S'pore's oil rig industry reaps bonanza from oil prices
S'pore's oil rig industry reaps bonanza from oil prices
Martin Abbugao, Agence France-Presse/Singapore
Singapore's oil rig manufacturing industry is reaping a multi- billion-dollar bonanza as sky-high crude prices boost MARINE exploration for new oil and gas deposits worldwide.
Potential repair work on U.S. rigs and platforms damaged by Hurricanes Katrina and Rita is also expected to further boost orders for Singapore's offshore engineering firms, whose share prices have risen in anticipation.
Two Singaporean oil rig makers with a number of overseas yards -- Keppel FELS Ltd. and SembCorp Marine -- have become the industry's main players, accounting for about 80 percent of the world market, analysts said.
Soaring crude oil prices which hit all-time highs above US$70 a barrel in late August, rising energy demand and dwindling onshore reserves are driving exploration into ever deeper waters.
With offshore exploration offering potentially larger finds, the search has expanded from traditional sources such as the Middle East and the North Sea to frontier fields in the Caspian Sea, West Africa, South America, the Gulf of Mexico and Southeast Asia.
"With the need for exploration and production work increasing, we believe demand for rigs will invariably increase," U.S. investment bank JP Morgan said in a report on the industry.
It noted that due to "massive underinvestment" over the past 20 years, the world's oil rig fleet has remained stagnant and by 2010, more than 90 percent of them will be over 20 years old.
Singapore, a Southeast Asian island-nation with not a single drop of natural oil reserves, has become a world leader in petroleum-related industries such as refining, trading and oil rig manufacturing.
Both top rig makers belong to government-linked industrial conglomerates.
Based on published figures, Keppel FELS' order book is now approaching $5.0 billion, with SembCorp Marine's at about $3.8 billion.
In the latest announcement, Keppel FELS said last Friday it had won a contract to build a semi-submersible rig for Dallas- based ENSCO International worth $312 million.
Keppel FELS -- which boasts 17 yards in the Asia Pacific, Gulf of Mexico, Brazil, the Caspian Sea, Middle East and North Sea -- is the current global market leader, having built and designed the most of jack-up rigs on order over the past decade, according to its website.
SembCorp Marine, which has shipyards in Singapore, China and Brazil, said in a statement to AFP it has a 28 percent overall market share and has taken steps to further expand its global profile.
SembCorp Marine said Thursday its unit PPL Shipyard was in the process of acquiring the Sabine Shipyard in Texas which caters to contractors in the oil-rich Gulf of Mexico region.
Last year, SembCorp Marine bought a 30 percent stake in the shipyard unit of China Ocean Shipping Co., one of China's biggest ship repair firms, giving it a foothold in a market whose insatiable demand for energy has helped boost world oil prices.
"Besides our strong track record in constructing oil rigs, we position ourselves to be ahead of the competition through research and development to develop proprietary technologies that include proprietary design in jack-ups," SembCorp Marine said.
A jack-up rig -- similar to a floating barge with legs that can be lowered to the seabed -- can cost $130-$135 million and takes about 26-28 months to build.
They are suitable for shallower waters.
Semi-submersibles, designed for exploration at water depths of up to 10,000 feet (3,000 meters), can cost $250-$400 million each and take 28-30 months to build.
Industry analysts have raised the two companies' earnings prospects on expectations they would benefit from repair contracts involving oil rigs and production platforms damaged by Hurricane Katrina, and possibly Rita.