OPINION: Keppel's decision to exit the offshore drilling rig construction business may have sent shockwaves through the sector, but Chinese yards are unlikely to follow the Singapore builder's lead in making any such announcements.

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Last week, Keppel said it will quit offshore rig building as part of its transition to being a developer and integrator of offshore energy and infrastructure assets.

Officials at the yard said the announcement reflects the dim near-term outlook for the offshore rig sector, which has been hit by low drilling activity due to poor oil and gas markets.

The Covid-19 pandemic has reduced the number of newbuild rigs from 27 units in 2019 to just five last year, and no newbuilds have been chartered since March.

Keppel has recently seen a number of rig-building contracts terminated, with owners demanding refunds.

The rig-building business ate into Keppel’s margins last year, with second-half profit plunging by 91%, in part due to the rig impairments.

Keppel's move may have been eye-catching, but Chinese yards have already set off on their journey to shift from rig building to offshore wind vessel construction.

Already they are among the world’s busiest yards in terms of offshore wind farm installation vessel construction as the country gears up to expand renewable energy infrastructure to help reduce its reliance on fossil fuels.

Even if Chinese yards wished to leave the ailing rig-building sector, do not expect them to advertise their exit as Keppel has.

(This is an Upstream opinion article.)