Demand for rigs has risen globally in response to relatively high energy prices.

A number of major emerging markets including India and China which rely heavily on energy imports face a shortage of offshore drilling equipment.

Anhui Tianda, Honghua and Molong mainly produce onshore products, unlike TSC Offshore (0206) which is aiming to expand rapidly into the capital- intensive offshore market.

TSC is a global product and service provider serving both the onshore and offshore drilling sectors.

Its products includes comprehensive drilling equipment, mechanical handling equipment, solid control equipment, rig power and drives, and tensioning and compensation systems for semi-submersible rigs and control drill ships.

TSC also provides jacking systems and rack materials for jack-up rigs. The company designs, builds and sells complete rig packages for jack-up, semisubmersible and platform modular rigs.

It also provides maintenance and repair services.

TSC designs and builds offshore deck cranes for both drilling rigs and production platform. The products are unique since other industry players mainly focus on onshore products.

Offshore products have a high daily rental rate - US$60,000 (HK$468,000) to US$600,000 - compared with US$8,000 to US$35,000 for onshore facilities.

This large discrepancy in rental rates was the reason TSC ventured into this capital-intensive sector.

TSC's main rivals are Singaporean and South Korean rig manufacturers, but their production costs are relatively high.

After acquiring Global Marine Energy, TSC has a 21 percent global market share of offshore products.

Because of GME's technical ability, TSC is able to provide a wide range of offshore packages for oil companies at low cost.

Its distribution network is broad: in the first half of 2009, 38 percent of revenue was generated in China and 19 percent from Singapore.

Apart from Asia, TSC also focuses on emerging markets which have great demand for offshore platforms. These include Brazil's Petrobras whose offshore findings have been surprisingly positive.

Studies indicate there are around 280 million barrels of oil about 120 kilometers off the coast of Rio de Janeiro state.

TSC delivered five automatic catwalk machines to Petrobras USA, a subsidiary of the Brazilian energy giant, in December 2008.

The catwalk machines were installed on schedule on Petrobras drilling rigs.

The Brazilian state-run energy giant said in January it has budgeted US$174 billion over the next five years to exploit its oil reserves in fields like Tupi, Guara, Iara and Carioca, which were discovered in deep water beneath a thick layer of salt.

TSC is backed up by major shareholders such as Keywise Capital, Global Energy Investors, a US based investment holdings company and Sharp Vision Holdings, a wholly- owned unit of China International Marine Container (Group).

Previously, there had been market rumors of Honghua merging with TSC to capture both onshore and offshore markets.

Considering the heavily institutional shareholders' structure, TSC executive chairman Jiang Bing Hua said a merger was unlikely because institutional investors would be strongly reluctant to see TSC moving to the onshore business.

Jiang, who is also TSC co-founder, assured investors that the company would only do things that it excels in. Having been in the business for over 34 years, Jiang's team is familiar with the production and distribution process.

Although it acquired GME, a company which has a long history in the offshore market, TSC has not completely changed the way it manufactures offshore rigs and other products.

The management understands that end-users in the offshore market are very picky and traditional.

If the company changes any single part of the design, end-users would start to cast doubt on the product.

Jiang insisted their customers have an old-school way of thinking, so to keep expanding, TSC should show maintain its track record.

TSC's growth momentum depends on the speed of offshore exploration. Apart from the fast growing Brazilian market, China's CNOOC (0883) has earmarked 200 billion yuan (HK$227 billion) for offshore projects. It is expected that the demand for offshore equipment in China will be 100 billion yuan.

But the problem with Chinese customers is that they prefer to buy foreign-made brands.

TSC is now striving very hard to build itself as a foreign brand.

With manufacturing facilities in the United States, Britain and China, it is now on track to building a solid global business.

The company's shares are trading at 17 times its price-earnings ratio. Demand for its offshore products is expected to increase because of its technical and manpower capacity.

Timothy Kwai is an investment strategist at Quam Securities

E-mail: timothy.tkkwai@quamgroup.com