Singapore Shipbuilding
Singapore is the only major oil and gas hub with neither of these raw materials. Its strength lies in its strategic location at the entrance to the Strait of Malacca. This has helped the country to become one of the most important shipping centers in Asia. The Port of Singapore is the world's busiest in terms of shipping tonnage. Its ship repairing skills have graduated to ship building and on to the construction of oil rigs, for which the country has patented cutting-edge technology and building know-how. Singapore is home to the world's two-biggest oil rig builders - Keppel and Sembcorp Marine.
The Singapore Marine Industry has seen significant growth over the last 40 years, evolving from a small regional ship repair andbuilding centre into a world-class industry that serves international clientele. The industry includes ship repair, shipbuilding, rig building and offshore engineering, and other marine supporting services. Today, Singapore is one of the world's premier ship repair and ship conversion centers as well as a global leader in the building of jack-up rigs and the conversion of FPSO (Floating Production Storage and Offloading) units. Renowned for its reliable and convenient range of comprehensive marine services, Singapore is a one-stop marine center for shipowners, managers and agents around the world. Employing some 100,000 workers, the marine industry plays a crucial part in Singapore's economic growth.
Ship repair and conversion form the backbone of the local marine industry, accounting for more than half of the total revenue. Singapore ship repairing has gained international recognition for its specialised re-construction jobs, which range from conversion to jumboisation. The extensive capabilities in ship repairing means a multitude of repair, reconstruction and conversion jobs can be carried out. The versatility of local shipyards is reflected in the wide range of ship conversions undertaken. Ship repair is carried out in shipyards and at the anchorage. To meet the needs of ship owners using the port, voyage repair are readily available on call. Projects include the conversion of car carriers to livestock carriers and tankers to FPSOs, just to name a few.
Singapore is also a niche player in the construction of customised and specialised vessels. Over the years, Singapore shipbuilders have earned a reputation for good prices, quality workmanship and short delivery time, for a range of specialised and customised vessels. Shipbuilding has progressed from minor projects such as the construction of wooden hulled boats and fishing boats to major projects like steel vessels and specialised ships. Vessels built include cable ships, container vessels, product tankers, naval ships, landing ship tanks and patrol craft.
The prospects for Singapore's shipbuilders have taken a brighter hue, thanks to the robust health of the shipping and offshore industries. With the intensified search for oil and gas extending into ever-deeper waters, a new generation of offshore support vessels (OSVs) is required to cater to the unique demands of deep-water support operation. Existing OSVs which were built in the 1980s would be hard pressed to meet the stiffer requirements.
With their forte in offshore construction, Singapore shipbuilders have been able to secure a fair share of the OSV contracts. The shipyards are also benefiting from the current newbuilding boom which has filled building berths across Asia, allowing those with building slots to command premium prices. In 2004 the shipbuilding sector registered an increase in gross revenues of 23% over 2003, following the completion of 97 vessels totalling a gross tonnage of 149,855 grt. Shipbuilding, the smallest sector within Singapore's marine industry, contributed 16.8% of the industry's total revenue.
Driven by the offshore boom, demand for OSVs has never been greater. However, supply is limited because of the relatively low level of newbuildings over the last two decades. As the average age of the current global OSV fleet is over 20 years, maintenance costs are prohibitive. With higher safety demands, many of the ageing vessels may have to be scrapped. Industry insiders estimate that over 1,000 of these ageing vessels will need to be replaced.
However, demand is spiralling up, with the increasing world dependence on offshore oil and gas. American Bureau of Shipping (ABS) Pacific Division president and CEO, James B. Liebertz, expects offshore oil production to increase from 34% in 2004 to 39% by 2015. As production in shallow waters has been declining, exploration and production are venturing into ever-deeper waters. Mr Liebertz said that in the late 1970s the frontier for offshore drilling was in 600 feet of water. By 2004 it was up to 10,000 feet. By 2010, it has been estimated that most, if not all, of the offshore growth came from deep water. By 2015, deep water will account for 25% of all offshore production, up significantly from the current 9%. Supporting such deep-sea operations located well away from shore bases would place greater demands on OSVs. The new generation of OSVs will have to be larger, more powerful, more manoeuvrable and are outfitted to respond to a wide range of potential emergencies.
