OUR STRONG & RESILIENT CORE BUSINESSES

Transcription

1 OUR STRONG & RESILIENT CORE BUSINESSES $ m 7 Ship Repair 7 $ m Shipbuilding $ m Ship Conversion & Offshore $ m Rig Building,,,7 7 7

2 The Global Economic Backdrop Following strong growth through the third quarter of 7, the global economic growth slowed markedly in the final quarter of 7 in the face of significant headwinds from the financial sector, originating in the US sub-prime sector. Economic growth in the United States slowed notably in the fourth quarter, with recent indicators showing weakening in manufacturing and housing sector activity, employment and consumption. Growth had also slowed in Western Europe. In Japan, growth was dampened by a tightening in building standards and weaker consumer and business sentiment. Despite some slowing of export growth, emerging market and developing economies had thus far continued to expand strongly, led by China and India. These economies had benefited from the strong momentum of domestic demand, more disciplined macro-economic policy frameworks and, for commodity exporters, from high food and energy prices as well. Headline inflation increased since mid-7 in both advanced and emerging market economies. In the US, the Federal Reserve had been cutting interest rates in response to increasing downside risks to activity, while policy had been on hold in Europe and Japan. Meanwhile, central banks continued to tighten monetary policy in many emerging market economies, where food and energy represented a higher share of consumption baskets and overheating was more of a concern. Source : IMF Against this background, global growth has been projected at. per cent in, down from. per cent in 7 (Table ). The projections for the advanced economies have been reduced significantly. Projected growth in the US in has been lowered to. per cent on a year-on-year basis, down from. per cent in 7. Similarly for Europe, growth forecast has been lowered to. per cent. Growth in emerging market and developing economies is also expected to ease, moderating from 7. per cent in 7 to. per cent in. In China, growth is projected to decelerate from. per cent to per cent, which should help alleviate overheating concerns. Singapore Economy For 7 as a whole, growth of the Singapore economy was still an above-trend 7.7 per cent, following. per cent in. Economic growth moderated in the fourth quarter of 7, with GDP growth at. per cent year-on-year, compared with the. per cent increase in the previous quarter. This slowdown reflected largely a sharp decline in biomedical manufacturing rather than the impact of the slowing US economy. According to the Ministry of Trade and Industry, external economic conditions have deteriorated, and the downside risks have increased since November 7. There is a broad consensus now that the US economy is entering a slowdown. The key uncertainty Estimates Projections % % 7 % % World Output.... Advanced economies of which.... United States.... Euro area ().... Japan.... Other advanced economies..7.. Emerging market and developing economies Africa Central and eastern Europe.... Commonwealth of Independent States Developing Asia.... Of which China.... Middle East.... Western Hemisphere.... (Table ) Sectorial Growth Rates Source : Singapore Department of Statistics ( $ billion) Sector % 7 % Q7 % Q7 % Q7 % Q7 % Total Manufacturing Construction Wholesale & Retail Trade Transport & Storage Financial Services Business Services is over the length and severity of this slowdown, which in turn could influence how the rest of the world and key industries are affected. In view of the greater downside risks, the Ministry has revised the forecast for the Singapore economy to between. and. per cent, from the previous. to. per cent. Current conditions suggest that the US will likely enter a mild recession in the first half but its strong fundamentals, coupled with fiscal and monetary stimulus, will help to support recovery in the second half. Growth in the region will be moderate but remain healthy. Singapore Marine Industry s Performance The Singapore marine industry performed well in 7. In, the industry achieved a total