Sembcorp Marine’s yard workforce down from 20,000 to 850 due to COVID-19 restrictions

Yard workforce employed by Singapore’s offshore builder Sembcorp Marine has been reduced from 20,000 to only 850 workers following movement restriction measures implemented due to the coronavirus pandemic.

Sembcorp Marine has been adversely affected by the global spread of the COVID-19 pandemic as lockdown measures have severely disrupted transportation, supply chains, manpower access and plant operations, with a resulting reduction in the demand for oil and energy.

To add fuel to the fire, the joint effects of the coronavirus pandemic and the oil price collapse have resulted in major oil companies deferring their final investment decisions (FIDs) for projects and cutting their capital expenditure (capex) significantly for 2020.

The company has several projects in progress but capex cuts by oil and gas operators have affected its ongoing negotiations and finalisation of new orders.

Despite the implementation of coronavirus mitigation measures at its facilities, SembMarine said that migrant workers’ dormitories have evolved into significant clusters of COVID-19 infections.

Therefore, the company is coordinating with the Government’s inter-agency task forces to identify, treat and isolate infected workers through mass-testing at its dormitories.

On 21 April when the Ministry of Manpower announced movement restriction measures that disallowed migrant workers from leaving their dormitories for work, Sembcorp Marine’s operating yard workforce of about 20,000 persons was substantially reduced to 850 persons.

The reduced workforce was deployed to manage critical works and support yard essential services such as emergency response teams, facilities and utilities management, dormitory, medical centres and yard security.

This was applied to the company’s yards in Singapore. The movement restriction measures and other circuit breaker measures have been extended to 1 June 2020.

“Our yard activities have been severely constrained by the reduced workforce. We will continue to assess the impact on our project schedules and are working closely with our customers to manage the ongoing projects during this challenging period.

“We aim to reactivate our workforce and resume work safely and efficiently when the measures are lifted”, Sembcorp Marine said.

The capex cuts by oil and gas operator have affected the company’s ongoing negotiations and finalization of new orders.

This includes Sembcorp Marine’s Siccar Point FPSO project.

Namely, Siccar Point at the end of March decided to postpone its planned sanction date for the Cambo project to 2021. Sembcorp Marine is in charge of delivering the design of a Sevan cylindrical FPSO for the Cambo field development.

Furthermore, the builder said that delays in executing existing orders and lack of new orders have resulted in lower revenue recognition.

COVID-19 has also affected global shipping operations and adversely affected the company’s Repairs & Upgrades business.

All this has resulted in low overall business volume for the group, which in turn impacted the company’s revenue recognition and overall bottom-line performance.

SembMarine has a number of offshore projects in progress including Shell’s Vito and Whale FPUs, Equinor’s Johan Castberg and Energean’s Karish FPSOs, Transocean’s drillships, and Tyra offshore platforms.

As the company makes efforts to progress these projects to completion, it will continue to right-size its resources in response to the activities outlook.

“We will also defer all non-essential capex to preserve our cash flow and manage our overall liquidity with prudence and discipline”, SembMarine said.

Except for the Repairs and Upgrades segment, the group’s business activity levels remain low for all other segments. Overall business volumes for all segments are expected to further weaken for the rest of the year.

Challenges have intensified, particularly due to the COVID-19 disruption of supply chains and the resulting impact on the timely execution of projects.

The effects of COVID-19, as well as the low oil prices on projects’ FIDs, will continue to adversely affect new orders in the foreseeable quarters.

In light of the challenging and deteriorating business environment, the company’s current priority is to ensure it has adequate liquidity to sustain operations and ride through this severe downturn.

SembMarine said it would continue to focus on the hunt for pockets of opportunities less affected by the current business climate. The group expects the previous trend of losses to continue in the foreseeable quarters.