Aker signs pact to build two tankers

Aker Philadelphia Shipyard, on the brink of closing just months ago, has landed a deal with Exxon Mobil Corp. to build two large tankers that will keep the shipyard afloat through 2014.

The 115,000-ton tankers - more than twice the size of product tankers built at the Philadelphia yard in the last decade - will transport Alaska North Slope crude oil from Prince William Sound to the U.S. West Coast, including Puget Sound, San Francisco, and Long Beach, Calif.

Neither Aker nor the wholly owned Exxon Mobil marine affiliate, SeaRiver Maritime Inc., of Houston, would confirm the financial terms of the agreement, which is still not final.

"These two ships are going to put the yard back to 1,000 people working there," said Manuel "Manny" Stamatakis, chairman of the Philadelphia Shipyard Development Corp.

Stamatakis said each ship order was worth "$200 million plus." In a memo to the Aker board, he wrote: "This is a $400 million-plus transaction."

Aker, the nation's second-largest commercial shipbuilder, bid for the work in competition with the largest commercial shipbuilder, General Dynamics Nassco, of San Diego. The final contract is expected to be signed by the end of September.

Aker senior vice president Scott Clapham declined to discuss financial terms, but he confirmed that the workforce would "peak at over 1,000" when the tanker project begins in mid-2012. Currently, more than 400 work at the yard.

Aker worked for six to eight months to land the business, said Stamatakis, a member of the shipyard board.

Aker is currently building two 46,000-ton product tankers, for which it has ordered parts but has no buyers. One will be ready in late 2012, the other in early 2013.

In February, Aker received $42 million from Pennsylvania taxpayers to construct the current two oceangoing vessels even though it had no buyers lined up. Without state money - and private construction financing that Aker secured - the yard might have shut operations.

The tankers for SeaRiver will be 820 feet long, capable of carrying 730,000 barrels of crude oil, and have the latest navigation and communications equipment and energy-efficient engines, Aker work. The shipyard will work with Samsung Heavy Industries, a technology firm, for technical and procurement support.

"These ships will well position us to meet Exxon Mobil's transportation needs," said Ray Botto, a spokesman for SeaRiver Maritime. "Based on our fleet needs, we are making this commitment at this time."

Other companies transporting oil from Alaska include Tesoro Corp., BP P.L.C., and ConocoPhillips Co.

Aker, which once employed more than 1,000 at the Navy Yard, has faced an enormous challenge to stay alive.

It is one of two U.S. shipyards that build oceangoing commercial vessels under the 90-year-old U.S. Jones Act, which requires U.S.-made and U.S.-operated vessels to transport goods between U.S. ports.

When the global recession hit, shipbuilding around the world stalled, and Aker had no new orders. The South Philadelphia yard built 12 product tankers and four container ships in the last decade.

The lull in work, and, thus revenue, has triggered more than 600 layoffs since July 2010.

Philadelphia has been a shipbuilding center since the Philadelphia Naval Shipyard's heyday in World War II. After the Navy ended activities here in the 1990s, the site became a commercial shipyard, first Kvaerner Philadelphia Shipyard, and in 2000 Aker, a unit of Norway-based Aker ASA.

Since the end of World War II, U.S. commercial shipbuilding has dwindled, and today most of the world's big ships are built in Asia, including South Korea, China, and Japan.

The hurdle for U.S. shipbuilding is cost - not labor cost, but productivity and economies of scale. South Korean shipbuilder Hyundai turns out 70 ships a year in each of its two yards, compared with three to five ships a year for the entire U.S. industry.

The more ships a yard builds, the more productive the workers, and the lower the overhead costs. Supplier prices also drop.

Even U.S. yards that cater to the military have too little work. Since the terrorist attacks of Sept. 11, 2001, the Navy and Coast Guard have not built as many ships as they once did.

In February, when Gov. Corbett gave Aker $42 million, "this was always the end game," Stamatakis said. Exxon Mobil's purchase of two ships "will give the yard a year or two to get more orders."

Corbett said in a statement Monday "that by taking steps to keep the shipyard open we have positioned them well to win prime business and provide well-paying jobs for Southeastern Pennsylvania."

"This is a big deal for shipbuilding," Stamatakis said. With the tepid economy and jobs hard to come by, "to be able to close a big order like this is huge."

Details of the two tankers to be built at

the Aker Philadelphia Shipyard.

Buyer: Exxon Mobil Corp.'s SeaRiver Maritime affiliate.

Function: Transport crude oil from Alaska to the U.S. West Coast.

Cost: About $400 million total.

Capacity: 730,000 barrels per tanker.

Tanker length: 820 feet.

Hull: Double hull.

Jobs: Will bring shipyard employment to 1,000 from current 400.

Construction: To start in mid-2012.

Completion: 2014.

SOURCES: SeaRiver Maritime Inc., Philadelphia Shipyard Development Corp.EndText

For more coverage of Aker Philadelphia Shipyard, go to www.philly.com/aker

EndText