China's shipyards are slowly but surely carving a niche in the offshore segment as the value of offshore contracts has steadily risen over the past few years, according to Clarksons Research Services.

Analyst Yue Xing noted that the value of offshore contracts placed at Chinese shipyards has increased considerably since 2009 at an average annual rate of 20%.

“In 2013, contracts with a record total value of $17.3bn were placed, despite the fact that the number of orders fell to 177, the lowest annual total since 2005. In contrast, 356 offshore contracts were placed in China in 2007, with a total value of $13.8bn,” she said.

Back in 2007, 90% or 319 number of offshore contracts were placed for relatively less complex offshore support and construction vessels, while less than 4% or 13 contracts were for the higher specification mobile drilling units (MDU) and mobile production units (MPU).

In recent years, Chinese shipyards have won more high value orders especially for jack-up drilling units, Yue noted.

Data from Clarksons Research Services showed that 41 MDU contracts were placed in 2013, of which 31 were jack-up rigs, exceeding the number won by Singaporean yards for the first time.

At the same time, lower orders for support vessels since a large number of contracts were placed in 2006-07 helped the share of MDUs and MPUs to reach 24% in 2013.

“Nevertheless, China has remained the most prolific builder of support vessels. Alongside the recent trend for ordering larger, more complex support vessels to operate in harsher environments, China has also taken a greater share of these orders from yards in Europe in particular,” Yue said.

She pointed out that China's success in attracting higher value contracts was partially due to the favourable payment terms being offered by the yards, with some reportedly asking for below 10% of the contract price as initial deposits and the remainder only due upon delivery.

“This helped Chinese builders secure 31% of global offshore investment in 2013, narrowing the gap with Korean builders, who accounted for 33% of investment. By comparison, in 2012, 19% of investment was secured by Chinese builders, while Korean yards accounted for 30%,” Yue said.

She added that while China has been able to shoulder a growing number and share of high value offshore contracts in recent years, most Chinese builders remain relatively inexperienced at constructing complex offshore units.

“There also remain inherent risks to yards from accepting relatively low deposits. However, with more builders attempting to diversify from conventional marine and offshore support vessels into more sophisticated offshore products, China seems well placed to benefit from the further expected growth and investment in the offshore industry,” she believed.