May/June 2010 - Keppel Offshore & Marine

BUSINESSFundamental demandAt the Asia Oil & Gas Conferencein June, CB Choo, CEO of KeppelCorporation and Chairmanof Keppel O&M, shared withSri Jegarajah of CNBC Asia onthe industry’s outlook and thechallenges and opportunities inthe face of the Gulf of Mexicocrisis.Is there fear within the industrythat we are going to see aregulatory backlash arising fromthe oil spill incident in the USGulf of Mexico?The moratorium that the USgovernment declared in the USGulf is going to affect all the rigsthere and their operators.Many of them will not wait untilthe moratorium is lifted. Theywill likely move the rigs outbecause there are deepwaterareas in other parts of the worldwhich need such rigs for drillingactivities.The authorities may swing theother way and be overly strict.When that happens, the costwill go up for drillers and oilcompanies, and that wouldaffect the business in the end.Will the regulatory backlash createpressure on margins for yourcompany?What we will see is that new rigswill be required because the oldand less capable rigs may not beallowed to drill in deepwater wells.We need to have a larger sphere ofsafety, not only on the rig, but alsoall the equipment that goes intothe rig.To make sure that things don’t gowrong, there will be more lines ofdefense to ensure that there is noblowout, so all this will add costto the industry. We are in a goodposition to provide this support tothe industry.Will we see a slowdown in newrig orders? Or could this beoffset by increased services andmaintenance contracts?For shipyards like Keppel, we canbuild new rigs, as well as repairand upgrade them.We think there will be morestringent safety requirements andsurvey compliances. There will beless deferment for inspections andsurveys, and fewer waivers.“With a strong balance sheet,we are well-positioned to seizeopportunities as the economyrecovers and capture valuein our key businesses anddeliver sustainable returns toshareholders.”CB ChooCEO of Keppel Corporation andChairman of Keppel O&MFundamentally, the industryoutlook remains sound asoil demand, particularly, inemerging countries in Asia, isrising and is likely to continue torise.Looking at the outlook for the restof the year, and possibly into 2011,how is your orderbook looking?It is better than what we feared,while at the same time, it is not asgood as what we want. This year,our yards are still busy. Since lastyear, Keppel has had zero debt.OffshoreMarine May – June 20105