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The Offshore Platform Builder Keppel Is Seeing Signs of Improvement in Offshore and Marine (O & M) Business, However, the Company Is Cautious with Its Optimism, Leaning More Toward Floating Production Systems Than Drilling Rigs.
Loh Chin Hua, CEO of Keppel Corporation said: “Despite the recent volatility in oil prices, there is a growing optimism in the O & M sector, with more projects sanctioned at oil prices between US$ 55 and US$ 65 per barrel. Keppel’s Offshore & Marine (O & M) division reported a net loss of S$ 109 million for the fiscal year 2018, an improvement of 87% over the net loss of S$ 826 million for the fiscal year 2017.
The loss included the one-time financial penalty and related costs arising from the global resolution of Keppel O & M, Keppel Offshore & Marine (KOM) reached in December 2017 with criminal authorities in the United States, Brazil, and Singapore, concluding investigations into corruption payments made by a former KOM agent in Brazil. Keppel O & M agreed to pay fines totaling US$ 422 million to the three jurisdictions.
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Excluding this, the net loss of US$ 109 million for the O & M Division for the fiscal year 2018 would have been reduced by 47%, from US$ 207 million a year ago, Keppel said.
The better performance of the 2018 fiscal year was mainly due to higher revenue, reduced provisions for claims, and lower net interest expense, partially offset by provisions for expected losses on contracts with Sete Brasil and other asset impairments. The O & M Division would have a net profit of S$ 6 million for the fiscal year 2018, excluding the provisions and write-backs made at the end of 2018.
In 2018, the Division secured new contracts worth around US$ 1.7 billion, including a semi-submersible environment in a harsh environment and over US$ 600 million in LNG and purifier projects.
It is worth noting that the rig order in question, worth US$ 425 million, was made by Awilco Drilling, which was the first order for a new offshore platform in the market in four years.
With the gradual decline in the rig supply, as well as the increase in bidding activity, there are signs of improvements in the offshore rig sector, although we do not anticipate a V-shaped recovery, said Keppel’s CEO.
Looking at FPSO Options for the Short Term
“In the immediate future, we are cautiously optimistic regarding the offshore production market. We see opportunities in FPSOs, especially conversions, with several projects approaching Final Investment Decisions (FID) in 2019 and 2020,” said Loh Chin Hua.
Global demand for gas, led by Asia, continues to grow, with some FSRU projects also targeting FID by the end of this year. Keppel Shipyard has also seen a recovery in ship repair work driven by retrofits of exhaust gas scrubbers. We secured 65 of these contracts last year from a variety of clients.
“We secured new contracts totaling US$ 1.7 billion in 2018, which represents over US$ 1.2 billion in new orders throughout the year of 2017. Significantly, LNG and scrubber projects accounted for over US$ 600 million of the new contracts secured in 2018. Keppel O & M’s net order book grew to US$ 4.3 billion at the end of 2018, compared to US$ 3.9 billion at the end of 2017.
Awaiting Approval for BP FLNG
Keppel O & M recently received a limited notice to proceed with Golar LNG to commence early conversion works on Golar Gimi for BP’s Greater Tortue-Ahmeyim field. Full construction activities will begin when Keppel Shipyard receives the final notice to proceed.
Keppel also provided an update on the Hilli Episeyo, the world’s first converted FLNG delivered in late 2017. According to Keppel, the FLNG has maintained 100% uptime since it began commercial operations and has dispatched 13 LNG cargoes to date.
“The proven proof of concept of Hilli as a rapid and cost-effective solution to monetize stranded gas reserves continues to drive new opportunities in the liquefaction vessel space”, said Keppel.
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