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Anchored in Singapore History : The Story of the Marine Industry


Anchored in Singapore History - Book Cover

Voice for the Industry
Made in Singapore
Positioning the Keel Blocks
A Remarkable Story of Growth
No. 1 Centre in Shiprepair
A Future in Industrial Engineering
Lending Support
A Marine Powerhouse
Confronting the Issues




Prospecting for Black Gold

Singapore expanded into offshore construction in 1969 when oil exploration intensified in South-east Asia. Her proximity to the drilling sites and her well-developed engineering capability made her the natural choice for offshore fabrication. President and Managing Director of Marathon Le Tourneau, George Moris, told a gathering of financiers and oil executives in 1975 that building rigs in Singapore would save a rig operator over US$1 million in towage costs, including insurance coverage for the tow from the US or Europe. The company also had the added advantage of early deployment.

At the height, there were five rigbuilders in Singapore, Far East Levingston Shipbuilding (FELS), Marathon Le Tourneau, Promet, Robin Shipbuilders and Bethlehem Singapore. Between 1970 and 1984, the five turned out 123 jack-ups, semi-submersibles, drill barges, tenders, drillships and semi-submersible accommodations.

A US Embassy report issued in 1981 acknowledged Singapore's growing importance. Singapore is getting to be Houston East. She is the third leading oil refining centre and the second leading offshore rig-building nation in the world, with major rig and tanker repair facilities. "She is the most important base for oil offshore oil exploration in Asia, and manufactures some drilling equipment. She has a growing oil trading market and will soon be producing petrochemicals." For a country which does not possess a single barrel of oil, this is quite an achievement.

A Rich Field

Singapore was launched into rigbuilding by the fledging Far East Shipbuilding Industries Ltd. The astute shipbuilder of small crafts reoriented its focus when it was barely three months old after it noticed that the oil search had intensified. "Our first step in this new direction was a courageous one, involving great risk. It was not lightly taken, nor did it prove profitable at that time, but by any judgement it must now be regarded as a wise and far-sighted business decision," Chairman Teo Seah Kee told shareholders in May 1970.

Far East Shipbuilding took a long-term lease or a 9.3-hectare site in Jurong, almost double its previous premises, and sealed a pact to partially fabricate a mat-supported jack-up for US drilling contractor Reading & Bates. The JW McLean was completed in 1969 and deployed in Indonesia.

To enhance its rigbuilding capability, Far East Shipbuilding signed a three-year technical and management agreement with Levingston Shipbuilding in July 1970, about a year after its public listing. Levingston provided the Singapore yard with sales, purchasing and engineering services, a general manager and numerous skilled personnel. The Levingston connection is reflected in the company's masthead: Far East Levingston Shipbuilding (FELS). FELS, however, lacked funds to finance its ambitious plans. In 1971, Keppel Shipyard took up the 38 per cent offered by FELS as an investment, and gradually accumulated more. By 1974, it had gained majority control.

Encouraged by the intensified oil search, four more yards followed, with Marathorn Le Thourneau and Bethlehem Singapore fabricating rigs to in-house designs. The presence of these foreign rigbuilders was credited for propelling Singapore's rigbuilding sector forward. At the official opening of offshore equipment manufacturer Baker Marine in January 1981, Mr Goh Chok Tong who was then Minister for Trade and Industry, noted: "Through direct association with foreign rigbuilders, the industry has benefited from a transfer of technology and expertise. I believe that had our shipyards developed their rigbuilding capabilities on their own, the industry would not be in such a strong position today."

Singapore's forte was in jack-ups. By 1980, it was the top jack-up builder, having clinched 31 contracts. That year, Singapore rigbuilders also landed a semi-submersible and three tenders out of 176 rigs contracts placed worldwide, making her second only to the US.

Hitting A Series of Dry Wells

Even in the boom years there were warning bells. In 1981, when rigbuilding was at its peak, then SASAR President Lai Park On warned: "When the industry next hits the trough, Singapore rigbuilders may suffer a more severe setback than that experience in 1977 and 1978." That ominous prediction proved only too accurate.

The cyclical fluctuations were growing in magnitude because of speculative ordering by rigs contractors who took advantage of generous rig financing schemes. In the 1970s, 130 jacks-up were completed worldwide, the same number as in the 1950s and 1960s combined, even though the demand for rigs for offshore exploration was not growing quite as fast. The first dip came in the mid-70s generating fears that the boom days were over. In it s quarterly publication published in 1977, FELS moaned: "It is bleak situation without much hope either in the immediate future or the years beyond."

That dire prediction was slightly premature. With some belt-tightening, the rigbuilders kept going, repairing and modifying rigs and other offshore structures, and building on speculation, confident of finding buyers when the turnaround came. It did, in 1979, following a surge in offshore drilling in Africa, Asia and the Gulf of Mexico.

All available rigs were mopped up sparking off yet another wave of ordering, far bigger than in the 1970s. Over 300 rigs were built between 1980 and 1982 in response to global concerns over future oil supply. It pushed the performance of Singapore rigbuilders to an all-time high of $790 million in 1981.

But when the downturn, it was so severe that some rigbuilders never recovered. Worldwide orders trickled to 27 in 1984. Singapore rigbuilders just did not stand a chance. Only two of the 27 contracts came to Singapore because her financial schemes were a poor match against South Korea and Japan, which were channelling the excess shipbuilding resources and workers into rigbuilding.

Starved of new orders, Marathon Le Tourneau and Robin Shipbuilders decided to close. Bethlehem Singapore tried to diversify without much success and closed in 1989 after having sold its existing facilities to Sembawang Shipyard. Promet scaled back while FELS took a calculated gamble.

Going For High Stakes

FELS began work on a harsh environment jack-up which can drill in water depths of 90 to 105 metres with rig designer Friede & Goldman. Speculative-building by rigbuilders is not unusual, but the US$45 -million stake which FELS took in this gamble surprised even its rivals. "It's highly speculative and would take a brave man to do it - but it could prove to be sound investment, "remarked an old industry hand in Business Times when the news broke.

FELS won. When completed in 1986, the Monarch found a ready buyer in Santa Fe International Corporation. The Kuwait-backed rig operator went on to order two more rigs in the Monarch series and a third in the Universe class. Between 1986 and 1991, FELS clinched six contracts, making it the undisputed world leader in rig construction.

But in a world awash with oil, orders are few and far between, as there are fewer reasons to explore new fields. The existing rig fleet, which is fully depreciated, is adequate to meet present requirements. Only specialised units are in demand, for deep-sea or shallow-draft operation. Rigbuilders have had to redefine their roles. Rather than limit themselves to themselves to drilling rig construction, they have evolved into yards that build, repair and convert both onshore and offshore structures which call on their heavy engineering capability.

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