SINGAPORE – Keppel Corp. Ltd. reported that its offshore and marine subsidiary, Keppel O&M, reduced its workforce by around 3,080 positions during this quarter, as its 3Q 2016 profit dived 38% since 3Q 2015. The job cuts affected around 660 in Singapore and 2,420 in the company’s overseas yards.
Since the first of the year, Keppel O&M has reduced its direct workforce by close to 8,000 or around 26%.
“Much of the reduction has so far been through natural attrition,” Keppel Corp. CEO Loh Chin Hua said in a speech on Thursday. “However, we will increasingly also look into early termination of contracts and selective retrenchment in Singapore, in line with the drop in workload, while ensuring that Keppel O&M continues to retain its core capabilities.
“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.”
Keppel O&M has remained profitable and the CEO said that these “painful measures” that have propped the business up so far will have to continue. Senior management across all business units have voluntarily taken a reduction in their monthly salary. Company directors will also be proposing lower directors’ fees for 2016.
The division was also revealed to have secured new contracts worth about S$500 million ($359 million) year-to-date.
Despite the rebounding oil price following OPEC’s announced production cuts, Loh noted that those occupying the “challenging” offshore and marine market still faced down other issues. However, there were still some bright spots.
“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.
The level of interest in FPSO conversions and production solutions such as tension leg platforms and semisubmersible production units continues, the company said, as well as opportunities in the development of specialized vessels.
The “right-sizing” will continue as it prepares for an extended period of weaker demand for new oil rigs, the company said.
“We are looking at re-purposing the technology that we have developed in the offshore industry for other uses such as floating power plants and floating desalination plants. We expect that our O&M business will be increasingly diversified beyond just oil and gas,” Loh said.
The Keppel chief also commented that it saw a “promising future for the LNG market over the long term.”
Keppel O&M subsidiary Gas Technology Development signed a memorandum of understanding with Shell to jointly explore potential opportunities catering to the demand for LNG as a fuel in coastal areas, inland waterways, and the international marine sectors. Keppel Corp. has an existing joint venture with Shell, FueLNG, and has also secured its first two contracts from Shell as it looks to provide solutions for vessel owners turning to LNG as a marine fuel.