July 27, 2021

18 thoughts on “Will Keppel Offshore & Marine and Sembcorp Marine Merge?

  1. Thank you…a good read especially from one who has domain expertise in the OG

    1. Dear sgdiv, thanks for dropping by and your compliments. Check out your website and see that u are an old timer in the blogosphere and wrote some wonderful articles. When the sudden stop lately in writing?

    1. Hi C plus, thanks for dropping by. Did spend some time researching the data and news on the HHI-DSME, but the rest mostly by opinion from experience.

  2. nice read for a sunday morning..

    i think SCM did well to est their mega yard. was there this year, and kinda reminds me of the smaller K-pop version (korean super duper mega yards of HHI, SHI , DSME. =) i recall being to these kpop yards many years back. and boy, was i mind blown. my legs always ached everyday, due to the sheer amount of walking from one end to the other, then up and down the rigs. literally, like a road march with PPE!. hah

    anw, back to the topic. i actually think the merger will go ahread. why? in any typical corp structure. there will always be those in the office (paper pushers) and those on the ground (tool pushers). one crunches numbers, the other does crunches. temasek is the former. and numbers will always look good for a merger.
    how many times have we seen paper pushers in office head butting with tool pushers on the ground, just becoz something looks good
    on theory, but not practical/feasible to be implemented.

    the only thing that is in their way, is the anti-competition trust.

    1. Hi bro, oh ya… its already sunday wo realising. Agree about SCM did well on megayard and heard it efficient. I was there several times too in office n also went onboard. Went to HHI and SHI in Korea too in recent yrs n lots of walking. In fact I was in SHI when the earth quake shook. But good thing is, u will not perspire as much compared to SG/Batam yards.

      Agree with paper pushers having more say. For me it is 50-50. But I do not think it will b this year, bcos the Covid situation does not really warrant an announcement of merger, bcos there will be restricted communications with anti-competition regulation.

      Also, business-wise, while KOM has already sold some fixed yard asset (I heard or understood – DYODD), SCM need to sell off more yards, which they are only at the beginning. The core problems now with both yards is not inefficiency from human resource point of view. Bcos they already trim down a lot during the oil crisis. The problem is external no demand from O&G and there are too many shipyards and excess capacity.

      Hence it is imminent within KOM and SCM to finish their internal problems structuring such as reducing no. of yards, before a merger makes more sense. So maybe next year, 1-2 years later. A merger now does not solve the core problem (which is lack of demand) they are facing.

      Diversification within them n downsizing yard capacity provides better solutions, I think. Just my own opinion

  3. Smm has no more sig yards to downsize anymore. They are left w their mega Tues yard and brazil yard, both with no utilisation. Would it be better to bite the bullet now and merge and downsize or drag on to help the employment rate in sg?

    Yes a merger now does not solve the lack of demand but it helps to reduce excess cost so that when demand resumes, they are in a much stronger position to compete against korean and china yards….

    1. i did not know that SCM has sold all their small shipyards and left with megayard n brazil yard.

      Where did u hear or read that info?

      Admiralty, Pandan, Tuas Crescent, Tanjong Kling, PT Karimum, PT SMOE yards all sold?

      By ttsh way in dealing with SCM, they told that SMM was already the very outdated abbreviations and were told to use SCM.

      Perhaps investors want merger, bcos it’s all $ and cents we care and all about ourselves. But do u know that in the last 2 yrs SCM were actually running short of capacity in terms of human resources when they took on just 1-2 or 3 projects.

      Their immediate soln is not merger, maybe for outsider n on paper, but merging NOW (i emphasize NOW) will not creat miracle improvement like what “on paper” investors think.

  4. For everyone’s info: Korean yards are always more expensive than SCM. But not sure if SCM under-quote. Korean yard eg SHI got project such as FLNG which is at the highest end worth more than $5bil in Coral South FLNG.

    SCM winning all the projects from Korea last 2-3 yrs. Eg Johan Castberg FPSO worth $490m. Shell Vito believed worth more than $1B. Shell Vito and also Technip Karish FPSO.

    Current Megayard is quite full with modules for Johan Castberg arriving for integration. Likewise Karish hull coming from China to megayard for integration. Shell vito is progressing.
    Shell Whale, they just signed the contract.

    Petrobras is also working on FPSO with SCM in Brazil.

    All these are big projects worth total billions.

    Hmmm… No utilization?

    Problem is as I mentioned above their margin is too low and often low skill set of new hire are not proficient as Marine sector lost a lot of talents and are no longer as efficient as in the past.

    If SCM and KOM merges now, more talents will lost, and in a very niche sector, it’s not as if, u can just hire people when u get new projects.

    Outsider or paper tiger like what FC mentioned are killing the industry. It is the loss of all the talents that is causing excessive high project costs unlike in the past when they are more efficient.

    Of course pricing is shitty as oil companies also squeezed due to lack of demand.

    Many good people in SCM left and many quit the industry, some went back to their home countries, bcos they felt unfair that after the oil crisis they were squeeze of their pay and bonus. Then 2 yrs ago, SCM received many projects and has a shortage of resources. Many fresh grads or people who are not familiar were employed. The old people who stay on have to teach the newbies which sometimes have higher salary than them and higher position than them.

