Sembcorp’s Marine business delivered strong results
in 2010 underpinned by its rig building, offshore and
conversion and ship repair businesses. Turnover was
S$4.6 billion compared to S$5.7 billion in 2009, while
the business’ net profit attributable to shareholders of
the company (net profit) grew 23% to a record high
of S$860.3 million from S$700.1 million in the previous
year. The business’ profit from operations (PFO) also
increased 19% to S$1.0 billion from S$877.6 million in
2009. A one-off credit of S$52.6 million arising from
the settlement of the disputed foreign exchange
transactions with Société Générale was included in the
PFO for 2010. This improved performance was mainly
attributable to the execution of projects ahead of
schedule and the achievement of better margins for
the business’ rig building, offshore and conversion
projects through higher productivity, as well as the
resumption of margin recognition for a rig building
project upon securing a buyer.
The business’ operating profit of S$998.2 million
was 16% higher as compared to 2009. The business’
operating margin also improved in 2010 with its
gross profit margin increasing from 17% to 25% in
the corresponding period, mainly attributable to
operational efficiencies and project execution ahead
of schedule. Its return on equity for the year stood
at a strong 38%.
The Marine business’ current net orderbook stands
at a strong S$4.8 billion as at February 2011, with
completions and deliveries until 2013. This includes
S$3.0 billion in contracts secured in 2010 and
S$361 million worth of orders secured since the start
of 2011, excluding ship repair contracts.
During the year, ship repair turnover stood at
S$646.1 million compared to S$706 million in 2009
and accounted for 14% of total revenue. A total of
282 vessels docked at our yards in 2010 and the
average value per vessel was S$2.3 million. Long-term
strategic alliance customers continued to provide
a steady and growing baseload. Together with our
regular repeat customers, they contributed 85% of
total ship repair revenue in 2010. High value repairs
to oil tankers, container vessels, liquefied natural
gas (LNG) and liquefied petroleum gas (LPG) tankers,
passenger ships and drillships as well as floating production storage and offloading (FPSO) upgrading
dominated the segment.
During the year, we secured a long-term contract
from Carnival Corporation & plc, to provide ship repair,
refurbishment and upgrading services for its passenger
ships operating in the Far East. This followed two earlier
repair, upgrading and refurbishment projects secured
with Carnival Australia and Carnival Cruise Line (United
Kingdom), both part of Carnival Corporation & plc.
As a world leader for LNG repairs, the business
was awarded several repair contracts for LNG carriers.
These include repairs for five membrane LNG carriers
for China LNG Shipping (International) Company,
repair works for three LNG carriers for K Line Ship
Management and an LNG carrier longevity contract
from North West Shelf LNG Venture which is a
Favoured Customer Contract partner. The business
also secured a cargo ship life extension contract from
Bluescope Steel and the renewal of a long-term
contract with Eitzen Group for the scheduled repair
and upgrading of its ships.
Other upgrading and repair orders secured during
the year included a ship repair contract from a regular
Taiwanese customer, a contract for lengthening and
dry-docking repairs from Interislander, and upgrading
and repair jobs for both Star Cruises (Malaysia) and PT
Pelayaran Nasional Indonesia.
Three other upgrading and repair projects worth
S$92 million were secured in 2011, including an
upgrade of a dynamically positioned heavy-lift and
pipelay vessel, an LNG carrier longevity project, and
an upgrade of a drillship.
Turnover from ship conversion and offshore
activities in 2010 was lower than the previous year at
S$820.4 million, compared with S$1.3 billion in 2009.
The sector constituted 18% of the total turnover of
the Marine business. Projects completed during the
year included two FPSO conversions for Tanker Pacific
Offshore Terminals and MODEC, a floating, drilling
production, storage and offloading vessel conversion
for Petroserv as well as an offshore platform for
Maersk Olie og Gas.
During the year, the Marine business secured a
S$130 million contract to carry out the pre-conversion
of a very large crude carrier (VLCC) into a FPSO, to
be renamed P62, for Petrobras Netherlands and a S$550 million contract from ConocoPhillips Skandinavia
to build the Ekofisk accommodation topside to be
installed in the North Sea.
In 2010, the business was also awarded two
offshore conversion contracts worth S$75 million,
comprising the conversion of the tanker BW Genie into a floating production unit (FPU) for BW Offshore
and the upgrading of FPSO Glas Dowr for Bluewater
Energy Services, as well as a S$351 million contract to
convert an Aframax tanker into a FPSO vessel, to be
renamed FPSO Petrojarl Cidade de Itajai, for Teekay
Further adding to its offshore orderbook, the
business secured a S$123 million contract in January
2011 for the engineering, procurement, construction
and commissioning of a dynamically positioned blue-water
research vessel, to be named RV Investigator,
for Teekay Shipping (Australia).
The rig building segment contributed S$3.1 billion
or 67% of our Marine business’ total turnover, compared
to S$3.6 billion in 2009. During the year, we completed
and delivered six proprietary Pacific Class 375 design
jack-up rigs on or ahead of schedule: the Setty for
the Egyptian Drilling Company, Tam Dao 02 for
Vietsovpetro, West Leda for Seadrill, Sneferu for
Egyptian Drilling, El Qaher I for Egyptian Offshore
Drilling Company and Kan Tan 6 for SINOPEC as well as
a heavy-lift jack-up barge, ARB-3, for Aramco Overseas.
