Sembcorp Marine has been adversely affected by the global spread of the COVID-19 pandemic, along with all other sectors and industries in the global economy. Measures to contain the pandemic have severely disrupted transportation, supply chains, manpower access and plant operations, with resulting reduction in the demand for oil and energy.
A separate major development has been the collapse in oil prices from March 2020. The current low and volatile oil price levels have resulted in major oil companies deferring their final investment decisions (FIDs) for projects and cutting their capital expenditure (CAPEX) significantly for 2020.
While COVID-19 has resulted in delays in the execution and completion of our existing projects, the collapse in oil prices has significantly affected our securing of new orders for the foreseeable future.
Industry-wide cuts in CAPEX have affected the Group’s ongoing negotiations and finalisation of new orders, including the Siccar Point Cambo Floating Production, Storage and Offloading (FPSO) project. The project’s FID is now postponed to 2021.
Delays in executing our existing orders and lack of new orders have resulted in lower revenue recognition.
COVID-19 has also affected global shipping operations and adversely affected our Repairs & Upgrades business.
The above have resulted in low overall business volume for the Group. This in turn impacted the Group’s revenue recognition and overall bottom line performance.
Sembcorp Marine has implemented all necessary COVID-19 mitigation measures, such as social distancing, safe distancing at work, workplace segregation, staggered work hours, telecommuting, twice-daily temperature monitoring and intensified cleaning at all our work sites and worker dormitories.
As migrant workers’ dormitories have evolved into significant clusters of COVID-19 infections, we are coordinating with the Government’s inter-agency task forces to identify, treat and isolate infected workers through mass-testing at our dormitories.
Since April 7 when circuit breaker measures were implemented, we have imposed no-entry into our yards for those workers staying in close proximity to dormitories linked to COVID-19 infections. This was followed by a stand-down of production activities from April 17 for two weeks to further protect our employees and other stakeholders.
On April 21 when the Ministry of Manpower announced movement restriction measures that disallowed migrant workers from leaving their dormitories for work, our 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 operations (including the central kitchen), medical centres and yard security. This was applied to our yards in Singapore. The movement restriction measures and other circuit breaker measures have been extended to June 1, 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.
Source: Sembcorp Marine
