$400 million Port of Brownsville shipbuilding contract finalized

MCALLEN, RGV – A $400 million contract between Honolulu-based Pasha Hawaii and Keppel AmFELS has now been finalized and as a result, two new Liquefied Natural Gas-fueled container ships will be built at the Port of Brownsville.

Eduardo A. Campirano, port director and CEO of the Port of Brownsville, announced the news at a Rio South Texas Economic Council meeting. He said 700 new jobs would be created. Campirano also gave an update about a natural gas pipeline coming into the Rio Grande Valley, liquefied natural gas terminals at the port, and SpaceX.

“I am delighted to say that the contracts were signed and contractors are on site starting the production expansion for those facilities. The Valley is going to be in the shipbuilding business in a big way,” Campirano said.

“Pasha Hawaii has commissioned AmFELS to build two roughly 775-feet vessels, container ships that will be LNG fueled, using a whole new technology. AmFELS are also starting to get calls about building LNG fired tugs, factory fishing vessels, all kinds of things. It is getting really exciting.”

Keppel AmFELS, a wholly owned subsidiary of Keppel Offshore & Marine Ltd, is best known at the Port of Brownsville for making and servicing oil rigs. With a drop in the price of oil, offshore oil extraction declined leaving AmFELS looking for other work.

In a news release, AmFELS said the LNG vessels will be built to Keppel’s proprietary design with delivery of the first vessel expected in the first quarter of 2020, and the second vessel in the third quarter of 2020.

“We are pleased that Pasha has chosen us to build their first two LNG-fueled container ships to our innovative design. Keppel O&M is at the forefront of designing vessels that run on LNG propulsion systems and has the experience in LNG vessel conversions as well as the expertise in newbuild specialized vessels,” Simon Lee, president of Keppel AmFELS said, in a news release.

“In addition, Keppel AmFELS is ideally located and well-equipped to build a wide variety of vessels for the Jones Act market. We look forward to building these ships which will have a direct impact on American jobs at our shipyard and suppliers across the country.”

The Jones Act requires vessels carrying goods between U.S. ports to be built in the U.S.

George Pasha, IV, president and CEO of The Pasha Group, said in the same news release: “This contract with Keppel allows Pasha Hawaii to continue to move forward in our commitment to providing the best resources possible for our customers and Hawaii’s shipping industry, while minimizing our environmental footprint. We are proud supporters of the Jones Act and look forward to working with Keppel’s team of highly skilled shipbuilders.”

Pasha said the 774-foot Jones Act vessels will be able to carry 2,525 TEUs (twenty-foot equivalent units), including a fully laden capacity of 500 45-foot containers, 400 refrigerated containers, and 300 40-foot dry containers, with a sailing speed of 23 knots. He said the ship’s hull has been fully optimized using computational fluid dynamics (CFD) and will be one of the most hydrodynamically efficient hulls in the world.

“The containerships will be able to run completely on LNG fuel, dramatically reducing their environmental impact and increasing fuel efficiency. Energy savings will also be achieved with a state-of-the-art engine, an optimized hull form, and an underwater propulsion system with a high-efficiency rudder and propeller,” the news release stated.

“When compared to conventional fuels, LNG is a much cleaner alternative fuel for shipping and offers significant environmental benefits, including the reduction of up to 95 percent sulphur oxides, nearly 100 percent particulate matter, up to 90 percent nitrogen oxides, and up to 25 percent carbon dioxide emissions from engine exhaust emissions.”

The AmFELS news release says the company is “well-positioned” to capture opportunities in the Jones Act market. “The average age of the U.S.-built fleet of vessels is more than 30 years old, beyond the typical operating life of most ocean-going vessels, and new vessels will be needed to meet the latest safety and environmental standards.”

In an interview with the Rio Grande Guardian following the RSTEC meeting had concluded, Campirano acknowledged that with the downturn in oil prices, “Keppel were hit hard.” However, he said the company has always been resilient.

“One of the things about Keppel is that during slow times they are always doing something to re-tool their yard. One of the things they looked at was getting into the shipbuilding, primarily getting into the Jones Act market. If they are successful with the first two LNG vessels, there is a provision to possibly do two more,” Campirano said.

“The announcement was made last May but the negotiations towards a contract were still pending. Well, the contract has been consummated, it isn’t just speculation anymore. It is going to occur.”

Campirano said Keppel already has a contractor on site to do modifications to its yard in order to accommodate a new production facility at the shipyard.

“They are not going to get out of the offshore oil business. They have a 1,200 feet launch-way, so they are still going to be able to deal with offshore oil, but, in the meantime, addressing the aging Jones Act fleet market and get into shipbuilding makes perfect sense,” Campirano said.

“And, it is 700 new jobs that are not related to the current operation. These are going to be new jobs so that is always a huge plus. We are talking about skilled jobs, welders, cutters, skilled set positions, where the average pay is $20 an hour. It opens up a whole new realm of opportunities.”

Editor’s Note: This is the first in a two-part series based upon the Rio Grande Guardian’s interview with Eduardo Campirano. Part Two will be published in our next edition.