OFFSHOREMARINE A newsletter of Keppel Offshore & Marine 2Q Issue 2017 MCI (P) 112/05/2017 SETTING NEW MILESTONES CONTENTS Demonstrating resilience 3-7 Taking the helm 8 Greater synergy 9 Building the world’s first EU Stage 10 V dredger Steady stream of repairs and conversions 11 State of the art drilling rig delivered in 12-13 Azerbaijan Renewing friendships at OTC Houston 22-23 Centrespread 18 Strengthening union ties 25 WSH outreach 26 Distinguished partner award 29 Celebrating friendship 34 As part of its regular engagements with key CENTRESPREAD stakeholders, Keppel Offshore & Marine hosted Keppel to deliver world’s first 18-20 Mdm Halimah Yacob, then-Speaker of Parliament, to converted FLNGV a dialogue session on 23 May 2017, during which a range of topics focusing on employees’ well-being was TECHNOLOGY & INNOVATION discussed. Tightening up on safety 27 EDITORIAL BOARD EDITORIAL ADVISOR Chris Ong EDITOR Ang Ting Yang ASSISTANT EDITOR Jayne Yeo COMMITTEE MEMBERS Michael Chia, Chor How Jat, Abu Bakar Mohd Nor, Dr Foo Kok Seng, Aziz Merchant, Hoo Yao Lin, Hayley Teo, Priscilla Chong, Alan I. Claveria, Gabriela Soares, Li Gang, Lee Wan Jun, Linda Mercado, Roy Tan, Brian Lee OffshoreMarine is a quarterly publication of Keppel Offshore & Marine Ltd 50 Gul Road, Singapore 629351 Tel: +65 6863 7200 Fax: +65 6261 7719 / 6265 1927 Company registration no. 199900642R Keppel Offshore & Marine is a subsidiary of Keppel Corporation 2 OffshoreMarine 2Q Issue 2017 Demonstrating resilience Despite the strong headwinds faced in the offshore sector, Keppel Offshore & Marine (Keppel O&M) continued to perform creditably in the first half of 2017. Mr Loh Chin Hua, CEO of Keppel Corporation and Chairman of Keppel O&M, discussed strategic developments and outlook at Keppel Corporation’s 2Q & 1H 2017 results briefing. OffshoreMarine reproduces highlights of his speech. We have had a busy quarter, opportunities and developing Building on strong relationships during which Keppel continued to new capabilities to strengthen with our network of customers, make important strides towards Keppel O&M. Keppel O&M secured contracts of strengthening our track record as around $300 million, year to date, a solutions provider for sustainable STAYING RESILIENT including for newbuild Liquefied urbanisation. Amidst the continuing downturn, Natural Gas (LNG) carriers and Keppel O&M achieved a million dredgers as well as Floating Three weeks ago, we held dollars in profit. Rightsizing efforts Production Storage and Offloading the naming ceremony for the undertaken by Keppel O&M (FPSO) conversions. world’s first converted Floating helped to achieve an operating Liquefaction Vessel (FLNGV), profit of $36 million, but it was We have closed the deal for the Hilli Episeyo, at Keppel Shipyard. not sufficient to cover higher novation of the five Transocean financing costs for the enlarged rigs to Borr Drilling and received Even as we navigate through the working capital. Contributions the downpayment of challenges faced in the offshore from associates helped the Division US$275 million, which has sector, we are seizing to break even. Continues on page 4... Keppel O&M delivered three major projects in 1H 2017, including FPSO John Agyekum Kufuor (pictured) OffshoreMarine 2Q Issue 2017 3 Continued from page 3. We are on track to deliver the world’s first FLNGV conversion in partnership with Golar LNG within three years and with a safety record of 18 million manhours worked without Lost Time Incidents. The converted FLNGV will be a game changer in the LNG industry, providing a solution that is not only significantly more cost effective but also much faster to market. The second vessel for Golar, the Gandria FLNG, is slated for deployment by Ophir in Equatorial Guinea. In May 2017, Ophir announced the signing of the Through its subsidiary, Caspian Shipyard Company, Keppel O&M delivered Heydar Aliyev (pictured), the first modern semisubmersible to be almost completely built in Azerbaijan Umbrella Agreement, one of the four key milestones required for improved the Division’s cash flow. excluding our projects for Sete the Final Investment Decision (FID). The first two rigs will now be Brasil. We will continue to focus We look forward to embark on delivered in 2018 and a third in on executing our projects safely, the conversion once we receive the 2019, while the remaining two will on time and on budget, and with Notice to Proceed after the FID is be delivered in 2020. the quality synonymous with achieved, which is expected to be Keppel. in 2H 2017. Despite some pick-up in activity in the offshore market, the In 1H 2017, Keppel O&M delivered To streamline operations general consensus is that, with three major projects – an FPSO and effectively capture new the prevailing uncertainty in the conversion for Yinson Production, opportunities, Keppel O&M oil market, and oversupply in the an FPSO integration for recently reorganised its operations jackup market, a quick recovery is BW Offshore and a into two divisions – the New unlikely. Our rightsizing will enable