Singapore’s Sembcorp Marine has been dealt some harsh blows by the global coronavirus pandemic, both directly and indirectly, and the offshore and marine contractor is not out of the woods yet.
“While we have made some progress in managing the delays in project completions, shareholders should note that Covid-19-related measures continue to have a serious impact on the group’s performance,” said Sembmarine, warning of further considerable financial losses on Tuesday.
Past outbreaks of the virus led to work being suspended and the contractor having to shut one of its yards for a period.
In April 2020, just as Covid-19 was starting to make its presence felt in Southeast Asia, Sembmarine work was massively scaled down at its Singapore fabrication facilities with the aim of reducing the risk of the transmission.
These measures particularly targeted the many workers and subcontractors staying in dormitories, which the Ministry of Health had identified as growing focus of Covid-19 infection.
One of the projects impacted by this suspension of work was Energean Oil & Gas, which was having a floating production, storage and offloading vessel for the Karish field development offshore Israel built at Sembmarine’s Admiralty Yard.
Also in April 2020, the contractor had a Covid outbreak among its largely migrant workforce at Sembawang Shipyard, which prompted the Singapore authorities to close that facility.
This yard was only given the all-clear to reopen after there were no new cases linked to it for 28 days, with the shutdown slowing work on some projects at that facility.
Then, in the following month the final four turret modules for Equinor’s Johan Castberg FPSO arrived from Dubai at Sembmarine’s Admiralty Yard which was already playing catch-up from its earlier shutdown.
Work on Energean’s floater only restarted on 2 June despite having arrived in mid-April for topsides integration, during what was initially expected to be a two-week temporary shutdown.
Plagued by delays
Delays soon started to plague other projects at Sembmarine’s yards as logistical challenges related to the pandemic also took their toll.
The offshore and marine contractor also had to contend with supply chain issues amid the increasing difficulty in sourcing skilled workers as Singapore effectively shut its borders to everyone except citizens, permanent residents and long-term pass holders.
And almost everyone entering the island nation was subject to 14 days' quarantine.
"Resolving the skilled manpower shortage on a timely basis is the group’s key priority to address the risk of project delays or terminations," the contractor said in May 2021.
At that time, it was working closely with clients to mitigate construction delays and reschedule delivery dates.
Two months later Sembmarine confirmed that, since the start of the pandemic, the majority of its projects have been delayed by at least 12 months.
The contractor has been actively recruiting additional skilled labour from non-traditional sources, such as China and Malaysia, as Singapore’s borders remain effectively closed to migrant workers from South Asia.
However, the disruption of supply chains and workforce reductions continues to affect Sembmarine’s productivity - impacting the progress of its projects, resulting in delays and unforeseen cost overruns, the company said on Tuesday.
In the third quarter, Sembmarine’s continuing execution challenges included: delays in delivery of equipment arising from border controls in certain countries; purchase of new components requiring a longer lead time due to supply chain constraints; slower than expected recruitment of additional skilled labour; the continuing attrition of skilled workers; work disruptions, including stop work orders, resulting from measures taken to address the recent Covid-19 spikes.
Of the 16 oil, gas and renewable energy projects under execution, five have now been further delayed by between one to three months.
“As the Covid-19 pandemic persists, the group continues to face serious challenges and risks.
"However, we are determined to ride through this difficult period, and remain committed to completing our projects,” said Sembmarine.