Offshore & Marine

As compared to $2.9b for FY 2016.

Net Loss

Includes one-off financial penalty from the global resolution and related costs.

Major Developments in 2017

  • Streamlined Keppel O&M into the New Builds and Conversions & Repairs divisions.
  • Delivered 10 major projects safely, on time and on budget, including the world’s first FLNG vessel conversion for Golar LNG.
  • Secured about $1.2 billion worth of new contracts mainly for non‑drilling solutions.
  • Signed Heads of Agreement with Pavilion Energy and PLN to explore small‑scale LNG solutions for West Indonesia.
  • Reached a global resolution with criminal authorities in the US, Brazil and Singapore, bringing closure to investigations on corrupt payments made in Brazil.
Focus for 2018/2019

  • Continue to focus on execution excellence, corporate governance and risk management.
  • Capture opportunities in new and existing markets, leveraging synergies across Keppel O&M and the wider Group to build up new strengths and expand solution offerings.
  • Invest in R&D to strengthen existing capabilities and build new muscles for long‑term growth.
  • Continue to explore re‑purposing offshore technology for other applications.

Earnings Review

In 2017, the Offshore & Marine (O&M) Division continued to see demand for production assets, Liquefied Natural Gas (LNG) solutions and specialised vessels. It secured new non‑drilling contracts worth about $1.2 billion from new and repeat customers. As at end‑2017, non‑drilling solutions made up over 70% of the Division’s $3.9 billion net orderbook.

Revenue from the Division declined 37% year‑on‑year to $1.8 billion, due to the lower volume of work and the deferment of some projects. The Division turned in an operating loss of $176 million for the same period, mainly due to weaker operating results arising from lower revenue.

The O&M Division incurred a net loss of $835 million for FY 2017, compared to a net profit of $29 million for FY 2016. This was due mainly to the one‑off financial penalty of $570 million, arising from Keppel Offshore & Marine’s (Keppel O&M) global resolution with criminal authorities in the US, Brazil and Singapore, and $49 million of related legal, accounting and forensics costs, lower operating costs and lower share of associated companies’ profit. These were partly offset by lower impairment provisions and lower net interest expense. Excluding the one‑off financial penalty from the global resolution and related costs, the Division’s net loss would have been $216 million.

During the year, the Division also made an additional provision of $81 million for expected losses on the semisubmersibles being built for Sete Brasil, as well as $54 million in impairments on other assets.

Earnings Highlights ($m)
2017 2016 2015
Revenue 1,802 2,854 6,241
EBITDA (47) 300 744
Operating (Loss)/Profit (176) 135 597
(Loss)/Profit before Tax (862)* 90 699
Net (Loss)/Profit (835)* 29 482
Average Headcount (Number) 15,571 22,191 29,004
Manpower Cost 623 821 1,170
* Includes one-off financial penalty from the global resolution and related costs.

Operating Review

2017 was an eventful year for the O&M Division. The global resolution reached by Keppel O&M with criminal authorities in the US, Brazil and Singapore brought closure to the investigations on corrupt payments made in Brazil. Keppel O&M will continue its operations in the US, Brazil and Singapore, and does not expect any negative impact on its ability to bid for contracts in these or other countries.

Effective compliance controls have been implemented to ensure that Keppel O&M emerges as a more disciplined and sustainable company.

In response to the challenging business environment, Keppel O&M continued its rightsizing efforts to streamline operations and reduce overheads. During the year, Keppel O&M’s direct global staff strength was reduced by about 25% from 2016, while its subcontract workforce in Singapore came down by about 23% in the same period.

As part of efforts to optimise operations and rationalise its global network of yards, Keppel O&M divested Keppel Verolme and ceased operations of two supporting yards in Singapore. In January 2018, Keppel also announced that Caspian Shipyard Company had commenced its members’ voluntary liquidation, following the expiration of the agreement made between AzerFELS (a subsidiary of Keppel O&M), the State Oil Company of Azerbaijan Republic (SOCAR) and Lukoil Europe Holdings.

Keppel O&M will continue to monitor the environment and take the necessary measures to reduce costs, while retaining its core capabilities, with the goal of making the company leaner, stronger and more competitive for the upturn.

