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Braving New Waves Together: World-Class Industry

BRAVING NEW WAVES TOGETHER

 

Celebrating 40 Years of ASMI
World-Class Industry

Premier Centre For Ship Repair And Conversion

Glowing Prospects For FPSO Conversion

Offshore Bonanza 
Specialist Builders
A Complete Maritime Community 

Developing Human Capital

Safety First
Leveraging On Technology 
Battle For Hearts And Minds

 

 

BRAVING NEW WAVES TOGETHER

 

World-Class Industry

 

Unprecedented Performance

The marine and offshore industry is witnessing one of its busiest periods as orders continue to stream in from both new and repeat customers. Orders to build and repair ships and rigs are higher than at any other time in Singapore’s history.

 

Said Mr Chia, “The fundamentals of the industry are very strong in both the offshore and marine sectors. The order book is heavy, stretching up till 2012, and the level of requests for quotes is also high.  The industry will remain good for the next three to five years. Beyond that there will be another wave. After all the drilling is done, there will be a next wave for production. It will require FPSO (Floating, Production, Storage and Offloading) vessels – that will come on stronger as it is the cheapest solution for marginal fields – as well as semi-submersible production rigs and tension leg platforms.”

 

By expanding the workforce, mobilising all available resources and operating at optimal capacity, the industry has ridden on the wave of demand to set new records. Since 2004, the marine and offshore industry has chalked up revenue growth averaging 30% annually.  

 

The record-breaking streak lifted the industry’s gross revenue to an outstanding S$13 billion in 2007, well beyond the industry’s best expectations. Mr Chia quipped, “If we had known, we would have invested in new yards and tripled our revenues.”

 

With the sterling performance, Singapore has consolidated its position as the undisputed global leader for the construction of new jack-up rigs and a major player for the building of semi-submersible platforms, and is the foremost centre for FPSO conversions.

 

Development to the industry’s present status has spanned over 150 years since the first dry dock was built, and during which the industry has suffered many travails. But its ability to survive against all odds has laid the building blocks for a bigger, better future.

 

Boom and Bust

The industry can trace its beginnings back to 1859 when Captain William Cloughton completed the first graving dock. Called Dock No. 1, it provided Singapore with an early headstart into ship repair, as it was the only repair dock between China and India. Eight years later, a second dock was in place. The brisk business that followed gave impetus to the ship repair industry and new facilities were built.

 

Shipbuilding activity also has its roots in humble beginnings catering mainly to river and port traffic. Singapore’s location in the heart of an archipelagic region, made it ideally placed to be a shipbuilder for regional trading, short-sea excursions. Shipbuilding started with the construction of simple wooden barges and tug boats by a number of shipyards whose activities did not range beyond the region. 

 

The lead was extended following Singapore’s independence, when the industry was identified for development and expansion to create employment. The industry gained momentum in the late 1960s with a steady inflow of investment by both the public and private sectors. The first commercial shipyard was set up in 1963, followed by the privatisation of the government’s dockyard and conversion of the naval dockyard into a commercial ship repair yard in 1968. Swampland along the Geylang River was transformed into Singapore’s first marine industrial estate. By 1968, all available space in the Kallang Marine Industrial Estate was taken up.

 

The overflow of ship repairing activities and shipbuilding orders saw more investments in infrastructure and facilities and expansion of capacities to meet growing demands. New shipyard facilities were also set up in the newly created Jurong industrial estate and Tanjong Rhu Basin. By 1975, Singapore had become the largest centre for ship repair. 

 

The discovery of oil in South-East Asia in the 1960s provided the industry with a second leg. “To build a rig here, it enabled rig builders US$1 million savings on towage costs. For rigs costing US$20-30 million then, this was quite significant,” said Tan Kim Pong, Director of Ngee Ann Polytechnic’s Centre for Innovation (COI) for Marine and Offshore Technology. By 1970, five rig builders had established in Singapore, turning it into a centre for rig building, second in importance only to Houston.

 

The dramatic increase in shipping activities, ship repair and shipbuilding orders created a huge demand for marine-related support services. The growth of a comprehensive marine supporting industry resulted in a critical mass of ancillary services. By the 1980s, Singapore had developed into a comprehensive marine hub of products and services.

 

Progress towards the present status has not been plain sailing, as the marine and offshore industry is inextricably linked to the cyclical shipping and oil trades. It faced its biggest challenge during the world recession of the mid-1980s – a period that has remained etched in the industry’s collective memory.

 

During the prolonged slump, all sectors of the industry were affected, which plunged the industry’s turnover to an all-time low of S$651 million in 1985. To add to the industry’s woes, operating costs were high. Some companies scaled back while others closed as orders dried up, throwing thousands of workers out of work. Industry observers, including government officials, labelled the marine industry as ‘sunset’ – a stigma which dogged the industry for over two decades in spite of its continuing contributions to the economy.

 

Through it all, the industry leaders remained steadfast. The ‘sunset’ label stiffened their resolve. Mr Loh told a union-organised forum in July 1985, "We have all the basic ingredients for continuing to be a viable industry: strategic location, political and social stability, technological capability, presence of a skilled and hardworking workforce, excellent shipyard management skills, highly competitive price, quality and delivery, and excellent union-management relations."

