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Norway - Shipbuilding Industry

Since the Viking Age, Norway has been a recognized shipbuilding nation with an affinity for small, agile ships. Shipbuilding is a very important industry for Norway. The Norwegian industry benefited from the oil price increase before 2008 but was hit by the lower price environment especially since 2015. Norwegian yards apparently managed to successfully shift towards other market segments including fishing vessels, fish-carrying vessels, and specialised cruise ships. However, these ships generate less value added than offshore vessels and raise some questions regarding how the Norwegian shipbuilding industry can adapt to this lower oil price environment. Norway is a high-cost country and needs to focus on high value added and knowledge based products. As a consequence, the access to competence and innovation is vital to Norwegian shipbuilding industry’s competitiveness.

In Aftenposten on 15 March 2021, parliamentary representative Christian Tybring-Gjedde wrote that the government only sees the sale of Bergen Engines as a trade policy issue. Relations between Norway and Russia, which share a border in the Arctic, gradually improved in the post-Cold War era before suffering a setback when Moscow annexed Crimea in 2014.

Minister of Defense Frank Bakke-Jensen (Post in Aftenposten 17.03.2021) responded "We do not do that, and I believe that both the Minister of Justice and Emergency Management and I have been clear on several occasions. Let me nevertheless try to reassure Tybring-Gjedde by repeating that this case obviously also has a defense policy side and a security policy side, and that this is the basis for the government now considering whether to stop the sales process. In this work, the government will, among other things, rely on assessments from the Intelligence Service, the Police Security Service and the National Security Authority.

"The case is serious, and therefore several ministries have been working on this for a long time. We see that there is great uncertainty associated with national security interests, and when that uncertainty is present, we are obliged to clear it of the way. The Security Act is used in the assessment of the suspension of sales, even though the company has so far not been subject to the Act. The law allows for that. The national security authority notified Rolls-Royce, which owns Bergen Engines and TMH Group, that the Norwegian authorities are considering whether the transaction should be stopped pursuant to the Security Act, and that we assume a temporary halt to knowledge transfer in connection with company review and related activity until clarified. Both Rolls-Royce and THM have confirmed that they have complied with our requests."

The Government said "The technology Bergen Engines possesses and the engines they produce would have had great military strategic significance for Russia, and it would have strengthened Russia's military capabilities in a way that would clearly be contrary to Norwegian and allied security policy interests. Although these are products and technologies that are not covered by the export control lists, Russia has had significant challenges in gaining access to them since the Western sanctions against the country were introduced in 2014".

Around 75 yards operate in the industry that focus on new building and ship repair while about 25 yards focus mainly on pure new buildings - a number that remained stable over the last ten years. All the yards are purely private, without any state-owned enterprises. Of those yards, one operates in both new building and ship repair (i.e. multi-tasking). The largest vessels being built at Norwegian yards reachs a size of about 135 meters (Length overall, LOA).

Differences between small and larger shipyards in Norway are reflected in the latter yards' focus on the new building market and higher investments in production facilities, standardizing procurement and logistical routines in order to achieve value creation throughout all parts of the newbuilding process. Over the past 15 years, these yards delivered almost 100% of all offshore service vessels built in Norway.

Most of the shipyards in Norway are privately run and family owned, such as SIMEK AS, Kleven Maritime AS, Ulstein Verft AS, Fiskerstrand Verft AS, and around 40 more yards. Some of these yards also have foreign interests, such as the Ulstein Group that has four offices abroad that operate under the general heading of “Design and Solutions”, notably Ulstein Design & Solutions BV and Ulstein Equipment BV in the Netherlands, Ulstein Poland Ltd Sp. Z.O.O in Poland and Ulstein Marine Systems Co. Ltd in Shanghai.

Some other shipyards have been acquired by larger holding companies, such as the Vard Group AS - a company listed on the Singapore stock exchange and controlled by the Italian shipyard consortium Fincantieri. The Group operates - additionally to its five yards in Norway - two yards in Romania, two in Brazil and one in Vietnam (NFD Questionnaire, 2016). The group had a turnover of around NOK 10 billion (USD 1.6 billion) in 2014.

Furthermore, Havyard Group ASA is registered on the Oslo Stock Exchange and is a fully integrated ship technology company delivering products and services within the entire value chain ranging from vessel design and construction to support of vessels in operation. It has a design office in Poland and a hull yard in Turkey, as well as representative offices in China, Singapore and Brazil. Bergen Group ASA registered at the Oslo Stock Exchange used to own Noryards AS, but it has been sold to a Luxembourg based company.

Finally, Aker ASA (listed on the Oslo Stock Exchange) was an important player in Norway's shipbuilding industry until it decided to diversify to the offshore oil and gas industry. Still it has a subsidiary located in the U.S., Philadelphia Shipyard (as of 2016).

Norwegian government has implemented several measures based on its maritime strategy “Maritime Opportunities – Blue Growth for a Green Future” launched in August 2015 and "Steady as she goes" launched in November 2007. Remarkable features of Norwegian support measures include the provision of export credits which records the second largest in transaction volume and the third largest in transaction number. Moreover, various types of R&D supports are provided to the maritime sector. Some new support measures such as a scrapping scheme targeting older ferries are included in the maritime strategy released in 2015.

Norway's population amounts to 0.1% of world population but controls over 5% of value of the global merchant fleet, and its offshore fleet is the second largest one in the world after the United States. The principal business activities of the Norwegian shipbuilding industry are concentrated within four areas: offshore vessels, advanced fishing vessels, passenger/car ferries and specialised coastal vessels.

Most of the Norwegian yards are involved in shipbuilding and construction for the offshore oil and gas industry. However, those yards (usually large) that focus on the activities for the offshore oil and gas industry do not target the shipbuilding or ship repair market. Rather, these large yards have specialised over the past 10 to 15 years in providing advanced services and construction vessels for the oil and gas industry. Moreover, most of their vessel production was delivered to domestic owners.

The Norwegian shipbuilding industry is part of a maritime cluster which also includes international shipping companies (6th largest fleet in the world), equipment manufacturers, classification societies, ship designers, brokers, and providers of insurance and financial services. The maritime industry accounted for around 6.7% of GDP in 2014 with the shipping, maritime equipment supply and shipbuilding sectors representing 3.9%, 1.2% and 0.3%, respectively. Norway is the 19th largest shipbuilding economy in the world, accounting for 0.25% of global ship completions in 2014. With 109 600 employees, the Norwegian maritime industry represented 4% of the labour force in 2014, with the 10 400 people working in the shipbuilding sector accounting for 0.4% of the labor force.

Norwegian ship yards have produced a wide variety of vessel types in the last ten years including fishing vessels, live fish carriers, service vessels for the oil and gas offshore industry, exploration vessels, sea bed mining and research vessels and passenger ships (notably yachts and ferries). In 2015, Norway produced around two thirds of worldwide fish farm support vessels (69% in cgt), 40% of global work/repair vessels (one third in cgt) and a fifth of live fish carriers (15% in cgt).