turnover of $. billion, up per cent from $7. billion in. The estimated turnover for 7 is $ billion..b The Singapore Marine Industry Revenue, - 7.b The industry s impressive performance was driven by the offshore sector, which continued to see strong growth underpinned by high oil prices and an increased level of oil and gas exploration and production activities. In fact, the last two years had seen an escalation of offshore projects, both in terms of new builds as well as the repair and upgrade of existing rigs coming to the Singapore shipyards. This milestone achievement and strong growth in output further affirmed Singapore s leading position in the global offshore rig construction and floating-production-storage-offloading (FPSO) conversion markets. The offshore sector grew by per cent to $. billion in, constituting per cent of the industry s total turnover. Revenue from the ship repair and conversion sector was also strong. Ship repair and conversion contributed $. billion Ship Repair & Conversion Offshore Shipbuilding Source : Association of Singapore Marine Industries *Estimated.b.b.b 7.b.b.b* 7 7

3 ( No. of person),,,, 7,,,,,,, 7,7 7,,, Marine Industry Employment - 7, 7,,,,7,7,7,7 7 7 Source : Ministry of Manpower *Estimated,77,,,* Sembcorp Marine: Overall Sectorial Performance Sembcorp Marine Group s revenue for 7 was derived from the four main sectors of ship repair, shipbuilding, ship conversion & offshore and rig building. Group revenue increased from $,. million to $,. million in 7, marking a significant improvement of 7. per cent. This increase was attributed to growth from the ship repair, ship conversion and offshore, and rig building sectors. Ship repair revenue increased. per cent from $. million in to $7. million in 7, while shipbuilding revenue declined by. per cent from $. million to $. million in 7. The ship conversion and offshore sector registered an increase of. per cent from $. million to $,. million in 7. However, it was the rig-building sector that was the star performer in 7, registering a growth of. per cent from $,7. million in to $,. million. 7,7 Sector FY 7 FY +/( ) +/( ) $ m $ m $ m % Ship Repair Shipbuilding.. (.) (.) Ship conversion/offshore, or per cent to total turnover in. The increase in global oil and gas development activities also saw a tandem increase in demand for offshore supply and support vessels. Shipbuilding revenue grew by per cent year-on-year to $.7 billion in, contributing 7 per cent to the industry s total revenue. Total Employment The high level of business activities in the industry also resulted in the need for more manpower, both local and overseas, to join the marine workforce. Total employment in the industry reached, in, inclusive of administrative and other non-production employees. In 7, it is expected to grow further. Safety Performance The marine industry continued to place strong emphasis in safety in its drive towards an incident-free work environment. Its key thrusts in this direction included instilling a safety culture in the industry, advocating zero tolerance towards safety infringements, going beyond regulations, raising safety ownership as well as implementing risk assessment and safe work practices. Rig Building,., Others 7.. () (.) Total,.,.. 7. Rig Building registered record growth contributing % to total revenue for FY 7. %, % % 7 FY 7 $.b % 7 %, % % 7% % FY $.b Rig Building Ship Conversion & Offshore Shipbuilding Ship Repair Others %,7 7 7

4 Sembcorp Marine : Ship Repair Sector By sector contributions, ship repair accounted for per cent of the Group s total revenue, at $7. million in 7 as compared with $. million in. Ship repair continued to register strong growth in 7, attributed mainly to increased volume, shortage of dock space, higher-value repairs, the ability to deliver on schedule and the high health, safety, security and environment standards being upheld. Although the number of vessels repaired in 7 declined from to in 7, average value per vessel increased from $. million to $. million in 7. By vessel types, tanker repairs accounted for per cent in the ship repair sector followed by LNG and LPG tankers at per cent and bulk carriers at per cent. Offshore upgrading comprising FPSO and rig repairs accounted for 7 per cent, container vessels at per cent, passenger ships at per cent and others at per cent. Average value per vessel increased by 7% from $. million to $. million. Year 7 % change No of vessels repaired () Average value per vessel ($m).. 