Axe to fall on hundreds more in Singapore oil & gas sector

Axe to fall on hundreds more in Singapore oil & gas sector

HUNDREDS more people in the oil and gas sectors will lose their jobs as industry contractors operating out of Singapore scale down further or exit the country altogether.

The Business Times understands that in addition to the 160 to 170 jobs that have been lost from the liquidation of Dolphin Geophysical Pte Ltd, leading floating production players BW Offshore and Modec and engineering giant Chicago Bridge & Iron (CB&I) are also retrenching in Singapore.

BW Offshore is said to be letting go 100 of the 300 people under its Singapore office payroll. This is in line with "an extensive cost reduction programme" that the Oslo-listed floating production contractor unveiled in a regulatory announcement.

In its Feb 19 Oslo Bors disclosure, BW Offshore said that it has initiated a "process to rightsize the organisation to fit the projected activity levels . . . that will affect about 35 per cent permanent onshore employees across global locations".

The move is part of organisational changes by BW Offshore to shave its annual cost base by around US$30 million. It comes as "macro conditions for the offshore industry (continue) to deteriorate over the past months" and the company expects "reduction in industry capital expenditure to continue".

BW Offshore's key competitor in the floating production space, Modec, is also understood to be drawing up a list by April of the staff to be laid off in Singapore.

One source said that the retrenchment exercise would affect mostly workers contracted for the execution of floating production projects out of Singapore.

Modec has a project team pulled together in Singapore to manage the conversion of a floating production, storage and offloading (FPSO) vessel earmarked for a contract with Tullow Oil TEN project off Ghana.

The Tullow Oil TEN unit is among two FPSOs on Modec's order book that are scheduled to enter operations in the second half of 2016, according to the company's Feb 10 results release.

The Tullow conversion project is undertaken by Sembcorp Marine's Tanjong Kling shipyard, which was subsequently contracted by Modec to build a floating storage offloading vessel destined to go on a charter in Maersk Oil's Culzean field off the UK.

However, the expectations are that members of the TEN FPSO may not be fully ported over to handle the Culzean FSO, not least because the two projects are likely to differ in their execution models.

The rightsizing of the Singapore operations of BW Offshore and Modec are taking place as new contract awards for floating production projects slump on unfavourable oil price movements and geopolitical instability in major demand centres such as Brazil.

Modec projected in its Feb 10 results that only five new contracts will be awarded in 2016 if oil prices stay in the US$50-70 (S$68.75-96.25) range. This comes after new contract awards more than halved to four in 2015 from 11 in 2014.

Compared to Modec and BW Offshore, CB&I - the third identified contractor - has a broader portfolio spanning the upstream and downstream segments of the oil and gas value chain, which cushions its order book against the current exploration and production budget cuts.

But CB&I is also said to be looking at exiting Singapore after having already reduced its staff strength here to under 100.

The engineering-focused contractor had several hundred on its Singapore payroll at the height of executing a standing contract with ExxonMobil for a gas project in Australia, a source said.

Job losses are piling up in Singapore's oil and gas sector, with most affected industry players seeking to trim costs in order to cope with the reality of operating under a persistently low oil price environment.

The Keppel conglomerate has reduced its global headcount by 6,000 and its Singapore sub-contract workforce by 7,900 while SembMarine has also unveiled job cuts for 3,000-4,000 positions at their FY15 results briefings.

BT also reported earlier that Technip, Subsea 7 and McDermott are either in the process of, or have completed shifting their operations out from Singapore to Kuala Lumpur.

The Singapore office of Technip once employed about 100 but is now down to a skeletal team of back office personnel handling accounts and human resources, sources said. Subsea 7 is due to complete its move to Kuala Lumpur by the third quarter and is said to be in the process of trimming at least two-thirds of its 90-strong team in Singapore.

For the adversely affected offshore marine sector, there are still hopes that oil prices - seen recovering consistently after dropping to US$20-plus in February - will rebound soon to US$50-60, a level deemed by many in the industry as necessary to revive expansion in offshore exploration and production spend.

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This article was first published on March 11, 2016.
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