Tanker Size Classes
Chart 7.1: Bahri Group Structure
7.7 Overview of the Bahri Group's Business Activities
The principal business activities of the Bahri Group are divided into the following six categories:
Crude oil transportation, gas & offshore services, chemicals transportation, dry bulk transportation, general cargo transportation and ship management. Of these activities, the chemicals operation is run through NCC, the ship management operations are run through Mideast and the dry bulk operations are run through Bahri Dry Bulk, each of which are subsidiaries of the Company. The oil transportation and gas & offshore operations as well as the general cargo operations are run by the Company through branch arrangements. NSCSA (America) Inc., a subsidiary of the Company, also runs general cargo operations. As at the date of this Prospectus, there are no important new products or activities provided by the company or its subsidiaries.
The principal business activities of the Company are further described below and in Section 7.8
"Overview of Bahri Group Companies":
7.7.1 Crude Oil Transportation
In 1992G, the Company entered the crude oil transportation segment through the ordering of five VLCCs, which entered into service between 1996G and 1997G. In 2001G, the Company acquired four additional VLCCs, bringing the VLCC fleet of the Company to nine vessels.
In 2005G, the Company formalised its crude oil transportation business through the opening of a branch office in Dubai, UAE called Bahri Oil & Gas, with commercial licence number JLT-65807 ("Bahri Oil & Gas"). Bahri Oil & Gas was setup as a base to operate the Company's crude oil transportation business, which sought to leverage Dubai's position as an international hub in the crude oil transportation market. In 2014G Bahri Oil & Gas was
divided into two separate segments: Bahri Oil Transportation and Bahri for Gas & Offshore services.
In 2004G and 2006G, the Company placed orders for eight new VLCCs which were delivered between 2007G and 2009G. The Company's VLCC business has steadily grown to become the Company's largest business segment by reference to assets and operating revenue.
Following the completion of the Vela Transaction, the Company's VLCC fleet grew to 31 vessels, which is the third largest fleet of VLCCs globally as at the date of this Prospectus.
Each of the Company's VLCCs has a capacity of at least 2.2 million barrels and a dead weight tonnage of 300,000 tons. The VLCC fleet usually operates on both short and long period time charters and in the spot market. Since 2011G, due to the poor spot market rates and the consequential impact on time charter rates, the Company has refrained from entering into medium or long-term time charter contracts at low rates. The Company's VLCC fleet comprises of the following:
Table 7.3: The VLCC owned by the company
Name DWT(MT) Built Type Flag
1 Ramlah ... 300,361 1996G Double-Hull Bahamas 2 Ghawar ... 300,361 1996G Double-Hull Bahamas 3 Watban ... 300,361 1996G Double-Hull Bahamas 4 Hawtah ... 300,361 1996G Double-Hull Bahamas 5 Safaniyah ... 300,361 1997G Double-Hull Bahamas 6 Harad ... 302,700 2001G Double-Hull Bahamas 7 Marjan... 302,977 2002G Double-Hull Bahamas 8 Safwa ... 302,977 2002G Double-Hull Bahamas 9 Abqaiq ... 302,977 2002G Double-Hull Bahamas 10 Hilwah ... 316,808 2002G Double-Hull Liberia 11 Tinat ... 316,502 2002G Double-Hull Liberia 12 Lulu ... 316,507 2003G Double-Hull Liberia 13 Shiblah ... 316,476 2003G Double-Hull Liberia 14 Wafrah ... 317,788 2007G Double-Hull Bahamas 15 Layla ... 317,821 2007G Double-Hull Bahamas 16 Jana ... 317,693 2008G Double-Hull Bahamas 17 Habari ... 317,664 2008G Double-Hull Bahamas 18 Khuzama ... 319,428 2008G Double-Hull Liberia 19 Manifah ... 319,428 2008G Double-Hull Liberia 20 Jaladi ... 319,428 2008G Double-Hull Liberia 21 Jaham ... 319,428 2008G Double-Hull Liberia 22 Shaybah ... 319,428 2008G Double-Hull Liberia 23 Karan ... 319,410 2009G Double-Hull Liberia 24 Kahla... 317,361 2009G Double-Hull Bahamas 25 Dorra ... 317,693 2009G Double-Hull Bahamas 26 Ghazal ... 317,693 2009G Double-Hull Saudi Arabia 27 Sahba ... 317,693 2009G Double-Hull Bahamas 28 Nisalah ... 319,141 2010G Double-Hull Liberia 29 Ghinah ... 319,141 2010G Double-Hull Liberia 30 Niban ... 319,286 2010G Double-Hull Liberia
Name DWT(MT) Built Type Flag 31 Farha ... 319,286 2010G Double-Hull Liberia
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Source: Company
7.4 The breakdown of voyages performed by the Company's VLCCs for the years 2010G, 2011G, 2012G, 2013G and 2014G, based on the main routes of operation of the Company, is set out below.