7 Revenue contribution ($m) 7.. % % % % % Tanker Container Bulk Carrier 7% FY 7 % % % % FY % % LNG/LPG FPSO Upgrading Offshore Upgrading % 7% Passenger Others Sembcorp Marine : Shipbuilding Sector Shipbuilding contributed $. million, or per cent, of the Group s revenue in 7, a decline of. per cent from $. million in. The year saw the completion of three vessels, comprising one, TEU container vessel and one double-hull tanker to Kuwait Oil Tanker and units of floating platform pontoons to the Defence Science & Technology Agency. Work-in-progress comprised two units of the, TEU container vessels, one each for Wan Hai Lines and Reederei F Laeisz, and one double-hull tanker to Kuwait Oil Tanker. Going forward, shipbuilding activities will be scaled down as resources are redeployed to grow the rig-building and offshore sectors. Shipbuilding activities will scale down with resources channeled to growing rig building and offshore sectors. No. completed FY7 * th unit, TEU vessel for Wan Hai Lines * Fabrication of units of Floating Pontoons * st unit, dwt tanker for Kuwait Oil Tanker No. of projects in * th unit, TEU vessel work-in-progress stages for Wan Hai Lines * nd unit, TEU vessel for Reederei F Laseisz * nd unit, dwt tanker for Kuwait Oil Tanker S$' 7 7 Market Outlook for Shipbuilding Sector Singapore shipyards continued to enjoy a niche market position for shipbuilding of customised and specialised vessels. These included barges, tugs, supply vessels, pleasure crafts and yachts, and to a lesser extent, container ships, offshore supply vessels, cable-laying ships and tankers. Buoyed by the robust market fundamentals, strong demand is expected especially for new builds of offshore supply vessels and feeder container vessels in the future. S$' Market Outlook for the Ship Repair Sector The ship repair market demand showed robust growth in the past year. In, overall ship repair demand is expected to remain strong despite the possibility of a slowdown in global shipping demand in view of a weakened US economy and recessionary fears that could reduce repair demand. However, the Group does not expect the impact to be adverse in. This is because the continued robust economic growth in China and India, which is expected to partially cushion the negative impact of a US economic slowdown, will continue to drive Asian oil and bulk demand. 7 7

5 Sembcorp Marine : Rig Building Sector The rig-building sector registered the highest growth at $,. million, a. per cent increase from $,7. million in. Five units of the Baker Marine Pacific Class 7 rigs were delivered to various owners in 7. At year-end, eleven units of the jack-ups were in work-in-progress stages, with five units in the early and planning stages. At the same time, four units of semi-submersible rigs were in work-in-progress stages, with three units in early and planning stages. units of jack-ups achieved initial % recognition in Q 7. No revenue recognition was achieved in Q 7. No major revenue recognition for semisubmersible in Q 7 as compared with unit that achieved initial % recognition in Q 7. S$' 77,7,,,, 7 Semi-submersible Jack-up Jack-ups No. completed in FY7 * rd unit Jack-up for Apexindo * th unit Jack-up for Maersk * th unit Jack-up for Deep Drilling Invest * th unit Jack-up for WilSuperior * 7th unit Jack-up for Seadrill No. of projects in * th unit Jack-up for Petrojack II work-in-progress stages * th unit Jack-up for Japan Drilling * th unit Jack-up for Petrojack III * th unit Jack-up for Awilco * th unit Jack-up for Aban Lloyd * th unit Jack-up for Sinvest * th unit Jack-up for JackInvest I * th unit Jack-up for Awilco * th unit Jack-up for Vantage Energy * 7th unit Jack-up Barge for Aramco * th unit Jack-up for Awilco In planning & engineering * th unit Jack-up for Vantage Energy stage * th unit Jack-up for Petropod * st unit Jack-up for Vantage Energy * nd unit Jack-up for Vantage Energy * rd unit Jack-up for EDC Semi-Submersible No. completed in FY7 nil No. in WIP stage * st unit Semi-submersible for Seadrill * nd unit Semi-submersible for Seadrill * rd unit Semi-submersible for PetroMena * th unit Semi-submersible for PetroMena In planning & engineering stage * th unit Semi-submersible for PetroMena * th unit Semi-submersible for Seadrill * 7th unit Semi-submersible for Atwood 7 77

