Not all offshore

Singapore?s marine industry enjoyed a good run last year driven by strong demand from the offshore sector. The outlook for this sector remains good even though overall marine demand is expected to taper off slightly.

According to the Economic Development Board, Singapore?s marine industry grew by 16 per cent in output to reach a record S$4.4 billion ($2.5 billion) in 2002. Value-added and employment also rose in tandem, reaching S$1.43 billion and 33,000 respectively last year.

Reflecting the sector?s strong performance, the two giant shipyard groups here have reported sterling profits. SembCorp Marine last year saw group revenue rise 18.4 per cent to S$1.01 billion. Operating profits grew 6 per cent to S$89.9 million. Newbuilding plus conversion and offshore jobs powered growth.

Newbuildings, which made up 18 per cent of total revenue, grew 77 per cent to S$184 million.

Turnover from ship conversion and offshore jobs, which generated a third of group revenue, last year ballooned 65 per cent to S$337 million.

SembCorp Marine?s deputy president Heng Chiang Gnee said at the results announcement that conversions tended to generate better margins than shipbuilding. He added that margins from shiprepairing were down. Last year, the company?s shiprepair revenue fell 13 per cent to S$423 million. Still, this was the group?s main revenue generator at 42 per cent.

SembCorp Marine repaired 332 ships ? 17 per cent less than the previous year. On the bright side, the average repair value per ship rose by 5 per cent to S$1.27 million. But prices were coming under pressure, said Heng. “In the last quarter of the year, shiprepair prices have come down purely because demand was weaker.” Prices, he added, had come off by up to 10 per cent last year.

However, SembCorp has started the year well. “The enquiry level in the first one and half months of this year has picked up about 15 per cent compared to the last quarter of last year,” said Heng.

SembCorp Marine is expecting both the newbuilding and ship coversion/offshore business sectors to remain healthy based on its current order book. It has already accumulated a total order book of S$1.4 billion, which stretches to the first quarter of 2005. Among the jobs bagged are the conversion of two tankers to shuttle tankers. The first vessel arrived in January this year. Work is scheduled to complete in March. A second vessel is due to arrive in April and leave the yard in June.

Last year also went well for Keppel Offshore and Marine (KOM) well. Turnover from this Keppel Corp business unit grew 26 per cent to S$1.92 billion. Operating profit soared 141 per cent to S$217 million. The profit and turnover growth stemmed from a higher level of jobs completion and cut costs.

KOM said that synergies from integrating Keppel?s offshore and marine division achieved S$15 million in cost savings last year. It aims to achieve another S$20 million in savings this year.

KOM expects the offshore business to remain at “healthy levels”. Oil and gas prices are likely to hover at levels attractive for exploration and production (E&P). Independent surveys, KOM added, showed that E&P spending was likely to rise this year. In addition, an ageing rig fleet spells a need for replacements.

For shiprepair, KOM said that it saw high-end sophisticated jobs involving LNG/LPG ships remain on the rise. Low-end repairs would continue to face strong competition from outside Singapore.

The newbuilding market for tugs and offshore supply vessels is likely to stay strong due to the ageing fleet.

So far, KOM has amassed an orderbook totalling some S$1.6 billion which will take it to 2004. Its orderbook includes five FPSO conversions and topsides worth S$267 million and three semi-submersible jobs totalling S$380 million.

Among the jobs completed this year was the conversion and repair of a 94,225 dwt vessel. Work on the ship, which included the fabrication and installation of a topside system, helideck and flare tower, was completed in mid-February. Now named FPSO Four Vanguard, it will be operated by Vanguard?s Australian subsidiary.

Despite the strong orderbook, KOM does not expect to reprise last year?s record performance in 2003. Lim Chee Onn, chairman of parent Keppel, said: “I believe that businesses will have to face a more trying environment in 2003 as we await the resolution of the situations in Iraq and North Korea.”