Rosy outlook for Singapore shipyards

Analysts in Singapore are forecasting robust growth and earnings this year from local shipyards which are claimed to be achieving global leadership in the offshore marine sector. The two biggest players, SembCorp Marine, the Sembawang group’s marine engineering arm, and Keppel Corp, the parent of Keppel Offshore and Marine, account for some 75% of Singapore’s marine business. It is, however, shiprepair and conversions that is underpinning the growth of the industry, with Singapore yards carrying a total order book of over $5 billion.

Keppel O&M and SembCorp Marine have become global leaders in fast-track vessel conversions for the offshore marine industry, particularly in the FSO/FPSO conversion business. They are also leaders in rig building, with Keppel being the world’s biggest builder of jack-up rigs.

The offshore sector is being driven by several factors, one of them being sustained, high oil and gas prices leading to the major oil companies raising their budgets for exploration and production. Also, the global fleet of offshore rigs and vessels is nearing replacement, with most being over 20 years old while, with increased exploration, new oil fields have to be found further afield which require more specialised drilling equipment and more advanced deep-sea rigs.

All this will lead to a 20% increase this year in spending on rigs and FPSOs. With industry consultants projecting $32 billion in capital expenditure spending on 90 FPSO conversions and upgrades in the next five years, SembCorp Marine and Keppel O&M can be expected to be the main beneficiaries. Both companies have already established a reputation for quality work and have become the preferred yard of choice for their customers.