Saipem will shut two fabrication yards and scrap three vessels in 2022 as a part of its strategy to reduce fixed costs amid a general reorientation centred on adapting to the energy transition.

Commenting on these planned cuts and Saipem’s new strategy, chief executive Francesco Caio admitted it will not be easy, but stressed it is necessary.

“I know very well that it’s not going to be a walk in the park to put a new organisation in place at beginning of next year,” he said.

Simple, cohesive and less bureaucratic

“We need to be a more simple, cohesive and less bureaucratic organisation, with a clearer central set of directions and tighter alignments between everything we do.”

Speaking during Saipem's recent 2021-2025 strategy presentation, Caio said “we have decided to exit the fabrication model that Saipem has been working with for quite a while”, and highlighted the company’s “detailed plan” to close three fabrication yards by 2025.

"Not helpful"

Asked by an analyst to name the yards that will shut-up shop, he said: “I don’t think it would be particularly commercially helpful at this stage.”

However, Caio was quick to stress that its Arbatax facility in Sardinia, Italy — operated by Intermare Sarda — will not be affected.

“They’re not in Italy.”

Saipem’s website and annual report indicate it has nine other yards on its books.

Nine other yards

These include three in Africa: Rumuolumeni in Nigeria operated by Saipem Contracting Nigeria; Ambriz in Angola operated by Petromar; and Pointe Noire in Congo-Brazzaville operated by Boscongo.

The Asian facilities are Karimun in Indonesia operated Saipem Indonesia; Kuryk in Kazakhstan operated by Ersai; Damman in Saudi Arabia operated by Star, plus Rumaila in Iraq, operated by Saipem.

Its yards in the Americas are Guaruja in Brazil, operated by Saipem do Brasil, and a facility in Edmonton, Canada.

One source familiar with Saipem suggested yards in Canada, Brazil, Iraq and Kazakhstan could be among those affected by closure, although this could not be confirmed.

While Caio did not name the yards to be closed, he indicated the closures are aligned with Saipem’s project revenues for certain regions.

Revenue generation

“The cost cutting is thoroughly in line with project revenues.”

Given Saipem expects a significant pick-up in activity in West Africa next year, the yards in Nigeria, Angola and Congo-Brazzaville would appear to be safe for the time being.

Chief financial officer Antonio Paccioretti told analysts: “We see an acceleration of awards, particularly offshore West Africa.”

'Robust and resilent'

Touching on Saipem's future bidding strategy for offshore and other orders, Caio said selected opportunities will have to be "robust and resilient with the capacity to generate margins which are well above our fixed costs".

Also feeding into Saipem’s decision-making on yard closures is its forecast for future contracting opportunities in various regions.

$26.6 billion opportunity set

Saipem has identified €23 billion (US$26.6 billion) of opportunities in its engineering and construction business between now and 2025 — €4 billion in the Americas, €5.5 billion in Europe, €4 billion in Africa, €7.5 billion in the Middle East and €2 billion in Asia Pacific.

Explaining the rationale behind these closures, Caio said it is partly to reduce fixed costs and partly to pursue opportunities that add more value than fabrication work.

“The market is very different from when Saipem decided to open its own yards. We can create more added value from other services rather than keeping capital tied to yards.”

He said if fabrication capacity is needed, “there might be more specialised players that can help us".

'Idleness' cut

As for Saipem’s plans to scrap two vessels next year and three more by 2025, Caio said this would reduce vessel “idleness", adding that “if we need capacity, we will lease it".

Saipem’s fleet of offshore vessels includes Castorone, Saipem FDS, Saipem FDS 2, Saipem 7000, Saipem Constellation, Normand Maximus, Saipem 3000, DeHe, Castoro II, Castoro 10 and Castoro Sei.

It is unclear if the “vessels” to be scrapped include units in Saipem’s offshore rig fleet — some of which is leased — given its expected contribution to revenues and margins in the coming years.

Other efforts by Saipem to reduce fixed costs by 2025 include the closure of three engineering hubs – one will shut next year – and 14 offices, with 10 closing in 2022.

These cuts are expected to generate savings of €100 million next year and €300 million by 2025.

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