    The old and experienced people cannot take this unfairness and left!

    There are many issues internally and not just as what outsider see, so SIMPLE AH…

    1. haha.. i guess that "no utilization" comment was a subtle reference to your reader above… i think he might meant more of "under utlization", rather than, "no utlization". the latter is a very strong word.. almost saying that there is zero activity, which i find it hard to believe too.

      i heard the korean yards produce their own steel? whereas, sg yards, import them from the likes of china/india/etc, which could be cheaper? from my conversation with operators, it appears that the korean-made usually carries a slight premium over the sg-made.

      previously, i stayed on one of french coy (dont want to mention name) support vessel, and capt invited me to the bridge for coffee. i casually mentioned looked like its been through some tough times.. and he gave a bemused look "its only 1 year old. but made in china, so what do you expect?" i think he was just being nice, thinking i was from china. he said, the coy made the decision to get from china, as delivery was fast and price was cheap. no other quotes came close. but the downside was the quality.

      back in the heydays there is a certain niche market ie. korean yards are known for their drillships and sg yards for the jack ups.i recall reading somewhere that >90% of Jackups are from sg-yards.

    2. Hi FC, I hate arguing in blog comments , but I prefer to tell the truth based on data and logic. Anyway, I am engineer by training! And frankly, I am not boasting, but I do know the industry at different levels over the years from young executives to several CEO levels, and involved in handson-dirty job onboard in early days, to project, to commercial to financial part of the business and travel widely to close many complex deals.

      I agree on the utilization which you assume it means low in utilisation, but it is also not fair you assume on behalf on another reader, when the fact is, it was written as “no utilization”.

      Actually if you look at Megayard, they are actually quite high in utilisation. If you are not in shipbuilding, there are many technical and production related things many people does not know. Consider Megayard has several mega projects in range of >500 or >1B projects Equinor Johan Castberg, Shell Vito, Shell Whale, Technip Karish, how can it be considered under-utilise?

      Hereema Slepnir is one project SCM delivered last year. Reported in the news: At its peak, the construction of Sleipnir involved up to 3,700 workers in a single shift. It is not lies.
      https://www.sembmarine.com/2019/05/24/sembcorp-marine-completes-worlds-biggest-and-strongest-semi-submersible-crane-vessel-for-heerema

      So do you think reckon that it is wrong to say that SCM is under-utilized? Just 1 project in Hereema needs 3700 workers in 1 shift!

      Perhaps going forward in 2021 and 2023 low utilization and definitely not the last few years.

      And also, I am not wrong to say about selling other yards when there are so many yards in SCM : Admiralty, Pandan, Tuas Crescent, Tanjong Kling, PT Karimum, PT SMOE yard, aside from Mega and Brazil. Hence the problem is we cannot make a very firm statement when we do not know the truth or have not done sufficient research.

      I just want to be fair to the readers that they are receiving the truth on data. And of course, there will be part on opinions, which I will state it is my opinion.

      Hope you understand. This is also what I just taught my kids that we must be fair and be responsible in the words we speak and the words we write.

      🙂 Ok, stay safe bro!

    3. About the French captain, he is probably right on the inferior quality of China compared to Euro or Korean or SG built quality. But then again, it is very unfair to make that comments. Captain normally only prefer the ships they operate to be the best technically or to suit what they use to operate.

      But in business, we have to look at all aspects. Yes, inferior by how many % but, the pricing is so much cheaper, and overall, it is still a value deal and as long as the ships can do its work. To tell u the truth, I knew tons of Westerners who are also biased against Asia also. I knew many Euro or US products, they are not as good either but super expensive. In the past maybe…but nowadays, perhaps do not always think Europe is more superior. We have to look at overall Value versus price.

      I knew the Korean yard management levels. It was definitely more expensive than SCM not because of higher quality, but because they are very rigid still, and labour in Korea is much more expensive as they use Koreans, but we use B'desh and Indians, and Chinese!

      This is a fact, I heard from many Koreans on real projects they lost. And I went there often in the last few years. Not anymore… as I am also involve in land Construction biz, and other segments aside from Offshore.

      The drillships saga is gone in Korea. They under-quote and almost go bust if not for state salvage I believe. You can go google.

  5. concidently , came across this..

    "Segmentally, revenue from the O&M division increased by $237 million to $569 million due mainly to higher revenue recognition from ongoing projects. Major jobs delivered by Keppel in 1QFY2020 include a jackup rig, a dual-fuel bunker tanker and a Floating Production Storage and Offloading vessel (FPSO) modification and upgrading project."

    https://www.theedgesingapore.com/capital/investing-ideas/keppel-corp-gets-buys-all-around-multi-business-strategy-remains-promising?utm_source=WeekdayEDM&utm_medium=email&utm_campaign=FREE

    1. Yes, problems for KOM and SCM is not over-utilisation in the last few years. Trust me! and you can see for yourself above figures. It is low Sell Price because Clients just squeezed the price down and they lost too much talents and have project over-runs or poor estimation of costs upfront taking contracts at low margin they thought. But when project finished, they lost money.

      But of course going forward, they will have less O&G orders. But that said, KOM n SCM did get lots of Wind projects, and Solar Projects! And they also use their yards to fabricate other stuffs for their parent company I believe. DYODD.

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