Overview

The marine and offshore engineering industry - the eco-system surrounding the design, construction and classification of the vessels and equipment used in the extraction of the ocean's oil and gas reserves - is one of global importance. With diminishing oil and gas stocks, and the importance of hydrocarbon-based fuel to the world economy, the extraction of offshore oil and gas is a pressing issue.

Forming naturally around one of the world's largest marine and offshore hub and international maritime centre, the industry is a lucrative one - in Singapore alone the total output was S$20.1 billion in 2009. The actors engaged in construction and classification, as well as their customers and contractors, have diverse needs and requirements as they face current and future challenges.

Deeper Waters

Offshore oil and gas exploration is descending to greater depths and facing more difficult working conditions than ever before. As oil become scarcer and more depleted in shallower, more accessible waters, market forces are driving the drilling companies to explore oil and gas fields at depths well in excess of 1,000 feet - and this exploration is expected to double in the next 10 years.

Deepwater drilling requires equipment and vessels that can withstand extreme environmental pressures. The world's largest drilling rigs, like the ultra-deepwater, semi-submersible SeaDragon I, constructed in Singapore's Jurong Shipyard, can operate in up to 10,000 feet of water. At these depths, sunlight fails to penetrate, the temperature drops to between 0°C and 2°C, and the pressure of the water is about 2,300 pounds per square inch: conditions that can damage systems and crush metal.

Overcoming the logistical tests of producing hydrocarbons at these depths presents a considerable technical challenge. To better support private sector R&D, the Maritime and Port Authority of Singapore (MPA), the Agency for Science, Technology and Research (A*STAR) and the Singapore Economic Development Board (EDB) jointly established the Singapore Maritime Institute (SMI) to drive public sector research for the marine and offshore and oil and gas industries.

Deepwater drilling will be focused in the future on the relatively untapped regions of offshore Brazil, West Africa, the Gulf of Mexico and Southeast Asia. Singapore rig-builder Keppel FELS Limited has introduced the DSS 21 series of semi-submersible, deepwater rig, designed specifically to operate in these regions' semi-tropical conditions.

Facts on the ground

Harsher Conditions

The drive to access new reservoirs has also seen drilling companies move away from more accessible offshore fields and into increasingly harsh working conditions. Ships and rigs operating in the polar conditions of the Barents Sea, off the Norwegian and Russian coasts, face freezing temperatures, snow, and drifting pack ice. Nevertheless, the potentially enormous gas reserves below make exploration of these ultra-harsh areas a necessity.

To work successfully in this environment requires vessels and equipment capable of withstanding extreme cold, gale force winds and turbulent seas. A new generation of smaller, more flexible deepwater vessels, such as Shell's deepwater drilling Bully I and II rigs, are being built, and they can be easily be upgraded to operate in such arctic conditions.

While the hull of Shell's Bully I rig was built elsewhere, the addition of the power generators, thrusters and drilling equipment were all completed in Keppel's Singapore shipyard. The Singapore yards' technical and project management ability enables contractors to carry out the complex integration and completion of drill ships and FPSOs utilising hulls built elsewhere. Other marine hubs lack this capability to customise an existing model, being able to only produce from one-model production line.

Government-sponsored R&D into ultra-harsh condition materials supports the yards' work. A*STAR initiated research into ruggedized electronics - specifically designed for use in harsh environments. Working with several universities, including the National University of Singapore (NUS) and Nanyang Technological University (NTU), the programme will focus on solutions such as ruggedised packaging and improved design.

Despite the country's tropical climate, Singapore shipping and marine equipment firms are thus well-equipped to tackle the harsh conditions of the northern seas. Maersk Drilling, a subsidiary of the Maersk Group that offers drilling services to oil majors, recently placed orders with Keppel FELS for two enhanced ultra-harsh, high-capacity, jack-up drilling rigs, specifically designed for operating in the North Sea's notoriously choppy waters.

Green Shipping

Environmental conservation is a global challenge. Given the maritime industry's links with the ocean, minimising its impact on this fragile eco-system is a key priority. The International Maritime Organisation (IMO), the United Nations' specialized agency with responsibility for the prevention of marine pollution by ships, has introduced greater regulations to curb the level of environmentally harmful emissions from vessels and ports.

The IMO's highly successful regulatory regime drives how shipping companies operate, which in turn drives how the marine equipment companies innovate in terms of products. Recognising that their competitive advantage lies in being at the forefront of the marine clean technology sector, companies are looking to establish dedicated centres to produce innovative 'cleantech' solutions and services.

Classification societies such as Det Norske Veritas (DNV), a risk management services company with a focus on the environment, set up their DNV Clean Technology Centre in Singapore. The country was chosen, explains the centre's managing director, Bjorn Tore Markussen, because it enables them to "tap onto Singapore's excellent eco-system of investment, infrastructure and support, and funding for research, development and innovation." The centre has worked closely with several Singapore governmental agencies on a recent DNV-led joint industry project on utilising liquefied natural gas as a cleaner conventional energy source. Markussen argues that industries transcending national boundaries, like shipping and marine engineering, face "increased scrutiny both from international and regional bodies, as well as the public at large." In anticipation of this, in February 2010, the MPA and NTU announced the launch of a joint programme to "help in the development of technologies toward greener shipping and port management," revealed Lam Yi Young, MPA's Chief Executive.

