- POSTED: 31 Dec 2013 23:43
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China has surpassed Singapore in becoming the global market leader in building oil rigs. But as Singapore rigbuilders continue to maintain their technological advantage and a strong track record of on-time delivery, some analysts remain upbeat about their prospects.
SINGAPORE: China has surpassed Singapore in becoming the global market leader in building oil rigs this year.
But as Singapore rigbuilders continue to maintain their technological advantage and a strong track record of on-time delivery, some analysts remain upbeat about their prospects.
Orders for oil rigs placed two to three years ago were completed progressively this year.
This has helped Keppel FELS deliver 21 new rigs this year - a world record for rigbuilders globally.
But 2013 also marks the year that Singapore lost its top spot as the global market leader in building rigs.
Vincent Fernando, director of ASEAN Research at Religare Capital Markets, said: "We can expect to see lower margins on revenue next year. And that is what we saw this year too.
"So revenue is quite strong but margins are down year-on-year for Singapore, and that is why earnings growth did not come through. It won't be so much of a shock in revenue, but we could see some disappointment in the margins."
In 2013, Singapore secured 26 per cent of all contracts awarded to build drilling rigs - lower than 33 per cent in 2012.
China has now gained 32 per cent of the global market.
Singapore rigbuilders are also facing stiff competition from South Korean yards, which were the market leader in 2011.
But analysts have said share prices of Singapore-listed rigbuilders will be well-supported, given that oil prices are expected to hover at around US$110 per barrel.
Desmond Chua, education business consultant at CMC Markets, said: "If we look into the broadbased sector, in fact, nearly nine out of 10 sectors have lagged. We have lagged in the global space.
"In terms of whether the offshore and marine sector will outperform next year, I think it stands a better chance with the oil price staying above the US$100 level."
The demand for oil should boost demand for new rigs and maintenance.
While some market watchers warn that rising costs have dampened capital expenditure from oil producers, Keppel Corp said it has managed to keep operating costs down.
Wong Kok Seng, managing director (offshore) of Keppel Offshore & Marine, said: "We are a designer and user as well. So we are able to look at it and construct it in the most cost effective way. We have volume and volume does help with the economy of scale."
OCBC Investment Research notes that Singapore rigbuilders should go into 2014 with record order books - Keppel Corp at $16.1 billion and SembMarine at $13.5 billion - keeping them fully occupied until 2019.