Credit crunch means slight shift at Aker shipyard

The worldwide credit crisis has hit South Philadelphia's Aker Philadelphia Shipyard. But thanks to the time it takes to produce the huge oil tankers it builds, the shipyard and its 1,300 workers appear likely to float past the economy's rockiest shoals.

Today, Aker Philadelphia said it had been forced to alter the production sequence for the next several ships under construction at the yard for its customer, American Shipping Co.

The reason: Financing was pending for the next ship due to be completed, and credit was unavailable, said Rob Kurz, American Shipping's chief executive officer. The vessel is expected to sell for about $110 million.

"Due to deteriorating financial and credit markets, large capital projects are extremely difficult to finance at the present time," Kurz said in an interview. "The general consensus is that things should get better after the first of the year."

That should be quick enough to protect the interests of the shipyard workers and both Aker Philadelphia and American Shipping - which until last year were part of a single company, Aker American Shipping. In December, Aker American spun off Aker Philadelphia Shipyard as a separate company. In June, Aker American Shipping renamed itself American Shipping.

Both companies are formally based in Norway, but they have operational headquarters here, according to Scott Clapham, vice president of Aker Philadelphia, which occupies a portion of the old Philadelphia Naval Shipyard.

Clapham said the shipyard was midway through a project, begun in 2005, to build 12 of the midsize tankers. Each of the 600-foot vessels can carry about 46,000 tons of supplies and cargo, including about 330,000 barrels of oil or petroleum products.

Ten of the ships were financed initially, and they were to be built as product tankers, which carry refined petroleum products. In 2007, Aker agreed to build two more of the tankers as so-called shuttle tankers - ships that shuttle crude oil to refineries from offshore wells and platforms in places such as the Gulf of Mexico.

Clapham said the eighth ship, scheduled for completion in September 2009, had been designated as a shuttle tanker, and was expected to be used, under a complex leasing arrangement, by Petrobras, the Brazilian oil company.

Now, because of the credit drought, that ship will be redesignated as one of the 10 product tankers that already were funded, Clapham said. The swap is easy because the models are identical except for extra equipment on a shuttle tanker that would be installed by another shipyard.

Also helping to ease the effect is the yard's long production timeline. The last of the dozen ships is not scheduled for delivery until 2011. Now, one of the later ships will become the shuttle tanker for Petrobras "and will be built once the crunch eases," Clapham said.

"This does not impact our day-to-day operations at all," Clapham said. "We're not suspending any shipbuilding."

Kurz said the companies "just got caught in a difficult time period."

"We hope, like everybody else in Philadelphia and elsewhere, that this will soon pass, and that the environment will improve in 2009," he said.