Singapore’s Sembcorp Marine has changed its contracting strategy towards a more collaborative approach in the wake of market uncertainty and the logistical and workforce challenges remaining from the coronavirus pandemic.
Sembmarine expects its losses for the six months ended 31 December 2022 will be similar to those it racked up in the first half of this year, it said on Tuesday.
The offshore and marine contractor had posted a net loss of S$143 million (US$104.18 million at the current exchange rate) for the first six months of 2022.
Although project executions were “relatively smooth”, Sembmarine admitted it continued to contend with higher costs stemming from the impact of the pandemic on hiring and retaining workers from traditional labour markets and the skilled labour it had to hire from countries such as China and Malaysia to complete delayed projects at its yards in Singapore.
In particular, the repatriation of the temporary workers from these higher-cost alternative sources — the contractor typically employs workers from South Asian nations such as Bangladesh and India — has been significantly delayed until the fourth quarter this year due to border restrictions and the unavailability of flights to their home countries.
“These delays led to increased one-off costs,” the contractor confirmed.
“The plan was for these [temporary] labourers to be demobilised and sent back to their home country some time in the middle of the year,” Sembmarine finance director William Goh told analysts and media on a conference call.
Goh said that while these temporary workers had been deployed to work on other Sembmarine projects while they remained in Singapore unable to return home, this translated to a higher labour cost than the company had been expecting in the third quarter.
To improve efficiency and profitability, Sembmarine is taking a new look at business and contracting formats.
“To get the job done in this current situation, one of the important elements we consider is the collaboration with industry to enable us to get more contracts and to deliver in a particular time frame,” Goh told Upstream.
The contractor has enjoyed a run of newbuild awards, including a S$4.25 billion contract for Petrobras’ P-82 floating production, storage and offloading vessel.
So far this year, Sembmarine has won new work worth in excess of S$6.71 billion, including S$420 million of repairs and upgrading contracts.
It has successfully completed projects that include the P-71 FPSO destined for Petrobras’ Itapu field offshore Brazil and the Gallaf Batch 2 project for North Oil Company that involved two wellhead platforms for the Al Shaheen field offshore Qatar.
“It is also important for us that we collaborate to complement what resources we have available at a specific time for us to secure the work. I think with this type of strategy, we are able to provide a valuable execution plan,” Goh said.
He added that collaboration is now also employed when the company is drafting its engineering and design proposals for a project.
Also, while Sembmarine remains essentially a fabricator, it has invested in an automated workshop and Goliath cranes with 30,000 tonnes’ lifting capacity as it keeps pace with the ever-evolving market.
Looking ahead, Goh said Sembmarine expects further collaboration, even with yards outside Singapore, to secure workscopes that might otherwise be beyond its capacity.
The contractor’s marine repairs and upgrades business continued to gradually improve into the third quarter, albeit this improvement was lower than expected due partly to the residual effects of Covid-19 measures.
Sembmarine’s recent successes included a deal with New Fortress Energy to likely ultimately repurpose two Sevan cylindrical hulls into floating liquefied natural gas facilities, the first firm one of these units is due for delivery by the end of June 2024.
Also, Sembmarine’s wholly owned subsidiary Sembmarine SLP recently secured an exclusive planned preventative maintenance (PPM) contract for Orsted’s Hornsea 2 offshore wind farm project in the UK.
Next year, Sembmarine will be targeting new work including floating production units and offshore wind farm installation vessels and — depending on the timing of project sanctions — potentially also offshore wind farms, Goh added.
The contractor also envisages continuing demand for FLNG vessels and floating storage and regasification units, and these could also be on its radar.
Sembmarine expects margins to be “very compressed”, Goh said and he warned there remains uncertainty over further impacts from the pandemic.
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