6 Sembcorp Marine : Ship Conversion and Offshore Sector The Group s ship conversion and offshore sector accounted for $,. million, or per cent, of total revenue in 7. A total of four projects, comprising two FPSO conversions, one FSO conversion and one unit integration and Ship Conversion & Offshore activities expected to be strong for FY 7. S$', 7 commissioning of the production modules for P-, were delivered in 7. Work-in-progress included a total of projects comprising FPSO conversions, drillship conversion, semi-submersible conversion and offshore platforms. Two projects, the heavy lift crane vessel and the semi-submersible rig conversion units, were in the early stages of production, with no revenue recognition for these two units in 7. No. completed in FY7 * FPSO Cidade do Rio de Janeiro MV conversion * YÙUM K AK NÁAB FPSO conversion * FSO Cidade de Macae MV conversion * P- Integration and Commissioning No. of projects in * Heavy Lift Derrick Pipelay work-in-progress stages Vessel for SapuraCrest * ConocoPhillips topsides installation & commissioning * Raroa FPSO conversion * Aoka Mizu FPSO conversion * Joides Resolution (Drillship) * Aker Smart I FPSO conversion * Montara Venture FPSO conversion * Noble Danny Adkins * CPOC Offshore Platform Integrated Deck * Offshore Platforms for Tunu Field * Conversion to DP Accommodation & repair vessels ( + ) In planning & engineering * Noble Jim Day stage * DP Heavy Lift crane vessel Market Outlook for the Rig Building, Ship Conversion and Offshore Sectors The underlying market drivers for the floating production sector remain very strong as global oil demand continues to grow, supply remains tight and oil prices climb above the US$ mark. Exploration and production activity also remains robust, with high rig utilisation level and strong rig rates. Global oil demand expected to grow. per cent in Global oil demand has grown each year over the past ten years, with annual growth ranging from. per cent to. per cent. IEA projected a. per cent higher demand for 7 and an even higher. per cent growth in demand for, based on an assumption that the world economy would continue to grow at a strong pace. There are concerns that in the short-term, global economic growth could slow down due to the US sub-prime market and the falling US dollar impacting export markets. However, in the long-term, oil demand is expected to grow at. per cent between 7 and, based on the most recent IEA projection. Satisfying this demand requires mb/d of new oil supply to be brought on-stream over the next years, which still does not take into account the need to find additional oil to offset the loss of supply from depleting fields. Driving the demand is the increased energy consumption in China and India. Energy demand in China is projected to more than double over the next years as China is expected to overtake the US as the world s largest energy consumer soon after. Increased demand from the transport sector will account for two-thirds of the increase in Chinese oil consumption. In India, energy demand is also expected to more than double by. Combined oil imports by China and India are expected to surge from. mb/d in to. mb/d in. concerns would diminish. In fact, it was far more likely in the foreseeable future to have a shock from oil supply disruption than a downturn in oil demand. Political instability in Nigeria, nationalisation policies in Venezuela and mayhem in Iraq all happening concurrently could pose threats to future oil supply. Demand for oil is increasing Excess oil production capacity is decreasing Capacity to meet future oil demand is a major concern Need to replenish depletion of reserves High oil prices will continue to support offshore fleet construction "The Oil Squeeze" : Oil Prices hit US$... Adequate oil supply remains a major concern Concerns about oil supply continue to grow. According to the November 7 IMA report, there was nothing on the horizon to suggest that the 7 7