Notwithstanding the challenging environment, Keppel O&M secured new orders worth about $1.2 billion in 2017, more than double the $500 million secured in 2016. These included two LNG dual‑fuel containerships from Pasha Hawaii; three dredgers from Jan De Nul; two LNG carriers from Stolt‑Nielsen Gas; Floating Production Storage and Offloading (FPSO) jobs from SBM Offshore, BW Offshore and Petrobras, as well as engineering and construction management support services on a Tension Leg Wellhead Platform (TLWP) from PetroVietnam.

In 2017, Keppel O&M delivered 10 major projects safely, on time and on budget. These included a Floating LNG (FLNG) vessel conversion for Golar LNG; four FPSOs for Yinson, MODEC, BW Offshore and MTC Ledang; a semisubmersible for SOCAR; an ice‑class multi‑purpose vessel for New Orient Marine, and a subsea construction vessel (SCV) for the Shah Deniz consortium.

The company continued to make headway in its gas strategy. In September 2017, Keppel O&M signed a Heads of Agreement (HoA) with Pavilion Energy and PLN to explore opportunities to develop small‑scale LNG infrastructure for West Indonesia. With a comprehensive suite of solutions for every stage of the gas value chain, Keppel is able to provide cost effective, end‑to‑end solutions for its customers.

Furthering its gas strategy in 2017, FueLNG, Keppel O&M’s joint venture with Shell, made progress and achieved its first commercial LNG bunker transfer in Singapore by completing truck‑to‑ship bunkering for Hilli Episeyo. The FLNG vessel has since been delivered to Golar LNG in 2017 for operations in offshore Kribi, Cameroon and is scheduled to commence commercial operations in 1H 2018.

During the year, Keppel O&M broke into the captive Jones Act market. The Jones Act requires vessels carrying goods between US ports to be built in the US, and Keppel AmFELS is well positioned to capture opportunities in this market. The average age of the US‑built fleet of vessels is over 30 years old, exceeding the typical operating life of most ocean‑going vessels, and new vessels will be needed to meet the latest safety and environmental standards.

To streamline operations and effectively capture new opportunities, Keppel O&M reorganised its operations into two divisions – the New Builds division, covering Offshore as well as Gas & Specialised Vessels, and the Conversions & Repairs division.

The reorganisation integrated key functions in the New Builds division, allowing Keppel O&M to improve efficiency and better leverage synergies and different capabilities of Keppel FELS and Keppel Singmarine. Keppel Shipyard can similarly draw on the Conversions & Repairs divison's diverse resources to undertake a wider variety of complex projects. With its business divisions working as an integrated body, Keppel O&M is able to achieve greater efficiency and provide customers with even more competitive and reliable end‑to‑end solutions.

Looking ahead, Keppel O&M will continue to focus on delivering its projects well, exploring new markets and opportunities, investing in R&D and building new capabilities to position itself for the upturn. The Division will also actively capture opportunities in the growing gas market and explore ways to re‑purpose its offshore technology for other applications including the area of renewable energy.

New Builds

In 2017, contracts for five jackup rigs being constructed by Keppel FELS for Transocean were novated to Borr Drilling. The deal includes an upfront payment from Borr Drilling and the bringing forward of deliveries of the first three rigs to 2018 and 2019 from 2020.

During the year, Keppel FloaTEC secured a contract from PetroVietnam to provide its patented Extended TLWP technology, engineering, and construction management support services for the Repsol Ca Rong Do TLWP. The TLWP will be the first in Vietnam and the first three‑column TLWP in the offshore oil and gas industry.

Building on its engineering expertise in offshore platforms, Keppel FELS will actively explore opportunities and also grow its product lines in non‑drilling sectors such as power generation vessels, as well as offshore renewable energy and offshore aquaculture projects.

Keppel Singmarine delivered two major projects during the year – the ice‑class multi‑purpose vessel, MPV Everest, to New Orient Marine, as well as the SCV, Khankendi, for Baku Shipyard. During the year, Keppel Singmarine also secured contracts to build two Trailing Suction Hopper Dredgers (TSHD) from the Jan De Nul Group.