Recognising that green shipping and the need to reduce emissions is interlinked with a vessel's design and how it performs in the water, Singapore is investing in growing capabilities in naval architecture and marine engineering. Across Singapore, universities, research institutes and companies are working in concert to support R&D and test-bedding of maritime technologies.

The Singapore difference

Manpower

Despite the growth of the marine and offshore engineering industry worldwide, with its growth in Singapore alone forecast at annual rates of 7.0 - 8.7% up to 2018 , there is a global shortage in the supply of trained manpower. Speaking to trade publication Euroasia Industry Magazine, Simen Skaare Eriksen, CEO of international drilling contractor Frigstad Offshore, talks about the main challenges in recruiting skilled personnel: "A key problem is the high average age of most of the experts, due to a scarcity of newcomers to the field. There is a basic lack of suitably qualified and experienced people, at least for senior posts."

In response, MPA has worked with Singapore tertiary institutions and trade organisations to develop relevant training programmes. NTU has partnered with the UK's University of Glasgow-Strathclyde to offer specialisations in both naval architecture and marine and ocean engineering. Meanwhile, the Association of Singapore Marine Industries launched a 2006 scheme to attract job seekers without marine-related skills to be employed and trained by the shipyards.

Delivery & Capacity

The capacity of a yard to deliver a vessel or rig on time is underestimated. With day rates for semi-submersible rigs ranging from US$300,00- 400,000 , a yard that is unable to deliver on time costs the drilling contractors vast amounts of money. There have even been cases of rigs being towed away from yards mid-project and brought to yards in Singapore - capable of meeting deadlines - because the original yards were taking too long to finish the job.

This capability stems in large part from logistics. Marine construction - whether from scratch, a custom job, or completing final assembly - requires multiple parts and components sourced from diverse countries. Singapore, for example, is the global leader in the retrofitting of Floating Production Storage Offloading (FPSO) vessels, used to process hydrocarbons and store oil out at the fields. This reputation for strong project management and integration, which allows the country to retrofit 70% of the world's FSPOs, rests in large part on a stable supply chain operating with minimum disruption.

Singapore's long-established logistical and transport links, centred on a geo-strategic location, and all supported by an efficient bureaucracy are an attractive value proposition.

The success of projects, such as the Jurong Shipyard's delivery in 2010 of the deepwater semi-submersible drilling rig West Orion on budget and 10 days ahead of original delivery schedule, points to an institutional ability to manage complex projects within time and cost. The strength of the logistics network is complemented by Singapore's design and engineering capabilities. Jurong Shipyard itself handles ship repair, construction, and conversion, as well as rig building and offshore engineering, and its CEO, Wong Weng Sun hailed the early delivery of West Orion as a feat of engineering. The ability, too, of the Singapore yard's project management teams to successfully coordinate the dozen or more processes in building a rig, while simultaneously matching timeline with resources, infrastructure and manpower, is a critical factor in consistently delivering projects on time.

Industry Needs

The three main industry sectors: shipyards, marine equipment companies, and classification societies, all require R&D and a pipeline of skilled personnel. Classification societies, for example, require specialised industry knowledge and a steady influx of engineers in order to deliver accurate classifications of ships and equipment.

To facilitate this, there have been a number of collaborations between government departments and tertiary institutions. The universities provide basic R&D research. For example, study on a particular component may require modelling and structural analysis. The company can then take those results and apply them in more detail using their own research staff and laboratories. Universities can also complement industry needs by educating upcoming graduates in industry-relevant fields. Oil and gas companies require subsea processing and flow assurance, so the Centre for Offshore Research & Engineering (CORE) in NUS is setting up a post-graduate programme in sub-sea engineering in anticipation of this.

Bringing all three strands together, the Singapore Maritime Institute acts as a forum where government bodies, industry companies and their customers can enter into dialogue around industry trends and areas of importance that then translate into technology drivers. This also enables companies to match their needs with the capabilities and research areas of relevant tertiary and research institutions.

A Maritime Hub

For a marine and offshore engineering hub to thrive, extensive capabilities and access to R&D are a must. In addition, the presence of ancillary businesses - such as the maritime law and classification societies necessary for the selling, leasing, insuring, and financing of vessels and equipment - play a supporting but vital role in the industry's success.

Singapore benefits from its history as a hub for Asia Pacific's shipping lanes, and as a centre for the production of offshore rigs. The presence of the shipping industry, home-grown yards like Keppel Offshore & Marine and Sembcorp Marine, and various marine equipment companies has led to a complementary network of ancillary and supporting businesses springing up around it.

The city-state has established a number of centres in response to these companies' differing needs. Instead of the traditional model of companies purchasing a set amount of waterfront land, the Offshore Marine Centre (OMC) is aimed at providing common facilities along the waterfront to offshore and marine companies that make heavy equipment, components or structures. All the structural and civil works for the wharf and pier are provided, meaning companies can use the OMC for approximately half of the fixed asset investment they would otherwise expect to spend. Similarly, the Loyang Offshore Supply Base is a logistics hub that provides companies with a comprehensive and integrated infrastructure that ensures an efficient supply chain.

Making Waves

The marine and offshore engineering industry is a vital one for the global economy. Meeting its challenges and needs will be significant for global socio-economic and political requirements. Singapore's geo-strategic position as a major maritime hub and the locus of Asia's shipping and offshore engineering places it at the heart of this environment. Its pro-active responses to the industry will go a long way towards shaping its future and preparing companies to tackle the coming challenges.