After more than 20 years of offshore drilling experience, Deng Mingchuan now finds himself chasing a new mission at what has swiftly become China's largest rig manager.
The general manager of SinoOcean Offshore Assets Management has set his sights on looking after offshore assets — including rigs and service vessels — abandoned at Chinese yards by previous investors.
The company was set up in early 2019 under the auspices of the state-owned Assets Supervision & Administration Commission of the State Council (SASAC), with a mission to “consolidate, optimise, re-modify and manage” offshore rigs, vessels and other assets ordered but stranded in China following the oil market downturn between 2014 and 2016.
The scheme has relieved the pressure on Chinese yards to finance, maintain and charter abandoned assets, giving them capacity to focus on engineering, procurement and construction of offshore facilities, Deng tells Upstream.
Several years ago, Chinese yards won the EPC contracts by using what Deng describes as an aggressive marketing strategy.
These yards are now under huge financial pressure after speculators cancelled contracts, leaving them to finance and finish construction work after offshore activities nosedived.
The market downturn has forced many rig and ship owners into bankruptcy, putting Chinese yards in an awkward position of having to both build and own assets, Deng says.
“It is difficult for yards to own, maintain and market them — the tasks that should be left with a professional team like SinoOcean to handle,” he says.
Deng may be relatively new to the rig management game, but he was working at the industry coalface during the market collapse in the past decade.
Before joining SinoOcean last year, Deng cut his teeth at China Oilfield Service Ltd (COSL).
After graduating from China's Southwest Petroleum University in 1998, he worked in various roles on COSL rigs in the South China Sea, Bohai Bay, East China Sea, Southeast Asia, Mexico and the Middle East in a career spanning more than two decades.
Deng was the first manager of China’s maiden home-built flagship deep-water semi-submersible drilling rig Hai Yang Shi You 981, when the rig started its debut drilling in the South China Sea in 2012.
In that same year, he became president of COSL’s Mexico outfit before being promoted to general manager of COSL’s drilling division in early 2016.
Although a rig expert, Deng has committed much of his attention not only to drilling operations but also to drilling engineering and reservoir conditions at wells.
The talented team he leads at SinoOcean has backgrounds in areas such as capital markets, offshore manufacturing and project management, as well as oil and gas operations.
“Our staff has more than 15 years of experience in their specialties,” Deng says of his ensemble.
SinoOcean has six stakeholders: China Chengtong Holdings Group and China National Offshore Oil Corporation (CNOOC) each with 25%; China State Shipbuilding Corporation with 20%; and Cosco Shipping, China Merchants Group and China Communications Construction Company each with 10% — and each stakeholder has its own role to play, Deng says.
“Offshore manufacturing enterprises are responsible for asset construction, modification and maintenance, while CNOOC is undertaking daily operation and business development. China Chengtong, as a strategic investor that sits on the board, provides financing support and capital operation,” Deng says.
With 48 offshore rigs and offshore support vessels under its wing and another 47 to come under its ownership by the end of this year, SinoOcean has had a rapid rise, becoming one of the largest global offshore asset managers.
Since joining SinoOcean last year, Deng has hit the ground running, having already secured work for 11 assets, including a quartet of jack-up rigs and seven OSVs.
The latest unit on contract is a LeTourneau Super 116E jack-up rig ordered by India-based contractor Deepwater Drilling through its Singapore-based associate, Dynamic Momentum, in 2014.
The bareboat contract between rig manager Selective Marine Services and SinoOcean will see the Cosco-built Dynamic Momentum rig work at fields operated by Abu Dhabi National Oil Company (Adnoc) in the Middle East.
Deng says SinoOcean is limbering up for a larger marketing campaign, homing in on both the domestic and overseas markets, with more rigs set to come under its management by the end of this year.
Two more rigs will come on contract by the end of July. About 70% of rigs and vessels on contracts are being chartered by CNOOC for operation off China, with the remainder by overseas offshore drilling contractors and vessel operators, according to Deng.
However, Deng sees a lot more opportunities for giving new leases on life to the rigs and vessels stranded at Chinese yards.
As of early 2019, there were 173 such offshore assets — including 65 rigs from SinoOcean’s own shareholders — worth a combined 120 billion yuan ($17 billion). Almost 100 remain stacked at Chinese yards.
The company is currently running the rule over the remaining stacked units.
“Those with minimum market demand and low return on investment will likely be scrapped to balance supply and demand and promote the healthy development of the offshore industry,” Deng says.