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Sembcorp’s Marine business recorded a turnover
of S$4.0 billion in 2011 compared to S$4.6 billion
in 2010 due to the timing, number and value of the
projects in varying progressive revenue recognition
stages in the three different sectors of rig building,
ship conversion and offshore and ship repair.
The business’ profit from operations (PFO) was
S$792.4 million compared to S$1.0 billion in 2010
mainly due to fewer jack-up and semi-submersible
rig projects. The business’ operating margin was
18.6% as compared with 20.7% in 2010, largely
attributable to fewer rig building projects, mainly
jack-up rigs, as compared to more turnkey semi-submersible
rigs in 2010.
The business’ net profit attributable to
shareholders of the company (net profit) was
S$751.9 million compared to S$860.3 million in
the previous year due to lower operating profit and
the receipt of the full and final amicable settlement
of the disputed foreign exchange transactions with
Société Générale in 2010. This was offset by the
higher interest income received in 2011 for deferred
payment granted to customers and write-back of
prior years’ tax over-provisions. Return on equity
for the year stood at 30%.
During the year, ship repair turnover stood at
S$643.9 million, comparable to 2010’s S$646.1 million
and accounting for 16% of total turnover. A total of
264 vessels docked at our yards in 2011, lower than
2010’s 282 vessels. However the average value per
vessel increased to S$2.4 million from S$2.3 million
in 2010. Long-term strategic alliance customers
continued to provide a steady and growing baseload.
Together with our regular repeat customers, they
contributed 82% of total ship repair revenue in
2011. High value repairs to oil tankers, container
vessels, liquefied natural gas (LNG) and liquefied
petroleum gas (LPG) tankers, passenger ships
and upgrading of drillship and floating production
storage and offloading (FPSO) units dominated
the segment.
During the year, we secured a long-term
contract from Teekay Marine Services to provide
repairs, refurbishment and upgrading of their fleet
of 137 vessels.
Turnover from ship conversion and offshore
activities in 2011 registered a growth of 31% to
S$1.1 billion from S$820.4 million in 2010. The
sector contributed 27% of the total turnover of the
Marine business. Projects delivered during the year
included the conversion of FPSO PSVM for MODEC,
the upgrading of FPSO Glas Dowr for Bluewater
Energy Services and the pre-FPSO conversion of P-62 for Petrobras Netherlands. In addition, we successfully
completed the engineering and construction of
Flintstone, a new generation of environmentally-friendly
designed fallpipe rock dumping vessel for
Tideway and the Gajah Baru platforms for Premier
Oil Natuna Sea.
In terms of new contract wins, we secured a
S$20 million contract from Golar LNG Energy to
convert the LNG Khannur, a LNG tanker, to a floating
storage and regasification unit, the FPSO conversion
of the very large crude carrier (VLCC) tanker
MV TAR II valued at S$130 million from MODEC and
a US$300 million floating storage offloading tanker
conversion contract from Mobil Cepu, a subsidiary
of Exxon Mobil.
The business secured two contracts for offshore
vessels comprising a S$123 million contract for the
engineering, procurement, construction and
commissioning of the RV Investigator, a dynamic
positioning (DP) bluewater research vessel for Teekay
Shipping (Australia) as well as a US$140 million contract
from Equinox Offshore Accommodation to convert
a ROPAX vessel into a DP Class 2 Accommodation
and Repair Vessel.
Two offshore platform contracts were also
secured during the year which included a S$600 million
contract from PTTEP International for an Integrated
Processing and Living Quarters platform and a
contract from Bechtel Overseas for the assembly
of process and cryogenic pipe-rack modules for
Australia Pacific LNG’s liquefied natural gas facility.
Valued at US$100 million, the value of this contract
may potentially increase in excess of US$150 million.
The rig building segment contributed S$2.2 billion
or 56% of our Marine business’ total turnover,
compared to S$3.0 billion in 2010. During the year,
we completed and delivered three jack-up rigs on
or ahead of schedule: the El Qaher II, a proprietary
Pacific Class 375 design jack-up rig to Egyptian
Offshore Drilling Company; the West Elara, a Gusto
MSC CJ70 150A harsh-environment jack-up rig, the
largest of its kind to be constructed by our Marine
business, to Seadrill; and the Transocean Honor, the
first proprietary Pacific Class 400 design jack-up rig to
Transocean. In addition, we completed and delivered
four semi-submersible rigs: the West Pegasus, a Moss
Maritime CS50 MKII design semi-submersible rig, and
three newbuild Friede & Goldman ExD ultra-deepwater
semi-submersible rigs: the West Capricorn for Seadrill, the Atwood Osprey for Atwood Oceanics
Pacific, and the Songa Eclipse for Songa Offshore.
Seven new rig orders were clinched during
the year including the building of a turnkey Pacific
Class 400 jack-up rig valued at US$182 million
from Atwood Oceanics Pacific; a turnkey Gusto MSC
CJ70 150A harsh-environment high-specification
jack-up rig worth US$450 million from Seadrill;
two sets of two turnkey Friede & Goldman
JU3000N jack-up rigs valued at US$427.6 million
and US$444 million from Noble, the latter with
options for another two similar jack-up rigs; and a
US$291.6 million GVA 3000E design accommodation
semi-submersible rig from Prosafe, with options for
another two units.
