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Singapore's O&M players invest for the next upswing: Asmi chief

SINGAPORE shipyards secured S$4.9 billion in new orders during 2015, demonstrating the willingness of some offshore and marine (O&M) players to invest and build up capabilities and capacities for the longer term despite the global economic downturn and uncertain market environment.

Association of Singapore Marine Industries (Asmi) president Chow Yew Yuen cited the data point in his report on the Singapore marine industry's performance in 2015.

Mr Chow acknowledged a significant slowdown in order intake, with new orders diving 49 per cent from the S$9.7 billion booked in 2014. This came on the heels of a cyclical downturn brought on by a collapse in oil prices and slow economic growth in emerging markets.

"Low oil price have led to significant reduction in exploration and production capital expenditure resulting in cut-backs in drilling activities and falling demand for drilling rigs," Mr Chow said.

But the decline in rig-building demand is partly offset by new order intake for non-drilling solutions. Among the significant contract wins are the world's first conversion of a large roll-on or roll-off cargo vessel to operate on a dual-fuel diesel liquefied natural gas (LNG) propulsion system, the conversion of the third Moss-type LNG carrier into a floating LNG vessel and the construction of the world's largest new semi-submersible crane vessel, according to Mr Chow.

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As at the end of 2015, the industry has a total order book of some S$19 billion, with deliveries stretching to 2020. This is a decline of 20.6 per cent from S$23.93 billion as at the end of 2014.

Mr Chow said the current storm of low oil prices and excess capacities in certain O&M sub-segments is the fourth down-cycle in the last five decades.

Singapore's O&M players "have learnt valuable lessons, improved ourselves and emerged stronger than before" weathering through each cycle, the Asmi chairman said. "Oil prices will eventually have to reach a new equilibrium, although no one can predict with certainty when that recovery will be."

To tide over the storm, "companies should brace themselves for a longer downturn by staying prudent and ensuring that overheads are under control".

But O&M players also need to diversify into new markets for growth opportunities.

"The shipping industry's demand for cleaner fuels and greener solutions opens up new opportunities in the emerging LNG market," he said.

He noted the move to provide LNG bunkering services in the Port of Singapore in 2017 will increase opportunities for the servicing of LNG services. To this end, Singapore shipyards have already embarked on developing technologies and solutions that cater to the LNG value chain, he said.

The Asmi chairman called on O&M companies here to make use of the space and impetus offered by the current market lull to invest in research and development to diversify and expand their products and services, enhance existing solutions, improve operational efficiency and develop new capabilities.

"We need to look at areas we can continue to improve to enhance our competencies and build up new strengths to prepare ourselves for the upturn," he said.

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