Route 2010G 2011G 2012G 2013G 2014G
Arabian Gulf / Far East ... 44 Per cent. 45 Per cent. 23 Per cent. 1 Per cent. 1 Per cent.
Arabian Gulf / United States of
America ... 25 Per cent. 30 Per cent. 41 Per cent. 48 Per cent. 35 Per cent.
West Atlantic / Far East... 31 Per cent. 25 Per cent. 36 Per cent. 51 Per cent. 28 Per cent.
Arabian Gulf / Red Sea ... 0 Per cent. 0 Per cent. 0 Per cent. 0 Per cent. 7 Per cent.
Red Sea ... 0 Per cent. 0 Per cent. 0 Per cent. 0 Per cent. 23 Per cent.
Other ... 0 Per cent. 0 Per cent. 0 Per cent. 0 Per cent. 6 Per cent.
Total ... 100 Per cent. 100 Per cent. 100 Per cent. 100 Per cent. 100 Per cent.
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Source: Company
When required to fulfil the needs of its customers, from time to time, the Company also charters vessels on a voyage by voyage basis.
7.7.2 Gas & Offshore
The gas & offshore segment was established in 2014G and managed through Bahri Gas & Offshore in order to allow the Oil Transportation segment to focus solely on the Company's oil transportation business, which expanded as a result of the Vela Transaction.
The Gas & Offshore segment focuses on exploring the available investment opportunities in the offshore sector, in line with the Company's overall strategic plan for expansion and business diversification. In addition to the offshore sector, the segment also manages the Company's gas business and its investment in Petredec (for further information, see Section 7.8.5 "Petredec"). Gas &
Offshore is managed through the Company's Dubai branch, Bahri Oil & Gas.
7.7.3 General Cargo
The Company was established in 1979G and its actual operations commenced in 1981G in general cargo. As at the date of this Prospectus, the Company operates its general cargo services across an extensive geographical area, covering the Middle East, the Indian sub-continent, the east coast of North America and the Mediterranean.
The general cargo fleet also operates a liner service for the carriage of both general cargoes and passengers from the east coast of the USA and Canada to the Indian sub-continent. This service passes through Livorno Port in Italy, Jeddah Islamic Port on the Red Sea, King Abdul Aziz Port in Dammam and Jebel Ali Port on the Arabian Gulf coast, along its route to the Indian sub-continent.
Following the Company's incorporation, the cargo operations were rapidly expanded in Saudi Arabia through the opening of branch offices in Jeddah (in 1982G), Dammam (in 1983G) and Jubail (in 1984G). These branch offices allowed the Company to increase the scale and network of its general cargo operations. In 2000G, the Company opened a liaison office in Mumbai, India, to expand its presence in the Indian sub-continent.