In addition, we completed and delivered two newbuild
Friede & Goldman semi-submersibles, the PetroRig III for Grupo R and West Orion for Seadrill, as well as the
Noble Jim Day, a semi-submersible converted from a
bare-deck hull, for Noble Drilling.
The business also sold a CJ-70 harsh-environment
jack-up rig to a subsidiary of Seadrill.
New rig orders clinched during the year included
the building of two turnkey Pacific Class 400 jack-ups
valued at up to US$364 million from Atwood Oceanics
Pacific, with options for three additional jack-up units;
the construction of two turnkey Friede & Goldman
JU2000E jack-ups worth US$384 million for Seadrill,
with options for four additional jack-up rigs; as well
as the building of two turnkey premium Friede &
Goldman JU3000N jack-up rigs valued at up to
US$400 million for a subsidiary of Noble Corporation,
with options for another four jack-up units and a US$195 million turnkey jack-up rig for Transocean
based on the Pacific Class 400 design.
In January 2011, Atwood Oceanics Pacific exercised
the first of its three jack-up options granted in 2010
with delivery at the end of June 2013.
In February, the business positioned itself for future
sustainable growth by announcing its acquisition of
land for the development of a new shipyard in Brazil
to cater directly to one of the fastest growing offshore
oil and gas exploration and production markets in
the world. The business acquired 825,000 square
metres of freehold land with 1.6 kilometres of
coastline in the state of Espirito Santo, the second
largest oil-producing state in Brazil, for this project.
Located in the municipality of Aracruz, the site is
strategically located close to the offshore Espirito
Santo Basin, which is one of the recently discovered
giant pre-salt oil basins of Brazil, making it an ideal
location from which to support the country’s oil and
On completion, the shipyard will be equipped
with state-of-the-art facilities for constructing
drillships, building semi-submersible rigs, undertaking
FPSO integration, fabricating topside modules and
constructing platform supply vessels, in addition to
the traditional activities of drilling rig repairs, ship
repairs and modification works.
In Singapore, the business marked a major
milestone in its growth and expansion strategy with
the ground-breaking of its Integrated New Yard
Facility at Tuas View Extension in June. As Singapore’s
first purpose-built, custom-designed integrated yard
facility, the 206 hectare landmark development will
further reinforce our Marine business’ competitive
edge through enhanced work-efficient processes as
well as state-of-the-art facilities and equipment.
With its new technologies and optimised layout,
the New Yard Facility will enable the business to
benefit from resource optimisation and economies
of scale through greater operational synergy,
production efficiency and critical mass. This will enable
it to provide customers enhanced services, faster
turnaround time and more cost-competitive solutions.
Designed as a centralised and integrated ’one-stop
solutions’ hub for ship repair and conversion,
shipbuilding, rig building and offshore engineering and construction, the New Yard Facility will be well-equipped
to serve a wide range of vessels, including
VLCCs, new generations of mega containerships,
LNG carriers and passenger ships, while meeting new
regulatory and environmental standards.
The facility will be built in three phases over a
period of six years. When fully completed it will
increase the business’ total dock capacity by 62% from
1.9 million deadweight tonnes to 3.1 million deadweight
tonnes. Under the first phase of its development,
73.3 hectares will be developed for ship repair and
ship conversion operations. This first phase featuring
four drydocks with a total capacity of 1.6 million
deadweight tonnes is scheduled for completion in
2013, with partial operations targeted to commence in
the second half of 2012.
Although global recovery has improved in the past
months, recent events in the Middle East and North
Africa may create uncertainties in the world economy
which may have an impact on businesses.
Fundamentals for the oil and gas industry remain
intact with oil prices expected to be sustained above
US$80 per barrel. Exploration and production (E&P)
spending budgets continue to show positive development
with oil companies reporting their intention to increase
E&P spending further in 2011.
Given the ageing rig fleets and the increasing
focus in the jack-up market on newer, safer and
more efficient rigs, demand for premium and high-specification
rigs is expected to remain strong. Since the
fourth quarter of 2010, Sembcorp Marine has already
secured eight firm orders for jack-up rigs amounting to
S$2.0 billion with options for another ten units.
While drilling activities in the Gulf of Mexico have
slowed pending finalisation in deepwater drilling
regulations, deepwater drilling activities for the rest
of the world are nonetheless expected to increase.
This optimism is reflected in the number of offshore
newbuild orders secured since the last quarter of 2010,
in particular for drillships by drilling contractors. With
its proven track record in deepwater rigs, our Marine
business will be well-positioned to meet the industry’s
most stringent operating requirements, capture new
orders and grow its market share. Overall enquiries
for this segment have improved, though competition
Meanwhile, the ship repair market continues to
improve with continued demand for bigger docks.
The Marine business has secured several long-term
contracts from its customers, particularly in the niche
segments of the repair, upgrading and life extension
of LNG carriers as well as passenger and cruise vessels.
These long-term customers will continue to provide
a stable baseload for the business’ ship repair sector