Singapore’s marine and offshore engineering sector has declined by nearly a third this year as upstreams cut back on new projects.
According to Bloomberg, Keppel Corp., Sembcorp Marine and other Singapore-listed services companies have had more than $24 billion of their total market value wiped out by low oil prices.
That amount is equivalent to about two-thirds of those companies’ total capitalization prior to July 2014, Bloomberg said.
Singapore has 70 percent of the world market for jack-up rigs and 70 percent of the global market for the conversion of Floating Production Storage Offloading units, according to Singapore’s Economic Development Board (EDB).
The EBD found that firms in the marine sector don’t expect conditions to improve in the short term.
Singapore’s marine engineering and manufacturing sector expects a decline in rig- building activities as well as “sluggish demand” for oil and gas field equipment during the third quarter.
According to data collected by the EDB, output in the country’s marine and offshore engineering sector declined just over 29 percent during the first eight months of 2016.
The EDB found that a net weighted 11 percent of firms in the marine sector expect the business outlook to worsen for the period of July to December 2016.
“This is due to the marine and offshore engineering segment, which anticipates offshore exploration and drilling activities to remain lackluster in the months ahead,” the EDB said.
Low oil prices have prompted upstreams to cut spending and scrap projects, dampening demand for new rigs and vessels.
A report published by Wood Mackenzie earlier this year found that global upstream capital spend budgets have been reduced by 22 percent, or about $740 billion, from 2015 out to 2020.
When cuts to conventional exploration investment are included, that number figure jumps to just over $1 trillion.
Mike Sim, executive chairman of Sinwa Ltd, told Bloomberg that the current downturn may be the worse the marine sector has seen in over 50 years.
Sinwa provides anchor chains, ropes and other components and equipment to the offshore and marine sector.
“Just as we thought the industry had seen the worst of the shipping downturn, the drastic fall in oil prices and its devastating effect on the entire offshore industry has served as a double whammy,” Sim told Bloomberg.