Why Singapore will still be shipbuilding king

It was recently announced that Sete Brazil had placed drillship orders worth over S$8 billion with Keppel Offshore and Marine and SembCorp Marine in Singapore.

This is a vivid demonstration of the growing importance of high-end offshore vessel construction to the Singapore shipbuilding sector. The increasing global demand for rigs and drillships will play an important part in Singapore retaining its position as the leading builder of offshore equipment.

Drillships are maritime vessels that have been fitted with specialist drilling equipment. The advantages of drillships lie in their ability to drill in water depths of more than 2500 meters and the time saved sailing between oilfields worldwide.

The drilling equipment is passed through the vessel's moon pool and connected to the well equipment below via the riser pipe. Once the water depth becomes too deep for mooring, drillships depend on state-of-the-art dynamic positioning systems to keep the vessel in place while in operation.

Over the last few years there has been a surge in the demand for drillships—driven by an increase in drilling permits in the Gulf of Mexico and growing demand for these vessels in Brazil, West Africa, and the Arctic. By 1 November 2013 the worldwide fleet of operational drillships numbered 83, more than double its size in 2009.

As of 1 November 2012, close to 50 drillships were on order from shipyards worldwide (excluding Brazil). At the same time, close to 30 drillships were on order from shipyards in Brazil. Behind these orders are rig owners like Transocean, Seadrill, Petrobras, Vantage Drilling, Ensco, Pacific Drilling, Maersk Drilling, Diamond Offshore and others.

The size and scale of drillship construction projects is enormous, and there is huge value in this sector for shipyards who can build high-quality, high-specification vessels of this type.

To provide some context of the sums involved, about a week ago it was announced that Sigma Drilling had entered into a turn-key construction contract for one ultra-deepwater drillship with STX Offshore & Shipbuilding in Korea (with options for four additional units). The contract value of this deal came to US$3.5 billion.

These drillships will be capable of drilling of wells down to 12,190 m (40,000 ft) in water‐depths of up to 3,650 m (12,000 ft). The drillships ordered by Sigma Drilling, represent the latest generation of vessels.

They will be more versatile and will have a higher payload, capacity and transit speed than competing drillships. The ownership company of the first of these drillships from Sigma Drilling will be based in Singapore.

As shipyards, such as Keppel and SembCorp, move away from building traditional drybulk and oil carriers (due to weaker demand), offshore vessel construction contracts will become an increasingly important part of doing business.

Additionally, there are real opportunities for Singapore to become a corporate hub for operators. Seadrill already has a considerable operation in Singapore and others, such as Pacific Drilling, have been attracted to setup the operational side of their businesses here.

With Singapore being a leading global shipping hub in the world, it is only natural that drillship operation and construction will continue to develop a strong foothold here. The outlook for the drillship and offshore industries in the years ahead remain very positive, and Singapore is in pole position to take advantage of this from a construction and corporate perspective.