by John Snyder
Editor

Some big wheels have gotten things rolling at the Kvaerner Philadelphia Shipyard (KPSI). The yard, which teetered on the brink of shuttering its doors back in 2001, is getting into the commercial tanker building business in a big way.

Kjell Inge Roekke, the majority shareholder of Kvaerner ASA, the parent of KPSI, was joined by former President Bill Clinton, Morton Arntzen, president and CEO of Overseas Shipholding Group (OSG) and other officials and dignitaries in announcing a deal to build 10 double-hulled tankers at the Philadelphia yard.

Kvaerner ASA and OSG inked an agreement in principle that will see OSG bareboat charter ten 46,000 dwt product tankers for periods of five to seven years at a cost of $500 million. The deal includes charter extension options for OSG and options to construct two more product tankers. The deal is subject to the approval of the boards of directors of both companies.

The estimated value of the order is $800 million. The first ship would be delivered in 2006, the last in 2010.

The product tankers will be based on designs secured under an exclusive $27 million, five-year agreement with Korea's Hyundai Mipo Dockyard.

The tankers are being chartered from American Shipping, Inc., a new wholly owned, U.S.-based subsidiary of Kvaerner ASA. Brad Mulholland, the former president of Matson Navigation Co., was named the CEO of American Shipping.

Matson Navigation bought KPSI's first four newbuildings, the Philadelphia Class 2600 TEU containerships.

A ceremonial contract signing for the OSG deal held at the shipyard in April was attended by more than 1,000 people. President Clinton served as the keynote speaker. Clinton's 1993 National Shipbuilding Initiative provided a shot in the arm to a struggling American maritime industry by streamlining regulations, reinvigorating the Title XI shipbuilding loan guarantee program and a providing a $220 million new technology support package.

Announcements of huge commercial shipbuilding orders for U.S. yards make some in the industry a bit wary. You don't have to have such a long memory to recall the pain of Project America and the difficulties encountered by the Double Eagle program.

This latest mega project,however, could go a long way towards boosting U.S. shipbuilding confidence and U.S.-flag shipping. And there are significant differences between the Philadelphia plan and the Project America and Double easle flops. Not the least of these differences, of course, is that KPSI is an ultra modern yard, designed specifically to build commercial ships.

Dave Meehan, KPSI president, said the construction project was "one of the

largest commercial shipbuilding transactions undertaken by a U.S. shipyard and represents a significant achievement for the American shipbuilding industry."

OSG's Arntzen said, the deal represents a significant commitment by OSG to its U.S. flag business. With these charters, OSG will have one of the largest and most modern Jones Act product tanker fleets.

KEEPING THE FAITH

"I never lost faith in the American shipbuilding industry and neither did so many of our public servants, workers and private businesses," said President Clinton. "I salute the men and women of Kvaerner Philadelphia Shipyard for showing all of us once again that it is possible to achieve great things even in the face of seemingly impossible odds. Today's announcement is good news for the workers here, for America's maritime industry and for the environment."

On the site of America's first naval base, completely rebuilt by Kvaerner to world-class specifications, company officials were also joined by Pennsylvania Governor Ed Rendell, Philadelphia Mayor John F. Street, U.S. Representative Curt Weldon, and numerous other local, state, and federal government officials who came together under the red-white-and-blue banner, "Building the Future."

PRODUCT TANKER DEAL AT BOLLINGER

There could be other significant commercial deals in the works for U.S. yards.

There's also a rumor of a ten 30,000-plus dwt product tanker deal between Seacor Holdings, Inc. and Bollinger Shipyards, Inc., Lockport, La. Those tankers would apparently be built at Bollinger Marine Fabricators in Amelia, La., the former McDermott Shipbuilding yard.

Other OPA compliant tonnage currently on order includes a series of crude carriers under construction at National Steel and Shipbuilding Company (NASSCO) in San Diego. NASSCO recently held a keel-laying ceremony for Hull 487, the fourth ship of the Alaska Class double-hull oil tankers being constructed for BP Oil Shipping Company, USA.

"These double-hull tankers are providing BP with the best available propulsion, ship, and environmental control technologies to protect U.S. waters," said Richard Vortmann, president of NASSCO. Vortmann added that the design of the 1.3-million-barrel-capacity tankers in the Alaska Class will allow maximum flexibility for oil deliveries to West Coast ports, including BP refineries in Los Angeles, Calif., and Cherry Point, Wash.

"The BP tanker contracts have created hundreds of jobs for NASSCO and are contributing millions of dollars in payroll, tax revenues and purchases from local suppliers each year during the life of the contract, which will run through 2006," added Vortmann. "We are continuing to hire people to fill hundreds of positions that remain available for this and other shipbuilding programs in our 10-ship backlog."

The first ship in the class, the 287 meter by 50 meter Alaskan Frontier, was delivered in August 2004 and the second ship, the Alaskan Explorer, was delivered in March 2005. On April 10, the third ship was floated out of NASSCO's graving dock following structural erection and is being completed pierside at the NASSCO shipyard. The third ship will be delivered later this year and the fourth ship in 2006.

The four BP ships will be operated by the Alaska Tanker Co., Beaverton, Ore., which is 25% owned by BP.

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