Keppel Corp., the world’s biggest oil-rig maker, said it may win higher prices because of rising raw-material costs and increasing investment in exploration that has helped it post record orders this year.
Prices for offshore units are “moving up a little bit,” Chief Executive Officer ChooChiauBeng said in an interview in Singapore yesterday, without elaboration. “When costs go up, prices have to go up otherwise the service provider cannot justify their existence.”
The Singapore-based rig-maker has won about S$7.8 billion ($6.5 billion) of orders this year, surpassing the company’s previous record, set in 2007, as customers including Transocean Ltd. drill in new areas to offset depleted reserves. About $205 billion may be spent on deepwater projects in 2011 to 2015, 79 percent more than the previous five years, according to Douglas- Westwood Ltd., a U.K.-based energy consultant.
“Looking for new reservoirs will continue even though they will be more difficult to find,” Choo said. “There will be demand” for offshore units, he said.
Royal Dutch Shell Plc (RDSA), Europe’s largest oil company, plans to spend $100 billion in four years through 2014 to maintain output growth, it reiterated in March.
Oil Demand
Global oil demand will increase by 1.2 million barrels a day, or 1.4 percent, this year to 89.5 million, according to forecasts by the Paris-based International Energy Agency. Next year, it will grow by another 1.6 million barrels to 91.1 million a day, according to the group.
The demand has helped push crude prices up by more than 16 percent in the past year to $87.88 a barrel yesterday.
“Oil prices will remain fairly high for a quite long period of time,” Choo said. “Energy demands are going up very rapidly.”
Keppel gained as much as 1.9 percent to S$9.63, the highest intraday price since Aug. 10, and traded at S$9.59 as of 12:32 p.m. in Singapore. The stock has fallen 6.8 percent this year, compared with a 9.6 percent decline for the Straits Times Index.
Keppel won a $195 million order this month for a jackup rig from a Transocean unit, following on from a $380 million contract for two similar rigs in February. It also announced an order to convert a very large crude carrier into a floating production, storage and offloading facility for Single Buoy Moorings Inc.
Sembcorp Marine won an order for two jackup rigs from Noble Ltd. for $444 million on Aug. 2. By comparison, Sembcorp received a contract for the same type of equipment from Noble for $400 million in December.
China Logistics
Keppel operates shipyards in Singapore as well as in the U.S., Qatar, Brazil and Indonesia. It is investing in a second yard in Brazil to tap growing demand there.
The company is also looking at building its logistics business in China, including possible projects in Jilin and Nantong, Choo said.
The price of hot-rolled steel in China was $633 per metric ton on Aug. 8 compared with $527 per metric ton on Aug. 9, 2010, according to Metal Bulletin data on the Bloomberg terminal.
Keppel, which is also involved in infrastructure projects, plans to focus on developing more power plants and waste-to- energy plants as demand for alternative sources of energy is expected to increase after Japan’s nuclear accident, Choo said.
Demand for office space in Singapore is likely to help push rentals higher, Choo said, without elaboration. Keppel is currently building the Marina Bay Financial Centre and Ocean Financial Centre in the city area.