The surge in demand is a boon for Singapore shipyards. As at September 2005 Keppel Singmarine Pte Ltd, a wholly owned subsidiary of Keppel O&M, has 22 vessels under construction, having delivered nine since the beginning of 2005. The strong order book made the shipyard one of the largest builders of OSVs in the world. Other keen contenders for OSV contracts in Singapore are Jaya Shipbuilding & Engineering, Labroy Shipbuilding and Engineering and Pan-United Marine.
The growth in intra-Asian trade is a boon for Singapore shipyards. As the biggest workshop in the world and the fourth largest trading nation importing and exporting in excess of US$800 billion in 2004, China is the catalyst. Raw materials and semi-manufactured goods are shipped to China to be processed or manufactured for export to third countries. Equally important for the region is the ASEAN Free Trade Agreement (AFTA), which came into effect in 2003. With the removal of tariff on automobiles and auto parts for instance, chassis can be manufactured in one country, seats and shock absorbers in another, and wheels in a third. Under AFTA, applicable for the six more developed ASEAN countries, products manufactured in any ASEAN country will not attract any tariff or duty if there is at least 40% local content. This increasing interdependence has given rise to a growing demand for shipping space which existing vessels cannot provide adequately. With their established track record, Singapore shipyards have secured contracts for the smaller container ships of up to 2,600 TEUs.
In 1969, Singapore delivered its first jack-up rig. Five years later, it grew from infancy to become the largest builder of jack-ups in theworld. Today, it still enjoys this premier status. Singapore's rig builders are competent in repairing, upgrading, converting and buildingjack-up rigs, semi-submersibles, drill ships, drilling tenders and FPSOs. They also have the expertise and experience to produce rigs of their own designs.
The total revenue of the marine sector which includes the offshore sector was US$12.83 billion in 2009. This is roughly the same as the previous year at US$12.81 billion. Ship repair activities dropped from US$5.38 billion in 2008 to US$5.13 billion. This is small drop in value of about 5%. A more significant dropped was registered by the shipbuilding sub-sector which saw a 50% dropped in orders from S$1.67 billion in 2008 to US$0.64 billion in 2009. These declines were a reflection of the poor state of the world economy. The offshore sector however stopped the down trend. It showed increased revenue. It rose from US$6.14 billion in 2008 to US$7.06 in 2009 registering a 15 % growth. This growth was sufficient to push total marine receipts above the previous year albeit marginally.
The growth of oil and gas activities in the region started to spur offshore rig building activities in the late 1960s. Through gradual acquiring technological know how and skills, Singapore was able to develop itself to become a leading oil rig builder since the 1980s. Supporting marine services companies join the shipyards to offer comprehensive ship repair services thereby propelling Singapore to become a leading ship repair center. To compete against lower cost and emerging countries, the marine industry underwent a phase of consolidation which allowed the industry to maintain its competitiveness. Keeping attuned to market demands, the industry extended its scope to include also ship and offshore conversions and has today made a name for itself as the world leader in FPSO conversions with a market share of over 70%.
The industry has increasingly moved towards the area of capital intensive and knowledge-based work. Yards are able to offer complete solutions with proprietary designs and products that are some of the world's best in class. The industry has shown itself to have the resilience to ride the economic cycles, coming out of each cycle to attain new revenue highs.
Going forward, the marine industry will continue to position itself as a global center for ship repair, ship conversion, offshore construction and specialised shipbuilding. It will leverage on Singapore's good infrastructure and critical mass already built up by the shipyards and supporting companies to further entrench its position as a global leader. The industry will continue to focus on more complex and high value added jobs and enhance its capability as a solution provider. Investments in both human resource development and new state-of-art facilities will provide the foundations to bring the industry to anew competitive level that will allow it to be relevant in the coming decades.
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