MPV Everest

Senior management from Keppel O&M, New Orient Marine and Marine Construction services celebrated the naming of MPV Everest, an ice‑class vessel built to Keppel's proprietary design.

Strengthening its track record as a provider of LNG solutions, Keppel Singmarine secured a contract worth over $100 million to build two LNG carrier vessels for Stolt‑Nielsen Gas. The LNG carriers, which are expected to be completed in 2019, will be built in Keppel Nantong, China.

In China, Keppel Nantong delivered a 65‑tonne bollard pull Azimuth Stern Drive (ASD) tug to an Indonesia‑based client, and continued to support Baku Shipyard in the construction of the SCV, Khankendi. During the year, Keppel Nantong commenced work on three TSHDs following customer Jan De Nul’s decision to exercise its option for a third unit in 2017.

Keppel AmFELS in Texas, USA, broke into the captive Jones Act market and secured a contract worth more than US$400 million from Pasha Hawaii for the construction of two dual‑fuel containerships to be built to Keppel’s proprietary design. The vessels are expected to be delivered in 2020. They will be able to run completely on LNG fuel, reducing their environmental impact and increasing fuel efficiency. Energy savings will also be achieved with a state‑of‑the‑art engine, an optimised hull form and an underwater propulsion system with a high‑efficiency rudder and propeller.

Looking ahead, Keppel AmFELS will build on its track record in Jones Act vessels newbuilding for the US as well as aftermarket services including repairs, upgrades and modifications of rigs for customers in the Gulf of Mexico.


Keppel AmFELS will be building its first two dual‑fuel LNG containerships for the Jones Act market.

Over in Brazil, BrasFELS completed FPSO P‑66, the first of its two Replicante projects for Tupi BV, a consortium represented by Petrobras. P‑66 was deployed in the Lula Sul field in Santos Basin, Brazil, where it achieved first oil in May 2017 and is undergoing final commissioning work in 2018. Meanwhile, BrasFELS is undertaking integration and commissioning of the topside modules for FPSO P‑69, which is expected to be delivered in 2018. As at end‑2017, BrasFELS also secured additional work on P‑69, which includes the installation of equipment and cables for the hull, as well as the commissioning of marine systems.

In 2017, BrasFELS also delivered the FPSO Cidade de Campos dos Goytacazes MV29 to repeat customer MODEC. The scope of work included the fabrication and integration of modules. The FPSO will be deployed in the Campos Basin, off the coast of Rio de Janeiro, Brazil.

In the Caspian Sea, Baku Shipyard reached a significant milestone with the successful delivery of a state‑of‑the‑art SCV, Khankendi. Named by the President of Azerbaijan, H.E. Ilham Aliyev, Khankendi is the first of such vessels to be completed in the Caspian region. The successful delivery of the project was a result of harnessing the strengths across Keppel O&M, including the Marine Technology Department's design and Keppel Singmarine's experience in building specialised vessels. The vessel has since been deployed in the Shah Deniz Phase 2 Gas field, which produces gas for export to Europe and beyond.

Meanwhile, Caspian Shipyard Company delivered Heydar Aliyev, the first modern semisubmersible to be almost fully built in Azerbaijan to Caspian Drilling Company, a subsidiary of SOCAR. The rig was built to Keppel FELS’ proprietary DSSTM 38M design and customised for the Caspian Sea’s harsh environment.

Conversions & Repairs

In 2017, Keppel FELS completed repair and modification works on 14 rigs. These included, amongst others, Atwood Condor, Ensco 106, Ensco DS10, Diamond Offshore’s Ocean Monarch, Maersk Convincer and Seadrill’s West Vencedor.

During the year, Keppel Shipyard successfully delivered several projects including three FPSOs, one turret fabrication and the world’s first FLNG conversion, the Hilli Episeyo. Meanwhile, the yard maintained its shiprepair volume, servicing over 380 vessels.

During the year, Keppel Shipyard secured several contracts from both new and repeat customers, including a turret fabrication project from SOFEC, a crane vessel conversion from Boskalis, the Liza FPSO conversion contract from SBM Offshore and various FPSO conversion and upgrading projects.

