19
Annual Report 2014
1. What efforts have the company made in
2014?
In 2014, marine engineering continued to be a major
contributor. Despite many challenges, we have
continually improved our technical competency and
execution capability and received support from our
customers.
Our efforts in further developing our marine engineering
segment has made a great difference to the Group’s
performance over the years, especially when the dry
bulk shipping market took a steep dive after the financial
crisis.
If we had not managed change and gone into the marine
segment of the market as one of the first movers in
China back in 2006, we would have been in a more
difficult position today. We have over the last eight years
been restructuring and re-engineering some of our major
yards in China for higher value projects, such as semi-
submersible drilling rigs, jack-up drilling rigs, drilling
tender barges, accommodation rigs and vessels, wind
turbine installation vessels, heavy lift pipelay vessels
and offshore support vessels.
We have made considerable headway in our construction
capability, and the yards’ technological base is today
more advanced than before. Our shipyards are able
to deliver more sophisticated products with new and
complex specifications. For instance, we had in July 2014
delivered “Kai Xuan Yi Hao”, a LeTourneau Workhorse
jack-up drilling rig with a number of major technological
and production breakthroughs for COSCO. The rig
operates at depths of over 400 feet and drills at depths
of up to 35,000 feet. It has been deployed by its Chinese
operator in the East China Sea.
During the year under review, delivery was made for
a deepwater pipelay heavy lift vessel capable of oil
pipe processing, laying, installation and heavy lift
work. We also delivered two drilling tender barges, the
“EDrill-1” and “EDrill-2” which incorporate high-end
specifications. These units are equipped with lightweight
Drilling Equipment Set (DES) and are amongst the better
designed units built so far for the tender barge market.
Another notable project was the first Rolls-Royce UT
771 CDL design supply vessel with a loading capacity of
3,800 tonnes and accommodation for 46 crew.
While we have been able to increase our share of marine
engineering projects, I must emphasise that we will
continue to maintain our capability to build a wide range
of transport vessels, including bulk carriers, livestock
carriers and oil tankers, and hopefully increase our share
of the ship conversion and repair business.
I believe the diversity of our shipyard capability has been
a source of strength in the last few years.
2. What are your observations on the various
scenarios given by economists and analysts
on the global economy and the maritime
market following the sharp drop in oil
prices?
Recently, there have been a lot of news reports and
projections on the world economy in 2015. Although not
all of the forecasts are congruent, the general consensus
is the world economy may recover slower than it was
expected months ago.
The International Monetary Fund (IMF) in its January
2015 Outlook report said that higher oil supply and
lower prices would give the global economy a boost,
though this boost is projected to be more than offset
by negative factors including investment weakness
due to lower expectations about medium-term growth
in many advanced and emerging market economies.
It projected 2015–16 global economic growth at 3.5%
and 3.7%, down 0.3% relative to its October 2014 World
Economic Outlook. IMF said the revisions followed its
reassessment of prospects in China, Russia, the Euro
area, and Japan, as well as in some major oil exporting
countries where there could be weaker activity because
of the sharp oil price decline.
Current market conditions for our industry, especially
marine engineering, remain very fluid. There have been
differing views on how soon oil prices will bottom out
and after that, how long it will take for prices to reach
a sustainable level for offshore production to pick up
again. Already some companies in the energy and allied
industries are facing lay-offs, temporary shutdowns and
spending cuts and cancellations.
Our biggest concern is how deep the actual cuts in capital
expenditure for offshore exploration and production will
be, as they can have a significant impact on our order
book for drilling rigs, tender barges and other offshore
vessels going forward.
We will keep our fingers firmly on the pulse of the market
and maintain a steady course in our pursuit of excellence
within the organisation. We have to tread very cautiously
in the near term.
Key Messages
