Singapore rig builder Keppel to exit oil sector

The world's largest builder of offshore oil rigs, Singapore-based Keppel, is pulling out of the sector and will instead focus investment on cleaner forms of energy.

Keppel is planning a comprehensive overhaul of its offshore and marine (O&M) business because of the global energy transition and major disruption in the oil industry, it said. Keppel O&M will exit the offshore rig building business after completing construction of rigs under order and will not undertake any new projects requiring large upfront capital expenditure or without milestone payments.

"The energy transition is upon us. It has been accelerated and the headwinds being faced in the offshore and marine industry are intense," chief executive Loh Chin Hua said after announcing a S$506mn ($380mn) loss for 2020, mainly because of S$1.19bn losses in its O&M business.

The company has laid out a plan to split its offshore rig business into three parts, although it is also open to a sale. Its Rig Co and Development Co will hold around S$2.9bn of completed and uncompleted rig assets. These will be put to work or sold as the oil market recovers, utilisation and day rates increase and the rigs generate steady cash flow, with an eye to an eventual sale of this business.

Operating Co will hold the rest of the assets and will be "transformed into an asset- light and people-light developer and integrator of offshore energy and infrastructure assets."

This business has an order book of S$3.3bn, 82pc of which is in renewables and natural gas. It will exit the offshore rig building business and progressively pull out of low value-added repair work, instead focusing on floating infrastructure and similar projects that can deliver predictable cash flow. These include offshore wind and solar farms, natural gas projects, production assets and new energy solutions such as hydrogen and tidal energy.

By Kevin Foster