7 Oil prices have risen above US$ Reflecting demand-supply fundamentals, compounded by speculators in the futures market, crude oil prices have risen and breached the US$ mark. The spot price for WTI crude as at November 7 was already hovering above US$, while Brent was trading at US$.. The NYMEX futures price for light sweet crude also jumped. These expected high oil prices set the scene for exploration and production activity. Deepwater exploration and production continue to strengthen Deepwater drilling activity has absorbed virtually all of the available drill ships and semi-submersibles, creating record day rates and revenue backlog for the drilling contractors. Day rates of US$,, and greater, are being realised for ultradeepwater rigs. All deepwater drilling contractors are reporting record backlogs. Reflecting the tight rig markets, the Global Santa Fe SCORE index, which tracks the profitability of rig contracts over time, continues at a record level. The base is set at a level that equals the sum of the daily cash operating cost plus approximately US$7 per day per US$ million invested. The higher the index, the more profitable the current market. The index in September 7 was, compared to a year ago and two years before. Floaters are being planned or under study There are now floating production systems in service worldwide. FPSO vessels comprise per cent of the current total, production semis at per cent, tension leg platforms at per cent, production spars at per cent and production barges at per cent. There are also floating storage offloading vessels without production capability in service worldwide. IMA s report dated November 7 identified projects currently in the bidding, design or planning stage that potentially required a floating production or storage system. If all these projects materialise, they would generate a requirement for to production floaters, to floating storage units, three to five re-gas floater terminals and three to four jack-up mobile offshore production units. From the planned projects identified by IMA, are in the bidding or final stage, with projects likely to start in the next to months. Almost 7 per cent of these projects are concentrated in Southeast Asia with projects, Brazil with seven projects, and West Africa with eight projects. No. of units 7 Gulf of Mexico No. of units SE Asia 7 W.Africa Brazil Mediterranean GOM Austrialia / N.Z Offshore Production Market : Floaters of the planned projects are in the bidding or final design stage with projects likely to start in the next to months SWA/ MEAST N.Europe China W.Africa SE Asia Brazil Australia/ NZ Carribean N. Europe Projects involving Floating Production or Storage Systems are planned or under study as of November 7 Floating Production Sector extremely strong SE Asia Floater Projects are in the Planning or Study Stage 7 W.Africa Brazil Mediterranean GOM Austrialia / N.Z SWA/ M EAST Mediterranean Others Canada China Ultra - Deepwater >m Deep water - m <m water depth Source: International Maritime Associates, Inc Jack-ups : Fundamentals remain strong SWA/ MEAST N.Europe China Canada Index Offshore Rig Score Sep Sep 7 Aging rig fleet worldwide World oil supply remains tight & demand for oil is increasing Supply of rigs well regulated due to certain constraints 7 Sep Source: International Maritime Associates, Inc 7 More than were ordered & delivered from late seventies to mid-eighties So far jack-up rigs ordered with deliveries till 7 < Source: ODS - Petrodata company As at January

