spoke transportation system
that can minimize transportation cost of workers and supplies
between land and offshore platforms.
Will be connected with the land by High Speed Vessels (HSV)
Will be connected with offshore platforms by helicopters
High Speed Vessels
(HSV)
Offshore Platforms Logistics Hub
Current System Logistics Hub System
250-300km
100km
30
Logistics Hub Systems for offshore development (cont’d)
Functions:
Transportation hub
Heliport (takeoff and landing / fueling),
helicopter hanger/elevator
Air traffic control tower,
air surveillance radar, airway beacon
Berth for safe and efficient transfer of
workers and cargo
Cargo storage (fuel, food etc.)
Accommodation
Workshop for maintenance
Offshore disaster response base
Oil fence, oil treatment, oil adsorbent
Fire extinguishant
Medical facility High Speed Vessel
(HSV)
Logistics Hub
Helicopter
SPC
Host
country
Japan
Companies
Banks
Companies
Banks
Government
•Government-funded • Investment capacity: $1B (FY2014)
New Agency
New agency*, to be established in autumn 2014 by MLIT, will back up the financing
of projects by holding a considerable portion of the equity of SPC.
* (Official English name is not fixed yet) “Agency for the business support in the overseas transportation
and urban/regional development”
* The law to establish this agency was adopted by the National Diet in Feb 2014.
Loan
Equity
Contract
Equity
New agency for support of overseas infrastructure project
31
Loan
How the funding by the new agency will work
32
Where the funding can go
Scope of funding
- Owning/O&M SPC of the Logistics Hub
- Owning/O&M SPC of the FPSO
- Owning/O&M SPC of the PSV/AHTS
- Shipyards in Brazil
- Projects, to be supported by the new agency, need to be relevant to overseas transport* or
urban/regional development.
* ”Transport” includes not only “traditional” sea transport such as the operation of LNG vessels
and container vessels, but also offshore projects such as the operation of FPSO, FLNG, PSV,
AHTS and Logistics Hub.
- Co-funding with the JBIC loan is possible
Offshore Platforms
Helicopters
Mega float（Logistics Hub）
H S V
Debt
Equity Japanese companies
JBIC
BNDES
NEW Agency
Brazilian
oil/ gas
company
Charter contract
&
O&M contract
Example of Finance structure
Owing/O&M SPC
Other Japanese banks
NEXI insurance
Potential usage of Mega-Float
33
Stock yard
Oil stockpiling base
Airport
Offshore
sites
Shore
Stock yard
Helicopters
Offshore support vessels
Multi-layered approach has been taken, and
will continue
Business and government coordination,
for mutual benefits of the two countries, is the key
- Shipbuilding: Coping with the local content
requirements, better production management
- Ship machinery and equipment: Adaptation to
the offshore standard, establishment of sound
after-sales services including quick and stable
supply of parts.
- Specific projects where Japan can take an
initiative from start-up phase
Conclusions
34
Muito Obrigado !
35
