Here's why diversification won't rescue Singapore's struggling rigbuilders

Newbuild demand has simply vanished.

Some shipbuilders in Singapore are hoping that constructing oil production-related assets will help them keep their heads above water in the current downturn, but analysts have little hope that this strategy will pay off in the near term.

A report by UOB Kay Hian warns that a shift to production assets provides no shelter for beleaguered rigbuilders, as demand for floating production systems has also been hit by the oil price crash.

"Reduced project spending and the favouring of subsea tiebacks to existing production assets versus construction of new platforms have impacted demand for these assets," the report noted.

The report highlighted that only 3 new orders for floating production systems have been placed so far this year, compared to 33 prior to the price collapse in 2014.

While opportunities exist in 2H16 (BP’s Mad Dog 2 production-semi, Shell’s Penguin FPSO, ConocoPhillips’ Caldita-Barossa FPSO, etc), these will be keenly contested among the Chinese, Korean and Singapore yards.

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