semisubmersible for SOCAR. Builds division, covering Offshore us to weather through a prolonged as well as Gas & Specialised downturn. We will continue to In 2Q 2017, we reached Vessels, and the Conversions & build new capabilities, look for agreements with our customers to Repairs division. new markets in the gas industry defer three offshore projects. The and non-oil and gas plays such as delivery of two semisubmersibles The reorganisation saw the Jones Act vessels and dredgers. will be moved from 2019 to 2020. integration of key functions We will also explore opportunities The projects are cash flow neutral in the New Builds division, to re-purpose our offshore and we will be compensated comprising Keppel FELS and technology for other uses. for the deferrals. The liftboat Keppel Singmarine, which allows for Crystal Heights will also be Keppel O&M to improve MAJOR DELIVERIES deferred from 2018 to 2019. We efficiency and more importantly, As at 30 June 2017, Keppel O&M’s will likewise be compensated for better leverage synergies and net orderbook was $3.4 billion, this deferral. different capabilities within 4 OffshoreMarine 2Q Issue 2017 Keppel O&M’s strong track record in oil and gas projects include the completion of the world’s first Floating Storage and Regasification Unit (FSRU), Golar Spirit (pictured) in 2008 as well as another two FSRUs after that. its group for new build needs, we have completed the build vessels. We had completed solutions. sale of a supporting yard in the world’s first Floating Storage the Netherlands to the Damen and Regasification Unit (FSRU) In the Conversions & Repairs Shipyards Group for a total conversion and will soon deliver division, Keppel Shipyard can consideration of EUR 23.5 million. the world’s first FLNG vessel similarly draw on the group’s Keppel O&M has the capacity and conversion. We have also won an diverse resources to undertake a resources to continue servicing its LNG bunkering licence with Shell in wider variety of complex projects. customers in Europe and the North Singapore, and are building For example, by combining Sea region, as well as pursue new dual-fuel LNG tugs and small-scale Keppel FELS’ expertise from opportunities in these markets LNG carriers. complex offshore projects with through our global network of Keppel Shipyard’s capabilities yards. Our commitment to Near Keppel’s value proposition extends in executing LNG-related EPC Market, Near Customer execution beyond that of an EPC yard. We (engineering, procurement, remains intact. are pushing boundaries to meet construction) projects, growing demand for small-scale Keppel O&M would be even better GAS INDUSTRY PARTNER & LNG in archipelagic markets across able to provide customers with ENABLER Southeast Asia, the Caribbean reliable end-to-end solutions. We With our ability to design, develop and the Mediterranean, in regions have already benefitted from such and integrate solutions across the unserved by pipelines. Our collaboration recently, with gas value chain, Keppel is poised contribution in the gas value chain Keppel FELS and Keppel Shipyard to be the gas industry’s preferred also extends to playing a role as a working together on the partner and enabler. co-owner and co-developer. We commissioning phase of the Golar can help source for funds to invest Hilli FLNG vessel. Keppel O&M’s deep cryogenic in these floating infrastructure expertise is supplemented by assets which can generate In line with Keppel O&M’s efforts a strong track record in oil and long-term recurring income for to rationalise its global yard gas projects, including over 110 Keppel and our co-investors. network according to business complex conversions and 400 new Continues on page 6... OffshoreMarine 2Q Issue 2017 5 Continued from page 5. IN CONVERSATION OffshoreMarine highlights management’s responses to key questions from media and the investment community on the Group’s results for 2Q & 1H 2017. Mr Loh Chin Hua (fourth from right), Chairman of Keppel O&M and CEO of Keppel Corporation, and Mr Chris Ong (second from right), engaged media and analysts at the 2Q & 1H 2017 results briefing Q: You talked about how you see our US yard, to build two Jones Act Q: What sort of markets are you opportunity in gas and LNG, as LNG containerships. All I can say targeting in the gas sector? What well as Jones Act Carriers. Could is discussions are still ongoing and type of floating infrastructure we get a sense of the scope of jobs we will make an announcement assets are you looking to co-own? that you are interested in and the when appropriate. LCH: Assets including small-scale sizes in terms of the work that you LNG carriers, regasification floating are pursuing? Timing wise, when CO: It is a reality that projects carriers and even floating power might we see some decisions or are hard to come by, because the barges will be on long-term potential contract awards? sector is in its downturn, but what contracts, providing services for LCH: It is important to look for we have done is to engage our infrastructure assets with steady new topline.