The Company's general cargo fleet initially comprised of two multi-purpose RoRo, which was increased to four vessels in 1983G. These RoRo vessels carried containers, break bulk and RoRo cargoes. In 2013G and 2014G, the Company expanded its business in this segment by taking delivery of six new RoCon vessels, which have better capacity utilisation and lower fuel consumption than the Company's RoRo vessels. The six new RoCon vessels were delivered to the Company on 24/3/1434H (corresponding to 5/2/2013G), 20/6/1434H (corresponding to 30/4/2013G), 15/9/1434H (corresponding to 23/7/2013G), 24/12/1434H (corresponding to 29/10/2013G), 8/3/1435H (corresponding to 9/1/2014G) and 28/6/1435H (corresponding to 28/4/2014G).
The Company's original fleet of four multi-purpose RoRo vessels were disposed of in 2013G, as the RoCon vessels were delivered.
As part of the Company's strategy of expanding its general cargo operations and extending its customer base, the Company was successful in being awarded a three year contract by the Ministry of Defence in the Kingdom. Pursuant to this contract, which was dated 13/10/1432H (corresponding to 11/9/2011G) and had a value of SAR 230,000,000, the Company was appointed as an official carrier for all the branches of the Kingdom's armed forces sectors to transport cargo by sea to and from the Kingdom. This contract was renewed in 2013G for an additional term of five years, with a value of SAR 383,335,000. This contract will continue until 12/1/1441H (corresponding to 11/9/2019G) (for further details, see section 14.1 "Summary of Material Agreements").
The Company has also been successful in being awarded a five year contract by the Ministry of Interior in the Kingdom. Pursuant to this contract, which was dated 28/04/1436H (corresponding to 17/02/2015G) and had a value of SAR 400,000,000, the Company was appointed as an official carrier to transport all new and old military equipment to and from the Kingdom. This contract will continue for 1,800 calendar days (for further details, see section 14.1 "Summary of Material Agreements").
A summary of the amount of general cargo carried by the Company's RoRos in the years 2010G, 2011G, 2012G, 2013G and the Company's new RoCons in 2013G and 2014G is as follows:
Table 7.5: Amounts of general cargo from 2010G to 2014G
Year
Amount of general cargo
(DWT) Containers Number of liner voyages
2010G ... 551,613 19,738 15 2011G ... 623,457 18,945 14 2012G ... 573,183 17,822 13 2013G ... 387,793 11,526 13 2014G ... 328,336 8,544 17
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Source: Company
The general cargo business is a liner business with the following port rotation: Dammam – Jebel Ali – Mumbai – Jeddah – Izmir – Livorno – Baltimore – Houston – Jacksonville – Savannah – Wilmington – Baltimore – Halifax – Jeddah – Dammam.
The details of the Company's fleet of RoCons are set out below:
Table 7.6: Company's fleet of RoCons
Vessel DWT Speed (knots) Flag Built
1 Bahri Abha ... 26,000 17 KSA 2013G
2 Bahri Hofuf ... 26,000 17 KSA 2013G
3 Bahri Tabuk ... 26,000 17 KSA 2013G
4 Bahri Jazan ... 26,000 17 KSA 2013G
Vessel DWT Speed (knots) Flag Built
5 Bahri Jeddah ... 26,000 17 KSA 2014G
6 Bahri Yanbu ... 26,000 17 KSA 2014G
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Source: Company
In 1992G, the Company entered into a long-term lease with the Saudi Port Authority to lease a Container Service Yard adjacent to Jeddah Islamic Port to provide additional storage facilities to its customers. The Container Service Yard has an area of 120,000 square metres, of which 95,000 square metres is used for container storage. The remaining 25,000 square metres is used as workshop space.
The lease was renewed for an additional 10 years in 2006G with the option to renew for a further five years.
The Container Service Yard is used to provide additional storage facilities to the Company's customers as well as the Company's own containers. The Container Service Yard allows for the rapid clearance of customers' shipments thereby enhancing the Company's position as a freight forwarder.
7.8