ENERGY & OFFSHORE | Staff Reporter, Singapore

Here's what the oil & gas sector needs to stay afloat

Orders are expected to come from the non-drilling segment.

In 2018, the oil and gas sector is expected to continue its recovery, as oil majors adapt to the lower oil prices environment and are better positioned to proceed with final investment decisions.

OCBC Investment Research said orders are still mainly expected from the non-drilling segment as the recovery in the drilling market will still take time.

However, should there be significant contract wins in 2018 for Keppel Corp and Sembcorp Marine (Sembmarine), there should be chances for trading opportunities like the price spikes we saw this year especially for the latter.

"A sustained recovery will only ensue with a continued flow of contract wins, which will drive a re-rating of related stocks in the sector," said OCBC analyst Low Pei Han.

Sembmarine recently secured the coveted Johan Castberg project, which was regarded as one of the few “rays of light” that could have illuminated the darkness at Korean shipyards.

OCBC Investment Research said when Statoil released the tender to several yards initially, the odds then were in favour of the Koreans.

However, SMM won the bid with a $659.74m (US$490m) price tag, outbidding the Koreans.

"We believe that SMM’s new Tuas yard and relatively stronger financial position vis a vis the Korean yards place it in a better position to secure contracts than before," Low said. 

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