20
COSCO Corporation (Singapore) Limited
interviewwith
vice CHAIRMAN and president
Key Messages
3. Against the backdrop of falling oil prices,
how do you think the Marine engineering
segment will look like in 2015?
Recent reports have said major oil companies have
announced capital expenditure cuts, contract re-
negotiations, contract terminations and staff layoffs in
the exploration and production sector amidst declining
rig leasing rates and deployment.
The International Energy Agency (IEA) has said that
investment in oil production is expected to decline
by US$100 billion, or 15%, in 2015 compared to the
previous year.
Crude oil prices have fallen by about 60% since June
2014. OPEC had earlier in November 2014 maintained
its position not to cut output. It recently said it did not
expect oil prices to drop any further and predicted
non-OPEC oil supply growth to slow down including
US drillers producing less than previously projected.
In February 2015, the IEA predicted in its monthly oil
market report that oil prices would stabilise substantially
below the high levels of more than US$100 per barrel
enjoyed by producers over the last three years.
IHS Petrodata’s weekly rig count on 27 February 2015
showed that the worldwide supply of rigs totalled 869,
up from 835 a year ago and utilisation has fallen to
87.8% from 94.7%.
Our marine engineering segment is facing tremendous
pressure in the short-term. However, the longer term
outlook for Floating Production Storage and Offloading
(FPSO)/Floating Storage and Offloading (FSO), Shuttle
Oil Tankers, Floating Storage & Regasification Units
(FSRU) and Floating Liquefied Natural Gas (FLNG)
remains promising.
We have to continue gearing ourselves up and be ready
to take on higher value projects. This will ensure that
we have the sustained capability to capture potential
opportunities that may present themselves in these
times.
As at 31 December 2014, the marine engineering
projects include 25 units of platform supply vessels, 7
units of jack-up rigs, 4 units each of semi-submersible
accommodation vessels, subsea supply vessels and
emergency/response/rescue/field support vessels,
3 floating accommodation units, 2 units of semi-
submersible accommodation rigs, 1 FPSO, 1 Sevan 650
Drilling Unit, 1 semi-submersible tender assist drilling
rig, and 1 DP3 accommodation barge.
4. With the slower growth for shipping
services and the continuing global bulk
shipping tonnage surplus, what do you
think is in store for the dry bulk shipping
business in 2015?
In 2014, despite the overall decline in the dry bulk
shipping market, we were able to charter out most of our
dry bulk vessels at the start of the year when the Baltic
Dry Index (BDI) was relatively higher.
With the economic slowdown, demand for ships to
transport raw materials has declined. The slide in
commodity prices is an unwelcome indication that
economic conditions are not likely to get better unless
growth in most regions of the world recovers firmly.
Nonetheless, a strong recovery in emerging economies
is necessary to drive demand for commodities and spur
growth in the shipping sector.
The BDI was at 2,113 points at the beginning of 2014,
declining to 782 points at the end of the year, with an
average of 1,105 points for the entire year. However, the
Index fell to its all-time low of 509 points on 18 February
2015. Given the tonnage oversupply in the market, we
foresee our dry bulk shipping business will continue to
face considerable headwinds.
5. Taking into account the performance
of 2014, how do you see the market for
the shipbuilding, repair and conversion
segments in the new financial year?
We delivered 8 bulk carriers and 2 livestock carriers in
2014. Currently, our shipbuilding projects include 23
bulk carriers ranging from 35,000 DWT to 92,000 DWT,
5 oil tankers, 3 module carriers, 3 livestock carriers,
2 salvage lifting vessel, 1 LNG carrier and 1 cargo &
training ship.
The majority of the vessels repaired at our yards were
bulk carriers, followed by container ships, tankers,
chemical ships and others.
The Clarkson Newbuilding Price Index recovered from
June 2013 at 126 points and peaked at 140 points in
mid-2014 before declining to 138 in December 2014.
Correspondingly, the China Newbuilding Price Index had
