Here are 2 biggest advantages of Singapore yards over Chinese rivals

It's all about speed and quality.

According to Maybank Kim Eng, the key advantages that Singapore and Korean yards wield over the low-cost Chinese yards are (1) timeliness of delivery (important when charter rates are on the rise), and (2) quality (important with increasing technical complexity and stringent safety levels).

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Tier-1 drillers with financing power would be less willing to compromise on these two key attributes for cost savings of USD20-30m per rig, which they could easily make back from high charter rates. To them, the repercussions (fines and opportunity costs) from an accident due to the deployment of a less worthy rig would be much greater.

Two years to see execution; five years to see reliability. We see two critical timelines for Chinese yards to prove themselves in order to gain the confidence of Tier-1 drillers:

(1) Ability to deliver the rigs on schedule in about two years’ time and for those rigs to secure charter contracts, and (2) The working competence of these rigs 3-5 years thereafter. Keppel and SMM are not sitting still. Both Keppel and SMM have taken the following actions to combat the potential competition:

Establishing presence in key markets: Keppel – Brazil, Mexico and Middle East; SMM – Brazil. New and higher-value products: Keppel – drillship and FLNG; SMM – drillship, accommodation semi, well-intervention semi and harsh environment semi.