In the Philippines, Keppel Batangas completed shiprepair works for over 85 vessels and delivered a 50‑tonne bollard pull ASD tug to an Indonesia‑based client. Meanwhile, Keppel Subic Shipyard completed 67 shiprepair jobs in 2017, including the drydocking and repair of two LNG carriers from Greece.

Keppel Subic Shipyard will continue to support Keppel Shipyard on FPSO and marine conversion projects, and explore collaboration opportunities with other companies within the Keppel Group for fabrication work in the renewable energy sector.

Over in the Americas, BrasFELS completed several repair jobs such as Olinda Star, Ocean Rig Mykonos and Siem Helix I.

In the Middle East, Nakilat‑KOM (N‑KOM) continues to be well positioned to serve customers in the Arabian Gulf. As one of the most well‑equipped yards in the region, N‑KOM remains focused on the execution of repair and maintenance of Nakilat's and other customers’ vessels, and is also actively pursuing opportunities in the region.

Gas Industry Partner & Enabler

As cities continue to undergo urbanisation, the demand for energy will grow. However, with climate change as the priority for most governments, demand for cleaner sources of energy such as LNG is also expected to rise. As one of the world’s leaders in LNG vessel repair, Keppel O&M has built up critical knowledge for handling materials at extremely low temperatures. This experience, coupled with a strong track record in oil and gas projects, has enabled Keppel to achieve many firsts in the delivery of LNG solutions.

The ability to offer end‑to‑end solutions has also primed Keppel to meet rising demand for LNG in archipelagic markets unserved by gas pipelines. In 2017, Keppel O&M signed an HoA with Pavilion Energy and PLN to explore the development of small‑scale LNG solutions for West Indonesia.

Keppel O&M's value proposition extends beyond a typical engineering, procurement and construction shipyard. With the ability to design, develop and integrate solutions across the gas value chain, Keppel is poised to be the gas industry’s preferred partner and enabler.

By collaborating with Keppel Infrastructure and Keppel Capital, Keppel O&M can also become a co‑owner and developer of floating energy infrastructure assets, which generate long‑term recurring income.

Offshore & Marine

Market Review & Outlook

In early‑December 2017, the Organization of Petroleum Exporting Countries (OPEC) and non‑OPEC countries reached an agreement to extend production cuts to end‑2018. Since the first production cuts agreed by the two groups in December 2016, oil prices have recovered from a low of about US$30 per barrel in early‑2016 to over US$60 per barrel as at end‑2017.

Following the recovery in oil prices, there has been growing optimism in the O&M industry. Final Investment Decisions (FIDs) for new offshore projects doubled in 2017 and are expected to gather momentum in the years ahead. However, the rig market continues to be plagued by a supply overhang, and both utilisation and day rates remain low. As such, a quick recovery is not expected in the demand for offshore drilling rigs as oil companies take time to restart exploration & production (E&P) programmes.

The cut in E&P expenditures by oil companies and fleet operators has led to a drive towards greater efficiency and productivity in the industry. From increased automation to the digitalisation of vessels, technology will be a key driver for the industry moving forward.

To remain competitive in a changing market environment, Keppel O&M has repositioned itself and improved on existing core products and services. Leveraging technology, the Division has developed innovative solutions to stay ahead of the curve.

Notwithstanding the current challenges in the drilling segment, there continues to be robust demand for production assets, LNG solutions and specialised vessels.

Keppel O&M remains confident about the long‑term potential of the O&M industry as demand for energy remains strong, driven by global economic growth.

Offshore Rigs

The offshore rig market is expected to remain saturated, due to insufficient rig retirements and a significant overhang in jackup rig supply. It will take some time before an equilibrium between supply and demand is reached. 2018 will continue to see industry consolidation and the potential emergence of new drilling operators.

As the cost of offshore projects normalises and oil companies focus on sanctioning new projects, market confidence will return to the industry. There is increased interest for mid‑water harsh environment rigs in the North Sea, while emerging markets such as Brazil, Mexico and Africa are also garnering more interest from major oil companies focused on managing their declining reserves.

In readying itself for the upturn, Keppel O&M is exploring how novel technologies can define the future of jackup rigs by introducing new systems and expanding rig capabilities. These rigs of tomorrow will transform the current operating environment to become more efficient, ergonomic and versatile, without compromising on safety.