8 No. of units No. of units Semi-submersibles: Fundamentals remain strong with demand trending towards deepwater exploration More than units were ordered & delivered from mid-seventies to mid-eighties Offshore Rig Sector : Fundamentals remain strong 7 Semi market is expected to be strong & ordering momentum to continue So far units ordered with deliveries till Source: ODS - Petrodata Sembcorp Marine Summary of Order Book Record high contracts secured in 7 The Group had a strong net order book of $7. billion as at end February with completion and deliveries till. Contracts secured in 7 stood at $. billion, which was 7 per cent more than. Based on the scheduled completion of these projects, the Group expects to be a better year than 7. S$' 7 (%) (%) (7%) (%) Contracts Secured to-date (exclude ship repair) Record contracts secured in FY 7 stood at S$. billion 7% more than FY & exceeding FY 's record high of S$. billion by % Contracts secured as at February stood at $ million. We expect to secure more 7 (%) (%) 77 (%) (%), (%) (%), (%) 7 Feb Conversion/offshore Shipbuilding Offshore Platform Rig Building : jack-up Rig Building : Semi-submersible,7,7 (%), (%) (%),, (%), (%) (%), (%), (%), (%),7 (%) S$' Net Order Book 7 7 Net order book at $7. billion Net order book expected to grow, 7, < , 77 (7%) (%) (%) (%), (%), (%) 7 (%),, (%), (%) (%) (%), (%), (%) (7%) (%) 7 Feb,7, (%),7 (%), (%), (%),7 (7%), (%) Drillship Semi-submersible Jack-up Source: ODS - Petrodata Semi-submersible Jack-up Ship Conversion & Offshore Shipbuilding

9 Schedule of Delivery & Completion (exclusive of ship repair) Jack-up Jack-up rig activities expected to be strong in Projects Year 7 st Jack-up (Deep Driller I)* Hardy nd Jack-up (Wilpower)* Aramco rd Jack-up (Soehanah)* Total th Jack-up (Maersk Completer)* Total th Jack-up (Deep Driller )* Reliance th Jack-up (WilSuperior)* Thang Long 7th Jack-up (West Triton)* Apache Corp, Australia th Jack-up (PetroJack II)* International Drilling Contractor th Jack-up (Hakuryu )* th Jack-up (PetroJack III)* Maersk th Jack-up (WilForce) th Jack-up (Aban)* th Jack-up (Deep Driller 7) th Jack-up (JackInvest I) Shipbuilding Shipbuilding activities will scale down with resources channeled to growing rig building and offshore production sectors Will deliver to units per year from onwards Projects Year 7 st unit, TEU container (Wan Hai Lines) nd unit, TEU container (Wan Hai Lines) rd unit, TEU container (Wan Hai Lines) th unit, TEU container (Wan Hai Lines) th unit, TEU container (Wan Hai Lines) th unit, TEU container (Wan Hai Lines) st unit, TEU container (R F Laeisz) nd unit, TEU container (R F Laeisz) st unit, dwt tanker (Kuwait Oil Tanker) nd unit, dwt tanker (Kuwait Oil Tanker) Fabrication of units floating pontoons Completion th Jack-up (WilSeeker) th Jack-up (Offshore Grp Vantage Energy Corp) 7th Jack-up Barge (Aramco)* Ship Conversion & Offshore Ship conversion & offshore sector expected to be strong for FY 7 th Jack-up (Offshore Grp Vantage Energy Corp) th Jack-up (WilConfidence) th Jack-up (PetroProd) st Jack-up (Offshore Grp Vantage Energy Corp) nd Jack-up (Offshore Grp Vantage Energy Corp) rd Jack-up (EDC)* Completion ( units on order) () () () () () () 7 units delivered ( units under construction) Projects Year 7 P- integration and commissioning P- marine conversion P- topside fabrication P- compressor modules YÙUM K AK NÁAB FPSO conversion FPSO Cidade do Rio de Janeiro MV conversion Semi-submersible Semi-submersible rig activities expected to be strong from onwards. ( )* denotes with charter contract FSO Cidade de Macae MV conversion P- integration and commissioning ConocoPhillips topsides Heavy Lift Derrick Pipelay DP Vessel Projects Year 7 Raroa FPSO conversion Joides Resolution Drillship conversion Lower semi-submersible hull (Atlantia) Aoka Mizu FPSO conversion st Semi-submersible (West Sirius)* Devon Energy Aker Smart I FPSO conversion nd Semi-submersible (West Taurus) Montara Venture FPSO conversion rd Semi-submersible (PetroRig I)* Petrobras Semi-submersible conversion (Noble Danny Adkins) th Semi-submersible (PetroRig II)* Petrobras Semi-submersible conversion (Noble Jim Day) th Semi-submersible (PetroRig III)* Pemex DP Heavy Lift Crane Vessel th Semi-submersible (West Orion) CPOC Offshore Platform Integrated Deck 7th Semi-submersible (Atwood)* Chevron New Offshore Platforms for Tunu Field Completion (7 units on order) () () () () () () () ( )* denotes with charter contract Conversion to DP Accommodation & repair vessels ( + ) Completion