 

By mounting an all-out effort to counter waste, the industry became leaner and fitter, making it better placed to capitalise on the next upturn. As Mr Heng put it, “The resolution of the industry leaders, their willingness to restructure, to make hard decisions, to implement tough changes, and to adapt to the changing market environment brought about continued success for the industry.”

 

The industry’s resilience prompted then Senior Minister Lee Kuan Yew to say in his speech at the 30th Anniversary of Sembawang Shipyard in 1998, “The ship repair industry has not become a ‘sunset’ industry as was once generally believed, as I believed.”

The industry’s ability to turn around and transform itself into a growth industry surprised many. Since then, key government agencies have worked closely with the association and industry members to formulate initiatives to strengthen the industry’s competitiveness, and forge a new future for the industry.

 

The marine industry has remained viable and become more relevant to the Singapore economy, and is an integral part of the maritime cluster, in Singapore’s pursuit to be a leading international maritime centre. Said Mr Chia, “Today, the marine industry is an important part of the larger Maritime Singapore. Together with the hub port, we are part of the total package as an international maritime centre providing a full suite of services.”

 

Singapore Unlimited

Following a comprehensive review of their competitive strategies, companies have reinvented themselves. The transformation, which began in the 1980s, continued in the 1990s, and right into the millennium. This willingness to restructure and adapt to changing market conditions has brought about profound changes in the industry.

 

Companies restructured in response to higher operating costs and intense external competition. Shipyards re-positioned themselves in niche markets for better differentiation, and regionalised to lower cost countries to complement the operations in Singapore and improve operational efficiency. The late 1990s also saw rationalisation in the form of mergers of industry majors, which improved the utilisation of resources, enlarged their marketing network and enhanced their market presence.

 

During the 1990s, the industry also moved on to higher value and technically more complex and sophisticated jobs. Companies adopted new technologies to advance their engineering and production processes, and developed proprietary designs and creative solutions to offer their clients. Strenuous efforts were made to develop a safety culture to engender amongst the entire workforce a healthy respect for safety, while training has been intensified to raise workers’ skill competencies.

 

As sub-contractors are used more extensively to ease fluctuations in work demand, programmes were designed to raise their capability level and assimilate them into the shipyards’ workforce for better productivity. By using the lull period to build up the resource capability, industry players were able to prepare themselves and capitalise on the next wave.

 

Industry players rationalised to counter competition from new, low-cost yards in China and the Middle East. Following a series of mergers and reorganisation, two major marine groups – Keppel Offshore & Marine (Keppel O&M) and Sembcorp Marine – emerged, with subsidiaries specialising in ship repairing, shipbuilding and offshore engineering.

 

Golden Age

The recovery was far better than most people could imagine. Fuelled by demands from emerging China and India, oil consumption is pushing prices skywards, prompting a surge in new orders for offshore drilling and production units. As the oil boom has coincided with the expansion in shipping, the shipbuilders are inundated with work, which has also filtered down to the supporting industries which supply equipment and services to shipyards, rigs and ship owners.

 

With their strong execution capability supported by an open economy, thriving port and technology access, Singapore companies have a distinct edge over their rivals elsewhere in securing complex contracts requiring strong planning, management and execution control.

 

Said Choo Chiau Beng, ASMI’s President, 1989-1991, and Chairman and Chief Executive Officer of Keppel O&M, “When we are committed to do something, we make sure it is done. Fulfilling of commitment is very strong; the Singapore brand name of reliability is very important. We are able to organise things. When we do not have enough resources, we co-opt. We buy from wherever is available. The free and open market, the ability to import from anywhere without discrimination, is a strong advantage for Singapore.”

 

Every available capacity in Singapore is being used to fulfil the order commitments, with resources deployed across the three sectors – ship repair and conversion, shipbuilding and offshore – to take advantage of the sectoral growth. Companies are also marshalling the resources of their overseas subsidiaries.

 

“The production is very flexible, Singapore yards are very flexible,” said Mr Choo. It is this same quality which has enabled Singapore shipyards to cope successfully with the cyclical swings in the industry.

 

With the robust demand, it looks like the golden age for the Singapore marine and offshore industry will last for a while, prompting the industry to mount its biggest drive to address its most intractable challenge – manpower.

 

As Mr Wong Weng Sun, ASMI’s Honorary Secretary, 2005-2009, and President and Chief Operating Officer of Sembcorp Marine, said in a documentary programme aired on prime time television, “We need to groom young minds as we know people are the major factors for running the business to sustain growth and to be successful. We need local talent to be in the position for the future shipyards. We need young mechanical professionals to be engaged in R&D to look for new products, to look at new ways to design marine structures. We need young people to come up to project management to take the lead in complex global projects which we are undertaking today.”

 

The battle is being waged on many fronts. Companies’ manpower policies designed to attract, train, develop and retain capable talents are backed by ASMI-initiated programmes to train and certify production workers and supervisors. As perception is key, ASMI is working on giving the industry ‘brand recognition’ and raising its profile amongst Singaporeans. The industry’s on-going campaign to make the shipyard a safer workplace has resulted in a quantum improvement in safety, which helps to debunk the image of the industry as dirty and dangerous.

 

By leveraging on the buoyant market to nurture a new generation of talented and skilled workers to succeed the present crop of industry stalwarts, ASMI and its members are securing a future for the industry, extending well beyond the current cycle.

 

 

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