In collaboration with the Group, Keppel O&M will continue to explore opportunities to re‑purpose its offshore technology for other applications such as floating data centres.

With an extensive suite of proprietary solutions for the offshore drilling market and global yard network, Keppel O&M is well positioned to ride the upturn when it returns.


Industry players foresee significant changes in the shiprepair industry over the next two years. This comes in tandem with the Ballast Water Management Convention in 2019 and the International Maritime Organization’s (IMO) global sulphur cap in 2020. Under the new regulations, IMO 2020 requires ships to use marine fuels with a sulphur content of no more than 0.5%, compared to the current limit of 3.5%. Consequently, ship owners will have to decide between the continued use of high sulphur fuel oil, in conjunction with scrubbers or exhaust gas cleaning systems, or switch to low sulphur fuel options including distillates and LNG.

Over the longer term, the shipping industry will also continue its drive toward greater efficiency by reducing costs, improving utilisation and deploying new technologies.

Against this backdrop, Keppel O&M is well placed to provide retrofitting solutions to meet the changing needs of the shiprepair industry.

Floating Production Systems

In 2017, 28 Floating Production Systems (FPS) contracts estimated to be worth over US$15 billion were awarded, including the high profile contract for ENI’s Coral South FLNG. The LNG space had also attracted a record number of contracts for Floating Storage & Regasification Units (FSRU) in 2017. Meanwhile, after almost two years with no orders, the award of 10 FPSO contracts in 2017 has signalled a brighter 2018.

Industry players are optimistic about the FPS market. The Energy Maritime Associates estimates that about 125 FPS projects, valued at over US$90 billion, are expected to be sanctioned over the next five years. Of these, FPSOs are expected to dominate, constituting over 40% of new orders.

With more contracts for production assets expected to be awarded, Keppel O&M is in pole position to benefit. Backed by a strong track record in executing offshore conversion projects, Keppel O&M will continue to monitor the pipeline of projects available in the market and proactively engage customers early to provide cost‑effective solutions.

Gas Solutions

The increase in demand for gas is expected to persist, with natural gas being the fuel of the future. In 2018, the number of LNG projects to be sanctioned is expected to increase, mainly due to an improving energy market and the need to invest to meet long‑term demand.

In 2017, Keppel Shipyard delivered the world’s first FLNG vessel conversion, Hilli Episeyo, to Golar LNG. The successful deployment of the vessel in offshore Kribi, Cameroon, will put Keppel O&M ahead of the curve as a leading solutions provider for floating liquefaction solutions.

There are increasing numbers of LNG carriers and oil tankers that travel the trade routes between Australia and the Far East, as well as between America and India and the Far East. Moreover, there is increasing demand for LNG within Southeast Asia, fuelled by rapid urbanisation within the region, as well as the increased use of gas for transportation purposes and power generation, and as raw materials for petrochemical feedstock.

Meanwhile, many countries are pushing for the use of cleaner fossil fuels such as LNG, driving up demand for regasification assets.

In anticipation of an increase in demand for LNG‑related products including FLNGs, FSRUs and LNG Carriers, Keppel O&M has designed a suite of proprietary solutions to cater to the market. With the ability to provide end‑to‑end solutions across the gas value chain, Keppel O&M is well positioned to capture opportunities in the gas industry.

Specialised Shipbuilding

Prospects in the specialised shipbuilding market remain robust, particularly for non‑oil related solutions such as dredgers and containerships, as well as vessels for subsea construction, cable lay and rock dumping. This bodes well for Keppel O&M, which can offer an extensive range of solutions, leveraging its technology and construction expertise. Keppel O&M is also primed to capture opportunities in the Jones Act market after securing its first contract with Pasha Hawaii through Keppel AmFELS in Brownsville, Texas.

Looking ahead, Keppel O&M will continue efforts to grow its capabilities for non‑drilling and gas solutions. These capabilities will provide the company with new opportunities and sources of revenue, despite continuing challenges in the offshore drilling sector.

EU Stage V dredger

Keppel Singmarine is building the world’s first EU Stage V dredger in compliance with stricter international limits on emissions.