Struggling shipyards brace for extended dry spell as austerity measures intensify

Contract wins have been extremely low year-to-date.

Austerity is in vogue for the oil and gas industry, and Singapore's biggest shipyards are bracing for an extended order drought.

Data from UOB Kay Hian showed that both Keppel Corp and Sembcorp Marine have had very low contract wins year-to-date. Keppel has won only S$330m of new contracts while Sembcorp Marine won none.

"Keppel’s and SMM’s order books - excluding ship repairs - currently stand at S$12.5b and S$12.6b respectively. While these order books extend till 2019 because of drilling rigs that will be completed progressively for Sete Brasil, both groups require new contract wins every year to keep their yards busy," the report noted

UOB Kay Hian noted that globally, there are only two drilling rig orders year-to-date, and both orders went to Chinese yards.

"The oil & gas industry faces poor earnings visibility as capex and operating costs are being cut. An austerity drive now permeates across the entire industry - among oil companies, service providers and shipyards," stated the report.