Singapore’s Keppel is cutting more than 3000 jobs in its offshore and marine division (Keppel O&M) due to slow global growth and weak demand in the first nine months of the year, the company said today (20 October).
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Image from Keppel. |
In the company’s Q3 and nine-month report for 2016, Loh Chin Hua, Keppel CEO said that Keppel O&M job cuts were global.
“In this quarter, Keppel O&M continued to right-size, further reducing its direct workforce by about 3080. This includes a reduction of around 660 in Singapore and 2420 in our overseas yards,” Hua said. “For the first nine months of the year, Keppel O&M has reduced its direct workforce by close to 8000 or around 26%.”
According to Hua, much of the reduction so far has been through natural attrition, however, the company is also looking into early contract terminations, and selective cutbacks in Singapore that it in line with the decrease in workload.
“Other parts of the Keppel Group are still growing and are in need of good people, especially those with strong engineering and project management expertise. Where possible, we will look to redeploy displaced talents to other business units within the Group,” Hua said.
Hua also said that senior management across all the Keppel business units have voluntarily taken a reduction in their monthly salary, in addition to the directors of Keppel Corp. proposing lower directors' fees for 2016.
Keppel O&M was able to secure new contracts worth about US$359 million (S$500 million) year-to-date. A total of 20 projects were delivered on time and on budget in the nine months of 2016 including nine in Q3. Four additional projects are scheduled for delivery in Q4.
In the first nine months of 2016, Keppel’s business divisions achieved a net profit of $461 million (S$641 million), representing a 43% drop year-on-year, which was mainly due to lower profit contributions from the O&M division.
The landscape for offshore and marine remains very challenging, Hua said.
“The big news for the oil and gas sector during the quarter was OPEC's announced deal to cut production. Although still scant on details, the news was welcomed by the oil market and we have seen oil recover to above $50 per barrel. Despite the gradual recovery in oil price, demand in the offshore market is expected to remain tepid. Oversupply remains a key concern in the offshore market, worsened by the overhang of rigs still under construction. With priority given to strengthening their balance sheets, the oil majors are expected to continue to hold back on offshore exploration expenditure,” he said.
Keppel did note a continued interest in floating production and storage offloading (FPSO) unit conversions and production solutions such as tension leg platforms and semisubmersible production units, as well as opportunities in the development of specialized vessels.
“Rightsizing of our Keppel O&M business will continue as we prepare for an extended period of weaker demand for new oil rigs. We are not just cutting costs and surviving the downturn in the offshore industry, but are also investing prudently in new capabilities and exploring new markets and opportunities. Our aim, as always, is to emerge from this downturn stronger,” Hua said. “We expect that our O&M business will be increasingly diversified beyond just oil and gas.”
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