THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Thursday, November 16, 1995 TAG: 9511160318
SECTION: BUSINESS PAGE: D1 EDITION: FINAL
SOURCE: BY CHRISTOPHER DINSMORE, STAFF WRITER
LENGTH: Medium: 77 lines
Newport News Shipbuilding might be about to further secure its future as a commercial shipbuilder by winning yet another contract to build double-hulled petroleum tankers.
MARITRANS Inc., a Philadelphia-based tug and barge operator, expects to sign a letter of intent Nov. 20 to buy four to six product tankers from a U.S. shipyard, a company official said Wednesday.
If Virginia's largest employer gets the work, it would have potential orders for more than 20 tankers.
Arthur J. ``Skip'' Volkle Jr., MARITRANS associate general counsel, said Newport News Shipbuilding is involved in the deal, but he didn't elaborate.
``We are in discussions with MARITRANS and others about the possibility of building Double Eagles, but nothing has been finalized yet,'' said shipyard spokeswoman Jerri Dickseski.
Newport News Shipbuilding has been aggressively marketing a 600-foot tanker design known as the Double Eagle. The tanker is the giant Peninsula shipyard's first step back into commercial shipbuilding since the late 1970s.
The yard has relied almost exclusively on building aircraft carriers and submarines since then, but the military budget is shrinking now that the Cold War has ended. The yard's work force has fallen from nearly 30,000 five years ago to under 19,000 today.
Newport News Shipbuilding is looking to a future when a mix of Navy, commercial and foreign military shipbuilding produce a steady flow of new orders. It currently has an order from a Greek shipper, Eletson Corp., for four Double Eagle tankers. Two other orders for up to 16 more tankers await approval of federal loan guarantees.
The tanker orders represent an estimated $850 million in revenue for the shipyard in the next few years and will help keep more than 1,200 workers employed at the yard.
The only other U.S. shipyard with an order to build product tankers is Avondale Industries Inc., which is building seven for a Russian shipping company. MARITRANS also is negotiating with the New Orleans-based Avondale.
Any MARITRANS order would be contingent on the company's getting federal Maritime Administration loan guarantees to purchase the ships, Volkle said. MARITRANS recently filed an application with the administration for $174 million of loan guarantees.
A Swedish shipping company, Furetank Rederi AB, also is seeking federal financing, which allows a buyer to borrow shipbuilding funds at low interest rates for 25 years. Furetank wants to build a pair of product tankers and might also be looking at Newport News' Double Eagle.
U.S. shipbuilders, which haven't built a commercial ship for export since 1960, have attracted foreign buyers because of the loan guarantee program and lower wages.
Domestic purchasers, such as MARITRANS, need to build double-hulled vessels to meet the requirements of the Oil Pollution Act of 1990.
MARITRANS transports oil and petroleum products from Texas to Florida and refineries on the East Coast using a fleet of giant barges. It has used tugs and barges because tanker operating costs have been higher and because tankers have needed more than twice as many people to operate, Volkle said.
But now MARITRANS thinks it successfully can mix tankers into its fleet, Volkle said. Tankers are larger and faster than its tugs and barges, he said. New tankers are also more automated than older tankers and probably won't require a crew too much larger than the nine or 10 used on tugs and barges.
U.S. shipyards still need to show they can build commercial ships at a profit. Newport News Shipbuilding is widely expected to lose money on the Eletson order as it relearns the commercial shipbuilding process. It took a $14 million charge in its third quarter to cover costs associated with its return to commercial shipbuilding.
Shipyard Chief Executive William P. Fricks has said the yard figures it will make a profit on future orders.
Meanwhile, Tenneco Inc., the yard's Houston-based parent, is investing $68 million to modernize the yard. It built a steel fabrication facility with the latest in robotic welding and is expanding a drydock so it can build tankers and aircraft carriers simultaneously. by CNB