OPINION: A memorandum of understanding signed last week between Sembcorp Marine (Sembmarine) and Keppel Corporation that puts a merger between Sembmarine and Keppel Offshore & Marine on the table comes more than a decade after such a tie-up to create a Singapore super-contractor was first aired by industry observers.

Although the contractors have different niche specialities — Keppel O&M has historically focused on newbuild jack-up drilling rigs and conversions of floating storage and regasification units, while Sembmarine has constructed offshore platforms and floating production, storage and offloading vessels — a merger, and the expected streamlining, would help eliminate any duplication of skill sets.

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There is no doubt that the last 12 months have been challenging for oil and gas contractors but, even before the onset of the coronavirus pandemic, the Singaporean pair have had to contend with growing international competition, particularly from yards in China that previously did not have the expertise or track record to secure lucrative overseas contracts.

The pandemic hit Sembmarine and Keppel with a double whammy. Not only were there outbreaks of the virus at their yards — which meant workers having to down tools — but the Singapore government put in place stringent conditions to curb its spread, leading to a limited numbers of employees being allowed at their facilities.

The pair, like many Singapore-based companies, rely heavily on foreign labour — typically from the Indian subcontinent and the Philippines — for most of their workforce, and filling these positions continues to prove challenging with international travel restrictions still in place.

Last year also saw many operators put upstream plans on ice. Field development projects that had been expected to progress — and which would have seen tenders for platforms and floaters hit the streets — fell by the wayside, meaning less work for Singapore’s two flagship yards.

A merger of Sembmarine and Keppel O&M — should it go ahead — could establish a super-contractor in Singapore for years to come.

It would, however, also mark the end of an era for the Lion City, and could yet take a heavy toll on jobs.

(This is an Upstream opinion article.)