Singapore, Malaysia Offshore Services Sector Outlook

Singapore, Malaysia Offshore Services Sector Outlook

Sentiment among established offshore oil and gas services companies in Singapore may be improving after being pressured over the past year by intense competition from North Asia, especially China, where excess capacity has driven many shipyards to turn to the offshore market to shore up their revenue base.

In contrast to Singapore offshore companies, Malaysia oil and gas services firms were to a large extent shielded from Chinese competition as the local offshore oil and gas market provided some business opportunities for them.

Singapore Firms Face Pressure from Chinese Yards

Subsidiaries of Singapore offshore contractors Keppel Offshore & Marine (Keppel O&M) – a unit of Keppel Corporation Limited – and Sembcorp Marine Ltd. encountered intense competition from Chinese shipyards throughout the year.

Profit margins at Singapore’s two largest offshore companies fell. Keppel O&M, whose year-on-year net profit dipped 8 percent to $351 million in the first half of 2013, said in July that “mounting competition from … Chinese yards continues to suppress prices and margins for newbuild rigs."

Sembcorp Marine’s net profit also declined in the same period, with the firm posting a gain of $192 million, 5 percent lower than the previous year. Like its local rival, Sembcorp Marine said in its Aug. 1 press release that “competition from the Chinese … yards will impact margin.”

Future prospects for the two Singapore companies looked rather bleak judging by their financial performances in the first half of 2013.


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