Cianbro, BIW to Team Up on $110 Million Oil-Supply Ship Conversions

By Tux Turkel, Portland Press Herald, Maine

Jun. 8–Pittsfield-based Cianbro Corp. and Bath Iron Works are teaming up on a $110 million project to build two massive supply vessels for the oil and gas industry, a venture that could make Maine a player in the booming offshore energy market.

Cianbro announced Wednesday that it had won a contract with Hornbeck Offshore Services, Inc. of Covington, La., to convert two now-defunct, coastal sulfur carriers into 370-foot supply vessels. These multi-purpose ships, which will be designed to bring equipment and material to and from deep-water drilling rigs, are expected to be the world’s largest offshore supply vessels.

The first vessel is under tow from Morgan City, La., and is expected to arrive in Portland Harbor late next week. More than 300 people will work on the project. The first ship is scheduled to be done in mid-2007; the second completion is expected later in the year.

For Cianbro, the contract highlights its growing reputation in the country’s marine construction industry, two years after successfully completing two drilling rigs on the Portland waterfront.

For Bath Iron Works, the work represents the shipyard’s first notable commercial job in at least 20 years.

And for Maine, the contract holds promise that the state can carve out a niche as a specialty builder for challenging maritime energy projects, despite its distance from the country’s oil and gas fields. High energy prices are an increase in exploration, as companies develop new fields in deeper water.

“If this is successful, we’re looking to feed more of these kinds of projects into the area,” said Todd Hornbeck, president and chief executive officer of Hornbeck Offshore. “I promise you, this will be a new industry for Maine.”

The vessel conversions will take place at four locations: Ricker’s Wharf, Cianbro’s marine facility in Portland; the Portland Ocean Terminal; Bath Iron Works’ fabrication facility in Brunswick; and Bath Iron Works’ main shipyard in Bath.

Cianbro will pay the city $150,000 for berthing at the ocean terminal and a yet-undetermined amount for limited office and warehouse space. By comparison, the company paid the city $1 million a year during the oil rig project, which was much larger in scope.

Cianbro also will employ smaller subcontractors, including those specializing in heating, ventilation, and air conditioning; fire protection; pipefitting, welding and electrical work. After finishing some work in Portland, Cianbro will tow each vessel to Bath. BIW will cut off the bow and install a new one.

A mix of hard work, good timing and long-forged relationships are bringing this unusual opportunity to Maine.

Cianbro is one of the largest industrial construction companies on the East Coast. Since completing the $100 million oil rig project in 2004, the firm has been trying to parley its experience into more energy sector work.

Hornbeck Offshore is a publicly traded company that is considered an innovator in developing high-tech, offshore vessels for the oil and gas industry. The company focuses on deepwater exploration and drilling activities.

Cianbro lost a bid last year to do some work for Hornbeck Offshore, but developed a relationship in the process. It didn’t hurt that Hornbeck employs several Maine Maritime Academy graduates and that Peter Vigue, Cianbro’s president and chief executive officer, is a Maine Maritime alum.

Hornbeck Offshore was impressed that Cianbro had completed the oil rigs on time and on budget, a challenge for even experienced shipyards. It discovered a similar performance history on past Cianbro projects, Hornbeck said.

“That’s very important when you have $110 million tied up,” he said.

The hurricanes that struck the Gulf Coast last year also played a role. Hornbeck Offshore liked the idea of having work done outside the hurricane zone, to reduce the risk of delays.

“That’s just what we here in Louisiana call ‘lagniappe,’ Hornbeck said, referring to a Cajun expression that means “a little something extra.”

The ships Cianbro and BIW are converting were built in the 1990s to stand up to the weight and pressure of carrying molten sulphur. Prices for that commodity fell when low-sulphur fuel came into use and manufacturers could acquire sulphur as a by-product from refineries. The ships then went out of service. But Hornbeck Offshore saw their potential as deep-water supply vessels and was able to buy them for a good price.

In bidding for the conversion contract, Cianbro knew it didn’t have a dry-dock and a ship fabrication plant. Teaming up with BIW was a natural fit.

The shipyard works exclusively for the Navy these days. Owned by General Dynamics, BIW has been upgrading its facilities to help position the yard for privately funded projects.

The income and scope of the Hornbeck job isn’t large compared to Navy work, according to Jim DeMartini, a BIW spokesman. But the chance to compete for commercial work is significant.

“We’re very pleased this opportunity came along,” he said.

Financial documents filed by Hornbeck show that the company is in the midst of a program to build and convert offshore vessels, in part to take advantage of increased offshore activity in the Gulf of Mexico. It had initially estimated that the sulphur carrier conversions would cost $65 million. The price rose to $110 million, the company said, “due to design enhancements requested by customers and higher than originally anticipated labor and material costs.”

Jud Bailey, an analyst who follows offshore drilling and supply vessels for the investment bank Jefferies & Co., said Hornbeck has one of the best offshore supply fleets in the country. “It’s a good company,” Bailey said. “I’m sure they’ll want to build more vessels.”

Looking to the future, Hornbeck said that the mix of skills Cianbro has acquired in heavy construction and maritime work will draw more projects to Maine, if the vessel conversions go well.

“Maine isn’t any further out of the way than Norway, or any other place we build ships,” he said.

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