In December 2011, our Marine business achieved
an important milestone in its growth and expansion
strategy with the ground breaking of the first
overseas Integrated New Yard Facility, Estaleiro
Jurong Aracruz, in the municipality of Aracruz in the
state of Espirito Santo – Brazil’s second largest oil
producer. Situated on an 82.5-hectare site with
1.6 kilometres of coastline, Estaleiro Jurong Aracruz
is strategically located in close proximity to the rich
oil and gas basin of Espirito Santo, one of Brazil’s
giant pre-salt reservoirs, and is poised to further
strengthen our business’ foothold in the country.
The Integrated New Yard Facility in Brazil will
be developed in stages over a period of three years
with full completion targeted for end 2014. Estaleiro
Jurong Aracruz is well-positioned to serve Brazil’s
vibrant offshore and marine sector with wide-ranging
capabilities in the construction of drilling rigs, FPSO
integration, topside modules fabrication, and the
repair and upgrading of ships and rigs.
In February 2012, Estaleiro Jurong Aracruz
secured a contract worth approximately
US$792.5 million from Guarapari Drilling,
Netherlands, a subsidiary of Sete Brasil Participacões,
for the design and construction of a drillship based
on Jurong Shipyard’s proprietary Jurong Espadon
drillship design. Scheduled for delivery no later
than the second quarter of 2015, the Jurong
Espadon drillship represents the next generation
of high-specification drillships with advanced capabilities for operational efficiency and ultra-deepwater
operations worldwide. The order win
is expected to be among the first of many orders
in Sete Brasil’s drillship expansion programme to
develop Brazil’s giant pre-salt oil fields.
The business also continues with the growth
and expansion strategy in Singapore with
construction of the Integrated New Yard Facility
at Tuas View Extension progressing on schedule. As
Singapore’s first purpose-built, custom-designed
integrated yard facility, the 206-hectare development
will further reinforce our Marine business’
competitive edge through enhanced work-efficient
processes as well as state-of-the-art facilities
and equipment.
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. Under the first phase,
73.3 hectares will be developed for ship repair
and ship conversion operations. It will feature four
VLCC drydocks with a total capacity of 1.6 million
deadweight tonnes and quays of more than
three kilometres.
In 2011, the Marine business exercised the
option to increase its shareholding in Sembmarine
Kakinada (SKL), a joint venture between Sembawang
Shipyard and Kakinada Seaports, from 19.9% to
40%, becoming the largest single shareholder of
the joint venture facility. The Technical Management
and Services Agreement to operate and manage
the joint venture was also extended from the current
five years to 10 years. This increase in shareholding
of SKL, a joint venture established since November
2009, is in line with the business’ strategy to
establish and grow a hub in India to cater to the
growing needs of our customers operating in India
and South Asia. SKL will be developed in three
phases with the construction of the first phase well
underway. When fully completed by end 2012,
SKL will offer ship owners and offshore operators
a one-stop integrated offshore service facility for
the repairs and servicing of offshore vessels and
ships, new builds, oil and gas riser and equipment
repairs as well as platforms and modules fabrication.
The Marine business has a net orderbook
of S$6.3 billion as at February 2012, with
completions and deliveries until mid-2015. This
includes S$3.7 billion in contracts secured in 2011
and S$1.3 billion worth of orders secured since the
start of 2012, excluding ship repair contracts.
Despite the global macro-economic uncertainty,
fundamentals for the offshore oil and gas
industry remain intact, underpinned by high oil
prices and projected increases in exploration and
production spending.
The offshore market continues to display signs
of cyclical improvement, especially in the deep and
ultra-deepwater segments fuelled by the growing
needs of operators in multiple regions, in particular
the “Golden Triangle” of Brazil, the Gulf of Mexico
and West Africa.
In the Gulf of Mexico, deepwater drilling activities
remain robust as operators continue to move ahead
with drilling programmes. Day rates for both jack-up
and semi-submersible rigs have been strengthening.
With offshore drilling moving towards deeper waters,
coupled with the business’ proven track record in rig
building, our Marine business will be well-positioned to capture new orders for high-specification
deepwater rigs which meet the industry’s most
stringent operating requirements.
Ship repair continues to see strong demand with
the newly forged long-term partnerships with several
renowned international ship owners and operators,
in particular in the niche segments for the repair,
upgrading and life extension of LNG carriers,
passenger and cruise vessels. These alliances and
long-term customers will continue to provide a stable
and steady baseload for the repair business.
In Brazil, the wholly-owned shipyard Estaleiro
Jurong Aracruz is strategically positioned to support
developments in one of the world’s fastest growing
offshore oil and gas exploration markets. In
Singapore, the Integrated New Yard Facility in Tuas
View Extension will become operational in 2013 and
will nearly double the Marine business’ ship repair
and ship conversion and offshore capacity from the
current 1.9 million deadweight tonnes.
Overall, competition is intense though enquiries
for the various segments of the market remain robust.
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